ABSTRACT
In the current economic environment, the trend of business activities and an ever-changing business has made it imperative for all forms of entities be it public or private to maintain and ensure internal control systems that are effective and can achieve optimum results for the entity in question. The main objective of the study was to evaluate the effectiveness of internal control systems between private and public hospitals. Descriptive research design was employed for the study, largely using primary data from a total of thirty-five (35) respondents from 27 hospitals of which eleven (11) were public hospitals and the remaining sixteen (16) were private hospitals. For sampling purposes, the purposive and the convenience sampling techniques were employed to achieve the objectives of the study.
From the study, it was revealed that both public and private hospitals attested to the existence of some policies and procedures which ultimately ensure internal controls in the hospitals. In addition, it was found that control systems are largely effective in both private and public hospitals, taking into account the percentage of persons who were in agreement that these systems have been effective tremendously except for the fact that when it comes to the private hospitals, the percentage of agreement is higher than that of public hospitals. This means that the private hospitals have been more effective as a result of the internal control systems. Furthermore, it is revealed that internal controls have had positive impact on both private and public hospitals. However, the positive impact in the case of private hospitals was found to be higher. It was also found that when it comes to challenges, private hospitals are better managers of the challenges possibly because they have ICS that function properly as compared to that of the public hospitals. It is thus recommended that to ensure the achievement of optimum effectiveness through the institution of ICS, the management of the hospitals must ensure that they provide their employees
with the needed training as well as developmental programs prior to and after implementation of internal control systems to ensure their efficiency hence ensuring their effectiveness.
CHAPTER ONE
INTRODUCTION
Background of the Study
Public as well as private entities exist to achieve certain goals and objectives. The main goal of a private entity is to primarily maximize returns for its stock/shareholders whereas that of a public sector entity is primarily to seek and ensure the welfare of its citizens (IPSASB, 2010). Both private sector entity and public sector entity exist in the same economy and also compete for the same scarce resources just to mention a few. These resources will have to be safeguarded in order to derive maximum benefit from them and to do this, control measures will have to be instituted.
Irrespective of the form or type of business nowadays, internal control issues have become an important subject matter for both private sector and public sector entities mainly as a result of issues such as efficiency, effectiveness, economy and in totality, value for money (Augusto, 2017; Jovanović & Ljubisavljević, 2011). Accountability in the private as well as public sector can only be achieved if there are proper mechanisms in place to hold persons accountable (Bazmi, Rehman & Rehman, 2016; Augusto, 2017).
Generally speaking, Internal control is explained to be the processes for assuring achievement of an organisation’s objectives or targets in an atmosphere of effective and efficient operations, reliable financial reports as well as strict compliance with rules, regulations and policies. As posited by COSO (2013), a business or organization requires internal control system so as to ensure that they achieve their financial, operational and compliance objectives; that is, helping the entity to achieve its mission. Due to an ever-changing economic environment, shift in customer demand
and priorities, and restructuring for sustainable development and future growth, issues of internal control have become very important irrespective of whether an entity belongs to the private sector or public sector.
Just like any private entity, private hospitals exist with the prime aim of providing health related services at a cost-plus profit so as to maximize its shareholders’ wealth. Also, just like any public sector, Public hospitals also exist in order to provide health services to all citizens at a subsidized cost thereby ensuring the welfare of the citizenry.
That governments exist to serve the interest of its people, it is important that they are held accountable to the latter (Bello, 2001) and one such way of holding them accountable is by putting internal control measures in place to check their activities.
Due to inadequate internal control systems large sums of monies are lost through fraud which to a large extent drains the state of its insufficient and meagre resources (Bello, 2001). Private businesses and in this particular instance private hospitals are also confronted with a myriad of problems as a result of poor internal control systems.
In conclusion therefore, internal control systems are the several measures instituted by organizations in order to ensure that the mission, objectives, as well as goals are achieved (Ogneva et al, 2007). Also, internal control systems may be measures to avoid wastages, theft and mismanagement of an organisations’ assets and these are very important to both private and public hospitals.
Currently in Ghana most entities, be it public or private have internal control measures in place and what this study is seeking to reveal is to evaluate the effects of these internal control systems between public and private hospitals.
Statement of Problem
Private and public entities alike have certain objectives to achieve in order to remain in existence. Resources for both private and public entities alike are virtually scarce hence the need to put measures in place to safeguard and obtain the optimum results from the available ones.
Private hospitals just like any private business exists to provide health services to its clients but at a profit, so as to create and maximize wealth for its shareholder(s) as such there needs to be systems in place that will ensure that, for every one cedi that the hospital incurs, there is value for money and systems to also ensure that theft as well as other forms of mismanagement is reduced to the barest minimum.
In today’s competitive business world, private businesses for that matter private hospitals need profit in order to grow and survive. Nonetheless, while the desire to make huge profits should be the primary focus of any private entity, internal control systems that are weak may result in the failure of the entity not achieving its objectives. Internal control systems thus ensure that all assets are properly safeguarded since it is these assets that help in generating profits for the firm. To corroborate these assertions, Kirsty (2008) revealed that internal control systems in businesses helps in ensuring confidence in its ability to perform a specific activity/task and also ensures that losses and other forms of business errors are reduced by means of monitoring activities as well as improving organizational and financial statement reporting processes and above all making sure that there is compliance with relevant rules, laws and regulations. Additionally, Muio (2012) performed a study on the impact of internal control on the financial performance of private hospitals in Nairobi and it was revealed that there exists a significant relationship between internal control systems and financial performance.
On the other hand, public entities are governmental entities established with resources from the tax payer as well as other donor sources. Since these resources are scarce in relation to the existing needs of the nation, there is the need to put measures in place to ensure that value is obtained from every penny that is spent. In spite of the efforts being made by governments, state funds meant for developmental purposes amounting to millions go into the pockets of individuals as a result of fraudulent acts by some individuals mainly attributable to ineffective internal control measures. Some public servants end up spending monies meant for the state on themselves on their personal projects which goes a long way to disadvantage the state as a whole (Ricchiute, 2000). A study was carried out by Csazer (2000) and it was observed that lots of fraudulent acts take place in the public sector as a result of internal control systems and mechanisms that are weak. Again, a study was undertaken by Njui (2012) to investigate the effectiveness of internal control and audit in enhancing corporate governance in the public sector in Kenya and it was observed from this study that internal control has the greatest influence on corporate governance within Kenya government ministries followed by risk management while compliance and consulting were revealed to have the least effect. Other studies have also been conducted to test how strong internal control systems are in both private and public companies and an example of this study was that of Ngugi (2011) who conducted a survey of internal control systems among listed private companies and the public sector companies in Kenya and the result of this study showed that when it comes to strong internal control systems, the private sector as compared to the public sector was far ahead with stronger internal control systems.
Private hospitals and public hospitals need strong internal systems in place to ensure the meeting of objectives. There are a number of studies on internal control systems and their impact on
performance on businesses both private and public as well as other subject matters (Csazer, 2000; Crawford, 2011; Doyle et al, 2007 and Njeri, 2014).
Although the concept of Internal controls is an essential one when it comes to the operations and success of an organisation, little have been the empirical studies to show how it helps to achieve the objectives of the entity and more importantly, there exist few studies particularly with regards to comparative studies to ascertain the effectiveness between private health facilities and public health facilities specifically taking into account the context of Ghana. For instance, a study was conducted by Ibrahim, Diibuzie and Abubakari (2017) in some health facilities in the Upper West area of Ghana and from the study it was revealed that the correlation between internal controls and financial performance is positive and further findings showed it was three of the elements of the internal control that were significant having p-values which were less than 5%.
In addition, Effah (2011) conducted a research in Brong Ahafo area of Ghana on two key health facilities in the jurisdiction and it was observed that there exist control systems in these hospitals which are guided by legislations such as the Financial Administration Act as well as the Internal Audit Agency Acts among others such as COSO. Further, a research on ICs was conducted by Osei-Boakye (2016) a health facility called Edweso Government Hospital. Most of these studies did not seek to do a comparison between private health facilities and public ones. There is therefore a gap as far as a comparative study is concerned considering the existing studies. The study will therefore address this issue accordingly by selecting a number of public and private hospitals in the country and then evaluate the effect of internal controls on them.
Research Objectives
The main objective of the study is to evaluate the effectiveness of internal controls between public and private hospitals. Specifically, the study seeks to;
- To evaluate the effectiveness of internal control measures between public and private hospitals.
- To ascertain the impact of internal control measures on the performance of private hospitals.
