ABSTRACT 

The study sought to evaluate the effect of internal controls on revenue generation in Ministry of Finance. The research design that was employed in this study is descriptive design. The study population was all the employees at the Ministry of Finance during the calendar year 2013. Data was analyzed by use of the linear regression. 

The study found out that ICS contributes to revenue generation at the company. Ministry of Finance play a number of roles in supporting the systems by ensuring all documents are authentic, correct and confirm that the relevant officers have signed all documents before processing to prevent misappropriation of revenues. The company has formalized policies and procedures for all activities which allows for good and efficient communication, control and monitoring of activities. All employees understand the concept and importance of internal controls, including the division of responsibility. Accounting records are limited to employees with designated responsibility for such records. The study revealed that Ministry of Finance reviews its ICS when need arises. 

Numerous audits are conducted in line with technological changes to ensure the systems‟ sustainability. Long queues have been replaced by auto-receipting system that reduces time wasted on serving students. There were formalized policies and procedures for all major operations of the entity and policies. The Management is committed to the operation of the system and provides feedback to the officers about the operation of the system. Management has defined appropriate objectives for the entire organization and has criteria for ascertainment of which fraud – related risks to the organization are most critical.

The study recommends firms to cultivate integrity and ethical values among its employees and management. Effective board of directors, management, and internal audit departments should be established in organizations. Management should design internal controls to ensure efficiency and effectiveness, reliability of financial reporting as well as compliance with laws and regulations. Firms should adopt internal control and information systems that produce operational, financial and compliance-related information reports to make it possible to run and controls the business. Internal controls need to be adequately monitored in order to assess the quality and the effectiveness of the system‟s performance over time. Monitoring of customer feedback and audits should be conducted periodically by internal auditors.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The rapidly changing economic and competitive environments, shifting customer demands and priorities, and restructuring for future growth and social trend indicates how extensive an organization internal controls should be structured to ensure continuous growth in revenue generation. Internal control is a dynamic integral process that is adapting continuously to the changes facing modern organizations. At all levels of the organization, the management and personnel have to be involved to address risks and to provide reasonable assurance of the achievement of the organization‟s mission and general objectives. 

Every organization strives to provide products and render some service at a price using the most effective and efficient operations of its business. It is by the effective and efficient operations in products or services delivery that revenue flow into the organization. In the Nigeria, organizations failures and widespread dip in revenues over the past two decades have been due to operations that have resulted into mismanagement thus elevated the importance of effective internal control within the formal business sectors. Internal control, which assures the stability of every organisation, therefore has gained importance today. This is because the control systems in place are a pillar for an efficient accounting system as well as the achievement of organizational goals.

1.1.The Concept of Internal Controls

Internal controls are measures that organizations institute with the aim of ensuring that the objectives, goals, and mission of the organization are met (Rezaee, 2002). They refer to set of organizational policies and procedures that ensure any transaction is processed in the appropriate way to avoid waste, theft and misuse of organization resources. Through internal control systems, organizations achieve performance and organizational goals, prevent loss of resources, enable production of reliable reports and ensure compliance with laws and regulations. Thus internal control is established by the organizational management to ensure that the business of enterprise is carried out in an orderly and efficient manner. This further ensures adherence to management policies safeguard the assets and secure the completeness and accuracy of the records.

Organizations are constantly and extensively working to improve their internal control systems so as to increase revenue inflow, survive in the rapidly changing economic and competitive environments, and adapt to the shifting customer demands and priorities (Kantzos and Chondraki, 2006). Internal control consists of five interrelated components which are derived from the way management runs a business, and are integrated with the management process: control environment; risk assessment; control activities; information and communication; and monitoring (Carmichael, 1996). According to Liu (2005) and Rittenberg et al. (2005), under the current operations of organizations in general, the importance of internal control can be divided into six major categories; detecting error and fraudulence, decreasing illegal conduct, improving the competence of the business entity, improving the quality of data, helping to create the business infrastructure, and decreasing auditors‟ fee.