INTERNAL CONTROL SYSTEM IN GOVERNMENT PARASTATALS

Abstract

This study is on internal control system in government parastatals. The total population for the study is 200 staff of PHCN in Edo Ekiti state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up customer care executives, lines workers, technical support officers and electricians were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies

 CHAPTER ONE

INTRODUCTION

• Background of the study

Several studies have been carried out in Nigeria to find out why many government parastatals or industries which started off well later fall or remain stagnant in their operations. The major causes of this situation were traced down to poor internal control system which emanated from a lot of factors, part of Horngren (1982) therefore defined internal control as referring to both Administration control and accounting control. Administration control organization showing who reports to who and all the methods, planning and control of operations. Accounting control comprises the methods and procedures that are mainly concerned with authorization of sections, the safeguarding of assets and the accuracy of the financial records. Good accounting control helps maximize profit; they help minimize waste, unintentional errors and frauds. This well designed control measure is a step towards the achievement of an organizational accountability which in other words means success of organization. The use of internal control system by government parastatal in Nigeria has been recently on great increase. Internal control has been recognized in the most organization as one of the most essential ingredients, necessary for the survival of the business enterprise and government agencies. Apart from the problem of scarce resources, organizations run a high risk of fraud, errors, miss appropriation of minimize, if not eliminate completely, these risks, by establishing internal control system. For every organization, there are risks that the organizational goals and objectives are not achieved. All efforts aimed at preventing such risks or identifying and correcting such risks are viewed as internal control. Anthony (1998) defined internal control as “the process by which managers assure that resources are obtained and used effectively and efficiently in the accomplishment of the organization objectives. Garrison and Noreen (2000) suggested a different definition for internal control as follows: “those steps taken by management that attempt to increase the likelihood that the objectives set down at the planning stage are attained and to ensure that all parts of the organization function in a manner consistent with organizational policies. He further defined internal control as those sets of organizational activities which include: planning, co-ordination, communication, evaluation and decision making as well as informal processes aimed at enhancing the efficient and effective use of the organizational resources towards the achievement of the organizational objectives. Anthony and Govindavajan (2004) identified several aspect or activities of management / internal control namely: planning, coordinating, communication, evaluation, decision-making and influencing. Planning what the organization should do to achieve proper accountability. Planning could be view as budget preparation. With planning the organization decides what to do and the responsibilities of its different members. Koontz and Donnel (1992) defined internal control as all the measures of a public or private organization that could be said to be strategies of owners and managers to monitor and control the activities within the organization.

1.2 STATEMENT OF THE PROBLEM

Internal control is management tools that are built into the entity as a part of its infrastructure to help managers and administrators run the entity and achieve their aims on an ongoing basis. Internal control is affected by people: people are what make internal control work. The responsibility for good internal control rests with all administrators and managers. Management sets the objectives, put the control mechanisms and activities in place, and monitor and evaluates the control. Internal control provides reasonable assurance, not absolute assurance; management design and implement internal control based on the related cost and benefits. No matter how well designed and operated, internal control cannot provide absolute assurance that all organization objectives will be realized. However, the researcher is examining the internal control system in Government parastatals.

1.3 OBJECTIVE OF THE STUDY

The following are the objectives of this study:

1. To examine the internal control system in government parastatals.
2. To examine the process of internal control system.
3. To determine the impact of internal control system on productivity and accountability in government parastatals.

1.4 RESEARCH HYPOTHESES

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

H₀: there is no internal control system in government parastatals

H₁: there is internal control system in government parastatals

H₀²: there is no impact of internal control system on productivity and accountability in government parastatals

H₂: there is impact of internal control system on productivity and accountability in government parastatals

1.5 SIGNIFICANCE OF THE STUDY

The following are the significance of this study:

1. The results of this study will be useful to the managers and administrators in both governmental and non-governmental organizations on the benefit and process of internal control system for organizational effectiveness.
2. This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic.

1.6 SCOPE AND LIMITATION OF THE STUDY

This study on internal control system will cover the proper process of internal control system that can be used as a tool for the realization of organizational goals and objectives.

Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work

1.7 DEFINITION OF TERMS

INTERNAL CONTROL: Internal control, as defined in accounting and auditing, is a process for assuring achievement of an organization’s objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies.

SYSTEM: A system is a regularly interacting or interdependent group of items forming a unified whole. Every system is delineated by its spatial and temporal boundaries, surrounded and influenced by its environment

GOVERNMENT PARASTATAL: A state-owned enterprise is a legal entity that undertakes commercial activities on behalf of the state, its owner. The legal status of SOEs varies from being a part of the government to being stock companies with the state as a regular stockholder

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