APPRAISING THE FUNCTIONALITY OF INTERNAL CONTROL SYSTEM IN PUBLIC SECTOR

1.1 Introduction

Internal control is one of the essential means of establishing and maintaining management control of a business. It involves the entire basic element of management control and is itself the main element of the appraisal, measurement and evaluation control. Effective system of control is a prerequisite for the attainment of organizational goals, but it has remained one of the biggest problems facing modern day business. It is an extremely broad topic and of course is not restricted to the accounting field but embraces all activities of the organization. Generally, all aspect of humans endeavor need control. For instance, the business is controlled by the manger or director, the church by the pastor, the school by the head teacher or vice chancellor as the case may be.

As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.

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1.2 Background of Study

Internal control system has recently gained much popularity among scholars in finance and corporate governance affairs due to the gap in transparency and accuracy in financial reporting in the public sector. According to Oxford Learners Dictionary, public sector is a part of the economy of a country that is owned or controlled by the government. It can also mean that part of the economy comprising of both public services and public enterprises. Public sectors include public goods and governmental services such as the military, law enforcement, infrastructure (public roads, bridges, tunnels, water supply, sewers, electrical grids, telecommunications, etc.), public transit, public education, along with health care and those working for the government itself, such as elected officials. The public sector might provide services that a non-payer cannot be excluded from (such as electrification), services which benefit all of society rather than just the individual who uses the service (Ellickson, R. C. 2017).

Public demands and expectations at the grassroots for the provision of essential social and basic services using government resources have continued to be astronomically high, as manifested by rising pressure on the resources with which to satisfy these. It is obvious that social, political and economic development involves the effectiveness and the efficiency of the bureaucracy on one hand and the probity of the bureaucrats on the other. The government exists to serve the interest of the citizens. There must therefore be a way of holding the former accountable to the latter (Bello, 2001).

In recognition of the essential features of a good system of internal control, this research project will try to evaluate the basic element of an organized system of internal control as it applies to Biase local government area, cross river state. In view of this, the researcher will look at the various facet so the local government, and administrative policies of the local government, with special attention on how the local government records her transactions, system of authorization and approvals, segregation of duties as well as safeguarding of properties.

In government accounting system, internal control is important because the essence of representative government is the existence of a system of checks and balances to safeguard the interest of taxpayers and other citizens. It may be described briefly as a disposition of operations and procedure whereby the accomplishment and recording of every transaction requires the participation of two or more persons.

Internal control system constitutes a system which monitors a firm in the direction of its set-up goals (Adetula, Balogun, Uajeh & Owolabi, 2016). There are also a variety of definitions of internal control as it affects a variety of constituencies (stakeholders) of an organization in various ways. Internal controls are very fundamental component of the risk management systems. It can be applied to several parts of a business, whether strategic, financial, operational and compliance (Financial Reporting Council, 2014).

Therefore, in Oron Local Government Area where the research was carried out, the activities that was conducted is to know the appraising the functionality of internal control system in public sector.

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1.3 Statement of Problems

Investigation revealed that the system is an all-round system, that is to say, it encompasses both financial and non-financial control in realizing the goals and objectives of running the organization in an orderly manner, safeguarding the assets of the organization and also ensuring the accuracy and reliability of the organization’s records.

The non-institution of internal control system in a public sector is detrimental to the continual growth and survival of that organization. Non institution of internal control system in a public sector result in improper keeping of records which could lead to the late preparation of accounts, doctoring of books of accounts, misappropriation of funds which are meant to be used for planning, decision making etc. illegal transactions being transacted, pilferage, misuse of fixed assets etc. improper keeping of records can also lead to inability to ascertain the company’s actual assets; goods in stock, which could breed pilfering.

Lack of proper record keeping, controlling of proceedings or actions in an organization could lead to concealing of errors and fraud that might crop-up to bring down the company.

The non-institution of internal control system could lead to inability of the company to make proper decisions and plan ahead effectively. When a company fails to plan, definitely it will forestall the growth of the organization; make the organization to start dwindling and struggling for survival, which will then bring the company to an end.

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1.4 Aim and Objectives of Study

The aim of the study is to appraise the functionality of internal control system in public sector using Oron Local Government Area as a case study. In achieving this aim, the following specific objectives were laid out as follows:

1. To identified the type of internal control in Akwa Ibom State Fire Service in Oron Local Government Area.
2. To prevent fraud and embezzlement in the public sector through effective internal control.
3. To ascertain the functionality of Internal Control System in public sector with particular reference to Akwa Ibom State Fire Service
4. To find out the extent of which internal control is applied in the public sector with particular reference to the Akwa Ibom State Fire Service
5. To make suggestion and recommendation on how to improve its application.

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1.5 Research Questions

The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:

• To what extent is internal control applied in the public sector with particular reference to the Akwa Ibom State Fire Service?
• How is fraud and embezzlement in the public sector prevented through effective internal control?
• What is the function of Internal Control System in Akwa Ibom State Fire Service?
• What are the types of internal control in Akwa Ibom State Fire Service in Oron Local Government Area?

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1.6 Research Hypothesis

In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.

Hypothesis One

• H0: There is no significant correlation that the evaluation of internal control system prevents fraud in the public sector.
• H1: There is a significant correlation that the evaluation of internal control system prevent fraud in the public sector.

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1.7 Significance of Study

The following constitute the significance of the study:

1. The study will help to improve operation of the capital development authority and other similar organization.
2. The significance of the help to reveal the relevant of internal control in organization with particular references to Akwa Ibom State Fire Service.
3. These studies will also be of help to the Akwa Ibom State Fire Service and other related organization as to show errors and fraud and other irregularities that could be easily detected and prevented.
4. To assist the researchers to satisfy the requirement for the award of advance diploma in accounting.

This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.

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1.8 Scope of Study

The scope of the research is focused on appraising the functionality of internal control system in public sector. The study is limited to Akwa Ibom State Fire Service in Oron Local Government Area.

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1.9 Limitations of the Study

During the course of this study, many things militated against its completion, some of which are:

1. Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
2. Research material: availability of research material is a major setback to the scope of the study.
3. Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
4. 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).

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1.10 Definition of Terms

Accounting: Is an information processing system that provide quantitative information, primary financial in nature, about economic activities that are intended for rationalizing decision making

System: Is defined as an entity (a body) having sets of elements or compounds joined together to performed specific functions, either individually or collectively.

Internal Control: To produce the necessary accounting information there management of a business must establish an adequate accounting system. The system should be in corporately control, to ensure that the information produced is reliable, complete and objective is achieved by the management.

Management: Is the process of getting things done through people by supervision and also the process of organizing, planning, actualizing, directing, coordinating and controlling in order to achieve the organizational objectives

Fraud: It is defined as the misrepresentation by a person of a material fact know by that person to be untrue or made with reckless attitude in difference as to whether the act is true, with the intention of deceiving the other party and with the result that the party is endured

Internal Audit: As defined by the institute of internal auditors Incan independent appraisal function established within an organization to examine and evaluate its activities as service to the organization

Auditing: Is the process of examining and reviewing the accounting transaction to give assurance that the financial statements at least to truthfulness and fairness