EFFECTIVE INTERNAL CONTROL IN ENHANCING FOUNDATION FOR SAFE AND SOUND OPERATION IN AN ORGANISATION: (A CASE STUDY OF COLLEGES OF EDUCATION IN ENUGU)

ABSTRACT

Effective  Internal  controls  are  system  consisting  of  specific policies and procedures designed to provide management with reasonable assurance that the goals and objectives important to the entity will be  met. The  purpose of  this research is  to  ascertain whether internal control has actually helped to promote operational efficiency and effectiveness; provide reliable financial information; safeguard asset and records; encourage adherence to prescribed policies; comply with regulatory agencies and many more. Findings after analysis of data have shown that these Colleges has an organizational structure in place in these colleges; Provosts of these colleges have limited powers on expenditure approval; there are segregation of duties as it relates to transaction authorization, recording and custody; authority documents such as conditions of service, scheme of service and financial regulations are available; and there are internal audit department to ensure that these internal control system are operational. The survey method was used in gathering data while chi-square statistical method was used for data analysis. Harvard style of documentation was adopted in this research.

CHAPTER ONE

INTRODUCTION

1.1   Background of the Study

Effective Internal Control in enhancing foundation for safe and sound operation in every business organization. For Colleges of Education, high level of losses would be experienced in cash and inventory the organization does not take steps to protect its assets. The best form of protection for these assets is good internal control system. A properly designed and consistently enforced system of operational and financial control helps Governing council and management safeguard its resources, reliable financial reports and comply with relevant laws and regulations. It also reduces the possibility of a significant error and irregularities and assists in their timely detection when they occur.

According to CIMA, internal control is defined as the whole system of control, financial and otherwise, established by management in order to  carry  on  the  business of  the  organization in  an  orderly  and efficient manner, ensure adherence to  management policies safe guard its assets and secure as for as possible, the completeness and accuracy of records in order words management want not only to safeguard assets and have reliable records, but also to maintain an efficient operation that follows its  policies. Generally, an internal control can be said to the methods and produces used to safeguard assets   and   other   resources   that   are   used   as   directed   by management.

Internal controls are necessary in very organization be it profit oriented or not and irrespective of good and services produced by the firm. From the banking sector to Education sector, to the oil and gas different internal controls are put in place to safeguard the assets, inventories and operational efficiency of staff and machines of the organization. An effective system of internal control can give managers the means to provide accountability for the programs, as well as the means to obtain reasonable assurance that the programs they direct meet established goal objectives. However, all the people in an organization not just the managers, have a part in and a responsibility for internal control. Internal control impacts executive managers who establish an organization strategic plan, as well as support staff.

For the purpose of this work, the research shall consider the impact of effective internal in different Colleges of Education in Enugu State, most of these Colleges made to see to it that a well planned and effective internal control system is put in place so as to avoid excessive loss of assets.

In designing the control systems, care should be taken to see to it that it will provide managers reasonable assurance that’s.

–        Recorded transaction assurance that’s

–        Financial reporting reliable

–        Risk management system are effective

–        The company complies with law and regulations. Internal policies and procedures associated with manufacturing concerns

–        Machine and equipment are efficient and effective control

system can help management measure performance, make  decision evaluate processes and  limit  risk  good internal controls can be also help managers achieve the organization objectives and avoid surprises. It will also facilitate the  defection of mistake caused by  personal destruction carelessness, fatigue errors in judgment or unclear instruments in addition to fraud and deliberate non-compliance with policies.

Effective and well-planned and designed internal control system is still subject to executing most control system and even well turned personnel with the best of intensions can be distributed carefully or confused.

Internal control must be consistently applied and well understood by all the staff of the companies it board and management policies are to be implemented.

Typically, an internal system would do the following:-

–        Limit authorities

–        Safeguard access to and use of records and company assets.

–        Separate and rotate duties

–        Ensure both regular and unscheduled reviews.

1.2   BRIEF HISTORY OF COLLEGES OF EDUCATION IN ENUGU STATE

It is very expedient at this point to give a brief information what so of the colleges of education in Enugu State.

Enugu is one of the ancient cities in Nigeria, a civil service town now being turned into a big commercial city. Enugu is known for their love for  education,  hosting  large  number  of  educational  institutions ranging from universities to polytechnics and colleges of education plus many monotechnics. Enugu host many colleges of education both federal, state and private owned colleges. Under study here are: Federal College of Education, Eha-Amufu: It was at the first instance established by the defunct Anambra State Government in 1981 but was taken over by Federal Government in 1993. Enugu State College of Education (Technical), Enugu was established in 2006 by  the Enugu State Government as a state owned College of Education. Institute of Ecumenical College of Education is private owned College of Education in Enugu State. It is owned by Catholic Church.

1.3   Statement of Problems

Effective internal control in an organization helps to set a foundation for sound operations when compliance to policies and procedures are not negotiable.

The sub-Problems are Summed up as to follows:-

(1)    Limitations in scope of internal control make it ineffective.

(2)  Internal control system consists of specific policies and procedures designed to  provide  management with reasonable assurance on achievement of goals.

(3)    Internal control contributes to effective management in an organization

(4)    Internal audit is a vehicle for internal control effectiveness

(5)    Internal control in Colleges of Education helps to safeguard fund and assets.

(6)    The record keeping processes in Colleges of Education are signs of effective controls.

1.4   Objective of the Study

The main purpose of this work is to establish the impact of effective control  system  in  an  organization with  reference  to  Colleges  of Education in Enugu State as a government establishment. The main objective of internal control is to assure members of the board of directors and management that the assets finance and inventories of the organization are safe and the system is effective in design and operation.

Generally, the overall objective of this research work includes the following:-

(i)     To evaluate the functions of internal control system in place in Colleges of Education.

(ii)    To  ascertain  how  effective  internal  control  system  can enhance management efficiency.

(iii)   Find  out  peculiar  problems  association  with  Colleges  of Education in Enugu State.

(iv)   To  certain  the  role  of  internal  control  system  in  the accountability process in Colleges of Education.

(v)    To find out problems that makes internal control ineffective and seeks ways to finding solution to them.

1.5   The Scope of the Study

The scope of this study is focused on the effectiveness of internal control system in Colleges of Education in Enugu State. This study shall also consider how these colleges maintain this system over

time. Three colleges would be considered for the purpose of this study.

They are:-

(i)     Enugu State College of Education (Technical), Enugu

(ii)    Federal College of Education, Eha-Amufu

(iii)   Institute of Ecumenical Education, Thinkers Corner

1.6   Research questions

According to Ikeagwu (1998), research questions refer to the fundamental questions researcher develops in his specific problem area. On this, this study has some questions that go thus:

i.      Do  colleges  of  education  have  a  structured  organigram showing clearly the flow of authorities and responsibilities?

ii.     Are  there  limitations  to  the  powers  of  the  Provost  on granting approvals on expenditures?

iii.    Is there segregation of duties as it relates to transaction authorization, recording and custody?

iv.    Are there any authority documents such as conditions of service, scheme of service and financial regulations?

v.     Has there been any review in these authority documents in the recent times?

vi.    Is  there  a  well  established,  well  staffed  internal  audit department in existence?

vii.   Is the internal audit department given that independence status it deserves?

viii.  Does the internal audit department give its report regularly on the weaknesses of the internal control system?

ix.    Is  the  accounting  control  system  review  carried  out regularly?

x.     Does the College maintain a budget tracking mechanism?

xi.    Has the College been ever involved in any financial fraud or loss of asset due to weakness of internal control system?

xii.   Has the internal control system anything to contribute in the proper working of management of the college?

1.7   Statement of Hypothesis

For the purpose of this study, the under listed hypothesis would be used to evaluate the effectiveness of the internal control in the selected companies.

a)

H0.        –           Internal  control  system  does  not  contributes  to  the proper working of management

b)

H0       –            Internal control does not helps to maintain and safeguard College funds, working and property.

c)

H0       –            Internal  audit  department  does  not  strengthen  the internal control system. d)

H0.      –           Limitations of powers of approval of provost do not make the internal control system work.

1.8   Significant of the Study

Management can be aided by the utilization of internal control system maintain the traditional policy role, while ensuring compliance with policies and procedures.

An effective internal control system can sever in particular.

–        To help reduce overhead cost

–        Identify ways to improve efficiency

–        Minimize  exposures  to  possible  losses  and  safeguard assets.

–        Ensure the protection of inventory.

For the above objectives to be accomplished the internal control system must perform certain function which, must be in line with requirement of regulations. Therefore, an effective internal control system will make a positive contribution to the objective of any organization.

This study is very significant in many aspects and it is intended to create awareness in the management of Colleges of Education, of the immense benefits of this study. It is hoped that this study will help administrators see the role of controls as that which in terms of ensuring that the operations of the business are well controlled and machines and personnel used are efficient, resources are utilized economically  and  the  information  provided  to  management  is reliable.

To the accountants and auditors who are expected to be of excellent communications, it will be of benefit to know the onerous responsibilities placed on them as the watch dogs of the organization. Others that would benefits from the study are future researches and fellow student it will improve to a great extent trial and practical knowledge about the nature.

1.9   Limitations of the Study

Although the role of internal control in every organization is about the same this study is restricted in only the Colleges of Education in Enugu State.

Due to the fact that the researcher was tightly scheduled in Enugu as at the time when this research was carried out, it was a little bit difficult for him to do a thorough study that will cover all the Colleges of Education in the state as this would even be near impossible due to lack of time and money. The researcher encountered some difficulty in reaching most top officials as much as he would have been necessary.

Lack of money in the sense that these Colleges of Education are situated in different parts of Enugu State, and even the materials needed for  in-depth study required money for it to be acquired. Also the fact that the study was being conducted from Enugu made it even more expensive.

Thirdly,  and  most  importantly  management  of  the  organization visited regarded some information as being secret and exclusively and such, the researcher was deprived of these information, due to these, hampered the analysis as he would have wanted to.

But then, to avoid the above limitation from being an impediment to the validity of the conclusion and recommendations in the study, the researcher choose three Colleges of Education to avoid the cumbersomeness associated with  a  study  on  all  the  colleges  of education in Enugu State and these colleges chosen were easily assemble and the staffs there were very co-operative.

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