Assessment Of Internal Control System In Government Establishment

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Assessment Of Internal Control System In Government Establishment


The primary objective of this project work is to discern the impact of internal control system assessment in government establishment using university of Nigeria Teaching Hospital, Enugu as a case study. Many people think of internal control system as a highly technical field which can be understood only by professional Auditors. Actually nearly every establishment practices internal control in one form or another on an almost daily bases.

However, internal control system therefore could be viewed as a firms or organizational plan including all methods and measures taken to:

  1. Safeguard its assets
  2. Ensure the accuracy and reliability of its accounting data
  3. Promote operational efficiency and
  4. Encourage compliance with the organizational policy.

These are the main concern of this research work efforts have been made in this research work to explain the normal governmental internal control systems, and its usage as an aid to asses government establishments. Also, the two categories of internal control are discussed. Various internal control procedures being practised in university of Nigeria Teaching Hospital are identified.

The findings were that internal control system needs urgent attention so as to ensure strict compliance to management policy.

Finally, in this research work, there is a constructive explanation of scope, objective, basis concepts and principles of internal control applicable in government establishment as an aid to solving the problem of expenditure control. The researcher therefore conclude that for internal control to be effective, emphasis should be placed on the accountability morality, integrity, Honesty, ethics and behaviours of the officers operating the system.

Chapter One


1.1 Background of the Study

The chartered institute of Public and finance accountants (CIPFA) states that the internal control system comprises the whole system of controls, 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 policy safeguard the assets and ensure as far as possible the completeness and accuracy of the records.

Individual components of internal control system are known as “control i.e Internal control”.

The Canadian institute of chartered accountants, Exposure Draft of proposed auditing Recommendations describes internal control as comprising of the plan of an organization and all the co-ordinate systems established by the management of the enterprise to achieve management objectives by ensuring as far as is practical, the orderly and efficient conduct of its business including the safeguarding of assets, the reliability of accounting records and the timely preparation of reliable financial information. Internal control system, therefore canto be viewed as a firms organizational plan including all methods and measures by the firm takes to

  1. Safe guide its assets
  2. Ensure the accuracy and liability of its accounting data
  3. Promote operational efficiency and
  4. To encourage compliance with company policies
This is my abridged definition:

It is the responsibility of management to determine the internal control which is appropriate to the organization. The nature and extent of controls will vary between organizations and also from one part of an organization to the other.

The controls used will depend on the nature, size and volume of the activities and the degree of control which management are able to exercise personally, geographically distribution and may other factors.

Internal control can be divided into two main categories financial controls which are primarily concerned with legitimacy of expenditure and the security of assets and income and other controls mainly administrative which are created and maintained by management the ensure that an activity is relevant to the needs of an organization and is carried out in the most effective manner. These categories are independent and should be regarded in isolation as both have an impact on the performance of activities and their consequent cost and value to the organization.

Accounting and Financial Controls

These consists of all accounting, financial and monetary control techniques and systems built into the internal control system to promote and encourage the attainment of the objectives on internal controls. Generally, accounting and financial controls consists.

(a) Budgetary Control:

This refers to formulation of plans of future activity, which by down carefully determined objectives and programmes of activity and provide yard stick by which deviations from planned achievements can be measured. It is defined as “the establishment of departmental budgets relating to the responsibilities of executives to the requirements of policy.

(b) Legitimacy of Income and Expenditure:

All income and expenditure should be in accordance with the policy of the organization should be properly authorized and written in law.

(c) Security of Assets:

Assets of the organization should be kept in properly custody and not wrongly applied either by error or intent.

(d) Accounting control:

All transactions should be correctly recorded processed and control account should be maintained. It is in the bid to discuss those internal control systems that this work is carried out.

1.2 Statement of Problem

The common problems encountered in Hospital Management includes

  1. Late and inadequate receipt of subventions from the government
  2. Placement of Management of the hospital in the hands of doctors instead of experienced administrations
  3. Lack of steady policy
  4. Inconsistency in the salary scale of Hospital staff
  5. Frequent internal control breakdowns
  6. Poor accountability of officers
  7. Lack of adequate motivation which has created the room fo row morals.

However, this study is therefore aimed at ascertaining the effectiveness techniques available in government owned recommend possible solutions using university of Nigeria Teaching Hospital as a case study.

1.3 Objectives of the Study

  1. Determine what are the internal control system existence at the Teaching Hospital and the extent to which they have been achieved.
  2. 2.Find out if management of the Hospital are overriding the internal control systems.
  3. 3.Determine if internal control systems at the Hospital are consistent with internationally acclaimed standards, contained on Committee of Sponsoring Organizations (COSO)framework.

1.4 The Research Questions

  1. What are the internal control systems in existence at UNTH?
  2. Is management at UNTH able to override the control systems?
  3. How consistent are the internal control systems at the hOSPITAL to the COSO framework?

1.5 Hypothesis

H.o2: Effective internal control is not associated with high level of accountability

1.6 Significance of Study

This research will be of invaluable importance to the online management and staff of the University of Nigeria Teaching Hospital. The management will be exposed t the specific objectives of internal control and also help them to close the gaps and weakness inherent in their adopted internal control system

1.7 Scope of Study

This research is intended to appraise the existing internal control systems in government hospitals, using the university of Nigeria Teaching Hospital, Enugu as an example.

1.8 Definition of Terms

The following terminologies are defined to reflect their meanings in the research.


This means the evaluation of marits or act of accessing, a valuable for the purpose of taxation with respect to control system

Government Establishment:

Refers to a permanent (Civil or military force or staff ruling or managing control system.

Internal Control Systems:

This implies the inward body as functional unity or principle which regulate or check the specific objective and weakness. Inherent in the adopted running of government establishment.

Budgetary Control:

It is the establishment of departmental budget relating to the responsibilities of executives to the requirements of policy.

Chapter Five

Summary of Findings, Conclusion and Recommendations

5.1 Summary of Findings

The research sought to describe the internal control polices at University of Nigeria Teaching Hospital, Enugu. The findings of the research revealed that the internal control policies that exist in the Hospital include strict supervision by heads of departments, authorization by the rector and adequate segregation of staff duties. Also the study revealed that all cash received are accounted for, and all payments are supported with valid receipts. .

Secondly, the research sought to find out if the employees in the Hospital are aware of the internal control policies. The findings of the research revealed that, employees are aware of the fact that the Hospital has an internal audit department and they are comfortable with it. Again, the study revealed that employees have sufficient knowledge of control procedures applicable to their duties.

That apart, the research sought to examine if the extent to which internal controls system has achieve its intended objectives in the Hospital. The findings of the research revealed that payments are supported with documents, proper authorization and segregation of the staff duties. However, the findings also indicated that, though internal audit department tests control policies for perfection, their bankers are notified of any change of staff assigned to transact banking duties.

Again, the study revealed that, the control policies of the Hospital are quite effective and are mainly directed towards avoidance and recognition of error or fraud.

Finally, the research sought to find out if the internal control systems are consistent with international standards (COSO framework). The study revealed that the Hospital has an independent audit committee and also that financial report is prepared to meet global accounting standard. The study has shown that strong control environment exists to address control activities.

5.2 Conclusion

From the study, it is resolved that University of Nigeria Teaching Hospital, Enugu has well designed control system to guide its operations. Thought the institution prohibits the overriding of controls, according to the study, the findings identified that management is task oriented and sometimes use positions to get work done without following the laid down rules. This study supports the works of the Tread Way Commission (1985), that top management must create a control environment and that the audit committee reviews management work as well as the internal audit role creating an atmosphere of control within the organization. In the whole, even though there have been few departments from effectively implementing internal controls in University of Nigeria Teaching Hospital, Enugu, the researcher concludes that internal control systems to an extent are effective in the institution

5.3 Recommendations

Although good internal control can be expensive, the cost involved would be offset by the benefit to be received from it such as protection of assets and prevention of errors. The following are the recommendation for the management of University of Nigeria Teaching Hospital, Enugu.

The management of the Hospital should as matter of urgency emboss the Hospital‟s name on all assets and update the fixed asset register thereon to safeguard all assets against pilfering and other irregularities.

The internal audit team of the Hospital should develop structure and consistent visits to all areas of the institution in order to keep all employees alert so as to eliminate any hidden transactions that may affect the institution‟s aims and objectives.

Management should always communicate to their bankers of any staff involved in banking activities whose appointment has been terminated. This would ensure that employees do not perform bank transactions unknowingly to the management of the Hospital. Systems of controls are well-known by managers that help them carry out business in a proper way. The management at University of Nigeria Teaching Hospital, Enugu should use their position to set good example by following the laid down procedures set by them so as to attain the aims and missions of the institution.

Since the internal auditor is appointed by management and for that matter forms part of management team, his duties could be influenced by management. However, the Hospital council should ensure a strong review agency for checking activities of the department of internal audit. Again, since the Hospital is a government institution, the Audit Report Implementation Committee set by the law should be up and doing.

The organizational structure in the Hospital should clearly show each person‟s role and the authorities required to perform those roles. The lines of authority should be clearly stated so that employees would know whom to report to or take instruction from in the Hospital.

Finally, University of Nigeria Teaching Hospital, Enugu should invest in computerizing most of its manual operations especially at the finance department. This would involve the acquisition of computers and various soft wares that would complement and facilitate smooth delivery of service to their services users.

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