Efficient Internal Controls System And Human Resources Management

Project and Seminar Material for Business Administration and Management BAM

Efficient Internal Controls System And Human Resources Management


Abstract


Although efficient Internal control is a critical component of company management and a foundation for safe and sound operation of organisations, there is lack of mutual understanding with regards to the effective functioning of internal control mechanisms and the management functions of govern organisations with regards to planning process. In this regard the study seeks carryout a critical analysis on Efficient Internal Controls System And Human Resources Management.

The study adopted the survey research design and randomly enrolled participants in the study. A total of 80 responses were validated from the enrolled participants where all respondent are active workers in the Enugu East local government of Enugu State. The result showed that there is a significant relationship between efficient internal control system and human resource management in the Enugu east LGA. It also proved that there is a significant impact of Efficient internal control system on effective human resource management. Finally, the result shows there is a significant relationship between Efficient internal control system and its impact on employee performance in Enugu east Local government.


Chapter One


Introduction

1.1 Background of the Study

The human society is increasingly becoming more complex. We live in a society in which both our work and leisure activities are dominated by both private and public complex organization.

Organizations emerge to carry out certain activities to the benefit of any of its members and the public. Everyone in the organization carries out certain activities to contribute to the goals of the organization and these activities can be positive or negative, high or low. All of those efforts put in place by individual to achieve organization goal is called “individual performance” the sum total of individual and group effort is referred to as organizational performance.

Thus, the objective of every manger is to ensure the individual and groups within the organization put in their best to bring about the performance need to be managed so as to contribute to organization expectation goal, and to being about performance success which is the essence of organization; there is need for the success which is the essence of organization, there is need for the management to predict and control individual and group behaviour so as to reduce the incidence of unfavorable attitude.

In other words, it is not only on individual level only that performance is evaluated. Organization at regular interval always evaluates its performance against certain criteria to see if it is efficient and effective. These criteria have variously termed as performance indicator. These performance indicators could be meeting goals, sourcing of inputs, organizational participant and satisfaction etc.

Internal control is not only essential to maintaining the accounting and financial records of an organization, it is essential to managing the entity. Reinforcing internal control is generally seen as one of the most important steps in avoiding negative surprises. Effective internal controls ensure that risks are identified at an early stage. As important as internal control is everyone such as the external auditors, the management, the management, the board of directors, the shareholders of large public companies, the government etc has interest in it.

According to the committee of sponsoring organization of the Trade Way Commission (COSO) internal control system is a process, established by an entity’s board of directors, management and other personnel, to provide reasonable assurance regarding the achievement of objectives in the following categories.

  • Effectiveness and efficiency of operation
  • Reliability and financial reporting
  • Compliance with applicable laws
  • Regulations and safeguarding of assets against unauthorized acquisition, use or disposition.

Division of duties make internal controls system to be effective, the fundamental principle underlying adequate division off duties is that employees who, as part of their normal, have access to an entity’s assets should not also have uncontrolled access to the records that establish accountability for those assets.

Internal control plays a very important role in the operational performance of an organization. Without a good internal control measures in an organization, things are likely to be done anyhow which might lead to poor performance and losses. A strong internal control ensures risk is mitigated and resources protected.

In this analysis the researcher intends to explore how internal controls actually contributed to empower businesses to release creativity and entrepreneurship of abusiness or organizational set up. Internal Controls in Public Sector Organization otherwise referred to as managerial policing plays an essential role in maintaining confidence in the stewardship of public funds by always putting those to whom the responsibility of stewardship is entrusted, in check.

To protect the interest of the public, every Local government agency or unit such as the Enugu east require some forms of checks and balances to self-appraise the organization and for that matter the LGA with regards to its operations and functioning. This is done mainly and unconsciously with the institutionalization of Internal Control system in the LGA and also by allowing the system to work or function properly.

Organizations therefore need to establish efficient and effective Internal Control system to ensure that the organization on the whole functions and operational activities are in accordance with established standards and geared towards the attainment of the organizational goals. In this report therefore, the Internal Control systems of which the Internal Audit function is a major player or component and forms one of the tools in any control mechanism need to be empowered to report on significant issues to management for redress and for purposes of informed decision making.

Recent corporate scandals (such as Enron and WorldCom scandal in 1990) and the legislations, like the Sarbanes Oxley Act which was passed in July 2002 have spurred the public to focus on the importance of Internal Controls and government of organizations which is not limited to only private business activities but include state, federal agencies, public utilities, hospitals, colleges and universities, pension schemes, boards of trustees, the legislature, board of governors and local government institutions of which the Enugu east LGA is part.

The Internal Control function of an organization, for that matter Enugu east has multiple roles of oversight, insight and foresight responsibilities. Oversight responsibilities handled by the Internal Control system of the Enugu east helps to ensure that the LGA is doing what it is supposed to do and serves to detect and deter public corruption, in the LGA.

By its insight responsibilities, the Internal Control system or function assist decision makers (management of the LGA) by providing them with an independent assessment of the LGA’s policies, programmes, operations and results. For its foresight responsibilities, the Internal Control function helps to identity trends and emerging challenges of the organization.

In the midst of the immense benefits of effective Internal Control systems to the citizenry and stakeholders of the LGA as a whole, this study seeks to assess the effectiveness of Internal Controls system on human resource management in Public Sector Organization with a case study of the Enugu east LGA.


1.2 Statement of the Problem

Most often, there is lack of mutual understanding with regards to the effective functioning of Internal Control system and the HR management functions of govern organizations with regards to planning process, each other’s role and working together to facilitate effective organization arrangements. A situation that often results in antagonisms and confusion in the governance processes of many government organizations.

Internal Control system in public sector organizations are often misconstrued and often aligned with political and management affiliations rather than they being lookedat objectively and holistically. This state of affairs often results in mistrust of the public in the Internal Controls in the public sector, particularly in the local government systems.

Further, the reporting lines of the Internal Audit Units in the organizational structure of the LGAs tend to conflict with other functions of numerous monitoring and review teams in the local government system thereby affecting negatively the independence of the Internal Audit Unit and the scope of their work.

Without over emphasizing the immense benefits of internal controls in public sector organizations and to the citizenry, coupled with recent revelations of financial malfeasances in many local government institutions, particularly the LGAs as unearthed by the Public Accounts Committee (PAC) of Parliament. This study therefore seeks to address the role of internal controls in human resource management of the Public Sector Organizations. Accordingly, the practice boundaries between what are internal controls versus managerial reviews/oversight, and what are controls in general versus other assessments or evaluation functions constitute what this study seeks to unearth.

However, recent accounting frauds by many of our public sector institution have created mistrust among users towards organizations. These incidences create consequences which have an economic impact. For the public to have the most beneficial impact of the Assemblies operations, it is essential that the Assemblies report the results of their work promptly, be it financial or operational and not just to elected and appointed representatives but also to management of the assemblies. Some executives of many organizations have sought ways to control the enterprises that they run. Internal controls help an organization to achieve its objectives.

An increasing change in the organizations environment has become a common feature in modern organizations and business which call for effective internal control systems to promote efficiency, effectiveness and compliance with rules and regulations. There have been calls for better internal controls in organizations. Internal controls are therefore looked upon more and more as a solution to a variety of potential problems in organizations including the Enugu east LGA.


1.3 Objectives of the Study

the main objective of this study is to examine the efficient internal controls system and human resources management. Specifically the study aims:

  1. To identify the various forms, measures and mechanisms put in place to enhance the effectiveness of internal controls in the Enugu east LGA.
  2. Assess the effectiveness of the existing internal controls on human resource management at Enugu east LGA.
  3. To identify and assess the key element of an effective and efficient internal control function.
  4. Identify the major problems that inhibit the effective and efficient functioning of internal controls in the accomplishment of the Enugu east LGA goals

1.4 Hypothesis of the Study

The following null hypothesis were formulated and tested

H01: there is no significant relationship between efficient internal control system and human resource management in the Enugu east LGA

H02: efficient internal control system has no significant impact on effective human resource management

H03: efficient internal control system has no significant impact on employee performance in Enugu east Local government


1.5 Significance of the Study

The importance of this study cannot be overemphasized, as it sets out to unearth how an effective and efficient internal control function impacts positively on good governance and accountability in public sector organizations; it also unearth as well the negative impacts of ineffective and inefficient internal control mechanisms impacts on governance of public sector entities. Thereby helping policy formulators and decision makers in public entities to know the kind of policy instruments regarding good governance that will help them to shape their respective organizations and institutions so as to make them more efficient and viable and vision oriented.

As evidenced in the introduction, internal controls form the cornerstone of good governance in all organizations. In the public sector, internal controls has a major role to play in protecting public interest relating public funds as well other important aspects of the purpose of public institutions. It is therefore not out of place to assess and take stock of internal control activities’ impact on good governance in the Ghanaian public sector entities in order to help plan the way forward.

The study also seeks to provide an opportunity to policy makers (government) to harness the most benefits out of the internal control function and tools by identifying loopholes in the existing processes/mechanisms and knowing how it impacts on good governance in government activities.

Lastly, it seeks to add to the knowledge and existing literature and also to serve as a pivot for future research work in the area or subject matter.


1.6 Scope of the Study

The study was conducted on the efficient internal controls system and human resources management focusing on the effectiveness that such control system have on the overall governance of public sector organizations, particularly the Enugu East Local government area. It will also take a look at internal audit recommendations, implementation, monitoring and strategies as well as other elements that comes together to form the case study.


1.7 Limitations of the Study

The major limitations anticipated in this research study included time and financial constraints. The time frame for the conduct of the study is limited, coupled with financial difficulties other public sector organizations beside the Enugu East LGA cannot be visited.

The case study approach is be adopted for this research, which means that there is the likelihood that issues to be discussed in the case study Assembly might not apply in other public sector organizations in the country.

Again the sensitivity and confidentiality of management information regarding internal audit and other management review reports and responses will make it difficult getting easy access to the needed data from the case study Assembly. The researcher, however, intends to find appropriate antidotes to overcome these in order that they do not affect the findings of this research work in any way.


Chapter Five


Conclusion and Recommendation

5.1 Conclusion

In this study, our focus was to carryout a critical analysis on Efficient Internal Controls System And Human Resources Management. The study specifically was aimed at identifying the various forms, measures and mechanisms put in place to enhance the effectiveness of internal controls in the Enugu east LGA. This study reviewed and anchored its framework on Steward theory.

The study adopted the survey research design and randomly enrolled participants in the study. A total of 80 responses were validated from the enrolled participants where all respondent are active workers in the Enugu East local government of Enugu State.

The result from this investigation proved that there is a significant relationship between efficient internal control system and human resource management in the Enugu east LGA. This shows that an improved internal control system will in turn improve the human resource management in the Enugu east LGA

The result from this investigation also proved that there is a significant impact of Efficient internal control system on effective human resource management.

Finally, the result from this investigation established that there is a significant relationship between Efficient internal control system and its impact on employee performance in Enugu east Local government.


5.2 Recommendation

Based on the responses obtained, the researcher proffers the following recommendations:

Policy makers have interest in promoting the public service organizations of which the Enugu east LGA is not an exception by making them efficient, stable and more productive in order to boast public (customer) confidence in them. Much of these are owed to effective internal control policies and their effective implementation. A pre-requisite to the formulating effective internal control policies to some extent depends on the understanding of how to manage the people of the organization. To add to this, it is often the desire of top management of many organizations to remain focused and competitive, for Human resource factor constitute the number one asset of every business or organization without which all other assets of the organization cannot run. To achieve this therefore, it is required of management to have a sound knowledge of how to acquire and maintain an effective workforce and a peaceful and conflict free working environment as well as how best to measure the human capital of the organization in the light of internal control measures in place for the effective and efficient operations of the organisation.


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