ADEQUACY AND EFFECTIVENESS OF FINANCIAL CONTROL IN THE PUBLIC SECTOR

ADEQUACY AND EFFECTIVENESS OF FINANCIAL CONTROL IN THE PUBLIC SECTOR

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ABSTRACT

This research was aimed at finding out the adequacy and effectiveness of financial control in the public sector in Nigeria. The population for the study entails all the workers in the State Board of Internal Revenue in Bayelsa State. Nigeria. Out of which the sample size was selected using the Taro Yamani’s sampling techniques. Data for this study were primarily and secondarily sourced. Linear regression analysis was used to analyse the data collected with the aid of SPSS version 23.

The study reveals that there is insignificant positive relationship between internal control on accountability and a significant positive relationship between internal audit and accountability in Nigeria. The study therefore, recommends that; organization should pay more attention on internal audit than on internal control to ensure effective financial control and improve on accountability, Management should establish and implement periodic review of internal audit performance to ensure that its performance and value to the Institution is maximized and to ensure compliance with appropriate standards and guidance and Internal control activities, procedures and policies should be regularly revised to ensure that they are effective.

CHAPTERN ONE

INTRODUCTION

1.1 Background of the study

The Nigerian society is filled with stories of wrong practices such as stories of ghost workers on the pay roll of Ministries, Extra-ministerial Departments and Parastatals, frauds, embezzlements and setting ablaze of offices housing sensitive documents and corruption are found everywhere in the country (Okwoli, 2004; cited in Onuorah, 2012).

Huge amount of Naira is lost through one financial malpractice or the other in Nigeria, which to say the least, drains the nation’s meager resources through fraudulent means with far-reaching and attendant consequences on the development or even socio-economic or political programmes of the nation (Bello, 2001). Billions of Naira is lost in the public sector every year through fraudulent means. This represents only the amount that is ferreted out and made public. Indeed much more substantial or huge sums are lost in undetected frauds or those that are for one reason or the other hushed up. Appah and Appiah (2010) argues that cases of fraud is prevalent in the Nigerian public sector and that every segment of the public service, could seem to be involved in one way or the other in some of these nasty acts.

The bane of public sector financial mismanagement in Nigeria since the oil boom years a period under which there existed structurally weak control mechanism, which create a variety of loopholes that have tended to facilitate and sustain, corrupt practices. This is coupled with the fact that there is a near total absence of the notion and ethics of accountability in the conduct of public affairs in the country (Bello, 2001).

According to Block & Geoffrey (2008) cited in John, et al, (2014), financial control is defined as the procedures designed to protect assets and ensure that all financial transactions are recorded to prevent and reduce errors and fraud.

Public sector organizations deal with large amounts of public funds and operate in a largely political environment, thereby necessitating a need for a high degree of confidence in the way in which their financial affairs are being conducted (Prowle, 2010). The goal of having a strong system of financial control is to promote the institution’s ability to reach its objectives, providing reliable financial data, safeguarding assets and records, evaluating operational efficiency through budget, organizational control and encouraging adherence to prescribed policies and regulations.

An institutions system of effective financial control has a key role in the achievement of public sector objectives. A sound system of financial control contributes towards safeguarding the stakeholders‟ investment and the institution‟s assets. Financial controls facilitate effectiveness and efficiency of operations, thus helping to ensure the reliability of internal and external financial reporting and assist in compliance with laws and regulations (Hayles, 2005).

Hayles (2005) opined that effective financial controls including the maintenance of proper accounting records help ensure that the institution is not unnecessarily exposed to financial risks and that the financial information is used only within the business. This also contributes to the safeguarding of assets, including the prevention and detection of fraud (ACCA, 2010). Walters and Dunn (2001) have stated that obtaining sufficient knowledge of the internal financial controls, both information technology controls and application controls, are needed to facilitate the determination of the audit strategy and to carrying out subsequent steps.

Financial control activities are the policies and procedures that help ensure that management directives are carried out (Walters & Dunn, 2001). Control of the financial decisions covering the organization, method, process and internal audit established by the administration in order to ensure that the activities are carried out in compliance with the purpose of the administration and determined policies and the legislation, the assets and resources are protected, accounting records are kept in an accurate and complete manner and financial and management information is produced in line and in a reliable manner (Khoove, 2010). Hence controls of the financial decisions and transactions of the public institutions related to the revenue, expenditure, assets and liabilities concerning their compliance with the budget, budget item, available applicable amount, expenditure programme, financing programme of the administration, to central government budget law and other financial legislation provisions.

Okoh & Ohwoyibo (2009), accountability reflects the need for government and its agencies to serve the public effectively in accordance with the laws of the land. This increase in activities has brought with it an increased demand for accountability of public officers who manage these activities of the public.

Achua (2009) says “serious consideration is being given to the need to be more accountable for the often vast amounts of investment in resources at the command of governments, which exercise administrative and political authority over the actions and affairs of political units of people.

Government spending is a very big business and the public demands to know whether the huge outlays of money are being spent wisely for public interests”.

Kaufman (2005) argues that an emphasis on accountability by citizens is one aspect of the growing emphasis on eliminating corruption and promoting transparency in government. However, the issue of accountability in Nigeria is a fundamental problem because of the high level corruption in all levels of government in the country. Amongst the countries surveyed by the Transparency International global  Corruption Perception Index in October 2010, Nigeria was placed 134 from its 130 position in 2009 an 2008 in 121.

1.2 STATEMENT OF THE PROBLEM

Also, Failures to understand the impact of internal control system in public sector has drastically eaten the fibre of the public sector as a result of lack of financial controls (John, 2014). The absence of adequate financial control measures exposes the accountability of the public sector to certain threats such as incorrect financial statements, loss of government assets, fraud, mismanagement of government vital documents,  incorrect and unreliable financial  records which may lead to loss of government integrity, and implementation of accounting policies inconsistent with the applicable legislation.

However, there is a general perception that institution and enforcement of effective financial controls may lead to improved accountability in the public sector. It is also a general belief that properly instituted systems of financial controls improve the reporting process and also give rise to reliable reports which enhances the accountability function of management of an entity.

Nevertheless, available literature although scanty indicates that in spite of elaborate system of controls in organizations, accountability has been elusive in most of these organizations (OAG, 2010). This necessitated this study which sought to establish the impact of effective financial controls on accountability in the public sector. Therefore, this study will specifically examine: the extent to which internal control impacts on accountability in the public sector and the extent to which internal audit impacts on accountability in the public sector.

1.3 AIMS AND OBJECTIVES OF THE STUDY

The aim of this study is the Adequacy and effectiveness of financial control in the public sector. With the following specifics:

1.   To have an overview of the adequacy and effectiveness of financial control in the public sector.

2.   To find out if financial control has negative insignificant impact on accountability.

3.   To determine if effective financial control has negative significant impact on public service delivery

1.4 RESEARCH HYPOTHESIS

Ho: Financial control has negative insignificant impact on accountability.

Hi: effective financial control has negative significant impact on public service delivery.

1.5 SIGNIFICANCE OF THE STUDY

This topic the adequacy and effectiveness of financial control in the public sector is important to public servants and government officials.

This study would contribute relevant literature on the topic.

1.6 SCOPE AND LIMMITATIONS

The population for the study entails all the workers in the State Board of Internal Revenue in Bayelsa State. Nigeria

1.7 DEFINITION OF TERMS

FINANCIAL CONTROL: This are processes, policies and procedures that are implemented to Manage finances.

INTERNAL CONTROL:  this are processes for assuring of an organization’s objectives in operational effectiveness and efficiency, reliable financial reporting, compliance with laws, regulations and policies.

PUBLIC SECTOR: This is simply part of the economy controlled by the State.

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.


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