Full Project – EFFECT OF INTERNAL CONTROL ON FINANCIAL MANAGEMENT OF POLYTECHNICS IN NIGERIA (A CASE STUDY OF SELECTED POLYTECHNIC)

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CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Internal control system provides assurance to the management of the dependability of accounting data used in making decision. Decisions made by management becomes company policies and to be effective, these policies must be communicated throughout the organisation and consistently followed. However policies are not adequately followed in the public sector and to the extent that good governance is only imagined in Nigeria.

Organisations are set up to pursue certain objectives. For profit making organisations the ultimate objective is to create wealth for shareholders and make reasonable profit to sustain the business. Not all organisations have similar objectives to achieve.

Management of controls in non-profit making organisations is a subject to which very little information exists in the accounting for literature. Though the way in which managers may apply the concepts of management control may differ in some esteem, the

basic concepts of management control are the same for both profit making firms and non-profit making organisations (Anthony and Young, 1994).

In pursuing these goals and objectives certain tools are employed to assist them in the efficient management of the scarce resources at disposal to bring the best out of them. In this regard, the right environment and tools are needed to employ to achieve the desired objectives. This involves both management and employees to ensure that enabling environn1ent is created.

According to Creveld [n.d] ancient times existed in control systems. The dual administration in Hellenic Egypt were one is bureaucrats responsible for assembling taxes and an observation on the other side.

Association of Certified Fraud Examiners (2007) stated in their manual indicated that all organisations are exposed to the fraud and risk. Big thefts have led to the collapse of firm‟s institutions and resulted to massive venture sufferers, substantial of legal costs, confinement of key individuals, and destruction of self-assurance in money markets. Broadcast fraudulent behaviour by key directors has destructively impacted the standings, brands, and images of many organisations round the globe.

Consequently, at hand are several methods that public sector organizations are held accountable and for many dissimilar traits of their presentation. Generally, however, they usually prepare and present financial reports.

1.2 STATEMENT OF THE PROBLEM

It has been established that public sector organisation form an important part of the economy, Setana (2009). Currently, there is a general fall in the operational performance of these organisations forcing the government to achieve less than its target objectives. Research conducted to find out the causes of ministries failure to achieve their objectives point to ineffective internal control system. Adepoju (2011), found that internal control was primary to the achievement of objectives in public organisations and the indications of effective internal control system that enhance performance. The problem here is to find out whether there are effective control mechanisms with regards to the budgeting, expenditure, tracking, transparency and accountability, risk management, fraud prevention and detection in the benue state ministry of finance.

Internal auditing has become an integral part of the administrative system of tertiary institutions in Nigeria. As autonomous as they are, tertiary institutions receive subventions from the central government to facilitate the execution of their duties. In the process of this, internal audit units of the various tertiary institutions play pivotal role in ensuring that the control systems in these institutions are effectively complied with so as to ensure good governance.

The public procurement act was not to be left out as well as the Financial Administration Act and the Internal Audit Agency Act was made to work effectively.

However, it is worth noting that most units and departments in universities and polytechnics have not fully appreciated the role of internal controls as being one to ensure efficient utilization of the resources of these institutions.

1.3 RESEACH OBJECTIVES:

The main objective of this research is to study and effect of internal control on financial management of polytechnics in Nigeria.

The Specific objectives are:

1. Determine what are the internal control system existence at the polytechnic and the extent to which they have been achieved.

2. Find out if management of the Polytechnic are overriding the internal control systems.

3. Determine if internal control systems at the polytechnic are consistent with internationally acclaimed standards, contained on Committee of Sponsoring Organizations (COSO).framework.

1.4 THE RESEARCH QUESTIONS

This research sought in providing answers to the following questions:

1. What are the internal control systems in existence at Isa Mustapha Agwai 1 Polytechnic?

2. Is management at the Polytechnic able to override the control systems?

3. How consistent are the internal control systems at the Polytechnic to the COSO framework?

1.5 SIGNIFICANCE OF THE STUDY

Internal control system promotes efficiency, reduce risk of assets loss and help ensure the reliability of financial statements and compliance with rules and regulations. This study will bring the awareness to the need for effective internal control system in public sector in general and the ministry of finance in particular.

Beside designing the study show the importance of a proper and effective internal control system in government ministries. It will be of imense benefit to academics, researchers, and students  who are interested in internal control and financial management. The study therefore provides informative reference materia as well as add to existing body of literature.

The outcome of this study will bring to light to the management of Isa Mustapha Agwai 1 Polytechnic, the degree of internal controls system in the Polytechnic. This would assist management of the institution to strengthen its internal control mechanism. Finally, the study will serve as a contribution of knowledge to help future researchers on the same topic. Researchers may fall on this study as a secondary source of literature on their research work.

SCOPE AND LIMITATIONS OF THE STUDY

There are many public institutions in the country but the researcher chose Isa Mustapha Agwai 1 Polytechnic because of proximity and time constraint. Among some of the difficulties faced by the researchers was the combination of the research work with the semester‟s course work. Limited financial resources to undertake the study adequately and Unwillingness on the part of some respondents to give out information which they consider delicate and private to the organization and the choice of words to represent what is actually in mind. Despite the above limitations, the data collected was sufficient and appropriate to help make helpful suggestions and valid conclusions.

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Full Project – EFFECT OF INTERNAL CONTROL ON FINANCIAL MANAGEMENT OF POLYTECHNICS IN NIGERIA (A CASE STUDY OF SELECTED POLYTECHNIC)