INTERNAL FINANCIAL CONTROL SYSTEM IN INSTITUTION OF HIGHER LEARNING. A CASE STUDY OF OSUN STATE UNIVERSITY.

TABLE OF CONTENTS

CHAPTER ONE

1.0     INTRODUCTION        

1.1     BACKGROUND OF THE STUDY 

1.2     STATEMENT OF THE PROBLEM

1.3     OBJECTIVES OF THE STUDY     

1.4     RESEARCH QUESTIONS

1.5     SIGNIFICANCE OF THE STUDY 

1.6     SCOPE OF THE STUDY

1.7     LIMITATION OF THE STUDY

1.8     DEFINITION OF TERMS     

CHAPTER TWO

2.0     LITERATURE REVIEW

CHAPTER THREE

3.0     RESEARCH METHODOLOGY

CHAPTER FOUR

4.0     DATA ANALYSIS

CHAPTER FIVE

5.0     SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION

REFRENCE

APPENDIX

CHAPTER ONE

1.0            INTRODUCTION

1.1 BACKGROUND STUDY

Internal financial controls are systems within a company that design methods and procedures to produce effective operations, establish reliable financial reporting, avoid fraud and maintain compliance with regulations and laws. Internal financial controls evaluation is meant to help institution review and assess the structure of accountability within the organization. An effective system of internal financial controls gives assurance regarding the integrity of financial reporting and safeguarding of assets. Fraud can easily be detected through internal controls. Such controls also help accuracy in financial reporting. Asare, T. (2006).

Internal financial controls are used by organisations to make sure financial information is accurate and valid. The existences of internal financial controls are important because they protect the integrity of an organisation's financial information and allow stakeholders a measure of financial health. Strong internal controls can also increase the profitability of a company. Krishnan (2005).

Internal control as “Comprising the plan of an organization and all the co-ordinate methods and measures adopted within a business to safeguard its assets, check the accuracy and reliability of its accounting data, prorate operational efficiency and adherence to prescribed managerial policies.” The definition of internal control is divided into financial internal control and non-financial (administrative) internal control.Financial internal control pertains to financial activities and may be exemplified by controls over company‟s cash receipts and payments financing operations and company‟s management of receipts and payments.Non-financial internal control on the other hand deals with activities that are indirectly financial in nature i.e. controls over company‟s personnel section and its operations, fixed assets controls and even controls over laid down procedures (Reid and Ashelby, 2002). A sound internal control system helps an organization to prevent frauds, errors and minimize wastage.Custody of assets is strengthened; it provides assurance to the management on the dependability of accounting data eliminates unnecessary suspicion and helps in maintenance of adequate and reliable accounting records.This study therefore attempts to establish the effectiveness of internal control system in manufacturing firms in Kenya (Amudo and Inanga, 2009).

Mawanda (2008), states that “there is a general perception that institution and enforcement of proper internal control systems will always lead to improved financial performance”. It is also a general belief that properly instituted systems of internal control improve the reporting process and also give rise to reliable reports which enhances the accountability function of management of an entity. Preparing reliable financial information is a key responsibility of the management of every public company. The ability to effectively manage the firm’s business requires access to timely and accurate information.

Dixon et al (1990) found out that appropriate performance measures are those which enable organizations to direct their actions towards achieving their strategic objectives. Stoner (2003) refers to performance as the ability to operate efficiently, profitably, survive, grow and react to the environmental opportunities and threats. In recent years the aspect of internal control system has achieved great importance since it is designed to safeguard the company’s assets against misuse, ensure compliance with the company’s laid policies, ensure the company’s personnel are efficiently utilized and the company runs in an orderly and efficient manner. So this study focuses on the internal financial control system in institution of higher learning, using Osun State University as a case study.

1.2     STATEMENT OF THE PROBLEM

There are various components of internal financial control systems used to develop and evaluate an organizational financial regulatory compliance. These components are control environment, risk assessment, control activities, information and communication and monitoring. They need to work together to form a strong set of methods and procedures the company follows in its operations.

In addition to these internal control system, there are other laws and institutional frameworks and are established to ensure sound financial administration of state and other enterprises. With increasing donor support for the education sector and increasing budgetary allocation there are calls for stringent financial management to ensure value for money and thereby increase the total wellbeing of the country.

Again, internal financial controls are enforced better in profit organizations compared to non-profit organizations. Therefore, there is the need to evaluate internal financial control system in institution of higher learning, using Osun State University as a case study.

1.3     OBJECTIVES OF THE STUDY     

The general objective of this study is to examine internal financial control system in institution of higher learning, using Osun State University as a case study. The specific objectives are:

1.     To examine if there are operational internal financial controls systems in Osun State University.

2.     To ascertain the nature of the internal financial control system implemented in Osun state University.

3.     To find out the effect of internal financial control system on the financial performance of Osun state University.

4.     To investigate the other conventions and laws that govern financial management in Osun state University.

5.     To establish the consequences for compliance or non-compliance of such systems and regulations in Osun State University.

1.4     RESEARCH QUESTIONS

The relevant research questions related to this study are:

1.     Are there operational internal financial controls systems in Osun State University?

2.     What is the nature of the internal financial control system implemented in Osun state University?

3.     What is the effect of internal financial control system on the financial performance of Osun state University?

4.     What are the other conventions and laws that govern financial management in Osun state University?

5.     What are the consequences for compliance or non-compliance of such systems and regulations in Osun State University?

1.5     SIGNIFICANCE OF THE STUDY 

The research would enable the government to be aware of the internal financial controls associated with non-profit making organization like in the education sector and to find appropriate steps in addressing them. The personnel of the sector would become aware of the problems and with the recommendations, and thus be in a better position to solve them.

Findings from the dissertation are expected to help managers to have insight into internal financial controls in place and to appropriate it to achieve results. It is also hoped that findings from this dissertation would confirm the existing research about internal financial controls in non-profit making organizations like public hospitals.

This study will enhance the existing body of literature by contemplating the areas of the literature that have not yet been examined or considered and incorporating these factors into the current study. The study will thus form the basis for further studies in the field.

1.6     SCOPE OF THE STUDY

The scope of this study is restricted to the investigation of internal financial control system in institution of higher learning. The study is limited to using Osun State University as a case study. 

1.7     LIMITATION OF THE STUDY

Some of the major constraints the researchers encountered in putting up this research include lack of time, lack of willingness to give information by respondent and also limited resources.

1.8     DEFINITION OF TERMS     

Financial reporting is the process of producing statements that disclose an organization's financial status to management, investors and the government.

Internal control: as defined in accounting and auditing, is a process for assuring achievement of an organization's objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies.

Educational institution is a place where people of different ages gain an education. Examples of some institutions are preschools, primary schools, secondary schools, and further and higher education. They provide a large variety of learning environments and learning spaces.