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THE ROLE OF INTERNAL CONTROL IN THE PUBLIC SECTOR: A CASE STUDY OF

EDWESO GOVERNMENT HOSPITAL.

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THE ROLE OF INTERNAL CONTROL IN THE PUBLIC SECTOR:

A CASE STUDY OF EDWESO GOVERNMENT HOSPITAL.

By

[EMMANUEL OSEI BOAKYE]

i
 ABSTRACT

The backward development in the public sector has been attributed to weaknesses in the Internal

Control Systems in the public sector. Huge amount of money is lost due to Internal Control

inadequacies and other criminal temptations, which to say the least, drains the nation’s meager

resources with its far-reaching and attendant consequences on the development or even socio-

economic or political programs of the nation. Thus, public sector organizations do not have

strong policies and systems to check these activities in the public sector. A sample size of 20

respondents was drawn from the population. The convenience sampling technique was used to

select the employees whiles purposive sampling technique was used to select management in the

organization. Questionnaire was the main instrument used to collect data.Tables and bar charts

were used to determine the frequencies and the percentages in data analysis. The study revealed

that Internal Control System had been effective at the Hospital as a result of effective

supervision, Segregation of duties, proper authorizations and approval etc. Internal Control

System faces some problems in its implementation such as poor judgement in decision making,

making errors due to carelessness, fatigue etc. This study concluded that Internal Control System

at Edweso Government had been effective and efficient. Hence, having positive effect on

employee satisfaction.

ii
 LIST OF TABLES

Table 4.1 Effectiveness of Internal Control System……………………………………….35

Table 4.2 Employee Satisfaction…………………………………………………………..38

Table 4.3 Challenges of Implementing Internal Control System………………………….41

iii
 LIST OF FIGURES

Figure 4.1 Effectiveness of Internal Control System…………………………………….36

Figure 4.2 Employee Satisfaction………………………………………………………..39

Figure 4.3 Challenges of Implementing Internal Control System…………………….…42

Figure 4.4 Relationship between Internal Control System and Employee Satisfaction....45

iv
 CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Public demands and expectations at the grassroots for the provision of essential social and basic

services using government resources have continued to be astronomically high, as manifested by

rising pressure on the resources with which to satisfy these. This assertion is not difficult to

appreciate if we accept the simple fact that the strength of any government depends on the

success of its development programmes, which largely depend on an effective implementation of

its policies, by its bureaucrats and technocrats. It is obvious that social, political and economic

development involves the effectiveness and the efficiency of the bureaucracy on one hand and

the probity of the bureaucrats on the other. Government exists to serve the interest of the

citizens. There must therefore be a way of holding the former accountable to the latter (Bello,

2001).

Huge amount of money is lost through fraud or due to internal control inadequacies and other

criminal temptations, which to say the least, drains the nation’s meagre resources through

fraudulent means with its far-reaching and attendant consequences on the development or even

socio-economic or political programmes of the nation (Bello, 2001). Thus, as Kamaluddeen

(1991) observed “billions of Naira is lost in the public sector every year through fraudulent

means”. This, he argues 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. Cases of frauds in the public sector are so pronounced that

everyone in every segment of the public service could seem to be involved in one way or the

1
other in some of these nasty acts (Kamaluddeen 1991). This assertion is not difficult to

appreciate if we accept and adopt the simple definition of fraud as any deliberate false act aimed

at deceiving or harming any party, individual or corporate body, in any manner (Bello 2001).

Presenting the 1989 budget, Babangida (1989) lamented that “This administration has always

appreciated the desirability of fiscal discipline and the need to bring planned expenditure and

projected revenue into reasonable alignment. Our performance in this regard in 1988 was far

from satisfactory” (p.16). According to Zayyad (1990), an estimated 8 billion has been lost in

abandoned projects during the two decades 1970-1990; this is not to talk of what was lost in the

last decade, through abandoned projects and other fraudulent means. Thus, one need not wonder

too much to see how devastatingly frauds have compromised the administrative competence,

performance capacity and general credibility of the public sector. Initial estimates of major

projects become little fractions of ultimate costs paid, original cash projections produce less than

half of the benefits expected and projects which seemed technically feasible and economically

viable, turnout “white elephant” if not, abandoned, with serious implications for growth and

development (Bello, 2001).

1.2 Statement of the Problem

In spite of efforts made by the government to combat fraud in the public sector, millions of state

funds meant for national development go into the wrong pockets through fraudulent acts by some

individuals in the sector. Some public sector stewards spend funds on themselves and on projects

based on their own interest and not that of the nation (Ricchiute, 2000).

2
According to Csazer (2000), there are lots of fraudulent activities in the public sector due to

weak internal control systems and measures. Thus, public sector organisations do not have strong

policies and systems to check fraudulent activities in the public sector. Financial laws and

regulations are implemented and courts and tribunals continue to administer justice to fraudsters,

all in a bid to prevent and control fraud but to no avail due to the weak internal control systems

and checks in the public sector (Csazer, 2000).

Hence, this study intends to look at the role of Internal Control System at Edweso Government

Hospital.

1.3 Objectives of the Study

The following are the objectives for this study:

1. To examine the effectiveness of Internal Control System at Edweso Government

Hospital.

2. To identify the relationship between Internal Control System and Employee Satisfaction

at Edweso Government Hospital.

3. To determine the challenges of implementing Internal Control System at Edweso

Government Hospital.

1.4 Research Questions

The following research questions are posed by the study:

1. How effective is the Internal Control System at Edweso Government Hospital?

3
 2. What relationship exists between Internal Control System and Employee Satisfaction at

Edweso Government Hospital?

3. What are the major challenges Edweso Government Hospital faces in implementing

Internal Control System?

1.5 Significance of the Study

This research study is aimed at helping the public institutions in Ghana to implement effective

Internal Control. This is to ensure that the state fulfils its mission and achieves its goals while

providing safeguard to government resources.

Again, it will help the management of Edweso Government Hospital to prepare and implement

effective and efficient plans by providing correct and reliable information in decision making

process. Thus, this study will help them to implement management policies to attain corporate

goals and objectives.

Finally, to students and researchers, a copy of this study will be put at the University’s library to

serve as a source of information and reference. To other readers, copies of this study will be

published in the electronic media for easy accessibility.

1.6 Scope and Limitations of the Study.

This study is to find out the role of internal control in detecting and controlling fraud in the

public sector using Edweso Government Hospital as a case study. It is Internal Control Systems

because it helps to protect the assets of the public sector from misuse, theft, and fraud etc. It also

boosts efficiency in the public sector and ensures orderly running of business through

supervision of duties and proper managerial review.

4
This research study also seeks to address the issue of fraud because it has become a great pain in

the neck of public sector organisations due to weak Internal Control Systems. Fraudulent

activities such as theft, double payment of invoices etc. are on the rise in the public sectors which

hamper national growth and development.

Moreover, it is Edweso Government Hospital because of easy access to accurate and reliable

data. Also, because the researcher resides in that area which will lead to easy access to the

hospital.

Finally, the major problem encountered during the study was inadequate time and financing the

work.

1.7 Definition of Terms

Internal Control System: Internal controls are policies, procedures, practices and organizational

structures implemented to provide reasonable assurance that an organization’s business

objectives will be achieved and undesired risk events will be prevented or detected and

corrected, based on either compliance or management initiated concerns.

Controlling: This is a managerial function which helps to check the errors and to take the

corrective action so that the deviations from standards are minimized and stated goals of the

organization are achieved in a desired manner.

Fraud: This is an action or an instance of deception in order to make money or obtain goods

illegally.

5
Public Sector: This is an area which belongs to the government which deals with the production,

ownership, sale, provision, delivery and allocation of goods and services by and for the

government or its citizens, whether national, regional or local municipal.

1.8 Organization of the Study

The study is organized in five chapters as follows:

Chapter one is the Introduction. It highlights Background of the Study, Statement of the

Problem, Objectives of the Study, Research Questions, Significance of the Study, Scope and

Limitations of the Study, Definition of terms and Organization of the Study.

Chapter two talks about the Literature Review. It covers an Overview of Internal Control

System, Overview of Fraud, Components of Internal Control System, Elements of Internal

Control System, Internal Control System in preventing Fraud in the Public Sector, Employee

Satisfaction and Challenges of Implementing Internal Control System.

Chapter three is the Methodology. This looks at the Type of Research, Population, Sample and

Sampling Techniques, Data Collection and Method of Data Analysis.

Chapter four is the Results and Discussion of Findings. This covers General Information on

Edweso Government Hospital, Data Presentation and Analysis, and Discussion of Research

Findings.

Chapter five gives the Summary of Findings, Conclusion and Recommendations of the Study.

6
 CHAPTER TWO

LITERATURE REVIEW

2.1 Overview of the Internal Control Systems

Internal control plays a vital role in how management meets its stewardship or agency

responsibility; to maintain controls that provide reasonable assurance that those adequate

controls exist over the entity’s assets and records. Proper internal control does not only ensure

that assets and records are safeguarded but also create an environment in which efficiency and

effectiveness are encouraged and monitored (Messier, et al., 2008).

According to Ricchiute (2000), the success of every organization be it private or public, profit or

non-profit oriented is influenced by Internal Controls as it seeks to make efficient use of its

resources. This implies that resources must be safeguarded to ensure that they are not employed

to serve personal interests of workers. Organizations must ensure that a reliable Internal Control

System is put in place to prevent the occurrences of any tragedy.

Internal Controls are policies, procedures, practices and organizational structures implemented to

provide reasonable assurance that an organization’s business objectives will be achieved and

undesired risk events will be prevented or detected and corrected, based on either compliance or

management initiated concerns (Awe, 2005).

Arens andLoebbecke (1997) defined Internal Control as the plan of organization and all of the

coordinate method adopted within a business to safeguard its assets, check the accuracy and

reliability of its accounting data, promote operational efficiency, and encourage adherence to

prescribed managerial policies. Kloot andSandercock (1982) defined Internal Control as “all

7
methods used by a business to guard against errors, waste and fraud, to promote compliance with

all company policies” (p. 23).

The Institute of Chartered Accountants of England and Wales (ICAEW), defined internal control

as the whole system of controls, financial or otherwise, established by management in order to

carry on the business of an enterprise in an orderly and efficient manner, ensure adherence to

management policies, safeguard the assets and secure as far as possible, the completeness and

accuracy of the records. According to McNamara (2004), Internal Controls are the measures

taken by an organization for the purpose of protecting its resources against wastes, fraud,

inefficiency; ensuring accuracy and reliability in accounting and operating data; Securing

compliance with organization policies and evaluating the level of performances in all divisions

of the organizations.

2.1.1 Classifications of Internal Controls

The Institute of Chartered Accountants of England and Wales (ICAEW), has classified Internal

Control System under three main categories which are as follows;

i. Preventive controls: These are controls that predict potential problems before they

occur and make adjustments. They also prevent an error, omission or malicious act

from occurring. Examples of preventive controls includes: Using well-designed

documents to prevent errors and establishing suitable procedures for authorization of

transactions.

ii. Detective controls: These controls are designed to detect and report the occurrence

of an omission, an error or a malicious act. Examples of detective controls includes:

8
 duplicate checking of calculations, periodic performance reporting with variance error

message over tape labels and hash totals counter cheques post-due account reports.

iii. Corrective controls: These controls help to minimize the impact of a threat, identify

the cause of a problem, correct errors arising from the problem. They also correct

problems discovered by detective controls and modify the processing system (s) to

minimize future occurrence of the problem. Examples of corrective controls are:

contingency planning back up procedures and rerun procedures.

2.2 Overview of Fraud

Fraud has been widely defined in literature by scholars and experts. Hornby (1998) defines Fraud

as an action or an instance of deception in order to make money or obtain goods illegally.

Hornby (1998) defines the perpetrators of frauds as fraudsters. According to McNamara (2004),

fraud consists of both the use of deception to obtain an unjust or illegal financial advantage and

intentional misrepresentations, affecting the financial statements by the one or more individuals

among management, employees, or third parties. Archibong (1992) describes Fraud as a

predetermined and well planned tricky process or device usually undertaken by a person or group

of persons, with the sole aim of checking another person or organization, to gain ill-gotten

advantages, be it monetary or otherwise, which would not have accrued in the absence of such

deceitful procedure.

Fraud according to Archibong (1992) may involve:

1. Falsification or alteration of accounting records or other documents

2. Misappropriation of assets or theft

9
3. Suppression or omission of the effect of transaction from records or documents

4. Recording of transactions without substances

5. Intentional misapplication of accounting policies

6. Wilfully misrepresentation of transactions of the entity’s state of affairs

This issue of fraud is a conventional phenomenon in the national life. In the government and

private sectors, it is the order of the day. In the public sectors, fraud is on the increase, companies

are failing every day, through the activities of fraudsters (Archibong, 1992).

2.2.1 Classification of Fraud

Robertson (1996) classifies Fraud into two main types which are stated below;

1. Management Fraud

2. Employee Fraud

2.2.1a Management Fraud

According to Fakunle (2006), management fraud often involves the manipulation of the records

and the account, typically by the enterprise’s senior officers with a view to benefiting in some

indirect way. An example is, obtaining finance under false pretences, or concealing a material,

worsening off the company’s true position, i.e., window dressing.

10
Robertson (1996) defines management fraud as a deliberate fraud, committed by management

that injures investors and creditors, through materially misleading financial statements.

Management fraud is sometimes called fraudulent financial reporting. Management fraud is

usually perpetrated by the management staff of an organization, which includes directors, general

managers, managing directors etc (Robertson, 1996). The class of victims of management frauds

is investors and creditors and the instrument of perpetration is financial statement.

The essence of management fraud most times is to attract more shareholders to come and invest

in the organization. It is also perpetrated, so that organization will be in better position of

obtaining loans from banks, because, a good statement will show a healthy look, hence it will be

a good collateral security (Robertson, 1996).

2.2.1b Employee Fraud

Robertson (1996) defines it as the use of fraudulent means to take money or other property from

an employer. It usually involves falsification of some kind, like false documents, lying,

exceeding authority, or violating an employer’s policies, embezzlement of company’s funds,

usually in form of cash or other assets. Employee frauds are more likely to be encountered where

internal controls are weak (Robertson, 1996).

According to Awe (2005), examples of employee fraud are as follows:

I. Alteration of invoices: It is where an individual unlawfully changes, alter, substitute, or

falsify an invoice if the practice tends to injure a competitor, destroy competition, or

mislead a court or the department. Such practice is unfair trade practice and a person

11
 resorting to that trade practice is guilty of a misdemeanour and is subject to the penalties

provided in the organisation.

II. Workers compensation fraud: Workers' compensation fraud is a type of fraud no

industry is safe from. Employees will attempt to fake an injury, such as a neck, back, or

joint problem to falsely claim money from you and your insurance company. This can

cause the organisation to lose thousands quickly, and can cause unwanted raises in your

premiums if left unchecked.

III. Pay check diversion: Pay check diversion is a form of employee fraud that takes place

when one employee takes a pay check from one of his co-workers when they are on sick

leave or other forms of absence. Make sure you keep paper checks in one area, preferably

locked in a safe with only trusted members of payroll and yourself allowed access.

Presenting identification to receive a check and a proper sign-in sheet are also affordable

ways to prevent pay check diversion

IV. Payment for hours not worked for: Unauthorized claiming of hours is one of the more

common types of employee fraud, rightly so because it is one of the harder ones to detect.

This happens when employees fluff their time sheets by several means, including but not

limited to, reducing lunch break times, increasing time before or after work, or sneaking

breaks without clocking out.

2.2.2 Causes of Frauds

There are many identified causes of fraud in the public sector. They vary from institutional to

economic, social, psychological, legal and even infrastructural causes. The immediate causative

agents of frauds in general are as follows (Fakunle 2006):

12
 I. Leadership by bad example: One major cause of fraud in the public sector is as a result

of bad leadership in the public sectors. Thus leaders in public organisations engage

themselves in a lot of fraudulent activities and also most of them are also corrupt and so

they are not able to check the fraudulent activity that goes on in the organisation as they

themselves are involve.

II. Societal Expectation: Almost all workers in the public sectors are bread winners of their

various families and society. Thus, families and the society expect a lot from them

financially which has led to public sector workers engaging themselves in fraudulent

activity so as to meet family and society expectations.

III. Poor Management Control, Monitoring and Supervision: Most public sector

organisations lack monitoring and supervision. Thus there is no accountability;

monitoring and also workers are not held responsible for their actions which have led to

an increase in fraud as there are no checks to monitor the activities of workers.

IV. Job Insecurity: This is another cause of fraud in the public sector. Thus, workers are not

assured of their jobs they have been employed to do knowing they can be sacked at any

time. With these ideas at the back of their minds they engage in fraud so as to earn a

living in case they are dismissed.

V. Weak Internal Control System in the public sector: This is another cause of fraud in

the public sector. Most public sector organisations have weak internal control systems

which have led to an increase in fraud since organisations assets and records are not

safeguarded and also there is less efficiency and effectiveness in the activities of workers.

VI. Increasing incidence of unemployment: The high rate of unemployment in the country

is also a major cause of fraud in the public sectors. Thus, people find it very difficult to

13
 get jobs in the country due to lack of job opportunities and once they are able to secure

jobs they engage in fraud to satisfy their personal needs and wants.

2.2.3 Ways of Preventing Fraud in the Public Sector

The functions of fraud prevention, detection and control are interwoven, as the three works

together to eliminate fraud and fraudulent tendencies. The knowledge of the possible causes of a

disease will assist a medical doctor to give adequate prescription and panacea, for the prevention

and cure of the disease.

Similarly, it is pertinent to recommend the following preventive, detective and curative measures

to control fraud (Archibong, 1992).

1. Adequate internal control system: Internal control which has been earlier mentioned and

defined as all types of checks and balances, both operational and financial, should be employed

by the management of every public organization, to ensure that the organization’s assets are

safeguarded, of which cash is one. This would go a long way in reducing and curbing fraud in

the public sector.

2. Effective internal audit department: The public sectors should try as much as possible to

have an effective internal Audit department, which should be headed by a qualified accountant.

In addition, the accountant should be responsible to the managing director or a higher authority

in the public sector.

3. Proper attention should be paid to cash: It is observed that cash is the most vulnerable

asset to theft. The study also reveals that cashiers are the major culprits in perpetrating fraud,

hence, their recruitment must be thorough, proper guarantee should be requested from the

14
applicant, before given the post of a cashier. Public sector organisation should also arrange for

cash in transit insurance cover in order to prevent the risk of loss of any cash in transit.

4. Attractive pay packages: The maintenance of a rewarding workmen compensation scheme,

will enable, an average worker live above poverty level. Hence, he will shun the temptation to

defraud his/her employer.

5. Formulation of good personnel and recruitment policies: This is alike with No. 3 above.

Recruitment not based on sentiment but on personal knowledge, guarantee and reference from

people of high integrity will go a long way in preventing the recruitment of kleptomaniac, greedy

and ungodly individuals in the public sector.

6. Good management: Management by example, should be the watch word of every worker in

the public sector, be it director, manager, officer or messenger. Everyone should comply with the

laid down policies and procedures in the performance of their duties.

7. Other measures includes: Keeping of adequate records, putting operating procedures

manual in writing, observing the attitude of the staff towards work and their spending habit,

whether amount spent is commensurate with income earned etc.

2.3 Components of Internal Control System

Senior Executives have sought long ways to better control the enterprises they run. Internal

Control is put in place to keep the company on course toward profitability goals and

achievements of its mission, and to minimize surprises along the way (Robbins & Coulter 2009).

They enable managers to deal with rapidly changing economic and competitive environments,

shifting customer demands and priorities, and restructuring for future growth (Robbins & Coulter

2009). Internal Control promotes efficiency, reduce risk of asset loss, and help ensure the

15
reliability of financial statements and compliance with laws and regulations (Robbins & Coulter

2009).

Internal Control consists of five interrelated components. These are derived from the way

management runs a business, and are integrated with the management process. Although the

components apply to all entities, small and mid-size companies may implement them differently

than large ones (Robbins & Coulter 2009). The components according to (Robbins and Coulter

2009) are:

I. Control Environment

The control environment sets the tone of an organization, influencing the control consciousness

of its people. It is the foundation for all other components of internal control, providing

discipline and structure. Control environment factors include the integrated, ethical values and

competence of the entity’s people; management’s philosophy and operating style; the way

management assigns authority and responsibility, and organizes and its people; and the attention

and direction provided by the board of directors (Arens & Leobbecke, 1997).

II. Risk Assessment

Every entity faces a variety of risks from external and internal sources that must be assessed. A

precondition to risk assessment is the establishment of objectives, linked at different levels and

internally consistent. Risk assessment is the identification and analysis of relevant risks to

achievement of the objectives, forming a basis for determining how the risks should be managed.

Because economic, industry, regulatory and operating conditions will continue to change

mechanisms are needed to identify and deal with the special risks associated with change (Ernst

& Young, 2002).

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III. Control Activities

Control activities are the policies and procedures that help ensure management directives are

carried out. They help ensure that necessary actions are taken to address risks to the achievement

of the entity’s objectives. Control activities occur throughout the organization, at all levels and in

all functions. They include a range of activities as diverse as approvals, authorizations,

verification, reconciliations, and reviews of operating performance, security of assets and

segregation of duties (Arens&Leobbecke, 1997).

IV. Information and Communication

Pertinent information must be identified, captured and communication in a form and timeframe

that enable people to carry out their responsibilities. Information systems produce reports,

containing operational, financial and compliance-related information, that make it possible to run

and control the business. They deal not only with internally generated data, but also information

about external events, activities and conditions necessary to informed business decision-making

and external reporting.

Effective communication also must occur in a broader sense, flowing down, across and up the

organization. All personnel must receive a clear message from top management that control

responsibility must be taken seriously. They must understand their own role in the internal

control system, as well as how individual activities relate to the work of others. They must have

a means of communicating significant information upstream. There also needs to be effective

communication with external parties, such as customers, suppliers, regulators and shareholders

(Kloot&Sandercock, 1982).

17
 V. Monitoring

Internal control systems need to be monitored. It’s a process that assesses the quality of the

system’s performance over time. This is accomplished through on-going monitoring activities,

separate evaluations or a combination of the two. On-going monitoring occurs in the course of

operations. It includes regular management and supervisory activities, and other actions

personnel take in performing their duties. The scope and frequency of separate evaluations will

depend primarily on an assessment of risks and the effectiveness of on-going monitoring

procedures. Internal control deficiencies should be reported upstream, with serious matters

reported to top management and the board (Kloot&Sandercock, 1982).

There is synergy and linkage among these components, forming an integrated system that reacts

dynamically to changing conditions. The internal control system is intertwined with the entity’s

operating activities and exists for fundamental business reasons. Internal control is most effective

when controls are built into the entity’s infrastructure and are a part of the essence of the

enterprise. “Built in” controls support quality and empowerment initiatives, avoid unnecessary

costs and enable quick response to changing conditions (Arens&Leobbecke, 1997).

There is a direct relationship between the three categories of objectives, which are what an entity

strives to achieve, and components, which represent what is needed to achieve the objectives. All

components are relevant to each objectives category. When looking at any one category, the

effectiveness and efficiency of operations, for instance all five components must be present and

functioning effectively to conclude that internal control over operation is effective

(Arens&Leobbecke, 1997).

18
2.4 Elements of Internal Control System

All systems of internal control have certain features in common; these are checklist,

principle or rules, concept of internal control. The elements of internal control are

discussed below (Awe, 2005):

1. Supervision: Any system of internal control should include the supervision by responsible

officials of day –to-day transactions and recording. Thus managers and directors should ensure

employees work under their guidance and also ensure that workers are held responsible for their

actions effectively and efficiently.

2. Physical safeguards: These are concerned mainly with the custody of asset and involve

procedures and security measures designed to ensure that access to asset is limited to authorized

personnel. Thus management should ensure that organizations asset such as computers and its

accessories, vehicles etc. are safeguarded against theft, misuse, accident etc.

3. Management control and management information system: These are control exercised by

management outside the day-to-day activities of the business systems. This includes the overall

supervisory control by management. Thus management should ensure that they acquire

information systems which will ensure that work and operations run smoothly and effectively.

4. Segregation of Duties: An individual should not be responsible for the recording and

processing of a complete transaction. Segregation of duties help to reduces the risk of intentional

manipulation or errors and increases the element of checking. The functions which are separate

include authorization, execution, custody and recording in the case of computer based accounting

systems, systems development and daily operations. Thus managers should ensure that duties of

employees are shared for more than one individual in one single task to prevent fraud and error.

19
5. Authorizations and Approval: All transaction should require authorization or approval by an

appropriate responsible person or authority. Thus managers and directors should ensure that all

cheques and other important documents are authorized and approved by them to ensure

credibility and validity.

2.5 Internal Control System in preventing Fraud in the Public Sector

Since the implementation of the Sarbanes-Oxley Act of 2002 (SOX), the emphasis on an

organization’s internal control over financial accounting and reporting has been much greater,

even for private companies. While companies may view internal control as a hassle and a

potentially expensive investment, the benefits of maintaining effective internal control far

outweigh the costs, when implemented strategically (Awe, 2005). According to The Institute of

Chartered Accountants of England and Wales (ICAEW), the roles of Internal Control System in

preventing fraud in the public sector are as follows:

1. Internal Controls in organization helps to minimize chances of errors and frauds in the

organization in the arm stretches of administration in any given organization, institution or even

in the government circles. That means through compulsory leave, rotation of duties, surprise

checks, segregation or separation of duties and using close supervision help organizations to

minimize and check fraud. Thus, it helps to regulate the work of staffs through division of work

among the staffs in a scientific manner which helps to make the daily works of staffs effective.

2. It serves as a safeguard to the organization's assets, growth use of proper authorization,

routine checks, segregation of custody and recording duties and arithmetic and accounting

controls. Internal control helps to protect the assets of the business from misuse, theft, accident

etc.

20
3. It boosts the efficiency in an organization and ensures orderly running of business through

supervision of duties, competent and reliable personnel define powers and managerial review

and supervision. Organization will have up to date data to be used in managerial decision-

making process.

4. Internal control helps the management to prepare and implement effective plans by providing

correct and reliable information. Thus it helps to implement management policies to attain

corporate goals.

5. It facilitates efficient statutory audits by external auditors as it will act as a basis on which the

auditors will perform his/her work, and as such this will reduce his/her tests and amount of time

in the organization and thus less audit fees. It also helps the auditor in his/her work detecting all

the errors and frauds which are committed in the books of accounts.

6. It also results in unqualified audit reports. It will facilitate identification of inefficiency and

outdated policies. It allows the organization to grow at a reasonable rate due to less fraud errors

and inefficiency all of which retard the organization's growth.

2.5.1 Negative Effects of Fraud Incidence in the Public Sector

Fraud has become a great pain in the neck of public sector organisations and it has hampered the

growth and development of the economy through the following ways (Bello, 2001).

1. Cost of Investigation: Every fraud should be investigated to determine the actual amount

involved, the method or methods used, and who was involved. Such costs can range from five to

six figures; depending on how complicated the fraud is.

2. Reputation: An organization that suffers a fraud will lose some of the trust the public

generally confers on non-profit organizations. At a minimum, people will assume the

21
organization lacks proper management. At worst, people will decide the organization has no

credibility whatsoever.

3. Damaged Relationship: Other non-profits, grantors, and governments will all reassess their

relationships with the organization.

4. Negative Publicity: When pundits say that any publicity is good publicity, they clearly are

not thinking of a non-profit that has experienced fraud. The resulting publicity not only damages

the organization immediately, but also leaves a kind of toxic residue. Those involved with the

organization will continue to harbour doubts about the organization’s credibility for years to

come.

5. Loss of Employees: Depending on the nature of the fraud especially if a senior staff member

commits it other employees may well begin looking for a better-run place of employment.

6. Loss of Donors: Donors receive solicitations from many nonprofits. An organization with a

publicized fraud is less attractive to all but the most highly dedicated donors. United Way of

America lost a full third of its income after well-publicized “irregularities” came to light

involving the organization’s top management. It took approximately three years for the

organization to return to the level of income it had received before the problem was identified.

7. Litigation: If the nonprofit decides not to hide a substantial fraud, it is quite possible that a

court case will ensue. The minimum cost of litigation will be in the tens of thousands and can, of

course, run considerably more. Donors or government officials could even allege that board

members are personally liable if it appears that they have failed to fulfill their fiduciary

responsibility.

22
8. Damaged Morale: For employees who decide to stay with the organization, there will be a

definite decline in morale. Employees may feel the organization has failed them and failed the

mission.

2.6 Employee Satisfaction

Employee satisfaction is a measure of how happy workers are with their job and working

environment. Keeping morale high among workers can be of tremendous benefit to any

company, as happy workers will be more likely to produce more, take fewer days off, and stay

loyal to the organization. There are many factors in improving or maintaining high employee

satisfaction, which wise employers would do well to implement (Ernst & Young, 2002).

Many experts believe that one of the best ways to maintain employee satisfaction is to make

workers feel like part of a family or team and also being concerned with their overall welfare.

Holding office events, such as group outings, can help build close bonds among workers. Many

organizations also participate in team-building retreats that are designed to strengthen the

working relationship of the employees in a non-work related setting and also give periodic

evaluations that identify training needs and opportunities for improvement. Organizations should

also ensure that they administer employee rewards policies in all departments’ whiles

maintaining adequate safety and health standards. The backbone of employee satisfaction is

respect for workers and the job they perform by recognizing their accomplishments (Ernst &

Young, 2002).

In every interaction with management, employees should be treated with courtesy and interest.

Also their suggestions on issues concerning circulation of information between departments in

the organization should be considered and acted upon appropriately to enhance better working

environment. An easy avenue for employees to discuss problems with upper management should

23
be maintained and carefully monitored. Even if management cannot meet all the demands of

employees, showing workers that they are being heard and putting honest dedication into

compromising will often help to improve morale (Ernst & Young, 2002).

2.7 Challenges of Implementing Internal Control System

According to Messier et al., (2008), the effectiveness of internal control systems is subject to

certain inherent challenges which make it implementation somehow difficult. It includes

management override of internal control, human errors or mistakes in judgment, break down and

collusion.

1. Judgment: Human judgment can limit the effectiveness of internal controls. Management and

other personnel may exercise poor judgment in making business decisions or in performing

routine duties because of inadequate information, time constraints etc. (Boynton et al.; 2001).

2. Breakdowns in Internal Control: This occurs when personnel misunderstand instructions or

make errors due to carelessness, fatigue, ignorance etc. For example, errors may occur in

designing, maintaining or monitoring automated controls. If the information technology

personnel do not completely understand how a revenue system works on sales transaction, they

may erroneously design change in the system to process sales for a new line of product (Messier

et al., 2008).

3. Management Override: Thus management overrules prescribed policies or procedures for

illegitimate purposes with the intent of personal gain or to enhance the presentation of financial

statements. Override practices include deliberate misrepresentations to auditors and others such

as by issuing false document to support the recording of fictitious sales transaction (Boynton et

al, 2001).

24
4. Collusion: Thus when employees acts with another employee, patients or supplier to

penetrate and conceal fraud to prevent its detection by internal controls. For example collusion

among health workers and their colleagues’ in the payroll department to initiate payments to

fictitious employee or kickback schemes between an employee in the purchasing department and

suppliers (Boynton et al., 2001).

5. Inadequate Funds: Not all Internal Control Systems are easy to come by as some require

huge amount of funds before being implemented (Arens&Leobbecke, 1997).

25
 CHAPTER THREE

METHODOLOGY

3.1 Type of Research

The study is classified under a descriptive research and uses a case study. A descriptive research

approach was used since it delivers an in-depth data about a particular subject by describing it

from various angles.

3.2 Population

The target population for the study consisted of both management and staff members of Edweso

Government Hospital. The entire population of workers at Edweso Government Hospital was

one hundred and nine (109).

3.3 Sample and Sampling Technique

A sample size of 20 respondents was drawn from the population. With this Fifteen (15)

questionnaires were distributed to employees whiles the remaining Five (5) were given to

management. The researcher used the non-probability sampling technique specifically the

purposive sampling technique to select respondents from management in the organization.

Purposive sampling was used to select respondents based on the fact that they have expertise in

the area being researched. Convenient Sampling was also used to select respondents from

employees based on their ability and willingness to respond to the questionnaire.

3.4 Data Collection

This includes the Type of Data, Sources of Data, and Instrument for Data Collection and

Procedure for Data Collection.

26
3.4.1 Type of Data

The researcher used ordinal data for the study. This is because the responses to the questionnaire

were based on a rating scale and could be ranked.

3.4.2 Source of Data

Primary data type was collected by the researcher. It was obtained from respondents through the

administration of questionnaires. This was sourced from the staff and management of Edweso

Government Hospital. The researcher used the primary data because it helps to know what is

actually happening on the ground and also come out with findings and recommendations.

3.4.3 Instrument for Data Collection

Questionnaire was the main instrument used to collect data for the study. This was to enhance

the truthfulness of the data regarding the study.

3.4.3a Instrument Validity

The need to ensure validity and reliability in research affects all aspects of the research design.

The questionnaires were appropriately pre-tested, removing bias from the study to ensure

validity. The researcher ensured that a proper understanding of the questions in the questionnaire

is made to the respondents.

3.4.3b Instrument Structure to Meet Research Objectives

The questionnaire was designed to contain simple question based on the set objectives of the

study. It was simple and easy to understand to ensure respondents provided relevant data to meet

the objectives of the study. The questionnaire distributed to respondents contained relevant close

ended questions for the purpose of attaining the research objectives of the study.

27
The questionnaires were in three parts. Section A was designed for respondents to provide the

necessary data about the effectiveness of Internal Control System. Section B sought to collect

data on Employee Satisfaction and Section C was designed to gather data on the challenges of

implementing Internal Control System.

3.4.4 Procedure for Data Collection

An introductory letter was obtained from the University to the Hospital related to the study. Data

was collected from a number of employees and management of the Hospital.

Questionnaires were handed out to individuals or personnel who work at the various departments

of the Hospital and the researcher paid personal visits to deliver and collect the questionnaires;

this was made possible as a special meeting was scheduled with the respondents for this activity

at their free or less busy times. Convenient Sampling technique was used because questionnaires

were directed to respondents who were available at the time the researcher visited the Hospital.

3.5 Method of Data Analysis

Qualitative data analysis was used. It was used to determine the percentages and frequencies in

the data analysis. Data gathered through questionnaires was presented in tables and bar charts

using Microsoft Excel.

28
 CHAPTER FOUR

RESULTS AND DISCUSSION OF FINDINGS

4.1 General Information on Edweso Government Hospital

Edweso Government Hospital is located in the Edweso-Dwaben Municipality in the Asante

Region. It started as Health Centre in 1972 and was re-designated as a Government Hospital in

the year 2010. The Hospital has a bed capacity of 64 and the hospital renders services to about

179,376 people. Edweso Government Hospital operates under Edweso-Dwaben Municipal

Health Administration. The Hospital has substantive staff strength of seventy-seven and thirty-

two casuals and provides some of the following services: Out Patient Services, Surgery &

Obstetric, Maternal & Reproductive Health services, General Administration, Eye care Services,

Laboratory services, Psychiatry services, Pharmaceutical services etc.

The Hospital has the following as some of its objectives under which they operate in order to

give quality health care to their clients:

1. To provide efficient, quality and accessible medical care to the people of the

catchment area.

2. To train and educate nursing staff, paramedical staff and newly qualified staff by

organizing workshops for all.

3. To improve utilization of the Hospital’s services.

4. Continuous improvement in service delivery through systematic human resource

development.

29
4.1.1 Mission Statement

The Hospital exists to provide quality, accessible and affordable health care to meet the needs of

the people of Edweso and beyond to be delivered by a team of humane, disciplined, and

dedicated staff in collaboration with all stakeholders.

4.2 Data Presentation and Analysis

4.2.1: To examine the effectiveness of Internal Control System

Table 4.1 Effectiveness of Internal Control System

(Respond /Answers) Number/Frequency and Percentage of Respondents

Variables Strongly Agree Not Sure Disagree Strongly

Agree Disagree

Freq. % Fre % Freq. % Freq. % Freq. %

q.

1. We work under the

7 46.7 7 46.7 1 6.7 - - - -
supervision of immediate

superiors to reduce waste and

accountability.

2. All transactions in the

4 26.7 6 40.0 4 26.7 1 6.7 - -
organization are approved by

the appropriate person in

authority.

30
3. Segregation of duties is
9 60.0 5 33.3 1 6.7 - - - -
done to ensure that duties of

employees are shared for

more than one individual.

4. Management ensures that

4 26.7 6 40.0 5 33.3 - - - -
organization’s assets such as

computers, cars etc. are

safeguarded against theft,

misuse etc.

5. Management has acquired

1 6.7 7 46.7 4 26.7 3 20 - -
the necessary information

system, equipment and

machinery to ensure smooth

work and operations.

Source: Field Survey Data, March, 2013

Figure 4.1 Effectiveness of Internal Control System

strongly disagree

disagree

not sure effectiveness of internal

controls
agree

strongly agree
0 5 10 15 20 25 30 35

31
Table 4.1 shows that 46.7% of respondents strongly agreed that they work under the supervision

of immediate superiors to ensure efficiency and accountability while 46.7% of respondents also

agreed, 6.7% were not sure whiles none of the respondents either disagreed or strongly

disagreed. More so, 26.7% of the respondents strongly agreed that all transactions in the

organization are approved by the appropriate person in authority while 40% agreed and 26.7% of

the respondents were not sure, also 6.7% disagreed whiles none of the respondents strongly

disagreed.

Furthermore, 60% of respondents strongly agreed that segregation of duties is done to ensure that

duties of employees are shared for more than one individual while 33.3% agreed and 6.7% were

not sure whiles none of the respondents either disagreed or strongly disagreed. In addition,

26.7% of respondents indicated strongly agreed that management ensures that organizations

assets are safeguarded against theft, misuse etc. while 40% also agreed, 33.3% were not sure

whiles none of the respondents either disagreed or strongly disagreed. Lastly, 6.7% of

respondents strongly agreed that management has acquired the necessary information system to

ensure smooth work and operations while 46.7% agreed, 26.7% were not sure, 20% disagreed

and none of the respondents strongly disagreed.

As shown in figure 4.1 with a blue colour, a frequency of 25 strongly agreed that Internal

Control System has been effective, whiles a frequency of 31 agreed, a frequency of 15 were not

sure and a frequency of 4 disagreed.

32
 SECTION B: Employee Satisfaction

Table 4.2.2 Employee Satisfaction

(Respond /Answers) Number/Frequency and Percentage of Respondents

Variables Strongly Agree Not Sure Disagree Strongly

Agree Disagree

Freq. % Fre % Freq. % Freq. % Fre %

q. q.

1. Our suggestions on
- - 10 66.7 5 33.3 - - - -
circulation of information

between departments are

considered and acted upon

appropriately.

2. Our reward systems in the

- - 3 20.0 9 60.0 3 20.0 - -
organization are administered

the same in all departments.

3. Organization is concerned
5 33.3 5 33.3 3 20 2 13.3 - -
with the long term welfare of

the employee.

4. We receive periodic
4 26.7 7 46.7 4 26.7 - - - -
evaluations that identify

33
training needs and

opportunities for improvement.

5. Organization recognizes our

- - 9 60.0 6 40.0 - - - -
accomplishments.

6. Immediate superior deals

- - 7 46.7 7 46.7 1 6.7 - -
with our problem fairly.

7. Organization has adequate

4 26.7 9 60.0 2 13.3 - - - -
safety and health standards.

Source: Field Survey Data, March, 2013

Figure 4.2 Employee Satisfaction

strongly disagree

disagree

employee satisfaction

not sure

agree

strongly agree

0 10 20 30 40 50 60

34
Table 4.2 shows that none of the respondents strongly agreed that their suggestions on

circulation of information between departments are considered and acted upon appropriately

while 66.7% of respondents also agreed but 33.3% were not sure while none of the respondents

disagreed or strongly disagreed. More so, none of the respondents strongly agreed that their

reward systems are administered the same in all departments while 20% agreed and 60% of the

respondents are not sure, also 20% disagreed whiles none of the respondents strongly disagreed.

Furthermore, 33.3% of respondents strongly agreed that the organization is concerned with the

long term welfare of the employee while 33.3% agreed and 20% were not sure, 13.3% disagreed

while 5.9% strongly disagreed. In addition, 26.7% of respondents indicated strongly agreed that

they receive periodic evaluations that identify training needs and opportunities for improvement

while 46.7% also agreed but 26.7% are not sure, while none of the respondents either disagreed

or strongly disagreed.

Again, none of the respondents strongly agreed that the organization recognizes their

accomplishments while 60% agreed, 40% were not sure, whiles none of the respondents either

disagreed or strongly disagreed. To continue, none of respondents strongly agreed that

immediate superiors’ deals with employee problem fairly whiles 46.7% also agreed but 46.7%

were also not sure whiles 6.7% disagreed and none of the respondents strongly disagreed. Lastly,

26.7% of respondents strongly agreed that organization has adequate safety and health standards

while 60% also agreed, 13.3% were not sure while none of the respondents either disagreed or

strongly disagreed.

As shown in figure 4.2 with a red colour, a frequency of 13 strongly agreed that Employee

Satisfaction measures were being practiced, whiles a frequency of 50 agrees, a frequency of 36

were not sure and a frequency of 6 disagreed.

35
4.2.3: To determine the challenges of implementing Internal Control System

Table 4.3 Challenges confronting Internal Control system

(Respond /Answers) Number/Frequency and Percentage of Respondents

Variables Strongly Agree Not Sure Disagree Strongly

Agree Disagree

Freq. % Fre % Freq. % Fre % Freq. %

q. q.

1. Poor judgment in making

- - 4 80.0 1 20.0 - - - -
business decisions or in

performing routine duties

because of inadequate

information, time constraints,

etc.

2. Personnel misunderstand
- - 5 100.0 - - - - - -
instructions or make errors

due to carelessness, fatigue.

3. We overrule prescribed
- - - - - - 3 60.0 2 40.0
policies to enhance the

presentation of financial

statement.

36
4. Employee acts with
- - - - - - 4 80.0 1 20.0
another employee, patient or

supplier to penetrate and

cause misstatement in the

financial statements.

5. Organization does not

- - - - 5 100.0 - - - -
have enough funds to

implement Internal Control

System.

Source: Field Survey Data, March, 2013

Figure 4.3 Challenges of Implementing Internal Control System

strongly disagree

disagree
challenges of implementing
not sure internal control

agree

strongly agree

0 2 4 6 8 10

Table 4.3 shows that none of the respondents strongly agreed that there is poor judgment in

making business decisions or in performing routine duties because of inadequate information,

37
time constraint etc. while 80% of the respondents also agreed but 20% were not sure whiles none

of the respondents either disagreed or strongly disagreed. More so, none of the respondents

strongly agreed that personnel misunderstand instructions or make errors due to carelessness,

fatigue while 100% agreed whiles none of the respondents is either not sure, disagreed or

strongly disagreed.

Furthermore, none of the respondents indicated strongly agreed, agreed or not sure of whether

management overrule prescribed policies to enhance the presentation of financial statements

whiles 60% disagreed and 40% strongly disagreed. In addition, none of the respondents indicated

strongly agreed, agreed or not sure of whether employees act with another employee, patient or

supplier and cause misstatement in the financial statements while 80% disagreed and 20%

strongly disagreed. Lastly, none of the respondents indicated strongly agreed or agreed as to

whether organization does not have enough funds to implement Internal Control System while

100% are not sure with none of the respondents indicating disagreed or strongly disagreed.

4.3 Discussion of Research Findings

The research was conducted mainly to meet some set of objectives. This section discusses the

findings of the research with regards to the set objectives so as to find out if they were met as set

out to achieve.

4.3.1 To examine the effectiveness of Internal Control System at Edweso Government

Hospital.

When employees work under the supervision of immediate supervisors, it helps in making

Internal Controls more effective. Here, the respondents affirmed to this statement as a frequency

of 7 representing 46.7% of respondents strongly agreed while the same frequency also

representing 46.7% of respondents also agreed as are shown in Table 4.1.

38
Also, Internal Control is said to be effective when all transactions at the Hospital are approved

by the appropriate person in authority. With this a frequency total of 4 representing 26.7% of

respondents strongly agreed to this statement whiles a frequency of 6 representing 40% of

respondents agreed. Again, when segregation of duties are done to ensure that duties of

employees are shared for more than one individual, Internal Control is said to be effective as a

frequency total of 9 representing 60% of respondents strongly agreed to this statement with a

frequency of 5 representing 33.3% indicating agreed. Moreover, management ensuring that

organizations assets are safeguarded from theft, misuse etc. also shows that Internal Control

System at the Hospital is effective as a frequency total of 4 representing 26.7% of respondents

indicated strongly agree to this statement with a frequency of 6 representing 40% of respondents

indicating agreed.

Lastly, for Internal Control to be effective management must acquire the necessary information

system, equipment and machinery to ensure smooth work and operation. Here, a frequency of 1

representing 6.7% of respondents strongly agreed to this statement with a total frequency of 7

representing 46.7% indicating agreed. Based on the responses given by the respondents the

researcher was of the view that the effectiveness of Internal Control System at the Hospital has

empowered employees to take actions they believe will best produce the desired results.

4.3.2 To identify the relationship between Internal Control System and Employee

Satisfaction at Edweso Government Hospital.

Figure 4.4Relationships between Internal Control System and Employee Satisfaction

39
 strongly disagree

disagree
employee satisfaction

not sure
effectiveness of internal
controls

agree

strongly agree

0 10 20 30 40 50 60

Here the study revealed how happy workers are with their job and working environment. With

Internal Control System measures being adhered to, employee suggestions on circulation of

information between departments are considered and acted upon appropriately as a frequency of

10 representing 66.7% indicated agreed. Also, ensuring that employees’ reward systems are

administered the same in all departments also exhibits that Internal Control System are effective

at the Hospital. Here a frequency of 3 representing 20% indicated agreed to this statement.

Moreover, employees receiving periodic evaluations that identify training needs and

opportunities for improvements also attest the fact that Internal Control has been effective at the

Hospital. With this a frequency total of 4 representing 26.7% indicated strongly agree whiles a

frequency of 7 representing 46.7% indicated agreed.

40
Again, the Hospital being concerned with the long term welfare of the employees shows the

effectiveness of Internal Control System at the Hospital. With these a frequency of 5

representing 33.3% strongly agreed to this statement whiles the same frequency also representing

33.3% agreed to this statement. Lastly, immediate superiors dealing with employees problems

fairly also show the effectiveness of Internal Control System at the Hospital. Here a frequency

total of 7 representing 46.7% agreed to this statement. Based on the responses given by the

respondents the researcher was of the view that the employee satisfactions were very high thus

employees were satisfied with their conditions of service as a result of the effectiveness of

Internal Control System at the Hospital.

4.3.3 To determine the challenges of implementing Internal Control System at Ejisu

Government Hospital.

Here the study discovered that Internal Control System faces some challenges in its

implementation. The study revealed that one major challenge of implementing Internal Control

System was poor judgment in making business decisions. With these a frequency of 4

representing 80% from management agreed to this statement. Another major challenge was

personnel misunderstanding instructions or making errors due to carelessness, fatigue etc. Here a

frequency total of 5 representing 100% from management agreed to this statement. Based on the

responses given by the respondents the researcher was of the view that to prevent these major

challenges , management should train and educate nursing staff, paramedical staff and newly

qualified staff by organizing workshops for all.

41
 CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Summary of Findings

After careful analysis of the study, it was discovered that 46.7% of respondents indicated

strongly agree that Internal Control System at the Hospital was effective as a result of effective

supervision of workers whiles that same percentage of respondents indicated agreed. Again

66.7% of respondents indicated that all transactions in the organization were being approved by

the appropriate person in authority. There was also a point of view that the segregation of duties

were done to ensure that duties of employees were shared for more than one individual with

which 60% of respondents attested to that fact by indicating strongly agree with 33.3%

indicating agree. Also, 66.7% of respondents indicated that management protected organization’s

assets from theft, misuse etc. and lastly management had acquired the necessary information

systems and equipment to ensure smooth work and operations with which 53.4% of respondents

confirmed to that fact.

The study revealed that the Internal Control System at the Hospital is doing its best to ensure

Employee Satisfaction is at its best in order to attain high working standards among employees

so as to provide effective services. With employee satisfaction, workers are very committed to

work at the Hospital without any biases with regards to delivery of services. With this, the study

revealed that on the average more than 65% of respondents confirmed to the fact that employee

satisfaction is at its best.

Again, the study discovered that the Internal Control System is being managed well, but is still

facing some challenges. These challenges include: Poor judgment in making business decisions,

personnel misunderstanding instructions or making errors due to carelessness, fatigue and

42
management overruling prescribed policies to enhance the presentation of financial

statements.More so, employee acting with another employee, patient or supplier to penetrate and

cause misstatement in the financial statements. Here, more than 90% of respondents on the

average attested to the fact that Internal Control System faces some challenges.

5.2 Conclusion

Based on findings, it can be concluded that Internal Control System at Edweso Government

Hospital has been effective and efficient. It effectiveness has had great positive impact on

productivity and therefore the less concentration on them will cause the Hospital to be less

efficient. With Messier, et al.(2008),proper internal control does not only ensure that assets and

records are safeguarded but also create an environment in which efficiency and effectiveness are

encouraged and monitored.

Again, it can also be said that most Employee Satisfaction measures at the Hospital have been

put in place which is serving as a motivational factor to employees to give out their best to the

benefit of the Hospital. Moreover, the backbone of employee satisfaction is respect for workers

and the job they perform by recognizing their accomplishments as stated by Ernst & Young

(2002).

In conclusion the researcher confirms that Internal Control System faces some challenges in its

implementation as stated by Messier et al., (2008), that the effectiveness of internal control

systems is subject to certain inherent challenges which make it implementation somehow

difficult and these include poor record keeping, high illiteracy rate, inadequate funds ,lack of laid

down procedures, ignorance and poor supervision in the public sector, therefore the management

of the Hospital with the help of the government must assume the responsibility of addressing

these challenges to operate effectively.

43
5.3 Recommendations

The researcher makes the following recommendations to the Public Hospitals in Ghana:

1. Management must constantly organise training and development programs for employees

of the Hospital on Internal Control System before its implementation to improve

efficiency.

2. There should be review of Internal Control System from time to time so that new

standards can be embraced for performance and improvement. It would help to change

weak conventions and new conventions can be accepted for operations.

3. There should be review of Employee satisfaction policies by the Hospital to ensure that

new standards can be incorporated for performance and development.

4. Supervision and instructions given to employees and personnel should be clear and

concise so as to prevent poor decision making and unnecessary errors. This could be done

by giving employees proper orientation on the various tasks they perform.

44
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Boynton, J., Race, P.,& Gregory, J. (2001). Factors that Affect Internal Control. London:

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Ernst, T. & Young G. (2002). Management and Organizational Behaviour. London: Pitman

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McNamara, S. (2004). Risk and internal control Management in Financial Institutions. London:

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46
 QUESTIONNAIRE (EMPLOYEES)

The Role of Internal Control in the Public Sector: A case study of Edweso Government

Hospital. The data gathered to this effect will be treated as private and confidential and will be

used for academic purposes only. Your assistance in this regard will be most appreciated, thank

you.

SECTION A: Internal Control System

Instruction: Using the scale below tick (√) to indicate your response to the questions;

5-Strongly Agree 4-Agree 3-Not Sure 2-Disagree 1- Strongly Disagree

Variable or Situation Rating Scale

1. We work under the supervision of immediate 5 4 3 2 1

superiors to ensure efficiency and accountability.

2. All transactions in the organization are approved 5 4 3 2 1

by the appropriate person in authority.

3. Segregation of duties is done to ensure that duties 5 4 3 2 1

of employees are shared for more than one individual.

4. Management ensures that organizations assets such 5 4 3 2 1

as computers, cars etc. are safeguarded against theft,

misuse etc.

5. Management has acquired the necessary 5 4 3 2 1

information systems, equipment and machinery to

47
 ensure smooth work and operations.

SECTION B: Employee Satisfaction

Instruction: Using the scale below tick (√) to indicate your response to the questions;

5-Strongly Agree 4-Agree 3-Not Sure 2-Disagree 1- Strongly Disagree

Variable or Situation Rating Scale

1. Our suggestions on circulation of information between 5 4 3 2 1

departments are considered and acted upon appropriately.

2. Our reward systems in the organization are administered the 5 4 3 2 1

same in all departments.

3. Organization is concerned with the long term welfare of the 5 4 3 2 1

employee.

4. We receive periodic evaluations that identify training needs and 5 4 3 2 1

opportunities for improvement.

5. Organization recognizes our accomplishments. 5 4 3 2 1

6. Immediate superior deals with our problem fairly. 5 4 3 2 1

7. Organization has adequate safety and health standards. 5 4 3 2 1

48
 APPENDIX II

QUESTIONNAIRE (MANAGEMENT)

The Role of Internal Control in the Public Sector: A case study of Edweso Government

Hospital. The data gathered to this effect will be treated as private and confidential and will be

used for academic purposes only. Your assistance in this regard will be most appreciated, thank

you.

SECTION C: Challenges of implementing Internal Control System

Instruction: Using the scale below tick (√) to indicate your response to the questions;

5-Strongly Agree 4-Agree 3-Not Sure 2-Disagree 1- Strongly Disagree

Variable or Situation Rating Scale

1. Poor judgment in making business decisions or in 5 4 3 2 1

performing routine duties because of inadequate

information, time constraints, etc.

2. Personnel misunderstand instructions or make 5 4 3 2 1

errors due to carelessness, fatigue.

3. We overrule prescribed policies or procedures to 5 4 3 2 1

enhance the presentation of financial statement.

4. Employee acts with another employee, patient or 5 4 3 2 1

supplier to penetrate and cause misstatement in the

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 financial statements.

5. Organization does not have enough funds to 5 4 3 2 1

implement Internal Control System.

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