CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Ministries faced and saddled with the responsibility of administration of wages and salaries. The need for this arises so as to eliminate the case of ghost workers, to ensure that standards are maintained and adhered to, to ensure that workers are paid at the appropriate rate and to detect fraud by managers or other persons. These motives led to the introduction of an internal control system which has been defined in statement on auditing (U.4) as being “not only internal check and internal audit but the whole system of control, financial and otherwise, established by management in order to carry on the business of the company in an orderly manner, safeguard its assets and secure as far as possible the accuracy and reliability of its records”.
It is known fact that management in all ministries irrespective of their size and nature has financial statement as their main vehicle for presenting accountability and stewardship to the shareholders of their ministries.
Accounting to LYNN (1983) “The statistical data that must be estimated and accumulated to plan and control virtually all operation of ministries are best used in conjunction with financial data”. It can then be deducted that accountability and stewardship are best rendered in form of financial statement. Hence, management must device adequate means of promoting efficiency in operations safe guarding resources from fraud and other forms of mis-management and creating a reliable atmosphere over recorded transaction. This necessitates the concept of internal controls system in any ministry. If a financial statement is to present a true and view, then there must be effective control at all facts of ministries.
Internal control includes internal checks, internal audit and other forms of control like budgets, budgeting control, variance analysis etc. internal control ensure the division of the whole work of an organization such that the work of one person is complementary to another or is proved independently so that fraud cannot be perpetrated without being detected. Frauds are perpetrated and concealed because of the weakness that exists in a control system established by management.
In most case, wrong and effective procedure are exploited by unscrupulous members of staff at all levels in the organization hierarchy. Thus a ministry that ignore the importance of internal control mechanism against fraud and other irregularities are highly susceptible to the risk of being defrauded
Taylor (1982) stated that “ministries that use one payroll cheque require at least two signatories before the cheque can be cashed in the bank to guard against the unscrupulous employee who may want to defraud the company by signing the cheque”. He opined that without control in an accounting system, it would be very difficult for a ministry to protect its resources, rely on its records or in the effect of the accounting. He further stated that the effect of the accounting provision in the foreign corrupt practice Act (FCPA) is to require public companies to maintain reasonable and effective financial records and an adequate system of internal control.
To emphasize the concept of internal control system, further, in making up wages sheets, one operator may enters their time from their time cards. This ensures that no “dumming” workmen are paid wages. A proper internal control system ensure reliability of financial statement by ensuring that wages and salaries are paid correctly and in their true value so that frauds, errors be erase or detected.
The installation of an effective internal control system is one step towards the achievement of true and fair financial records and the implementation and adherence to the control system is another. The benefits derived from maintaining effective internal control system by ministry with respect of the administration of wage and salaries cannot be over-emphasize. The study therefore is concerned with the effectiveness of the internal control system in the administration of wages and salaries in ministries in Imo Stat. the emphasis will be the factors affecting the effectiveness of their internal system in the area of administration of wages and salaries.
- STATEMENT OF THE PROBLEM
Internal control in some ministries dates back to the period when such ministries were established. The purpose of this study is to remedy the situation were people intentionally or unintentionally perpetrate frauds, act of mis-management and without being detected its purpose has been to guide, detect and print out lapses that made mismanagement and misappropriation a possible act.
It has remained controversial whether or not these ministerial have actually allowed the internal control system to function. Their performance is very dismal and their future appear gloomy with the constant report of the lackadaisical attitude of managers and other employees towards their jobs. The incidents of ghost workers manipulation of accounts, pilferages, errors, fraud, theft of government properties still occur. The question still remains, why do these problem still exist despite the internal control system in operation to check them?
The extent to which such problem that inhibit ministries from effective operation of internal control system depends on how deep rotted and fundamental they are: they includes
i Tendencies for staff t shortcut the system.
ii Tendencies for informal changes in responses to new situation.
iii Tendencies to perpetrate elaborate and costly producers when the need has passed.
Despite these problems, the following area suggestions available to management to tackles the problems.
i Plan the organization effectively
ii The duties and responsibilities of the staff should be stated and separated.
iii Physical checks on personnel and assets should be done and a system should be designed to limit access to assets to authorized personnel only.
iv Embark on a full authoritarian and recording producer
v Ensure proper arithmetic in the administration of wages and salaries