Internal control and financial management of universities in Nigeria

CHAPTER ONE

INTRODUCTION

• Background of the study

Universities in Nigeria are required to use funds for improving the living standards of their employees and their immediate environment but most times it’s the reverse that is the case as some employees in various universities are often found guilty of diverting fund for their personal use (Lent, 2004), this often makes the management of most universities conduct surprise audits which serves as a form of control to check mismanagement of funds (Anthony and Young, 2003). Good financial management practices demand that key management concepts and principles such as sustainability, accountability and transparency among others are put in place to ensure administrative efficiency. Some universities also ensure this administrative efficiency is achieved by installing a well organised internal control procedures. According to (David, 2008), internal controls can be defined as a procedure designed by those charged with governance (i.e. the management) to ensure reasonable assurance about the achievement of an entity’s objectives with regards to reliability of the financial reporting, effectiveness and efficiency of operations and compliance with applicable laws and regulations. Management of most universities adopts the internal control in a flexible way such that the system checks itself and any irregularities within the system which are being detected and corrected without much effort. To ensure that the system checks itself, management could adopt controls such as: segregations of duty supervision of work and acknowledgement of performance, the effective arrangement and implementation of this control system would ensure proper management. Financial management is focused on financial aspects of running the several universities in Nigeria and it also be described as the application of planning and control to the finance function of a universities. It helps in profit planning, measuring costs and controlling inventories and accounts receivables. It also helps in monitoring the effective deployment of funds in non current asset and in working capital. It aims at ensuring that adequate cash is on hand to meet the required current and capital expenditure. It facilitates ensuring that significant capital is procured at the minimum cost to maintain adequate cash on hand and to meet any needs that may arise in the course of business. Financial management helps in ascertaining and managing not only current requirements but also future needs of a university (ACCA, 2014). Most Universities manage their finance by behaving in an economic way and trying to realize their goals in the most efficiently way possible.

 

• Statement of the problem

Challenges associated with the segregation of duties which is also a major characteristic of internal control has led to a whole lot of problem of collusion, fraud and misstatement of financial records in most of the universities in Nigeria and the responsibility for the establishment of internal control is basically that of the management. For any organization to achieve it’s targeted goals and objectives, the internal control must be strong and reliable. To get this done, all the basic characteristic that guarantee effective functioning of the internal control must be readily available.  There is a general consensus that any organization without an internal control system in place is generally exposed to several threats that are capable of crumbling the organization in less or no time. One of the major problem is the problem of incorrect financial statement and the mismanagement of the organizational vital documents which may be done by an employee to take undue advantage. However, recent developments have shown that where due approval or authorization has not been granted by appropriate authorities (i.e. the university’s governing council) this often leads to wastages and mismanagement of resources.

 

• Objectives of the study

The main objective of the study is to ascertain internal control and financial management of universities in Nigeria. However for the successful completion of the study, the following sub objectives were put forward by the researcher:

(i) To determine the impact of internal controls in ensuring proper use of the universities funds and assets.

(ii) To ascertain whether perpetration of fraud and losses of the revenue in the universities are as a result of weakness in internal control system.

(iii)To examine the extent that internal control system helps in minimizing misrepresentations of facts and proper preparation and presentation of financial statements by the employees.

(iv) To ascertain the extent to which internal controls helps the universities in staying on budgets.

 

• Research question

For the successful completion of the study, the following research questions were formulated:

(i) What are the ways of determining the impact of internal controls in ensuring proper use of the universities funds and assets?

(ii) How can the perpetration of fraud and losses of the revenue in the universities are as a result of weakness in internal control system be ascertained?

(iii)To what extent can the internal control system helps in minimizing misrepresentations of facts and proper preparation and presentation of financial statements by the employees?

(iv) How can the limit to which internal controls helps the universities in staying on budgets be ascertained?

 

• Significance of the study

There is no controversy that this research works have been conducted on internal controls system, however much emphasis has been placed on the impact of a good internal control system on financial management of organizations. This research work will go a long way in helping an organization discover the impact of weakness in internal control and suggest measures in correcting them. It will also reveal the problems caused by bad internal control system and be useful to students, scholars, lecturers and other third parties as it shall open new area of further research work and at same time advance challenges to up-coming researchers.

Finally the study is a contribution to the academia and it will serve as a reference tool for further studies on the topic since one of the serious problems that have been identified in the academic community in Nigeria is being emphasized.

 

 

 

1.6 Scope and limitation of the study

The scope of the study is to ascertain the internal control and financial management of universities in Nigeria. However, the study has some constrained and limitations which are:

(a)Availability of research material: The research material available to the researcher is insufficient, thereby limiting the study.

(b)Time: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

(c)Finance: The finance available for the research work does not allow for wider coverage as resources are very limited as the researcher has other academic bills to cover.

 

• Definition of terms

Internal control

Internal control is defined as 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.

 

Financial management

Financial management refers to the efficient and effective management of money (funds) in such a manner as to accomplish the objectives of the organization, it is the specialized function directly associated with the top management.

 

University

A university is an institution of higher (or tertiary) education and research which grants academic degrees in various academic disciplines.

 

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