Full Project – Internal audit and service delivery of public sector organizations

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CHAPTER ONE

1.0 INTRODUCTION

This chapter of the research report explains the background of the study, statement of the problem, objectives of the study, research questions, scope and significance of the study

1.1 background of the study

Internal audit is a long-standing function and an effective tool of management in many organizations. It has been a recognized component of organizations in both the public and private sectors and in most industries for many years. Internal auditing is often seen as an overall monitoring activity with responsibility to management for assessing the effectiveness of control procedures which arc the responsibility of other functional managers. The internal audit function is not limited to the operation of any particular function within an organization. Rather, it is all-embracing and accordingly is structured in the organization as a separate entity responsible only to a high level of management. As Okezie(2004) puts it, the main objective of internal auditing is “to assist management in the effective discharge of their responsibilities by furnishing them with analysis, appraisal, recommendations and pertinent comments concerning the activities reviewed”.

According Griffiths, D. (2006), Internal Audit in United States of America are performed to ascertain the validity and reliability of information; also to provide an assessment of a system’s internal control. The goal of an internal audit is to express an opinion on the person /organization/ system (etc) in question, under evaluation based on work done on a test basis. Due to practical constraints, an internal audit seeks to provide only reasonable assurance that the statements are free from material error. Hence, statistical sampling is often adopted in audits. In the case of financial audits, a set of financial statements are said to be true and fair when they are free of material misstatements a concept influenced by both quantitative and qualitative factors.

Auditing is an independent examination of, and the expression of an opinion on the financial statements of an enterprise by an appointed auditor, in accordance with his terms of engagement and the observance of statutory regulations and professional requirements (Dandago, 2006) and (Mainoma, 2007) This definition clearly stated that there must be someone (auditor) responsible for expressing an opinion on the entire financial statement of an organisation. The auditor here may mean an individual or firm carrying out the audit of an enterprise. The auditor should be approved and must have personal and operational independence in order to perform his duty effectively.

Internal auditing is an independent, objective assurance and consultancy activity systematically designed to add value and improve an organizations operations, performance, efficiency and effectiveness. It helps the organization to achieve its objectives and goals by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk control; planning and management control (IIA Report, 2000). In the past, auditors complained of fraud and theft as an objective of auditing and it was the auditors duty to report to shareholders of all the dishonest acts that were observed and had affected the propriety of the contents of the financial statements and by early 1930’s, it was recognized that the auditing objective was for the verification of accounts (Carey, P., 2000).

From the first authoritative definition of internal control by the American Institute of Public Accountants in 1949 to the definitions which still exist in professional pronouncements (see for example APB, 1995), there seems to have been no substantial change of meaning, yet a sea change in the internal control of companies was underway during the 1980s and 1990s. From all the definitions, it is clear that internal auditing is the centre of integrated activities within an organization, and is best suited for a new role as an agent of change. This can be developed on the one hand in terms of demand for audit committees and the growing importance of management efficiency and performance audits (Cooper etc., 2000), on the other hand because of the growth of information technology; and changes in audit methods (Spira and Page, 2003)

By 1993, the statement of responsibilities of internal auditing noted that internal auditing encompasses the examination and evaluation of the effectiveness of organizations system of internal control and the quality of performance in carrying out assigned responsibilities (IIA Report, 2002). It led to reduction in corruption cases in many organizations that was uncovered and had a big impact on the company’s sales and profitability. Auditors had to explain to the shareholders what those effects would have on the organizations growth (www.deloitte.com).

Many organizations have now employed the use of internal auditing since it is today’s major factor in establishing the quality of the organizations internal control system. Organizations are also struggling to implement more effective governance structures and processes. In such s climate, it is no surprise that the internal audit function is viewed as the most qualified group of professionals to help with such experimentation with improved governance as well as support key governance processes for monitoring the controls over and for evaluating the operational effectiveness of these management strategies and initiatives. However, to take advantage of this tremendous surge in the demand for their services, not only do internal auditors need a considerably enhanced repertoire of skills, attributes and competencies but they also need to commensurately raise their organizational status and profile and align themselves appropriately within their respective organizations (Stone, M., 2000). Internal auditing group was to monitor compliance with the policies and standards and the effectiveness of the internal control structure across the organization. There work was focused on the areas of great risk as determined by the risk assessment approach (CCR, 2008).

Definition of Service Delivery according to Oboth (2001) noted that in as far as the Local Government Act, the constitution and any other statutes that are studied, there is no definition of the phrase (service delivery) either deliberately or ignorantly. However he said, Service is a system or arrangement that supplies public needs. Whereas delivery is periodical performance of a service. Therefore service delivery is a system or arrangement of periodical performance of supplying public needs. Helmsing (2000) in his study defines service delivery as a deliberate obligatory decision by the elected or appointed officials to serve or deliver goods and services to the recipients. Heskett (2001) defines service delivery as an attitudinal or dispositional sense, referring to the internationalization of even service values and norms.

Organizations today still face many problems despite the presence of internal auditing teams. Companies are seen to have poor management of resources, mainly funds due to the high levels of fraud. The findings of audit were meant to be used by management to ensure that the organization grows but management seems to be so reluctant to take immediate actions hence hindering organizational competitiveness and effectiveness.

In Uganda, National Water Sewerage Corporation expanded enormously over the last ten years. This has been due to the establishment of programs such as Service delivery and Revenue Enhancement programmes (SEREP), Area Performance Contract (APCs), Support Services Contract (SSC), Stretch Out Programmes and Funding of vital departments such as the internal Audit function. This has generated revenue for the period of 2000-2008 at an average rate of UGX. 3.7 Billion Representing an increase of 42.8% within just 8 years as of 2008. However, the internal Audit function remains significantly weak in preventing wastage of organizational resources (Kampala Stretch out Progamme, 2009).

According to investigation attached to the public sector organizations of which national water and sewage corporation is inclusive, which was set up by president Museveni in October (2009) to scrutinize operations in the public sector performance all country wide, confirmed a total of 289 ghost workers. Despite the Internal Auditing that has been taking place over the number of years periodically since the beginning of National Water and Sewerage Corporation for improvement in financial performance of the organization in relation to the funds collected, there has been mismanagement of funds at National Water and Sewerage Corporation Mbarara Branch.

1.2 Statement of the problem.

Majority of organizations today have created the internal audit department to examine the fraud issues, financial reporting and misappropriation of the organizations assets by ensuring accuracy, objectivity and consistency of the financial statements as a prerequisite in monitoring proper organizational financial performance (Thomason; 2005). This has led to the seen developments in organizations such as improved financial records keeping, restricted access to financial records by unauthorized persons, fraudulent detection and improved management of funds. This has led to faster organizational growth. However, despite the establishment of the internal auditing department in organizations and all the above advantages, the goals are not attained at the expected level. The organizations today still have poor book keeping methods, lots of fraudulent behavior by mostly the top officials and hence the poor performance and so it’s against the above background that the researcher compel to evaluate the contribution of internal auditing on services delivery.

1.3 Purpose of the study

The main purpose of the study was to examine the effect of internal audit on the service delivery of public sector organizations while considering National Water and Sewerage Corporation- Mbarara Branch.

1.4 Objectives of the study

Establish the contribution of internal auditing towards the growth of National Water and Sewerage Corporation- Mbarara Branch.
To establish the factors affecting service delivery in National Water and Sewerage Corporation- Mbarara Branch
To establish the relationship between internal audit and service delivery of National Water and Sewerage Corporation- Mbarara Branch

1.5 Research questions

What is the contribution of internal auditing towards the growth of National Water and Sewerage Corporation- Mbarara Branch?
What are the factors affecting service delivery in National Water and Sewerage Corporation- Mbarara Branch?
What is the relationship between internal audit and service delivery of National Water and Sewerage Corporation- Mbarara Branch?

1.6 Scope of the study

1.6.1 Geographical scope

The geographical scope of the study is to be National Water and Sewerage Corporation- Mbarara Branch which located near Mbarara Town immediately after Uganda Martyrs Catholic Church in Kamukuzi Division Mbarara Municipality. Mbarara Municipality is found in Mbarara district in South Western Uganda. Mbarara Municipality is divided into three divisions of; Nyamitanga, Kamukuzi, and Kakooba. This study considered the management and staff at National Water and Sewage Corporation- Mbarara Branch plus people that will be selected from the public who are assumed to be the customers of the same organization of National Water and Sewerage Corporation.

1.6.2 Content scope

The study considered the relationship between internal audit and service delivery of public sector organizations, the content scope include ; Establish the contribution of internal auditing towards the growth of National Water and Sewerage Corporation- Mbarara Branch;; to establish the factors affecting service delivery in National Water and Sewerage Corporation- Mbarara Branch and to establish the relationship between internal audit and service delivery of National Water and Sewerage Corporation- Mbarara Branch

1.6.3 Time scope

The study is estimated to take a period of three months and mainly consider information related to four years that is (2008- 2013). The period of four years is chosen because it is long enough for the researcher to establish the effect of internal audit on the service delivery at National Water and Sewerage Corporation- Mbarara Branch.

1.7 Significance of the study

The study findings are hoped to narrow the knowledge gap between the internal Audit and the service delivery of public sector organizations and National Water and Sewerage Corporation- Mbarara Branch in particular.

The study also added literature review to the already established information about the variables hence acting as a source of literature review to the future academician’s who may get interest in researching about the same study variables of internal Audit and the service delivery of public sector organizations.

The study may further help to bring out the weaknesses in internal Auditing mostly found at National Water and Sewerage Corporation- Mbarara Branch regarding to the auditing as well as service delivery recommendable strategies to solve established weaknesses at the same organization.

The study further helps the researcher to acquire practical skills that may help in carrying out more researches in some future time. This is because during the process of carrying the study, she may come up with the new inspiring problem in the area.

To make organizations aware of the roles of internal auditors to effective and efficient organizational growth.

To avail more data on organizational development, this helps future policy makers.

To avail more analytical techniques, this could b used by future researchers.

The study was also helpful to policy makers to formulate ways on how to improve the service delivery in the economy.

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Full Project – Internal audit and service delivery of public sector organizations

Full Project – Internal audit and service delivery of public sector organizations

CHAPTER ONE

1.0 INTRODUCTION

1.1 background of the study

1.2 Statement of the problem.

1.3 Purpose of the study

1.4 Objectives of the study

1.5 Research questions

1.6 Scope of the study

1.6.1 Geographical scope

1.6.2 Content scope

1.6.3 Time scope

1.7 Significance of the study

Full Project – Internal audit and service delivery of public sector organizations

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