A CASE STUDY OF THE CHURCH OF PENTECOST-LA AREA, ACCRA-GHANA
The study was conducted in the Church of Pentecost, La Area; Accra-Ghana. The Church of Pentecost is a worldwide, non-profit-making Pentecostal church with its general headquarters in Accra, Ghana. It exists to bring all people everywhere to the saving knowledge of our Lord Jesus Christ through the proclamation of the gospel, the planting of churches and the equipping of believers for every God-glorifying service. The objective of the study is to assess the effectiveness of the internal control system of churches in Ghana. The study had a sample size of twenty – four (24) respondents including staff and management of the church. The study made use of convenience and purposive sampling method to gather data from respondents. The study however concluded that, the staffs of the Church of Pentecost have knowledge in internal control system which is effective. They had taken and participated in workshops organized for staff in relation to internal control system issues. Issues of internal control systems are also communicated to staff members but not effective. However there are deficiencies in the organization’s computer base which needs proper remedies. There are also no defined roles for staff and management for specific functions causing a threat to the internal control system of the church. The determination of re-order level and maximum stock level was also cited as constraints faced in the inventory control. From the findings of the research, the researcher recommended that the management of the church should employ more personnel who are members of the professional bodies such as the ICA Ghana, ACCA, and CIMA into the unit, this is because with their knowledge and in-depth study of their profession it will help to reduce the problems of internal control as highlighted in this work. Again, the management of the church should strengthen the training programs, refresher courses and seminars for their employees in the area of internal controls on regular basis.
This chapter examines the background of the study, statement of the problem, objectives of the study, research questions, significance of the study, scope and limitation of the study and organization of the remainder of the study.
- BACKGROUND OF THE STUDY
Organizations, be they profit or non-profit, are established to achieve a set of goals and objectives. In the case of non-profit making organizations, their goal is to satisfy a certain social need of the citizens. However, for profit making organizations, their main or ultimate goal is to make profit from their operations. In order to achieve these goals or objectives of an organization, it is required that management of organizations should put in place an effective internal control system which will ensure the smooth running of the organization or enterprise.
A system of effective internal controls is a critical component of company management and a foundation for the safe and sound operation of organizations. However, ineffective internal controls result in ineffective programs and losses (Financial Management Manual, 2005).
An internal control has been seen to play an important role in the overall effectiveness of information systems security in an organization and religious organizations are no exception. It helps to provide a mechanism to align organizational goals and aspirations with employee’s capabilities, activities and performance. Internal control means different things to different people, resulting in miscommunication and different expectations and this causes problems within the organization, confusion among business people, legislators, regulators and others (Atkinson, Anthony A. et – al. 1995).
The definition of internal control has evolved over recent years as different internal control models have been developed.
In definition, internal control is an organization’s plan and all the related measures that an entity adopts to accomplish its objectives which are:
- Safeguard of assets and used for business purposes
- Encourage employees to follow company policy that is working towards the same goal
- Promote operational efficiency, because, companies cannot afford to waste resources
- To ensure accurate, reliable accounting records
- To have timely feedback on the achievement of operational or strategic goals, and compliance with laws and regulations in an organization (A.H .Millichamp 2002),
Also internal control is defined as the process designed, implemented and maintained by those charged with governance, management and other personnel, to provide reasonable assurance about the achievement of an entity’s objectives with regard to reliability of financial reporting, effectiveness and efficiency of operation and compliance with applicable laws and regulations. (Source: Glossary of Terms Relating to Hong Kong Standards on Quality Control, Auditing Review, Other Assurance and Related Services).
In practice, an internal control system is not a gadget or computer system, it changes the way work should be done, the things that should be used to do the work and also to deal with the uncertainties the work involves. It is not perfect, it has some inherent limitations, e.g. human errors, management override, collusion between personnel, cost and benefits and inadequacies in dealing with changes in conditions such as environmental protection regulations (DiNapoli TP. 1999). The role of internal control is to manage risk appropriately rather than eliminate it. It is therefore vital that those responsible for the stewardship and management of a company be aware of the best methods for identifying, and subsequently managing such risks.
Management has three objectives in establishing internal controls (Vatter William J, 1950):
- Reliability of financial external reporting; this requires the maintenance of proper records and processes that generate a flow of timely, relevant and reliable information from within and outside the organization.
- Effectiveness and efficiency of operations; it helps to respond appropriately to significant business, operational, financial, compliance and other risk to achieving the company’s objectives. This include the safeguarding of assets from inappropriate use or from loss and fraud, and ensuring that liabilities are identified and managed;
- Compliance with applicable laws and regulations and also internal policies with respect to the conduct of business.
All the above definitions of internal controls systems have identified the main objectives of internal controls to be the assurance that organizational resources will be put to economic, efficient and effective use in order to achieve the objectives for which the organization was set up.
1.1 STATEMENT OF THE PROBLEM
Understanding of the concept of internal control is essential for every organization. There have been many incidences of fraud and embezzlement in recent times partly due to ineffective internal controls systems in operations.
Most often, there is lack of mutual understanding with regards to the effective functioning of internal control mechanisms and the management functions of govern organizations especially non-profit making organizations like churches with regards to planning process, each other’s role, protection of the organization assets and working together to facilitate effective organization arrangements.
Internal Control Mechanisms in religious organizations are often misconstrued and aligned with spiritual and leadership affiliations rather than they being looked at objectively and holistically. This state of affairs often results in mistrust of the church management and key stakeholders in the internal controls of the religious institutions, particularly the church. Further, the reporting lines of the Internal Audit Units in the organizational structure of the churches tend to conflict with other functions of numerous monitoring and review teams within the church thereby affecting negatively the independence of the Internal Audit Unit and the scope of their work.
However, recent accounting frauds by many religious institutions have created mistrust among public and the congregation towards the church leaders. There have been calls for better internal controls in religious organization.
Again, internal controls only provide reasonable assurance, not absolute assurance. This is because it is people who operate the internal controls, breakdowns can occur, human error, deliberate circumvention, management override, and improper collusion among people who are supposed to act independently can cause failures of the internal control to achieve objectives.
In Ghana, the emergence of numerous charismatic and Pentecostal churches in recent years and the alarming rate of misconducts and bad corporate practices have led to steadily decline in public confidence in most religious organizations. For instance, in recent times the Church of Pentecost has suspended most of its leaders due to financial malpractices and misapplication of church funds. Again, there is also lack of maintenance culture as the assets of the church such as chairs, instruments and buildings are mishandled reducing its lifespan.
Most researchers have conducted studies on internal control system in profit making organization. Notwithstanding, few studies have focused on non profit making organizations especially the religious organizations in the West African Sub regions. The present study would fill this gap and provide practical significance to this area. Therefore, this study seeks to assess the effectiveness of internal control systems in the religious organization in Ghana; using the Church Pentecost, La- Accra; as a test case, to examine closely, the nature and form of internal control systems of the church, and also ascertain the weaknesses in the system. The primary focus, then, would be the evaluation of the internal control systems put in place by management of the church, to ensure the proper and efficient use of resources in attaining their set objectives.
1.2 Objectives of the Study
The broad objective of this research work is to examine the effectiveness of internal controls system in the churches of Ghana using the Church of Pentecost-La Area, Accra- as a test case.
In order to accomplish the above general objective, the study sought to address the following specific objectives:
- To identify the various forms, measures and mechanisms put in place to enhance the effectiveness of internal controls in the Church of Pentecost.
- To identify and assess the key element of an effective and efficient internal control function.
- Identify the major problems that inhibit the effective and efficient functioning of internal controls in the accomplishment of the church’s goals.
1.3 Research Questions
Related to the problem, the research sought to address the following questions
- What are the various forms, measures and mechanisms put in place to enhance the effectiveness of internal controls in the Church of Pentecost?
- What are the key elements of an effective and efficient internal control function?
- What are the major problems that inhibit the effective and efficient functioning of internal controls in the accomplishment of the church’s goals?
1.4 Significance of the Study
The importance of this study cannot be overemphasized, as it will set out to unearth how an effective and efficient internal control function impacts positively on good governance and accountability in religious organizations; it will also unearth as well the negative impacts of ineffective and inefficient internal control mechanisms impacts on governance of religious entities particularly churches. Thereby helping church leaders and decision makers in the churches to know the kind of policy instruments regarding good governance that will help them to shape their respective churches so as to make them more efficient and viable and vision oriented aside spiritual aspect of winning souls for Christ.
As evident, internal controls form the cornerstone of good governance in all organizations. In the religious setting, internal controls has a major role to play in protecting church members interest relating to funds collected, effective and efficient day to day management of the church, safeguarding assets, prevention and detection of fraud, errors and irregularities as well as other important aspects of the purpose of church. It is therefore not out of place to assess and take stock of internal control activities’ impact on good governance in the religious entities in order to help plan the way forward. The study will also seek to provide an opportunity to religious leaders to harness the most benefits out of the internal control function and tools by identifying loopholes in the existing processes/mechanisms and knowing how it impacts on good governance in the church activities. The significance of the study is to also bring to the notice of scholars and authorities the essence of appreciating the effectiveness of internal controls in the religious institutions in Ghana.
1.5 Scope and Limitation of the Study
The research is limited to activities in the financial sector specifically the savings and loans industry. There are currently several metropolitan, municipal, and assemblies in the country. However for the purpose of the study, the Church of Pentecost-La Area, Accra was selected for investigation and analysis. The study focuses on internal control systems in the organization, their roles, and objectives, and employees’ knowledge on the internal control systems, its effectiveness and how they impact decision making.
The challenges faced in the study include resource constraints in terms of time and logistics as well as difficulty in accessing information. Also, academic work has to be combined with the research work and this negatively affected the researcher. However, various measures were put in place to minimize the problems which emerged in order to reach the goal of this research.
1.6 Organization of the Study
The research is made up of five chapters.
This chapter one deals with the general overview of the study. It introduces the study of the research, gives a background of the study, the problem statement, research questions, research objectives, significance of the study, definition of terms, scope of the study and organization of the rest of the study.
Chapter two focuses on literature review and presents a comprehensive review of relevant literature in an attempt to position the study in an appropriate theoretical framework. Thus, it discussed findings of related researches to the study.
Chapter three focuses on research methodology and this includes: research design, research population/sample size, instrument used, and data analysis techniques.
Chapter four focuses on findings and discussion of data gathered from the survey and
Chapter five comprises of conclusion and recommendation.
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