i

DECLARATION

I, Michel GIKUNDIRO hereby declare that this dissertation

entitled “The Role of Internal Control system in Organizational Performance of

public Institutions in Rwanda ” case study Gasabo District, is my own work

and it has not been submitted anywhere for the award of any

degree.

Name of the student: Michel GIKUNDIRO

Date………/…………/2011

Signature……………

ii

CERTIFICATION

This is to certify that the project work “The Role of Internal Control

system in Organizational Performance of Public Institutions in Rwanda” was done

by Michel GIKUNDIRO a student in Economic sciences and

Management, department of Finance in partial Fulfilment of

requirement for the award of Bachelor’s degree of Business

Administration (BBA) under my guidance and supervision

Supervisor: Maria MUNGARA

Date…………/…………/2011

Signature……………………………

iii

DEDICATION

To my father

SEBIKAMIRO Zacharie

To my mother

NYIRANGARABA Ramu

To my Brother-in-law

BIHIZI RUMANURA Edmond

To my sister NYIRAHIRWA

Dorcas

To my Brother RUCOBOGO

Felix

To my friends

This Dissertation is

dedicated

iv

ACKNOWLEDGEMENT

This research would not have been a success without the support,

help and guidance from many people. However, it is not easy to

mention each and every one’s name that might have in one way or

the other helped in this Endeavour.

My thanks go to the God Almighty, the best solution of all our

daily problems

I am very grateful to my Brother-in-Law BIHIZI RUMANURA Edmond

and my sister NYIRAHIRWA Dorcas his wife and both their children

v

NGUWENEZA and UWONKUNDA, for having tirelessly and with love

supported me in every step I made in my studies and in shaping

me to what I am.

I would like to extend my sincere gratitude to my supervisor

Maria MUNGARA for her support and guidance during the course of

this work. Thanks a lot also, for the time you put aside to

attend to me.

Heartfelt regards go to my lovely parents, the couple SEBIKAMIRO

Zacharie and NYIRANGARABA Ramu that I love so much, you have been

a way for me to come into life and I am enjoying it, may you live

long.

I very much acknowledge my Brother RUCOBOGO NTAGAWA Felix’s

assistance in my academic life.

Special thanks also go to Independent Institute of Lay Adventists

of Kigali (INILAK) especially Faculty of Economic

sciences/Finance department for the knowledge extended to us.

I thank also my friend Muhoza Richard and my classmates who provided

their support to accomplish this work.

May Almighty God bless you so much

Michel GIKUNDIRO

vi

ABSTRACT

The research on “ The Role of Internal Control System in Organisational

Performance of Public Institutions in Rwanda” a case study Gasabo Distrct,

has been carried out to know the internal control systems aspects

in the performance of public institutions in Rwanda.

The general objective of this research was to study internal

control system aspect in public institutions and assess their

performance.

In this study, a purposive and simple random sampling technique

were adopted to select population under study, and the researcher

has collected both primary and secondary data to achieve the

research objectives, data collection was done by carrying out

personal interview, observation and questionnaire. Data were

analysed and interpreted using tables from which frequencies and

percentages of responses were provided.

Findings have shown that Gasabo District has internal control

system which plays a great role in its performance, success and

contributes in efficient and effective management. This is proved

by the fact that Gasabo District has established all kind of

internal control system, which are operating effectively and

efficiently as designed.

vii

Finally, a conclusion was made that an internal control system

plays a key role in performance management of public institutions

in Rwanda and helps them to achieve the desired objectives as

planned. The researcher has also concluded that an effective

implementation of internal control system is not a task of one

person or department, but, effective internal control system can

be implemented when there is cooperation and full commitment of

all employees

The researcher has provided recommendations on this research

suggesting ways of strengthening the implementation of effective

internal control system which is a foundation of good performance

SOMMAIRE

Les recherches sur "Le Role de système de contrôle interne de la performance

organisationnelle des institutions publiques au Rwanda" une étude de cas de

Gasabo Distrct, a été réalisée pour connaître les systèmes de

contrôle interne des aspects de la performance des institutions

publiques au Rwanda.

L'objectif général de cette recherche était d'étudier les aspects

internes du système de contrôle dans les institutions publiques

et d'évaluer leur performance.

Dans cette étude, une technique d'échantillonnage aléatoire

viii

simple objet et ont été adoptées pour sélectionner la population

à l'étude, et le chercheur a recueilli des données primaires et

secondaires pour atteindre les objectifs de recherche, la

collecte des données a été réalisée en effectuant entretien

personnel, l'observation et le questionnaire. Les données ont été

analysées et interprétées à l'aide des tableaux à partir de

laquelle les fréquences et les pourcentages de réponses ont été

fournies.

Les résultats ont montré que le district de Gasabo a le système

de contrôle interne qui joue un grand rôle dans ses performances,

succès et contribue à la gestion efficiente et efficace. Ceci est

prouvé par le fait que le district de Gasabo a créé toutes sortes

de système de contrôle interne, qui fonctionnent de façon

efficace et efficiente que prévu.

Enfin, une conclusion a été faite que d'un système de contrôle

interne joue un rôle clé dans la gestion de la performance des

institutions publiques au Rwanda et les aide à atteindre les

objectifs souhaités, comme prévu. Le chercheur a également conclu

que l'application effective du système de contrôle interne n'est

pas une tâche d'une personne ou un service, mais, un système

efficace de contrôle interne peut être mis en œuvre lorsqu'il ya

coopération et l'engagement complet de tous les employés

Le chercheur a fourni des recommandations sur cette recherche

suggère des moyens de renforcer la mise en œuvre du système de

ix

contrôle interne efficace qui est un fondement de la bonne

performance

vii

TABLE OF CONTENT

DECLARATION....................................................iCERTIFICATION.................................................iiDEDICATION...................................................iiiACKNOWLEDGEMENT...............................................ivABSTRACT.......................................................vSOMMAIRE......................................................viTABLE OF CONTENT.............................................viiLIST OF TABLES................................................xiCHAPTER ONE. GENERAL INTRODUCTION..............................11.1. Background of the study...................................1

1.2. Problem Statement.........................................3

1.3. Objectives of the study...................................3

1.3.1. General objectives...................................31.3.2. Specific objectives..................................3

1.4. Research questions........................................3

1.5 .The scope of the study....................................4

1.6. Significance of the study.................................4

1.7. Structure of the study....................................5

1.8. Gasabo District profile...................................5

1.8.1. District’s vision....................................61.8.2. District’s mission...................................6

CHAPTER TWO: LITERATURE REVIEW.................................72.1. Introduction..............................................7

2.2. Definition of key terms...................................7

2.2.1. Definition of internal control.......................72.2.2. Internal Audit.......................................82.2.3. Definition of internal check.........................9

2.3. Types of control..........................................9

2.4. Objectives of internal control...........................10

2.5. Steps in controlling the organizational activities.......11

2.6. Characteristics of good internal control system..........11

viii

2.7. Classification by nature of control......................12

2.7.1. Management control..................................122.7.2. Executive control...................................132.7.3. Management by exception.............................132.7.4. Internal control....................................13

2.8. Divisions of internal control............................14

2.9. Internal control components..............................14

2.10. Internal control evaluation.............................14

2.11. Characteristics of an effective system of internal control

..............................................................15

2.12. Categories of internal control..........................16

2.12.1. Administrative control.............................162.12.2. Finance control/accounting.........................162.12.3. Physical control...................................172.12.4. Operational control................................17

2.13. Internal control limitation.............................17

2.14. Why institution need internal control system............18

2.14.1. Internal Check and internal Audit..................192.14.2. Internal Control and Internal Auditors.............202.14.3. Internal Control need to ensure that...............202.14.4. Internal Control and External Auditor..............20

2.15. Distinction between internal control, internal check and

internal audit................................................21

2.16. Parties responsible for and affected by internal control 21

2.17. Performance.............................................22

2.18. Theory of performance...................................22

2.19. Types of performance....................................23

2.19.1. Financial performance..............................232.19.2. Organizational performance.........................23

2.20. Standard of performance.................................24

2.21. Dimensions of performance...............................24

ix

2.22. Definition of public institutions.......................25

CHAPTER THREE: REASERCH METHODOLOGY...........................263.1. Introduction.............................................26

3.2. Nature of the study......................................26

3.3. Population Under study...................................26

3.4. Sampling.................................................26

3.4.1. Sampling techniques.................................263.4.2. Sample size.........................................27

Table:1.Selected sample of the study..........................273.5. Method and instrument of data collection.................28

3.5.1. Interview Schedule..................................283.5.2. Questionnaires......................................283.5.3. Observation.........................................28

3.6. Data Collection Methods..................................29

3.6.1. Primary data........................................293.6.2. Secondary data......................................30

3.7. Data processing, analysis and interpretation.............30

3.7.1. Editing................................................31

3.7.2. Coding..............................................313.7.3. Tabulations.........................................31

3.8. Data Analysis............................................32

3.9. Limitation of the study..................................32

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND INTERPRETATION. .334.1. Introduction.............................................33

4.2. Age of respondents.......................................33

4.3. Respondents Educational level............................34

4.4. Respondents experience...................................35

4.5. Knowledge of internal control system by Gasabo District

employees.....................................................35

4.6. Reviewing internal control system........................36

x

4.7. Payment and receipts in Gasabo District..................36

4.8. Division of labor to payment and receipts................37

4.9. How do you rate internal control system within Gasabo

District?.....................................................38

4.10. Crosscheck work.........................................38

4.11. If yes what is his position?............................39

4.12. Role of internal control system in Gasabo District......40

4.13. Existence of internal control over fixed assets.........40

4.14. Performance of internal control system in Gasabo District

..............................................................41

4.15. The scope of internal control system in Gasabo District. 42

4.16. Problems affecting implementation of internal control in

Gasabo District...............................................42

CHAPTER FIVE: SUMMARY OF MAJOR FINDINGS, CONCLUSION AND.......44RECOMMANDATIONS...............................................445.1. Introduction.............................................44

5.2. Summary of the major findings............................44

5.3. Conclusion...............................................45

5.4. Recommendations..........................................46

5.5. Area for further study...................................47

REFERENCES....................................................48APPENDICES....................................................49

LIST OF ABBREVIATION, ACRONYMS

%: percentage

COSO: Committee of sponsoring organization

EDPRS: Economic development and poverty reduction

xi

IAS: International accounting standard

INILAK: Independent Institute of Lay Adventists of Kigali

ISA: Internal standard of Auditing

MDGS: Millennium development goal

LIST OF TABLES

Table:1.Selected sample of the study..........................27

xii

Table:2. Distribution of respondents by Ages..................33

Table:3.Distribution of respondents by educational level......34

Table: 4. Distribution of respondents by job experience.......35

Table:5.Distribution of respondents by Knowledge of internal

control system................................................35

Table: 6. Distribution of respondents on reviewing internal

control system................................................36

Table: 7.Distribution of respondents to Division of labor to

payments and receipts.........................................37

Table:8. Distribution of respondents on rating internal control

system in Gasabo District.....................................38

Table:9. Distribution of respondents on crosscheck work.......39

Table 10.Distribution of respondents on the position

crosschecked..................................................39

Table:11. Distribution of respondents on role of internal

control system in Gasabo district.............................40

Table: 12.Distribution of internal control system over fixed

assets........................................................40

Table:13.Distribution of respondents on performance of Gasabo

District......................................................41

Table:14. Distribution of respondents on scope of internal

system in Gasabo District.....................................42

Table.15.Respondent on problems affecting internal control

implementation in Gasabo District.............................43

1

CHAPTER ONE. GENERAL INTRODUCTION

1.1. Background of the study

Internal control systems are a whole system of control, financial

or otherwise established by organizations in order to carry on

the business of the enterprise in orderly and efficient manner.

To ensure the adherence to management policies, safeguard the

company’s assets, and secure as far as possible the completeness

and accuracy of the record .Gupta (1999:85).

In accounting and auditing, internal control system is defined as

a process effected by an organization’s structure, works and

authority flows, people and management information

system ,designed to help the organization accomplish specific

goals or objectives. It is way by which an organization’s

resources are directed, monitored, and measured.

At the organizational level, internal control objectives relate

to the reliability of financial reporting, timely feedback on the

achievement of operational or strategic goals, and compliance

with laws and regulations. At the specific transaction level,

internal control refers to the actions taken to achieve a

specific objective (example, how to ensure the organization’s

payments to the third parties are for valid services rendered),

internal control procedures reduce process variation, leading to

more predictable outcomes.

However, performance is defined as the organizations’ ability to

attain its goals by using resources in an efficient and effective

2

manner .He further stresses that manager’s responsibility is to

coordinate resources in a most effective and efficient manner to

accomplish organization’s goals. , According to Daft (1991:11),

While streets (1991:1640), defines performance as the extent to

which an individual can succefully accomplish a task or achieve a

goal. Performance includes not only the production of certain

tangible output , such as effectively supervising others,

thinking in a creative way investing a new product, resolving a

conflict between others or selling a good or service.

According to Oxford advanced learner’s Dictionary (2000), a

public institution is a corporate body which either wholly or

partially owned by the state or in which the state has a

controlling hand /interest and which is established by a specific

act of parliament or equivalent decree to manage or regulate a

given industry or public utility in the public interest .While

Shirley and Terra (1989:18) , definition include entities that

are expected to earn most of the revenue from the sales of goods

and services , having separated legal entity and are majority

owned by the government which same expectations this definition

depicts the view.

In Rwanda, public institutions are put in place in order to

deliver appropriate services, to general public that is why those

institutions need to undertake their functions effectively for

the benefit of the institutions. It is in this sense that, public

institutions need to be efficient for achieving their objectives.

3

In order to be more efficient, public institutions need to

operate and design sound internal control systems, which will

help them to increase profitability and achieve the prescribed

goal

Internal control systems in safeguard the assets of the

organization and help everyone especially, manager. Inventors and

generally employees to have confidence in organizations

activities .It can help organizations to prevent and detect

frauds and errors among employees and can also enable them to

minimize misuses and losses of assets due to the theft or

misappropriation of fund.

It should be noted that different institutions could design

different internal control systems depending on goods produced or

the services they render to the public. There is no standard

internal control system for all public institutions. They are

circumstances under which an institution is working.

In that dictates what internal control system to be established.

Internal control systems are not static; they can update

depending on the institutions changes takings places and the

nature of the environment in which the institution is working.

Gupta (1999:85).

In Rwanda, many public institutions tried to establish internal

control systems in their operations. However, many of them still

operate in loss or operate in break-even point. This caused a big

4

loss to the government revenue and has negative impact to the

public services or to the socio

Economic life of people. Then, for this reason government decides

to privatize and some time to liquidate them.

Hence, the research on this area was aimed at gaining clear

understanding on how performance the internal control systems are

in public institutions. Particularly in Gasabo District in order

to achieve their planned objectives and then contribute to their

appropriate management

1.2. Problem Statement

In our days, organizations both public and private are facing the

problems of poor performance because of their daily operations,

however, in most cases public institutions in Rwanda face

different problems of mismanagement and fail to achieve their

objectives as planned.

The poor performance may lead to many factors in the

organizations but the major is lack of applying properly internal

control system as a basis for proper management

The research was interested in finding out how effective and

efficient are internal control systems in public institution in

Rwanda particularly in Gasabo District.

5

1.3. Objectives of the study

The objectives of the study are divided in general and specific

objectives.

1.3.1. General objectives

To show clearly the role of internal control systems aspects in

organizational performance of public institutions in Rwanda.

1.3.2. Specific objectives

1. To identify and analyze the internal control systems operating

within Gasabo District

2. To determine the internal control procedures of Gasabo

District

3. To establish the role of internal control system to safeguard

the Gasabo District assets

1.4. Research questions

In order to conduct research the following questions have to be

asked;

1. How internal control system operates in Gasabo District?

2. Does internal control systems help the public institutions to

achieve their objectives?

3. How internal control system intervene in safeguarding the

Gasabo District’s assets?

6

1.5 .The scope of the study

The current study was conducted at Gasabo District located in

Kigali city. It concerned with the information on the performance

of internal control system in Public institutions in Rwanda .The

Secondary data collected are From 2008- 2010

1.6. Significance of the study

This study is an addition to existing data for future reference

and to aid internal control system as a system to the excellent

performance not only in Gasabo District but also in other public

institutions in Rwanda.

This study is important to the researcher, Gasabo District,

Independent Institute of Lay Adventists of Kigali .the research

is significance because suggestions and recommendations that are

provided by the researcher to help institutions to improve the

internal control system, which is basis of organizational

performance.

However, this study provided relevant information on the internal

control systems conducted in the public institutions in Rwanda.

Thus, it improved skills and knowledge of the researcher.

The research is also one of the requirements for the researcher

to be awarded a Bachelor’s degree in Business Administration.

7

The research report will be available in the library of INILAK

and will be used by other researcher who should be interested in

this area of research. Given that the library of INILAK is also

accessible to the public. Thus, any other person who may need

information about internal control systems in Public institutions

in Rwanda may also find them in this library.

The Public institutions other than, Gasabo District may rely on

the findings. Conclusion and recommendation and take corrective

measures. This will help them to improve their performance

1.7. Structure of the study

The research results were presented in five chapters;

Chapter one is introduction part and presents the background to

the study, statement of the problem, objectives of the study,

research questions, scope of the study, significance of the

study, the structure of the study and profile of Gasabo District.

Chapter two is the literature review. This is concerned with the

consultations of the existing literature in this field of the

study. Fetching the knowledge from the work already conducted

etc.

8

Chapter three consists the research methodology. The decision

pertaining to the methods of investigation is to be done in this

chapter etc.

Chapter four contains the analysis and interpretation of the main

findings

Chapter five is the last chapter, which is about the summary

recommendations, conclusion and areas for further studied

1.8. Gasabo District profile

Gasabo is the district in Kigali province, Rwanda. Its capital is

at Kacyiru, a village on the outskirts of the Kigali urban area.

The district also includes large areas of the city itself,

including; Kacyiru, Remera, Nyarutarama, and Kimihurura.

The total objective of the development plan which is spread out

over five years (2008-2012) is to provide an instrument of

planning and coordination of the interventions in order to

improve the living conditions of the population in Gasabo

District and to ensure a harmonious development

The district occupies the northern half of Kigali province, which

had its boundaries extended under local government reorganization

in 2006.

The relief of Gasabo District is dominated by mountains of high

altitude (1800m) especially in the rural areas. It is surrounded

by sloping basins and valley

9

The District of Gasabo possesses small rivers in valleys in a

region of elevated hills. The unique small river network, which

merits this description, is the Nyabarongo, which originates from

Lake Muhazi and empties into Nyabugogo River after traversing a

marshy and boggy valley of about fifty kilometres long and 1000

metres wid

However, certain wild plants still exist in the swamps and small

corners, which are not cultivate

Gasabo District experiences four seasons namely: Two rainy and

two dry seasons, which alternate in the following fashion:

A short dry season: December, January and February;

A long rainy season : March, April and May;

A long dry season : June, July, August and September;

A short rainy season: October and November.

These four seasons are characteristic of the climate in the whole

country. The seasons being irregular, one cannot correctly fix

rower or upper limits of each season.

1.8.1. District’s vision

District’s vision is sustainable development in line with the

strategy for economic development and poverty reduction (EDPRS,

Reaching the Millennium development Goals (MDGs) whose ultimate

goal is the 2020 vision of Rwanda.

1.8.2. District’s mission

The district accomplishes the mission conferred upon it by law

and regulations’ regarding the policy, Administration, economics,

10

social welfare and culture.The district is a part of the

promotion of democracy and development base. It is the guarantor

of solidarity of the population for the development of the

district in General and the population.

The district should support the initiatives in which the

population is involved. It should reflect the aspirations of the

people in the planning of development activities and ensure

coordination of all development activities in the District.

The District should ensure the maintenance of its infrastructure.

Associations of people involved in the promotion of development

of the District. The government, the private sector and

development partners to assist the District in the field of

technical and financial.

CHAPTER TWO: LITERATURE REVIEW

2.1. Introduction

The concept of internal control evolved slowly over some years

and its greatest development occurred in early 1940. This method

not only comes in existence due to complexities of modern

business techniques but also due to increased sizes of business

11

units that have forced the adoption of the method while

increasing the efficiency of the business and act as safe guard

against errors frauds.

This chapter review the related literature based on the study of

various studies, the researchers and authors in the field of

management. Therefore, it reviews the relevant literature

resulting from the work of several researchers and presented in

books, reports and other published documentation that were

available to the researcher.

The overall purpose of the review is to identify gaps that this

study will fill and contributions success relationship.

2.2. Definition of key terms

2.2.1. Definition of internal control

Internal control consist of all measures taken to provide

management with assurance that everything in functioning as it

should, and it extends beyond the accounting and financial

functions; it touches all activities of the organization.

According to Mill champ (2002:85), internal control systems are

defined as the whole systems of controls, financial or otherwise

established management in orderly and efficient manner, ensure

adherence to management policies and completeness of records.

According to Spicer and Pegler (2003:23) internal control are

plans financial institutions and all the methods and procedures

adopted by the management of institution to assist in achieving

12

management objective of ensuring as far as possible, the

safeguarding of assists, prevention and detection of errors and

fraud, the accuracy and completeness of the accounting records

and timely of reliable financial information.

According to the council of institute of chartered accountant of

India in their sixth standards of auditing practices (1998:5),

defined internal control as a plan of an institutions and all the

methods and procedures adopted by the management of institution

to assist in achieving management objectives of ensuring as far

as practicable, the orderly and efficient of activities including

adherence to management policies, the safeguarding of assets, the

prevention and detection of errors, the accuracy and completeness

of accounting records and the timely preparation of reliable

financial information.

According to Walter (1985:172), internal control consists of all

measures employed by an institution

Safeguard assets from waste, fraud and inefficient use.

Promoting accuracy and reliability in accounting and

operating data.

Encourage and measure compliance with institution policies.

Evaluate the efficiency of operation

Subhash (1998:15), stated that internal control system is

primarily concerned with checking the reliability of accounting

data, monitoring operational efficiency and checking adherence to

managerial policies with which the accountant is concerned.

13

2.2.2. Internal Audit

Internal auditing is defined as a managerial tool, which acts as

a watchdog over the company’s entity internal control systems. It

is a recent development in the accounting field, Paul.In his book

principals of auditing (1990:62),

Kapoor (2000:227) Internal audit an independent appraisal

activity within an institution for the review of operation as a

service to a financial institution.

Kamal (1999:32) the internal audit an independent appraisal

function established within a financial institution to examine

and evaluate its activities as service to the institution.

Freeman and Gilbart (1992:575) defined internal control audit

performed by the institution to ensure that its assets are

properly safeguarded and its financial records reliably kept

Mill champ (2002:18) defines internal auditing as in independent

appraisal function established by the management of organization

for the view of the internal control system as service to the

organization. It objectively examines, evaluates, and reports on

the adequacy of internal control as a contribution to the proper,

economic, efficient and effective use resources

However, it should be clear that, internal audit does not bring

things to perfection but it systematically detects and corrects

significant deviations from planned events by evaluating of

various functional units within an institution especially in

14

terms of operating efficient and implementation of controls

designed to achieve optimum results.

2.2.3. Definition of internal check

Batra and Bagardia (1992:44) defined internal check as

arrangement of duties of staff on scientific lines, so that no

one person is allowed to handle all aspect of transaction.

According to the institute of chartered Accounting in

England(1992:43) Internal check is a system or method introduced

with a view to control and verification of their work also

maintenance of accurate records as their ultimate aim.

According to Gupta (1992:32) ,Internal check is a system of

instituting checks on the day to day transaction which operate

continuous as part of routine system whereby the work of

another object being the prevention of errors

2.3. Types of control

The organization draws on many controls and of some are not

especially visible or obvious as being controls that helps run

the organization’s day-to-day operations and business.

There are many types of control but they can be categorized into

four main types:

Detective: These controls identity undesirable outcomes have

occurred and function after the event has happened.

15

This means that they are suited when it is possible to accept the

loss or damage incurred.

An example of this type of control is a financial reconciliation

(whether unauthorized transactions are detected after they have

occurred).

Directive: These controls direct an activity towards a desired

outcome. An example of this type of control would be training

staff to work towards achieving particular objectives for the

organization staff towards a specific aim.

Preventive: They are controls limit or stop the possibility of an

undesirable event happening.

Examples include separation duty controls or authorization limits

and levels.

Corrective: They correct undesirable outcomes after they have

happened and an example of this might be the terms and conditions

of a contract to recover an over employment. Institute of

Internal Auditors (Howard settler, 1982:119).

2.4. Objectives of internal control

Robert (1985:172), stated, that” The basic purpose of internal

control is to promote efficient operation of an institution.”

According to Benoit (2001:12),”internal control plays a double

role in the institution.

Its first role is to ensure that decisions made by institution

managers are efficiently implemented.

16

Its second role in the institution is to detect any abnormality

in the systems and therefore contribute to the orderly conducted

of financial.

According to Batra and Bagardia (1992), internal control system

has six objectives:

protect its assets

protect against improper assets disbursement

Protect against incurrence of unnecessary charges

Assure accuracy and dependability of all financial and

operating information

Ensure an operating efficiency

Measure adherence to the organization’s established policies

Kamal(1999) recognized the objectives of internal control and

observed that with internal control:

The transaction are executed in accordance with the

management’s authorization

All transactions are promptly recorded in appropriate manner

to permit the preparation of financial information and to

maintain accountability for assets

Assets are safeguarded from an authorization access, use or

disposition

Assets are verified at reasonable intervals and appropriate

action is taken with regard to discrepancies.

2.5. Steps in controlling the organizational activities

17

Settler (1982:134) considered some important steps for any

controlling process to take place

Controlling and marking the decision in the development

plan

Authorizing action and implementing plans

Designing and operating an information system ,summarize

and report on all activities

In order to provide necessary feedback

Taking collective action to pass action and result.

According to Daft (1991:494), based on the definition of an

institution control, as well designed control systems consist for

steps, which are described below.

Establish standard performance within an institution, managers

defines objectives for institution departments in specific,

operation terms measure actual performance.

Many institutions develop quantitative measurement performance

that can be periodically example, daily, weekly, monthly,

quarterly, yearly

Compare performance to standards, these steps are based in the

comparison of actual activities performance standards.

Take corrective action collective action is following up to

change work activities in order to bring them back to acceptable

standards.

2.6. Characteristics of good internal control system

18

A plan of an institution, which provides appropriate

division of functional

responsibilities.

A system of authorization and procedures as to ensure

reasonable financial control.

Over assets, liabilities and revenue.practices and

performing duties and function of each of the department in

the Institution.

Management should ensure that only qualified people with an

aptitude job should be appointed to do those particularly

job.

Managerial supervision by setting internal audit department.

Budgeting control and standard costing to assist the working

of internal control systems.

2.7. Classification by nature of control

According to Mill champ (2002:85, 86) the following are levels of

control prevailing in an institution functioning;

Management control

Executive control

Management by exception

Internal control

Administration control

Operation control

Financial control

Physical control

19

Internal check

2.7.1. Management control

The most important in an institution is management control as at

related to top management functioning.

Top management always determines the extent and nature of the

control they should have in exercising their authority, in

governing or in directing the activities of personal responsible

to them for them for the execution of policies and procedures. In

the process of accomplishment of such plans, policies and

procedures of the institution, (control by top management will

also embrace executive control) management control can be defined

in various ways;

Setting up for institutional structure with a commensurate

institution chart, by which management control the

institution establishment goals

Management control is the management process by which the

operation personnel accomplishment of organizational goals.

Management control is a tool attainment assessment of

objectives by top management

2.7.2. Executive control

20

Executive control is the control exercised by those personnel who

executions are putting into action the organization’s plans,

policies and procedures with view to achieving the objectives of

institution

2.7.3. Management by exception

The institution’s activities manageable and evolved the concept

of “management by exception”

This principle of management is based on the presupposition that

major happenings or functioning’s are according to laid down

policies and procedures or the normal happening and only

exception matters or events should be highlighted and reported

for necessary action by the top management

2.7.4. Internal control

This nature of control aspect is applied to an institution

functioning in detailed manner. This is fundamental ingredient

for successful operation of business.

It is not only concerned with accounting procedures, approval and

other forms of financial management but also embraces the human

relations approach, coordination of activities, motivation and

morale in the institution. As make the internal control is

effective degree of internal control a manager the institutions

the differences are attributed to;

Magnitude of institution

21

Facilities available

Nature of the institution

Types of the institution

Capabilities of an institution

Internal control embraces the whole system of controls,

financial, or otherwise, established by the management in the

functioning of an institution, including internal check internal

audit and other forms of control.

2.8. Divisions of internal control

Ron Weber (2001:11-14) highlighted the following divisions of

internal control

Specific authorizations on other hand are those that apply

to individual activities

Segregation of duties: separation duties should be

responsible for initiating duties

Authorization division: management issues authorizations

division to execute transaction

Independent checks on performance: these are checks

necessary to be done because the employees are likely to

forget procedures, genuine mistakes. Independent

Millchamp (2002:90-92) highlighted other categories of

internal control plan of an institution, which comprises of

defined allocation of responsibilities, every function

22

should be in charge for the responsible official. This makes

it possible for a particular person to be answerable for

every transaction.

Reporting : the delegation and responsibilities should be

clearly special

Budgeting: a common technique used for the institution in

use of budget, this can be comparing with actual out and

differences investigated.

Personal: procedures should be designed to them as the

proper functioning of systems depends up the competence and

integrity of operating human resources

2.9. Internal control components

The formality of any control system will depends largely on an

institution’s size, the complexity of its operations and its risk

profile.

Less formal and structured internal control systems at public

institutions can be as effective as more formal and structure of

internal.

2.10. Internal control evaluation

Bateman and zeithaml (1990:637), Evaluation plays internal

control involves,

Identifying the internal control objectives relevant to the

institution’s department

23

Reviewing pertinent policies, procedures and documentation.

Discussing control with appropriate levels of institution

personnel.

According to Gupta (1999:83) the objectives of internal control

relating to the accounting systems

The transaction are executed in accordance with the management’s

institution

All transaction are promptly recorded in an appropriate manner to

permit the preparation of financial information and to maintain

accountability for assets.

Assets are safeguard from unauthorized access, use or deposition

Assets are verified at reasonable intervals and appropriate

action is taken with regard to discrepancies.

2.11. Characteristics of an effective system of internal control

Settler (1982:135) to attain the objective behind the institution

of internal control or internal check, following factors must be

present and are called basic ingredients of control

Appropriate segregation of functional responsibilities

Functional responsibilities are attainable and not academics

Understandable by employees as to the purpose and proper

methods of application

Practicable in application

Employee’s acceptance of the system

Must be effectives towards solution of the problems of

management

24

Before control measure are instated, the questions of cost

of maintaining control

System to be considered against possible hazards, loss or

inefficiency, which may occur in the absence of control

measures. It cost money to install and must be in

consistence with the risk involved

Control measures must be tied up the objectives of

institution

Control measures should not be static but dynamic.

This means according to circumstances of business

functioning, control measures should be revised and adopted

by management. Control must fit in to meet the current

condition

Management should not be reluctant to take steps in

formulating effective system of control at any stage or at

any time of institution functioning

Management should not be interested only in safeguarded the

Institution’s interest but also in protecting the employees

from any misdoings, frauds of Waste

There is no conflict of interested among institutional

personnel. This is institutional climate for effectiveness

of control

2.12. Categories of internal control

The internal auditory becomes concerned will all forms of control

including internal control at all times at any level and in

25

aspect of appraisal and internal control can be divided into four

classifications;

Administrative control

Finance control

Physical control

Operation control

The above definition expressed as follows

2.12.1. Administrative control

Administrative is the starting point for establishing

accountability control. This comprises the application of

policies, efforts for achieving overall objectives, achievement

of integrated efforts through guidance, leadership and control.

Administrative is exercised through;

Implementation of plans and policies

Achievement of objectives and goals

Measurement of performance against predetermined target

2.12.2. Finance control/accounting

This control is also known as the financial management that is

exercised through authorization, allocation of the duties,

accounting manual and operational manual

Authorization and ongoing approval

Adequate recording

Reliability of both external and internal reporting

26

Safeguarding of assets and evidence of control

2.12.3. Physical control

There include protective devices for safeguarding assets such as

provision of steel safes and strong room for cash office, locked

cash registers and other security arrangements

2.12.4. Operational control

This part is concerned

Standards for management

Budgetary control standard costing

Planning

Forecasting and profit engineering

2.13. Internal control limitation

Mill champ (2002:100), outline internal control limitation

systems

The possibility of circumvention of control either alone or

through collusion with parties

or inside of an institution

An internal control tends not to be directed at routine

transactions the transaction tends

not be the subject of internal control

Potential human errors caused be stress of work-load,

alcohol, carelessness, distraction

27

mistakes of judgment and the miss understanding of

instruction

Management override of control

A requirement that the cost of a control is not

disproportionate to the potential loss that may result from

its absence

According Kamal (1998:83), subscribed the following of

internal control limitations

Any system of control has its limitations in preventing

frauds through collusion between two or more persons

Management itself may manipulate transactions or estimate

A member of management may himself override the control

In order to provide reasonable assurance that the

management’s objectives achieved; controls have to be cost

effective. Thus some internal control system may not be

instituted merely because they are not cost effectives

Control may not keep pace with changes in conditions

The potential of human errors remains in any system of

control

Most control is at transaction direct of a usual nature.

Therefore, transactions of an nusual nature might escape

being subjected to rigorous control

2.14. Why institution need internal control system

Institution need internal controls to stop thing go missing and

to make some sense of how the activities is doing. Document gets

28

lost and assets go home with staff even where there are controls

in place to record everything.

Therefore, documents are batched and pre-numbered so that one can

check that they are all there.

This means that our cash flow suffers and we cannot pay our

expenses. It is also means that our proper financial management

may be wrong.

Also, if daily activity document go missing, or if we do not

match information received at the period end in order to arrive

with a good services may be wrong.

Therefore, the institution can think it is offer good services

while not. It might spend money that Owings and borrowings from

the foreigner country and when they prevent final demands, we

have no cash to pay and threaten to put as into liquidation.

Thus, institution good will is damaged which leads of some

institution into privatization

Therefore, the larger public institution gets the bigger the

numbers get the tighter the controls

Have to prevent significance errors. In order to allocate

responsibility and deal with every day

Problems, may authorization controls should be established.

International standards of auditing ISA 400(Risk Assessment and

Internal Control) states that internal controls within an

accounting system are needed to ensure that,

Transaction are recorded in accorded in accordance with

general or specific authority

29

All transactions are recorded at the correct account in the

proper period so as to permit the preparation of financial

report

Access to asses and records in authorized

Recorded assets and recorded in authorized

Recorded assets are compared in existing assets periodically

and the appropriate action

Is taken with regard to differences

(Source: Committee of Sponsoring Organization of the Tread way

commission, COSO).

2.14.1. Internal Check and internal Audit

These two terms are important constituents of the overall system

of internal control. Internal check signifies systematized

procedures in allocating duties, responsibilities and authority

in such a manner so that no single group of public institutions

functions are entrusted to on individual or working unit

However, according to Gupta (1999:82) internal check is a system

of instituting checks of the days to day transactions, which

operate continuously as part of the routine system whereby the

work of one person is proved independently or is complementary to

the work of another, the object being the prevention and

detection of errors or frauds.

This means that absolute and independent control is not dependent

on one person. The work of one is complementary to work of

30

another. The flow of and documentations thereof is arranged in

such a way that there are automatic verification, prevention and

detection of errors and frauds. This mechanism of control is at

lowest level of management .It is system based on checks and

counter- checks.

As discussed earlier, internal check is, a part of internal

control is creative force.

The internal audit, this is independent appraisal function

established within an organization to examine and evaluate its

activities as services to the institution. The objective of

internal audit is to assist member of public institution I

effective discharge of their responsibilities. To this end,

internal audit furnishes them with analyses, appraisal,

recommendations, counsels, and information concerning the

activities reviewed

According to Foulks (2003:171), internal auditing is an appraisal

activity established by management for the view of accounting and

internal control systems as a service to the entity.

It reviews monitors and make recommendations for the improvements

of the systems.

Therefore, the management determines the scope of internal audit.

Example, the scope of internal audit in an institutions may be

confined to reviewing whether the accounting and allied records

have properly maintained, the assets of public institution

adequately safeguarded, and the policies and procedures allied

down by the management complied with.

31

2.14.2. Internal Control and Internal Auditors

The objectives of internal auditor are to review the

institution’s system of internal control to provide that

requirement being met. Thus, internal controls are fundamental to

the work of internal audit. Therefore, both internal and external

auditors have a common interest in confirming the system of

internal control

2.14.3. Internal Control need to ensure that

The control in place are adequate to guard against the risk

identified

The controls are operating efficiently and effectively

This requires a decision on whether the right controls are in

place for the types and level of risk identified. The auditor

will be interested not just in whether there are sufficient

controls, but in examples of over control and inefficiencies.

Traditionally, internal audit were seen as financial managements

prevention because they were seen as adding in additional

unnecessary control. Increasingly, however, internal auditors

need to be adding value and therefore, will review the cost

effectiveness as well as adequacy of control.

2.14.4. Internal Control and External Auditor

32

At first stage in their auditor work, auditor has to decide to

extend to which they wish to place reliance on the Internal

controls of public institution. Therefore, as the audit proceeds,

that decision will be kept under review and depending on the

result of the examination, the auditor may decide to place more

or less reliance on these controls

The principal reason why internal control interests the auditor

is that the reliance on internal control will reduce the amount

of substantive testing of transactions and resultant balance in

the ledger accounts required .The operation of internal controls

should ensure the completeness and accuracy of the accounting

records. If the auditor is satisfied that the internal control

system is functioning there, it therefore reduce risk of errors

in the accounting records. It is very important to the auditor

therefore, to establish what internal control system exists that

system to ensure that it is working properly.

Another reason that the auditor needs to consider is the adequacy

of accounting system. The auditor usually has an additional

responsibility under legislation to form an opinion as to whether

proper accounting records have been kept. This implies the

operation of a sound system of internal control. By recording

accounting system and checking its operation by test of control,

the auditor can reduce the number of substantive procedures

2.15. Distinction between internal control, internal check and

internal audit

33

According to Walter Bemus, (1969:62) internal audit is defined as

an independent appraisal of activities within a public

institutions ensuring that the management operate efficiently so

as managed according the mission of the firm.

Internal control is term which includes in it internal audit and

check.

Batra and Bagardia (1992:59) gave the distinction between

internal control internal check and internal audit

According to Walter Meigs (1969:185), internal auditor is to

investigate and appraise the system of internal control system

and the efficiency, with which the various unit of public

institution are performance their assigned functions.

2.16. Parties responsible for and affected by internal control

While all of the organization’s people are an integral part of

internal control, certain parties merit special mention. These

include management, the board of directors (including the audit

committee) internal auditors, and external auditors.

The primary responsibility for the development and maintenance of

internal control rests with an organization’s management. With

increased significance placed on the control environment, the

focus of internal control has changed from policies and

procedures to an overriding philosophy and operating style within

the organization.

34

Emphasis on these intangible aspects highlights the importance of

top management’s involvement in the internal control system. If

internal control is not a priority for management for management,

then it will be one for people within the organization either.

As an indication of management’s responsibility, top management

at publicly owned organization will include in organization’s

annual financial report to the shareholders a statement

indicating that management has established, as system of internal

control that management (Source: Committee of Sponsoring

Organization of the Tread way commission, COSO).

2.17. Performance

A.Steer (1991:4) has defined performance as the extent to which

individuals can successfully achieves a goal. Performance as a

concept includes not only the production of certain tangible

output but also of less output, such as effectively supervising

others, thinking in a creative way, inventing new products,

resolving a conflict between others or selling a good or service.

The definition by steers provides a clear understanding of what

performance is but the idea of “ability “should be well

emphasized in his definition. This comprehensive definition

should consider performance as the extent to which an individual

in his or her ability and within or outside the limits of a

position can successfully accomplish a task or achieve a goal.

35

2.18. Theory of performance

According to Carter Mc Namara ( 2008:11) , highlights that

performance refers to a situation where an organization is

able to meet its missions , goals and objectives efficiently

and effectively through utilizing the available resources.

In simples word performance means the execution or accomplishment

of work, acts feats.

The accomplishment of a given tasks measured against present

known standards of accuracy, completeness, cost and speed. In

contract performance is deemed to be the fulfillment of an

obligation in a manner that releases the performer from all

liabilities under the contract.

(http:www.businesssdictionary.com).

Effective: An action is effective to the extent that it achieves

what it was intended to achieve.

According to the website new riverside dictionary (1984), the

word effective means, producing or designing to produce a desired

effect (page 223)

Therefore, effective control system refers to a system designed

to fulfill the goals and objectives of the non-government in

detecting and preventing frauds that may occur.

Efficiency: Efficiency means performing or functioning

effectively with the least waste of time and effort, competent

capable.

36

It concerned with achieving a given result with minimum use of

organization resources .Action plan of organization may thus be

effective.

2.19. Types of performance

2.19.1. Financial performance

Financial performance is a subjective measure of how well

a firm can use asset from its primary mode of business

and generate revenues.

This term is also used as a general measure of a firm’s

overall financial health over a given period of time , and

can be used to compare similar firms across the same

industry or to are industries or sectors in aggregation.

2.19.2. Organizational performance

According to Richard et al. (2009) organizational performance

encompasses three specific areas of firm out comes:

Financial performance (profit, return on assets, return on

investment, etc.

Product market performance (sales, market share, etc.); and

Shareholder return (total shareholder return, economic value

adds, etc.)

Specialists in many fields are concerned with organizational

performance including strategic planners, operations finance,

legal, and organizational development.

In recent years, many organizations have attached to manage

organizational performance using the balanced scorecard

37

methodology where performance is tracked and measured in multiple

dimensions such as;

Financial performance ( Example:shareholder return )

Customer services

Social responsibility ( Example: corporate citizenship,

community outreach)

Employee

2.20. Standard of performance

People are the most important source for achieving or shaping the

end product that is achieving the results through the control

measure. In the connection, the two aspects are to be

considered:

Whether control measures established are themselves

effective

Whether the organizations personnel are capable enough to

make the control measures effective.

In such a situation, naturally the question of assessing

the performance should come in against the pre-determined

standards draws by the business. In this context, the basic

elements of effective internal control system are:

Setting standards

Measuring the performance

Analyzing , interpreting and comparing performance with

the standards and targets

Examining deviations from budgets or targets

38

Taking corrective action and the review of standards

wherever necessary

Verifying physically assets and other facilities.

2.21. Dimensions of performance

Miner et al (1985:115), asserts that there are four general

dimension that appear to

Encompass most of what is considered performance. These

dimensions are;

Quality; mistakes, errors; waste and accuracy.

Quality; Amount, productivity, profit and loss

Time at work; Absenteeism, lateness, lost time, accidents,

premature turnover, long service, overtime

Cooperation towards goal attainment, including positive and

negative effects on the performance of others and on goal

attainment; theft, sabotage, incurring of costs, squandering

resources and contribution.

2.22. Definition of public institutions

Modified and completed by organic law no 34/ 2007 of 13/08/2007.

A public institution enjoys a legal personality and is managed

in accordance with laws governing public service, to which the

39

state allocates funds in order for it to carry out specialized

activities for public interests. The responsibilities, category,

organization, management and functioning of such an institution

shall be governed by the law establishing it. The institution

shall enjoy administrative and financial autonomy and

report to a public supervising authorit

40

CHAPTER THREE: REASERCH METHODOLOGY

3.1. Introduction

This chapter indicates values methods and techniques used by the

researcher during the process of collecting relevant data of the

study. It describes methods and techniques used in selection of

population, sample size, processing analyzing and presenting data

collected for the study.

3.2. Nature of the study

This study is analytical by the nature the researcher had to use

and analyze facts or information available to make a critical

evaluation of the material. Due to limited time, the researcher

adopted a case study approach. The researcher concentrated his

study on public institutions operation in Rwanda especially in

Gasabo District.

3.3. Population Under study

Population refers to the all items that have been chosen for

study or the target group to be studied. Then the total

population is 75 employees of Gasabo District, but the researcher

selected a sample in order to conduct the effective and efficient

research.

3.4. Sampling

41

Sample is a process of selecting a number of elements or

individual for a study in such a way that the element or

individuals selected represent the range group from which they

were selected Kakooza (1996: 69)

According to Grinnell and William (1990:127), state that a sample

of at least one third of the targeted population is considered

sufficient to provide a reasonable control over sampling error.

A sample of 25 employees was selected out of 75 employees of

Gasabo District so as to have a good representation of the

population.

3.4.1. Sampling techniques

Sampling techniques refers to the technique used by researcher in

selecting a representative sample from the population under the

study Kakooza (1996:69), the study used

Purposing sampling techniques

According to Saunders, Lewis and Thornhill (2009:237), purposive

or judgmental samples enable you to use your judgment to select

cases that will best enable you to answer your research

question(s) and to meet your objectives.

In this study, purposive sampling or judgmental sampling

technique was based on the researcher’s knowledge of population,

so as to get respondents who are equipped with the information

regarding to the research.

The random sampling technique

42

In order to eliminate bias and giving respondents an equal

chance of being selected. The simple random sampling was used.

All employees from Gasabo District who have code numbers

Hence those numbers were written on pieces of papers and then

forded. Papers forded were placed in the box and thoroughly

mixed. An impartial third party was called upon to draw the

respondents needed from the box without replacing them back. The

drown papers were then opened and names of employees which

corresponded with the drawn papers were taken to be sample.

3.4.2. Sample size

In most cases, it’s not easy for the researcher to carry out his

study on the entire population or the target group. Then, few

unity or element representatives of the population (sample) are

selected for the purpose of the research.

Table:1.Selected sample of the study

Categories of population Number of

population

Sample size

Management 14 5Staffs 61 20Total 75 25

3.5. Method and instrument of data collection

The main methods of data collection are Interview

43

Questionnaires and

Observation

3.5.1. Interview Schedule

This technique involves face- to- face oral questions and

discussion that will be conducted between interviewer and

respondents. The interview techniques is beneficial that

researcher is able to get first hand information as question

order is followed, There is further a chance to control the

environment and the researcher has chance to ask and probe for

questions that will be left unanswered in a questioner .

Regarding formal interview, respondents will be asked similar

questions and flexibility will be followed to permit respondents

express their opinions and give more information

3.5.2. Questionnaires

Questionnaires were designed, printed out and distributed to the

respondents. In these questionnaires, relevant questions focusing

on the objectives of the study were asked. An explanation was

given to guide respondents about the research topic and to

prevent any excuse of not understanding the issue in the

questions or not having much knowledge on the matter.

Questionnaires used were of two types: Fixed alternative (closed)

questions and Open-ended questions. Closed questions restrict the

44

respondents to a specified set of answers, while open-ended

questions are designed to permit free responses from the people.

3.5.3. Observation

Observation is one of the techniques employed (used) to collect

primary data and it is non verbal observation as techniques

involves sight or visual data collection and could be used

especially to individual respondents who never like to reveal

their personal status in the field of study.

According to Schwarz (1969, pp.243), observation is “a process in

which the observer’s presence is maintained for the purpose of

the scientific investigation. The researcher would consider the

objectives of particular projects and compare them with what is

being implemented on the field and the restoring impact they have

on lives of people.

3.6. Data Collection Methods

Data collection is process of gathering facts, figures, and other

relevant materials past and present serving as basis for study

and analysis. Then, the data for this researcher are of two

types; primary and secondary data.

3.6.1. Primary data

45

George Benson (1988:73) defined primary data as “data that the

researcher gathered/ collects for himself” This means that

primary data collected directly by the researcher himself “on

field” and that enable him to confirm relevance of the study.

Questionnaire contained both closed and open-ended questions

Open-ended questions: are those to which there are proposed

answers. So the respondent is free to formulate his/her ideas, as

he/she wants;

Proceeds by explanatory technique in order to verify whether

basic hypothesis has been previously formulated.

Get the maximum valuable information, because the interviewee is

not limited in the scope answering;

To prove the causes of certain beliefs or attitude

The question are designed in order to allow free expression

of the interviewee

However, these kinds of question have certain risks.

The responded may give an open answer, but which does not

express his opinion. In order to avoid these limitations,

multiple type choice questions were designed.

Closed questions is when the respondent is given a series of

possible answer among prepared he has to choose one or more for

his type of the question. Closed question were prepared together

with multiple type questions where the respondents are also given

46

a series of answers to choose one or more that fit his question.

The advantages of closed questions are that they give researcher

exact information he wants and they avoid the incorrect or

irrelevant answers or words that are difficult to interpret.

However, such questions have certain limitation in the sense that

the dictate answers. The possible answers given to the

interviewee may not necessarily respond to his attitude. Here

that possible answer may be forgotten in the series of

alternative answers. So to avoid such limitations, the respondent

was given the opportunity to give his opinion. Adding the item on

the questions like state other reasons, give comments and explain

did this. This helped the researcher to avoid the collection poor

information.

In general, the questionnaire helped the researcher to collect

the data smoothly in assessing and evaluating “Role of internal

control system in organizational performance of public

institutions in Rwanda”.

3.6.2. Secondary data

Secondary data are those ones which are already collected by

someone else and which already passed through the statistical

process. Then, through this process, the researcher used various

books and documents from different libraries and visited

different websites in order to obtain related literature.

47

3.7. Data processing, analysis and interpretation

After being collected, data have been processed and analyzed in a

line with the research objectives. In order to get quality

information, he is need for standard checking so that the

research ends with realistic data, which clearly reflect the

depicted situation. Data processing is intermediary stage of work

between data collection and summarization of data in order to

make them amenable to the analysis. On the other hand, data

analysis means a critical examination of the assembled and

grouped data for study the characteristics of the object under

study and for determining the techniques that are going to be

used for data processing, analysis and interpretation.

According to Nachmias (1978:29), data processing and analysis is

defined as the link between data collection and analysis it

concerned with transformation of findings collected from the

field into the system of categories.

During data processing, relevant data to objectives of study is

considered and transformed into meaningful pattern for easy

interpretation and understanding this will be done through

Editing, coding, and Tabulation.

3.7.1. Editing

Editing is a process of examining the collected raw data so as to

detect any errors and omissions and to correct them when the

possible. Editing is done at field work stage after collecting

48

data. At both stages: it involves correction of spelling,

punctuation, capitalization and checking to ensure completeness,

accuracy and uniformity

3.7.2. Coding

In this research study, coding was used to put data in a

summarized form under different categories or groups based on the

type of information collected from the respondents of our study

for easy manipulation of the data.

3.7.3. Tabulations

Different tables were used in this research, which give

mathematical explanations of percentages; ratios and other

related data were used.

According to Christensen (1991:399) Tabulation is putting the

data into some kind of statistical tables, with percentages used

to express data in ratio form, and used this. The gathered data

was analyzed in order to count the responses and to make

frequency distribution and statistics. The tabulation plays a big

role in presenting information more concisely and precisely. Thus

easy to read, interpret and understand the gathered information.

3.8. Data Analysis

Data were collected using questionnaires and interviews analyzed using tables and percentages.After the data was processed, the researcher started the process

of analyzing them “data analyzing them. “Data was ordering,

49

breaking down into constituent parts in order to obtain answers

to research,

3.9. Limitation of the Study

Time limitation

There was problem of shortage of time on the side of respondents

since the research was carried out the normal working hours.

There was also a title time for the part to be interviewed.

However, the researcher remained committed to the study by

persisting on going back, time and again to the respondents until

the end of data collection exercise.

Insufficient funds

The funds for collecting data for this study was not enough given

the scope of this study, and then the research tried to minimize

cost as much as possible.

Problems in responding

Same respondents met the problem of understanding well some

parts of questionnaires and then as a result they did not provide

suitable information, others jumped some questions without

responding them. Then, for this problem the research used also

the interview in order to get suitable information.

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CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1. Introduction

This chapter involves presentation; discussion and interpretation

of the data collected from the field in order to draw an

appropriate conclusion from the findings. Data are analyzed and

interpreted using tables from frequencies and percentages of

responses are provided.

By the use of frequencies, different alternatives responses to

questions are compared and conclusion is made according to the

frequency representing a big number of responses. Tables

facilitate also easy presentation and comparison of the results.

Therefore, when the researcher tried to analyze the data on

internal control applicable to the public institutions, he is

based only at the District level. Then the questionnaire is

handed to the staff of the district and was analyzed to assess

the internal control system at District level.

The consolidated interpretation has been briefly made when

considering the district level, which is the supervising

authority of the sector level.

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In addition, for more information to the study, the respondents

were interviewed to supplement and explain the answers provided

by them. The findings were presented and analyzed as follows

4.2. Age of respondents

Knowing ages of respondents is very important to our research.

The obtained information is in table below.

Table: 2. Distribution of respondents by Ages

Respondents by ages Frequency Percentages %20-25 4 1625-30 5 2030-35 8 3235-40 6 2440 And above 2 8Total 25 100

Source: primary data

This means that the total number was 25 employees of Gasabo

District staff answered questionnaires and they make 100% of the

total respondents. Then the big number of respondent was at ages

between 30-35 and the small number of respondents was at above 40

ages. This is to say that the majority of the respondents were at

the productive age and has the willing and ability to work.

4.3. Respondents Educational level

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In such research, knowing the respondents’ educational is of

great importance. The information is in the below table:

Table: 3.Distribution of respondents by educational level

Category Respondents Percentages%Secondary 0 0Diploma 2 8Degree 16 64Master’s 6 24Other 1 4Total 25 100

Source: primary data

The table number 3 revealed that (0%) of respondents are

secondary educated, (8%) of respondents has diploma, (64%) of

respondents are graduate with degree, (24%) of respondents are

Master’s holder, (4%) of respondents was select the answer of

other which are not apart from specifying assertion. This shows

that majority of respondents in Gasabo District are graduates

then, the researcher deems that it was sufficient to extract the

information required from them and that their understanding of

matters dealt with in the questionnaire was sufficient.

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4.4. Respondents experience

This was very important to the researcher because it implies that

the respondents were aware or had enough knowledge on the systems

of control and procedures applied in Gasabo District

Table: 4. Distribution of respondents by job experience

Period Respondents Percentages%Less than 1 year 5 20To 1-2 years 5 20To 2-4years 13 52To 4 and above 2 8Total 25 100

Source: primary Data

The table number 4 shows that the big number of employees

contacted have experience of more than 2 years in Gasabo District

where 52% of respondents have working between 2 and 4 years. Thus

this indicates that the majority of respondents are experienced

with public institutions’ operations and procedures.

4.5. Knowledge of internal control system by Gasabo District employees

This is very important for Gasabo District because knowledge of

internal control system by employees; it also helps much Gasabo

District to detect errors and frauds in order to achieve its

objectives.

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Table.5.Distribution of respondents by Knowledge of internalcontrol system

Alternatives Frequency percentages%

Yes 25 100No 0 0Total 25 100

Source: Primary Data

According to the data collected by the researcher, the total

number of employees contacted is aware of internal control system

and its operations in Gasabo District.

4.6. Reviewing internal control system

This is a good practice in organization like the one Gasabo

District since it can easily adapted to any changes and to detect

any irregularities.

Table: 6. Distribution of respondents on reviewing internalcontrol system

Alternative Frequency Percentages %Yes 22 88No 3 12Total 25 100

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Source: Primary data

The objective of this section is to carry out a study and see

whether Gasabo district internal control systems are regularly

updated and reviewed. Then, the research findings revealed the

following;

A big number of respondents (88%) commented and said that the

above controls are reviewed and updated on regular basis.

4.7. Payment and receipts in Gasabo District

These part discuses about payment and receipts in Gasabo

District, the respondents gave view about division of labor to

payments and receipts, procedures for authorization,

responsibilities and records made under payment and receipts

process. The researcher tested these processes by reviewing

procedures of payment and receipts.

Table: 7.Distribution of respondents to Division of labor topayments and receipts

Alternatives Frequency Percentages %Yes 20 80No 5 20Total 25 100

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Source: Primary Data

This table shows that big number of respondents which equal to

(80%) agreed that there is division of labor to payments and

receipts in Gasabo District and (20%) disagreed. This means that

the payments and receipts are made through different people, and

these results are appropriate. Then, the researcher wanted to

know how this segmentation of duties to payments and the

following are the findings;

By the personal interview, the chief of procurement in Gasabo

District said that for every payment there are different

employees from different departments who must be involved in such

transaction.

For example; Department which needs the material to be purchased,

procurement department, finance department etc, therefore,

accountant approve to all documents related to the expenditure

and then after , there is the approval of Director of executive

secretary who is the deputy budget officer. Thus, the results

from this table and interview respond to the objective of

researcher, which is the measurement of responsibilities and

authorities at different levels of management levels of

management.

4.8. Division of labor to payment and receipts

According to the interview with the internal Auditor; as it

happens in payment there are also different persons who are

involved in the receipt transactions in order to avoid

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misappropriation of cash of frauds, therefore, the receipts in

Gasabo District are received in different ways depending upon

their sources.

Then, Gasabo District provides the tax collectors with necessary

documents to record and facilitate collection of tax and fees.

Thus, as the table 4 and the personal interview indicate it,

there is Division of labor concerning payment and receipts and

this is good indicator of performance of internal control system

over cash in Gasabo District.

4.9. How do you rate internal control system within Gasabo District?

Hire respondents were given a chance to rate internal control

system according to: excellent, good, fair, poor, and bad

Table: 8. Distribution of respondents on rating internal controlsystem in Gasabo District

Answers Frequency Percentages %Excellent 6 24Good 8 32Fair 0 0Poor 10 40Bad 0 0Is not there 0 0Total 25 100

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Source: Primary data

From the table above, all respondents said that they could not

give a rating of excellent to the internal controls because they

felt there is always something that can escape the controls and

also that there are always ways to improve.

As shown above the rating of poor to the internal control

system within Gasabo District were showed a percentage of 40%

This was noted by the researcher as confirmation of the theory

that there are inherent limitations in the internal control

systems of this organization

4.10. Crosscheck work This was tested by asking respondents whether knew about internal

check and also whether anyone crosschecked their work.

Table.9. Distribution of respondents on crosscheck work

Answers Frequency Percentages%Yes 25 100No 0 0 Total 25 100

Source: primary data

This table shows that the total number (100%) of respondents

crosschecked their work

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4.11. If yes what is his position? Table 10.Distribution of respondents on the position crosschecked

Position Frequency Percentages %

Executive

secretary

2 8

Human resource

manager

6 24

Internal audit

service

3 12

Manager of

department

14 56

Total 25 100

Source: primary data

As evident from the two above table, 56% of respondents confirmed

that the manager of department crosschecked their work, 24 % of

respondents says is human resource manager and 12 % confirmed

that internal audit crosschecked their work finally 8%

respondents stated for them is the executive secretary.

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4.12. Role of internal control system in Gasabo District

Table: 11. Distribution of respondents on role of internalcontrol system in Gasabo district

Alternatives Frequency Percentages%To prevent and detect frauds

and errors

0 0

Safeguarding assets of the

organization

0 0

The protection of integrity

and stewardship

0 0

All of the above 21 84Any other reason 0 0No idea 4 16Total 25 100

Source: primary data

This question was aimed at testing awareness of employees to

matters of the role of internal control system within the

organization.

From the table above, the majority of the respondents (84 %)

agreed that the role of internal

control system in Gasabo District is to prevent and detect frauds

and errors.

Safeguarding assets of organization and protect the integrity and

stewardship of the organization

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4.13. Existence of internal control over fixed assets

According to the interview with assets controller, all fixed

assets are marked clearly indicating identification and serial

number, annual or periodic physical checking is done and results

of this are compared with those in registry of assets.

Table: 12.Distribution of internal control system over fixedassets

Alternative Frequency Percentages%

Yes 25 100No 0 0Total 25 100

Source: Primary Data

Concerning the proper control over fixed assets, all respondents

100 percent agreed that the control over fixed assets in Gasabo

District is properly performed. Then, according to the results

above, it can be noted that the control over fixed assets in

Gasabo District is really proper and efficient.

By the interview, respondents said that to emphasize the control

over fixed assets, there is an employee who is in charge of

control and protection of Gasabo District’s assets (Assets

controller). This employee must deal with all issues concerning

the fixed assets.

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The person in charge of fixed assets updates the register of

assets following changes, which have taken place.

Under this issue, all acquisitions of fixed assets are subject to

the tender awarding; an order voucher is written in the name of

selected bidder, and on delivery, the department proceeds to

receive the item the name of the institution.

The assets controller makes a register of all assets containing

the following details:

Description of assets

Serial number or model

Date of acquisition

Localization and physical state of the asset

Cost in Rwandan francs, etc.

Disposal and periodic physical checking is done , results of

which are compared with register of assets .Gasabo District has

also appropriate insurance policies for its assets .

4.14. Performance of internal control system in Gasabo District

In this research, we have been interested to know Internal control performance realized by Gasabo district for period 2008-2010. The information obtained is in the table below.

Table: 13.Distribution of respondents on performance of GasaboDistrict

Alternative Frequency percentages%Yes 16 64No 9 36Total 25 100

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Source: Primary data

According to the table above it analyzed the performance of

internal control system within Gasabo District. Then 16

respondents, which equal to 64 percent, agreed that internal

control system in Gasabo District perform well while 9

respondents, which equal to 36 percent disagreed. The researcher

realized that majority of respondents are aware that there is

performance of internal control in Gasabo District.

Thus, it helps Gasabo District as an organization to attain its

objectives as planned in such a way it can avoid everything

relating to mistake on daily transactions

4.15. The scope of internal control system in Gasabo District

Knowing also the scope internal control system is very importance

because it shows how an employee perceives internal control in

their work. The obtained information is in table below

Table: 14. Distribution of respondents on scope of internalsystem in Gasabo District

Scope Frequency percentages%Cover whole controls 21 84Limed to specific

controls

4 16

Total 25 100

Source: Primary Data

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Majority of the respondents 84% said that internal control system

in Gasabo District cover key control areas necessary for whole

organization, which is why it must cover the whole organization.

During the interview, they also confirmed that all departments in

Gasabo District are equipped with effective and efficient

controls that can enable the users to detect and correct errors

or cases of frauds as they arise in any department.

4.16. Problems affecting implementation of internal control in

Gasabo District

In this section of research, researcher what to assess problems

encountered in the implementation of internal control in order to

provide the appropriate recommendations .the obtained information

is in table below.

Table.15.Respondent on problems affecting internal controlimplementation in Gasabo District

Alternative Frequency Percentages%Yes 14 56No 11 44Total 25 100

Source: Primary Data

This section, the researcher wanted to know whether there exist

any problems affecting the effecting implementation of internal

control procedures in Gasabo District.

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Then, as it indicated by the table above, a big number of

respondents, (56%) confirmed that there are some problems

affecting effective implementation of internal control system in

Gasabo District.

For this reason, the researcher interviewed some respondents from

internal Audit department , planning department and Human

resource department in order to know those problems ,thus, they

highlighted them in the following explanations;

Some employees are not motivated by internal control system,

as they do not like to be controlled and they consider

internal control system as a hash way of controlling them.

The employees concerned with the internal control system are

sometimes involved in the mal practices of frauds and

corruption.

Few number of Internal Audit division: the respondents said

that internal Audit department composed by 2 employees and

for them it is difficult to cover the whole institution.

Then, they confirmed that 2 Auditors are not sufficient compared

to the total number of all employees of Gasabo District and the

transactions they have to realize ,they also add that because of

their small number , they encounter heavy workload while

reviewing the internal control system and supervising its

performance implementation. Same employees are doing the work

that they do not understand very well the system under study;

such that they cannot really tell which problems are within the

system itself or caused by implementer

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CHAPTER FIVE: SUMMARY OF MAJOR FINDINGS, CONCLUSION AND

RECOMMANDATIONS

5.1. Introduction

This chapter presents a summary of major findings of the study as

well as the conclusions drown basing on the findings about “Role

of internal control system in organizational performance of

public institutions in Rwanda” with case study Gasabo District.

It also involves constructive recommendations that will improve

performance of public institutions in Rwanda while at the end

area for further studies is also suggested.

5.2. Summary of the major findings

With reference to General objective of this research which was

“to study internal control system aspect in public institutions

and assess their performance” the analysis and interpretation of

the findings have shown that internal control system plays a

greater role in the performance and proper management of public

institutions in Rwanda. The respondents in Gasabo District

confirmed that internal control system in this institution is

effective, efficient and play an important role in helping Gasabo

District to achieve its objectives.

67

The researcher’s first objective was to identify and analyse

the internal control systems operating within Gasabo

District. According to indenting, it was found out that the

management of Gasabo District has the performance systems of

internal control. In Gasabo District there are all kinds of

internal control systems, that is to say that; Physical,

Financial and Administrative control are operating

effectively and efficiently as established.

The second objective of the researcher was to determine the

internal control procedures of Gasabo District. According to

the data collected, it was found out that in Gasabo District

there are internal control procedures which are followed in

its operations in order to ensure efficiency and

effectiveness of those operations. The respondents confirmed

also that these internal control procedures are appropriate

and are followed properly. For example, in Gasabo District

there are internal control procedures concerning payments and

receipts and these procedures contribute so much in avoiding

frauds and misappropriation of cash. Means that in Gasabo

District there is proper Division of labor to payments and

receipts where the transactions are allocated to different

persons in manner that the work of one person is

complementary to the work of other person. In Gasabo District

there are also procedures for authorised of transactions. In

Gasabo District, payments and receipts are approved and

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authorised by responsible staff. Then, it was found that the

internal control procedures in Gasabo District are

appropriate and effective to avoid frauds and

misappropriation of cash.

The third objective was to establish the role of internal

control system in safeguarding the Gasabo District’s assets.

Then, it was found that the internal control system within

Gasabo District, play a greater role in safeguarding Gasabo

District’s assets. Within Gasabo District there is an

employee who is in charge of protecting and controlling all

Gasabo District’s assets.

This assets controller verifies and ensures the proper uses of

all assets. It was also found out that all Gasabo District’s

assets are marked clearly indicating identification and serial

number and there is periodic physical check. After checking,

there is a comparison of the results with those in registry of

assets.

5.3. Conclusion

Then findings have shown that the performance internal control

system is very important in helping public institutions to

achieve their objectives. It plays key role in early detection

and correction or removal of errors and frauds that can lead the

institution into losses.

The performance internal control system assists also in the

safeguarding of the assets of the institution and ensures the

69

reliability of financial information and compliance with laws and

regulations. The general objective of the research was to study

internal control aspect in public institutions and assess this

according to the statistics of respondent’s answers an internal

control system help public institutions to operate efficiently

and cannot die few days after their establishment the weak

internal control system affects the performance of public

institutions negatively and cause a big loss to the government

revenue: then, this leads them to their liquidation or

privatisation. Many public institutions employ thousands of

persons and conduct their operations from various branches with

many different activities. For this reason there is big

possibility of risk, errors and frauds. Then, internal control

system has to be sound so that there are appropriate control

procedures and regulations to be applied in call carrying out all

those operations.

Effective and efficient implementations of internal control

system in public institutions is not the task of one person or

one department , it can only be achieved when there is good

collaboration and cooperation among all the managers at different

levels and with the awareness and full commitment of all

employee

That is why each employee should be aware of his/ her role in

achievement of goal and objectives of the organization .In

addition establishing all kind of internal control system in

70

public institution can also help them to succeed in their

operations.

5.4. Recommendations

The findings have revealed that internal control system plays a

key role in the performance of Gasabo District face different

problems as identified in the control system of the organization.

Thus from this point view, the following recommendation are

provided in order to help Gasabo District as well as other

public institution in Rwanda to improve efficiency in their

operations

To be more effective and efficient Gasabo District should

increase the number of employees in internal auditor division

because internal auditors encountered heavy work road while

reviewing the internal control system and supervising its

effective and efficient implementation

The management of Gasabo District should increase the number of

times the employees are rotated from their functions in order

to reduce the possibility frauds and corruption.

All employees should be sensitized about the importance of

internal control system and internal check with in Gasabo

District so that they can consider them positively because some

employees regard in internal control and internal check as

harsh way of controlling them

Gasabo district employees /staff regardless of their levels

must properly follow internal control policies and

71

procedures .training session should be well- arranged for not

only new employees but also for existing employees /staffs to

improve their skills and knowledge insure better performance of

the organization

Give that public institutions are established to provide public

service and to contribute in economic growth of a country ,

the Government of Rwanda should ensure that all public

institutions have effectives internal control system to ensure

good performance , and it should set up the means of

establishing them wherever they are not. it should also follow

up the implementation of such control.

The Government of Rwanda should also strengthen than the means

of controlling the implementation of effective of internal

control system in its institution. Because the ineffective

internal control system in its institutions, because the

ineffective internal Control system leads this public

institution to losses or bankrupts

5.5. Area for further study

Due to the time and financial constraints, this research focused

on one public institution which is the Gasabo District. Then,

other research studies should take more than seven or totality of

public institutions in Rwanda in order to come up with exhaustive

information in this field. Furthermore, a research on The Effect

of internal Control system in management performance of public

institutions in Rwanda should be conducted

72

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APPENDICES

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