The internal controls on procurement of a government entity : a case study

Abstract

PURPOSE: The overarching objective of this research study is to assess the effectiveness of the internal controls applied, specifically related to the procurement cycle of a chosen government entity, namely, the Foundation for Medical Services (FMS). This was accomplished by first assessing the primary internal controls of the FMS and its control environment, then identifying any current or potential internal control weaknesses. In order to assist both the FMS itself and the general public, this study aimed to offer assurance about the trustworthiness of the FMS' operations. This study also aimed to highlight the steps taken by such a significant institution to reduce the risk of fraud and errors. DESIGN: A qualitative methodology was used. Line managers and the entity's top management participated in semi-structured interviews. FINDINGS: The internal controls of the procurement department of the case entity were found to be quite robust. Given that the case entity is a medium-sized organisation, segregation of duties could potentially be applied at every stage of the procurement process—and they frequently were. In fact, a number of effective control mechanisms were in place, including authorisations, policy documents, reconciliations, and legal compliance. Although internal controls were strong and effective, a few shortcomings were also found in some instances for example, with regard to the filing system, evaluation of Green Public Procurement, and appointment of an internal auditor. CONCLUSIONS: Internal controls are very important for any type of organization. But more so in a public sector entity, due to accountability and transparency needed when handling public resources. This need is even more evident for a public entity like the FMS, since its operations have a direct impact on the citizens’ health requirements. IMPLICATIONS: The study presents suggestions for both the procurement process and the public procurement procedures. The suggestions are intended to assist the organisation in improving its overall efficiency and ensuring that its goals are accomplished successfully and efficiently.