Selected internal controls in a Maltese private hospital : an evaluation

Abstract

Purpose: The purpose of this study is to gain an understanding and to evaluate the selected internal controls in a Maltese Private Hospital. The selected internal controls concern the sales, purchases, payroll and cash cycle. The study also recommends ways of improving the current controls in place. Design: The objective of this dissertation was reached through semi-structured interviews conducted with different personnel within the Private Hospital. To authenticate the data given during such interviews, one-site observations were also carried out. Findings: From the research conducted it became apparent that adequate systems of internal control exist in all selected internal controls. However, various risks remained unaddressed. Sales Cycle: Authorisation and approval procedures are adequately provided for through the use of pre-recorded prices. Nonetheless manual procedures inherently increase the risk of human error. Purchase Cycle: In the purchasing process there is a lack of supervision on the actions of the purchase manager as the directors and the Financial Controller are rarely included in the process of choosing suppliers. Hence irregularities such as kickbacks and conflict of interest are not adequately provided for. Payroll Cycle: Irregularities relating to 'ghost employees' and falsified hours and salaries are not being addressed. This is mainly due to the fact that the same person inputting standing data is also responsible for calculating and validating wages and that there is no review and approval in terms of adding and removing employees to and from the records. Cash Cycle: The fact that cheques are being prepared by the same person responsible for recording accounts payable, indicates lack of segregation of duties. Conclusions and implications: These basically relate to the introduction of a bar code system, increase in automated procedures, and increase in segregation of duties. Such control measures should result in stronger internal controls.