Internal control systems and the compliance support structures of the Eastern Cape Department of Rural Development and Agrarian Reform

Abstract

The non-compliance with the public finance management act, national treasury regulations, and internal financial controls hinder service delivery within most local government institutions. Consequently, the region is worse affected by sporadic service delivery protests. To prevent this, internal control units (ICU) were established within government departments. The establishment of ICUs is necessary as an essential internal control mechanism, as a monitoring tool, and ensuring compliance processes are upheld within the department. They also manage any risk of financial mismanagement of public funds. Against this background, this paper reports on compliance support structures of the ECDRDAR, as this department shares with district municipalities the role to develop rural communities. This paper sought to establish factors that lead to non-compliance issues and their effect on financial management and service delivery in the mentioned department. This research study’s main objective was to determine the extent to which the management support to the ICU’s role could help to properly manage the government funds. The study employed a quantitative research cross-sectional survey method to investigate the effectiveness of the ICU’s role using a sample of 110 with valid interviewer-administered questionnaires. Data were collected from the finance employees of the department, which consisted of unit managers, their assistants, and internal control unit Directors. This study employs several statistical techniques such as the descriptive statistic, correlation, and ANOVA to analyse the data from the survey. The survey results reflected that poor management communication about compliance procedures among finance employees, inadequate training, ICUs independence and objectivity, and lack of management support were the main deterrence to the effectiveness of the ICU. Based on the drawn conclusion, appropriate recommendations were suggested to assist the government departments to overcome non-compliance issues. Although the study provided some useful insights, it is also acknowledged that further research could employ larger sample sizes and other departments.