Major internal controls in selected category 3 voluntary organisations

Abstract

Purpose: The objective of this research is to assess the internal control environment of Category 3 voluntary organisations. Additionally, it seeks to evaluate major internal controls implemented within the organisations. It also identifies the strengths and weaknesses of the internal controls and provides recommendations for improvement. Design: To meet the purpose of the study, a qualitative research approach was adopted. Semi-structured interviews were carried out with personnel engaged in the setting, implementation and monitoring of internal control in eleven Category 3 voluntary organisations. Findings: Voluntary organisations are aware of their responsibility to maintain accountability, hence, they value the importance of internal control. However, it was observed that some voluntary organisations had weak internal control environments. Six major revenue-related internal controls and five major expenditure-related internal controls were identified among the participating voluntary organisations. A relationship was observed between the strength of the internal control environment and the effectiveness of the internal controls. A lack of resources, time and engagement of accounting professionals contributed significantly to weaknesses in internal control. Despite this, not all respondents were able to identify such weaknesses. Conclusion: The establishment of effective internal control is necessary for all types of organisations, irrespective of their nature of operation. The fact that some Category 3 voluntary organisations exhibit weak internal control implies that more specific guidance and assistance in relation to internal control should be provided, especially to those voluntary organisations which do not have access to professional assistance. Value: Voluntary organisations contribute significantly to the community and the economy. The repercussions of a tainted reputation can be hazardous for voluntary organisations. As a result, effective internal control is essential for the sustainability of voluntary organisations. Therefore, the assessment of current internal control practices and the subsequent recommendations for improvement may generate value to the Maltese voluntary sector.