Views Concerning Internal Controls on the Revenue Collection: Critical Analysis

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1.1 Introduction

This section will mainly focus on the background of the problem which will be about what has caused the problem. Also the research will focus on the main aims of this research and research objectives giving the reader a clear picture of what the researcher wants to achieve. The research will also come across the significance of the study giving the importance of why this study is being carried out. Moreover the research will focus on the limitations of the research meaning the effects that the researcher may come across when conducting a research.

There are other sections that the study will come across. One of those sections is the literature review. This section will focus on the perceptions or the views of other authors relating to the internal controls on the revenue collection.

1.2 Background of the study

Botswana Unified Revenue Services continues to face low levels of revenue collection. This study will find out the internal controls that may be put in place so as to curb out the problem. There are many Batswana whom shall pay tax and they are not doing so. Remember that it is the right of every Motswana earning P3600 per month to pay tax. Even though they know that, they are not paying tax hence resulting in low generation of tax revenue. This research will look more into the relationship between internal controls and revenue collection in Botswana Unified Revenue Services (BURS).

Having strong internal controls in an organization will make high chances of giving a high assurance that all that is expected out of a company is being met. One may find out that sometimes internal controls are being put in place so as to solve agency problem.

One may find out that there are some internal controls that are being put in place at BURS but there are still some leakages. Even though there are some internal controls, the government is continuing to generate less revenue in tax collections.

This study will therefore look into the effectiveness of internal controls in revenue collection in BURS. This research will look more onto the internal controls that are into place at BURS and their impact in the revenue collection at BURS. After this research, the department should set up internal controls that they think are the best so that they can increase revenue collection at BURS and even come up with how they have to improve internal controls that are already in place.

1.3 Theoretical foundations

There are some theories that link very well to the internal controls and revenue generation. This research project will be based on the internal controls that are put in place and how they contribute towards revenue collection in BURS.

Hypothesis has been portrayed as ‘an inter-disciplinary part of designing and science that manages the conduct of dynamical frameworks with information sources. The outside contribution of a framework is known as the reference. When at least one yield factors of a framework need to pursue a specific reference after some time, a controller controls the contributions to a framework to get the ideal impact on the yield of the framework. The goal of a control hypothesis is to figure answers for the best possible restorative activity from the controller that outcome in framework steadiness, that is, the framework will hold the set point and not sway around it. Frameworks (Sarens and Beelde 2006) have data sources and yields to bring an item in the wake of preparing thus data sources and yields of a control framework are commonly related by differential conditions. Setting targets, spending plans, plans and different desires set up criteria for control. Control itself exists to keep execution or a situation inside what is normal, permitted or acknowledged. Control worked inside a procedure is inward in nature. It happens with a blend of interrelated segments, for example, social condition affecting conduct of representatives, data important in charge, and arrangements and methods. Inner control structure is an arrangement deciding how interior control comprises of these components (Sanusi and Mustapha, 2015).

Internal controls concept

According to Hilario (2015), he explains that internal controls are one of the important aspects that every business should adhere to. He explains them as set standard and principles that are used in the business so that they can help to detect fraud and error. He said that these internal controls should be realistic and should bas on the truth so that the business can be able to achieve what it has set.

According to Obat (2010), BURS was framed to create enhance income accumulation measures just as ensuring that all income spillages are shut. He continues to explain that these internal controls were meant to avoid some of the individuals to cheat the government by not paying tax. It was likewise to guarantee that it speeds up exchange by setting up those measures that permit controlled development of commodities and ventures. BURS in this manner have set up those measures to decrease the spillages. They perpetually incorporate isolation of obligations, care of benefits, exacting approval strategies, inner review, and the utilization of passwords, legitimate record controls and the executive’s supervision.

Revenue concept

According to Rittenberg and Schwieger (2005) he explains that revenue is an asset that is in monetary form which enhances the organization activities. They continue to say that this asset is mostly in cash form and they are paid by all eligible customers. When analyzing the organization performance one has to look at how much was collected and the wealth that has been created. In order for the business to have better revenue collection, it has to take into consideration all the different stakeholders that have an impact in revenue generation. All the companies should have in place the internal controls that will be effective for revenue collection.

Relationship between internal controls and revenue

According to Jersen (2003), he explains that internal controls are being put in place so as to give a high assurance that things are being done in the correct way. Doyle (2005) explains that internal controls are being put in place so as to deal with problems that are associated with the low levels of revenue generation. It continues to tell us that these internal controls they help in the fighting of fraud and corruption that can take place in revenue generation.

When internal controls are being put in place they can help to make high values of revenue generation. This is due to the fact that every stakeholder will perform his or her responsibility. It explains that there are five internal controls that are there that can help in revenue generation. These internal controls will be explained further in literature review.

1.4 Statement of the Problem

‘BURS’ continues to face the low levels of tax collection because people do it intentionally knowing that they will be avoided. Regardless of the rules and regulations that put in place there is fluctuation on the levels of tax revenue generation and collection which is happening across all the sectors of the government as well as private sectors. Internal controls are only designated to make sure that the company’s aims are being met in terms of revenue collection. In analyzing the problems related to this, is to check whether there are internal control systems in preventing and detecting of the problem that led to the losses. Internal controls are designed to give the company the confidence in its aptitude to achieve a particular task and avoid errors and losses through monitoring and improving organizations and financial reporting processes as well as ensuring compliance with laws and regulations. The internal controls on the tax revenue generation have caused effectiveness in the performance of the finances. A research has been carried out in respect of the effect in the internal control system on tax revenue collection. Regardless of the internal controls that are put in place in BURS, the revenue collection remains below the target market and the resources are being poorly managed. This is due to the fact that the internal controls that are put in place are weak. This is because people are being too slow to pay their taxes on time and some are being corrupt. The authority has identified that one of the major causes of low revenue collection is corruption which has led to the integrity plan action being formed which will lead to transparency thus reducing corruption in revenue collection. Thus, the idea of this research is to inspect and assess the internal control system in procedure at BURS with the outlook of knowing whether escalation of internal controls can have any impact of revenue collection and to answer the question “To what degree has internal controls enhanced revenue collection in BURS in Francistown.

1.5 Aim of the study

This study aims to establish best internal controls that will help to generate revenue at BURS.

1.6 Research Objectives

The study aims to achieve the following:

To identify the controls those are put in place by BURS in the revenue collection.
To establish the importance of the internal controls in enhancing revenue collection at BURS in Francistown.
To suggest the best practices of internal controls that can be used in BURS to enhance revenue collection.

1.6.1 Hypothesis

The hypothesis is that there is no important effect of internal controls on revenue generation at BURS in Francistown.

1.6 Research Questions

What are the internal controls that are put in place by BURS to enhance revenue collection?
What is the importance of internal controls in enhancing the revenue collection at BURS in Francistown?
What do you think are the best practices that can be put in place in order to enhance revenue collection in BURS here in Francistown?

1.7 Significance of the study

This research would be critical to BURS as it will help the company to recognize the effectiveness of internal controls that they put in place in order to enhance revenue generation. The research will help the company to find out if there are any weaknesses with the internal controls and help them to find a way better of improving them so that they become effective. This research will furthermore help the employees of BURS to work tirelessly accordingly to the internal controls so that they can be able to meet the set objectives. The study will help the researcher to know more about the background of the internal controls and how they function at BURS.

1.8 Scope

The scope of the research will be based on the relationship between internal controls that are put in place at BURS and the revenue generation. There are different methods that will be used in order to collect data. These include the use of questionnaires and interviews. The data collected will then reveal all the efforts that the company has put in place in order to increase the levels of revenue generation at BURS.

1.9 Limitations of the study

One of the limitations of this study is that there is less time that we are supposed to complete this project. Also it is costly to do this research project as I have to pay for transport costs and other expenses that are needed in order to complete the project. The management of BURS may not want to disclose some of the information as they feel that it is confidential.

1.8.1 Mitigation measures

I intend to do all the work required from me well on time so that I can catch up with time. Also I will be saving so that I can be able to pay well the expenses without constraints. Some of the information will be taken from the government portal for incase the management do not disclose some information.

Summary

From this chapter we have learnt out that there can be internal controls that are put in place in order to generate revenue at BURS in Francistown but they are not giving that high confidence that they are doing well. This is due to the fact that the researcher has found out that even though the internal controls are being put in place, BURS in Francistown continues to generate low levels of revenue. The researcher then came with the research objectives and questions that were discussed above which shall then give a true picture of what might be the problem. This project shall play a very important role as it will help BURS to recognize the effectiveness of internal controls that they put in place. It shall also help the effectiveness of each employee as they will have to perform their responsibilities knowing that they have to meet all the aims of the company. The researcher is likely to face some challenges in the process as there is less to do the project. Even though this problem, the researcher will make sure that she plans her time well so that she can be able to catch up.

References

Hilario Ribeiro, Daniel (2015), internal control system, America
Kaplan E and Schultz Y (2007), authorization as part of internal control system, Lesotho
Matamande, et al (2012), The effectiveness of internal controls in revenue management. A case study of Zimbabwe Revenue Authority. University of Zimbabwe.
Obat, J. (2010). The effectiveness of Internal Control Systems in achieving value for money in revenue services, South Africa
Rittenberg, L. E & Schwieger, B. J. (2005). Revenue generation: concepts for a changing environment. Mason: South-Western, Thomson Corporation.
Jensen, K. L. (2003). A basic study of agency-cost source and municipal use of internal versus external control. Accounting and Business Research, 35 (4), 33-48.
Sarens, G & De Beelde, I. (2006). Internal auditors’ perception about their role in risk management: a comparison between US and Belgian Companies. Managerial Auditing Journal, 21 (1), 63-80.

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