Essential internal control: evidence from the executive branch of the State of Ceara.
| Autor | Gadelha, Ana Lucia Lima |
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Introduction
To achieve efficiency, efficacy and effectiveness in its plans and programs, public activity requires a function that is essential to the Rule of Law: control. There are three types of control: social, external and internal. Social control is exercised by society and consists of surveillance by the recipients of public policies. External control is exercised by agencies and entities outside the organization's body. In the public sector, it is that exercised by the Federal and State Courts of Accounts. They are autonomous and independent organs of the administration, never participating in the acts performed by it, being responsible for monitoring and inspection (Margola, 2011).
Internal control is defined by Machado (2015) as a process conducted by the management of an organization to enable, in a reasonable way, the achievement of objectives in the following categories: effectiveness and efficiency of operations, reliability of financial statements and compliance with laws and applicable regulations. In this article, we adopt the author's concept of control as an essential function of surveillance and frequent monitoring of an organization's resources, with the observance of good practices and integrity in the use of these resources, providing conditions so that the organization, whether public or private, can be evaluated and have the directions corrected to avoid damage and curb or minimize risks. Contemporary authors (Araujo, Santos, Araujo, & Dias, 2017; Silva, Abreu & Couto, 2017; Freire & Batista, 2018) agree and express the importance and the good character of control in organizations, for the economy, to combat fraud, vice and corruption in any entity, whether public or private.
Control in public administration is advocated in the Magna Carta of 1988, which refers to it in articles 70 and 74 (Constitution of the Federative Republic of Brazil, 1988). Besides, other Brazilian laws also do so, such as Law 4.320 (1964), where the first internal control records are located, and the Complementary Law--LRF (Law n. 101, 2000). In public administration, internal control is also pointed as a management tool that improves the quality and effectiveness of services provided (Moreira, Dias, & Souza, 2017).
This scope of control within the public administration to respond to risks and provide security to the organization (Capovilla, Goncalves, Dantas, & Oliveira, 2018)bringstothe function the design of indispensability of achievement. To ensure this desideratum, the state edited Constitutional Amendment No. 75 (2012), which confirmed the treatment of essential, making it indispensable within the state public administration. It should be noted that the State of Ceara had already been implementing some control management actions,whichculminatedintheenactment of that constitutional amendment. But the treatment given by Constitutional Amendment No. 75 (2012)--that added to the State Charter Article 154, item XXVII (1989)--established the essentiality of the function control, linking it to the important activities: ombudsman, controller, government audit and correction.
The essentiality character printed by the referred constitutional amendment imposed a duty onto the state public administration, and more than that, imprinted on it a quality of being essential, indispensable. However, this essentiality cannot become a dead letter of the law. There must be a commitment by the competent bodies to demonstrate it concretely so that the desired effects for the control function are effectively produced. In the State of Ceara, the central body competent to execute internal control is the office of the State Controller and Auditor General. This state body has been delegated the functions of the ombudsman, controller, government audit and correction. So, it is up to this body to carry out management practices that demonstrate the essentiality of internal control in the state.
Thus, in the context of this constitutional delegation, the research question of this article arises: What practical evidence of the State of Ceara public management proves the pertinence of the expression of essentiality, constitutionally declared, to the control function? After all, from Amendment n. 75 (2012), it is vital to identify which management practices were adopted or strengthened to corroborate the constitutional affirmation of control essentiality.
The article aims to identify management acts practiced by the State of Ceara that corroborate the constitutional assertion, and how they are effective in practice. This justifies the relevance of the study based on the fact that internal control is taken to a condition of essentiality at the constitutional level and, therefore, knowing the effective management decisions may influence other entities and entities of the Federation. There is pertinence and practical importance for other units of the Brazilian Federation because, according to this research, only the State of Ceara--out of the 27 units of the Brazilian Federation introduced the essentiality of internal control by constitutional amendment. This in itself constitutes an important reason for study, which is also of interest to public administration organizations in the country. It aims to verify how this is presented in practice. It is also of interest to private organizations. For the academic area, the article contributes to the enrichment of the theme both from the theoretical-legal side and from the practical side, that is, of interest to the technical-scientific community.
The research is characterized, as to its objective, as exploratory, as it aims to present an overview of a new fact to make it more explicit (Gil, 2008). As to its nature, according to Prodanov and Freitas (2013) it is an applied research, as it aims to produce knowledge for practical application, for the solution of specific problems: in this case, through the results found under the title of management acts imposed by the executive branch of the State of Ceara. As for the technical procedures, the research is classified as documentary. According to Gil (2008), it has not yet received analytical treatment or can still be reworked according to the research objects. In this article, the documentary research is based on the reading and analyzing of the main rules issued by the internal control in the State of Ceara that established management acts. As for the research approach, it is qualitative, in which elements of interpretation by the research author prevail (Menezes, Duarte, Carvalho, & Souza, 2019), and deals with phenomena, allowing the hermeneutic analysis of the data (Appolinario, 2004).
As a result of the research, aimed at the characterization of the essentiality of internal control, consideration is focused on the management acts practiced in the internal control area within the Executive Power of the State of Ceara which denotes regulatory initiatives or directives to be complied with by the organs and entities of the state Public Administration. These management acts will be treated as evidence and parameterized by comparison to the categories presented in the "Control Environment" concept adopted by The Committee of Sponsoring Organizations (COSO, 2013). The categories are patterns, processes and structures, which define the concept of control environment (COSO, 2013).
In addition to this introduction, this article is organized into five sections. The second section is the theoretical framework, based on different scientific contributions and control legislation, which is divided into three subtopics: (1) legal frameworks of internal control, (2) the control function as essential to public administration, (3) the control environment according to COSO (2013). The third section deals with methodological procedures; the fourth section deals with results and discussion of the information that shows the essentiality of control through management practices; and finally, in the fifth section, we have the final considerations.
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The theoretical framework
2.1 Historical and legal landmarks of internal control
Internal control integrates the scope of the control function and, within the organization, occupies a level of extreme importance that affects objectives, plans, information, processes, systems, activities, functions, projects and initiatives (Montenegro, Oliveira, & Lopes, 2017). The internal control system comprises a process that aims to achieve operational effectiveness and efficiency, reliability, criteria compliance and compliance with laws and regulations (Pangaribuan, Donni, Popoola, & Sihombing, 2019).
Authors Santos and Pereira (2019) warn about the substantial absence or inefficiency of internal control in organizations. According to the authors, this can be understood as a result of decisions made by managers who, with limited information, believe that the implemented controls as they are would be sufficient to protect the organization. Therefore, the improvement of controls in public administration sheds light on the activities performed by the public manager, with due accountability for faults and irregularities committed in the exercise of the function (Alencar & Fonseca, 2016).
The importance of internal control in organizations has been a point of agreement for many authors who have studied the subject since its origin. A brief historical rescue is brought by De La Cruz and Delgado (2021), summarized here. The authors allude to its antiquity going back to the appearance of accounting itself. They classify its emergence and evolution into four stages called: genesis--when the first accounting records came up, dating back to 1280; changes, starting in 1902, with the increase in production that led to the need for auditors and accountants, and when internal control started to be discussed as means to prevent fraud; during development, the third stage according to those authors, records the internal control's...
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