The Control Environment on Expenditure Cycle: The Case of a Non-Formal Education Institution in Indonesia

Abstract

The control environment is the foundation of an internal internal control system. The control environment must be sturdy in order to support other internal control components to form a good control atmosphere.The control environment is a form of inculcation of culture, ethics, structure, and responsibility in an entity both business and non-business entities.This paper aims to analyse and give suggestion on control environmenton expenditure cycle of a non-formal education institution in Indonesia. The internal control is described by Committee of Sponsoring Organisations of the Treadway Commission (COSO). This paper is conducted using qualitative method where a case study approach is applied. Data is collected from interview and document analysis. The analysis of control environment concludes that a leveling authorisation policy on payment process is insufficient,several employees are not aware of the existence and the function of operational standards and there is no regular training for accounting team. From the findingswe recommend several suggestions, first, there must be an adequate authorisation policy. Second, there must be there must be regular outreach to every existing operational procedure. Third, there must be an adequate employee competency training policy.
Keywords: Control environment; COSO; expenditure cycle; internal control system; non-formal education institution.