County Government Internal Control Findings: Causes and Implications

Abstract

The extant literature has been quite limited concerning the underlying factors associated with internal control weakness findings among local governments. Overall financial accuracy is essential in the overall assessment of the government unit. This study examines the impact that indigenous county characteristics have on internal control problem weakness findings among financial management practices. Logistic regression measurements isolate material weakness and significant deficiency findings among North Carolina county governments for FY 2018-2019. Less accounting positions, a lower number of county employees, a lower net position compared to the previous year, and counties in a ‘high’ risk category had a higher likelihood of increased material weakness findings while less employees, a lower net position compared to the previous year, a larger service area, a low or no bond rating, and the use of the most contracted auditor all had relationships with elevated significant deficiency findings. Overall, the findings continue to elucidate the personnel and organizational challenges facing smaller governments along with the importance of an auditor with government expertise.