Abstract:
This study primarily focuses on examining the impact of internal control systems on fraud
prevention and detection in registered non-governmental organisations (NGOs) in the
Western Province, Sri Lanka. Built upon the Committee of Sponsoring Organisations of the
Treadway Commission (COSO) internal control-integrated framework, this study
conceptualises the internal control system using five core components: control
environment, risk assessment, control activities, information and communication, and
monitoring activities. Adopting a quantitative research design, data were collected from a
sample of 120 senior finance personnel in selected NGOs through a cross-sectional survey
using stratified sampling and subsequently analysed using ordinary least squares (OLS)
multiple regression. The empirical findings revealed that only the control activities emerged
as a statistically significant and dominant predictor of fraud prevention and detection in
NGOs. In contrast, the control environment, information and communication, and
monitoring activities did not demonstrate statistically significant effects, while risk
assessment was found to be marginally significant. These findings indicate that for NGOs
within the Western Province, the implementation of rigorous operational procedures and
physical safeguards remains the most effective strategy for the prevention and detection of
fraudulent behaviour. The study recommends that NGO management and donors prioritise
the rigorous implementation of operational control activities to strengthen fraud prevention
and detection, thereby enhancing financial integrity and organisational accountability
within the sector.
