88 In addition, by following the two-part internal control research model, the SDA schools in Thailand will be able to identify internal control problems quickly. This will help them to prevent or make efforts to resolve these problems to avert even small amounts of fraud, misuse, or error. These internal control weaknesses are not policy violations. But if these systems are strengthened with periodic checks, they will serve as fences to prevent and reduce the temptation for fraud, and help to ensure that innocent mistakes may be quickly identified and corrected. Furthermore, strengthening these internal control issues will avoid putting the organization at risk and assist the officers in making timely decisions. Even if fraud cannot be completely eliminated, the knowledge that internal controls are in place can significantly decrease fraud risk. The conceptual framework demonstrates the importance of strong internal control systems in schools to support and provide an effective guide to comply with denominational policies. b. Limitations of the Study After going through the study of the four Adventist schools in Thailand, some challenges in policy compliance issues can be improved by the school board and school management team work. But some seem to need more study because the setting (location) and practices (culture and beliefs) in Thailand are not aligned with denominational policies. These policies were made in Western settings and a centralized standard may not be entirely applicable for a specific country, location, or setting as Thailand. It is best that higher organizations and the school management there are given responsibility in their areas to comply with core denominational policies. These policies may also provide guidelines that apply to unusual local country conditions with appropriate approval. However, in case policy exceptions may not be approved,
89 it will be challenging for the schools to survive and retain their best employees. This brings up the need for flexibility in the application of policies supporting institutional work. Since church organizations are designed to be operated individually, the TAM treasurer’s primary duty is to the mission, and to oversee the financial departments of the 11 Adventist schools in Thailand. In addition, the church has designed an audit committee which is responsible to work with the school management with the support of the school board. In the Adventist working structure, the TAM treasurer has no authority over the school management, which is one main challenge in the Adventist culture. Adventist organizations are designed to be accountable to the officers. In Thailand, limited Adventist human resources may be another challenge in getting right person for a particular responsibility. This may sound discouraging to Thai Adventist school managers who face the recurring policy compliance deficiencies and the internal control issues mentioned in the GCAS audit reports. Despite all the many challenges, SDA institutions are very unique, and everyone chosen to work in God’s institutions in different parts of the world knows that the main goal is to spread the gospel and to represent God in all their work. From this study, the researcher has learned that it is very important to do the right thing by complying with policy, but what is even more important is to encourage SDA teachers to work in Adventist schools and to keep them competitive in Thailand, a Buddhist country with limited members and an English language barrier.
90 I also believe that the school board and management know what is best for their institution, and sometimes a situation may be out of their control, so adjusting or changing may also depend upon the limitations of what the organization can do in Thailand. This study may serve a guide for higher organizations to have a better understanding of the challenges and solutions with limitations in human and financial resources, culture, beliefs, lifestyle, and language barriers since Thailand is an Asian country, and these church policies were created in Western countries. How can higher organizations better support God’s work in Thailand? c. Recommendations In the light of the study analysis, here are the following concluding recommendations: External Stakeholders 1. A monthly or quarterly meeting with the school board to closely follow up and oversee the schools’ operational conditions. 2. The school board members should have a travel allowance or other support to encourage their voluntary work for the 11 Adventist schools in Thailand. 3. The school board meeting appointments may have to be more frequent, at least quarterly with an online meeting option. 4. School management should be responsible, capable, and proactive to deliver monthly financial statements. 5. School board members should be willing to sign the conflict of interest documents. 6. The TAM officers should help the school officers by assisting with the appointment of SDA volunteers with experience and expertise in the finance area for various committees.
91 7. The TAM officers can further study and balance the costs and benefits of obtaining insurance with ARM or with a reputable local firm that may be more closely aligned with the financial condition of the schools in Thailand. 8. The TAM officers can prepare guidelines, checklists, or arrange orientations for newly elected school officers (including treasurers) that outline their responsibilities, emphasize the importance of their positions, and set committee schedules during the school year cycle. 9. The TAM officers may prepare guidelines, checklists, or arrange orientations for newly elected school board members that outline their responsibilities, emphasize the importance of their positions, and set committee schedules during the school year cycle. 10. The TAM treasurer may assist with preparation for the yearly GCAS audit, with tips, guidelines, checklists, or help as needed, especially with the English language barrier faced by some schools. 11. The TAM treasurer may assist with a review of the core denominational policies with all school treasurers and finance office staff for better understanding and communication. 12. For the recurring policy compliance deficiencies of building insurance, employee benefits, education subsidy, medical subsidy, and vacation policy, the TAM officers can develop some written guidelines or exemption requests for consideration to assist Thai Adventist school managers who have not been complying with policies in order to help their schools survive. In addition, the TAM officers and school managers can review the purpose of these policies, which is to give guidance and help SDA institutions to improve, but if the policy is not suitable or applicable, it should be up to the management to make an appropriate judgement. This is still noncompliance with the policy, but it may be necessary to save the organization and support the employees, and that is the most important thing.
92 13. With regards to the building and equipment insurance policy, TAM could help the school officers study and communicate a request for consideration to higher organizations. This might involve permission to purchase insurance from local but reputable insurance firms, or permission to insure for assessed value rather than replacement value. This would provide better security for the next generation that if something unexpected happens, replacement funds will be available so that God’s work can go on, and the schools do not need to request for donations. 14. With regards to the unorthodox vacation policy of Thai Adventist schools, the school setting has rules for teachers that are more generous than the denominational policy. This rule can be adapted to provide the greater benefit, regardless of whether this is denominational or local policy. Policies do not need to be fixed; they can be made and changed because the purpose of the policy is care for the needs of the organization and its employees. Internal Stakeholders 1. The school management can provide quarterly updates to the school board on progress implementing approved GCAS audit report recommendations, along with an annual summary of accomplishments. 2. The TAM treasurer can advise the school management about how to implement the recommendations made by the GCAS audit reports. 3. The school management should prioritize work on the most important policy compliance and internal control items first in order to protect organizational resources. 4. The TAM treasurer may create a Line App Chat group as an instant support team of the 11 Adventist school treasurers; this may help provide a better understanding of and updates about denominational policies and internal control management in the local language (Thai) since all treasurers are locals.
93 In connection with this study, a very good example of how a company’s policies may be used in different parts of the world is McDonald’s. McDonald’s is a very successful fast food restaurant that operates in different countries by using adaptation as well as innovation. It comes up with a variety of services and products catering to the needs of consumer markets that are widely diverse, basing its product offerings on local consumer demographics and economic factors (Racoma, 2019). McDonald’s is known as a fast food chain that mainly serves beef hamburgers and French fries, and various countries have accepted this international food franchise. McDonald’s has outlets on all continents, operating in more than 100 countries (Racoma, 2019). McDonald’s is an example of a company that gained tremendous benefits from globalization. It is largely due to the dual marketing plan of the company: 1. Standardization strategy: anywhere the company operates, it offers identical food products such as McFlurries, McNuggets, McChicken, Happy Meals or Filet-O-Fish. The plan provides the company with a strong image. 2. Adaptation strategy: this strategy can be compared to localization. With this strategy, McDonald’s adapts to the needs of consumers as required by the cultures of specific countries. The strategy helps the fast food chain to have a wider reach worldwide. This strategy does involve greater communication and production costs, but the company’s marketing mix is flexible in order to tailor it to the local market requirements in terms of location of distribution, promotions, plans, and pricing (Racoma, 2019). As a global business, McDonald’s also applies other strategic marketing tactics such as segmentation and experimentation/product testing. For example, there are big differences in
94 strategies for the American and the Japanese markets (Racoma, 2019). In the United States, McDonald’s spends the biggest slice of its budget where it has the biggest audience. The company’s advertising is typically skewed to children in the United States. In Japan, the company’s ad campaigns are widely different. The Japanese ads are focused on adults as well as children, with some features that are unique to the local culture (Racoma, 2019). The localized marketing plans work great for McDonald’s. Because the appetites of Japanese consumers differ from Americans, the serving sizes of burgers, fries, and drinks in Japan are smaller. McDonald’s is able to adapt its menu and business plans to each culture. It shows that it respects the differences between cultures, and adheres to the country’s policy when they develop additional items for their menu. The company does product tests and experimentation of food items based on local trends and popularity among consumers. Not all of McDonald’s menus are the same (Racoma, 2019). There are a variety of different menus that McDonald’s locations offer around the world. For example, the McDonald’s in South Korea has the Bulgogi Burger. McDonald’s New Zealand has a Kiwiburger so that customers feel like a real New Zealander. McDonald’s Brazil has a big bowl of melted cheddar cheese burger dip. McDonald’s Hong Kong’s has a Taro Pie. McDonald’s India offers Maharaja Mac similar to the Big Mac’s recipe. McDonald’s Germany serves McRibs. McDonald’s Japan has McShake flavors of matcha and Hokkaido melon. McDonald’s Malaysia has Bubur Ayam, and it pays homage to traditional Malay cuisine with Nasi Lemak, a national dish in Malaysia with McDonald’s fried chicken. McDonald’s Philippines has McSpaghetti and Cheesy Eggdesal. McDonald’s Singapore created the Chocolate Hershey ice cream flavor. McDonald’s Thailand has a Sweet Corn Pie and Kraprao Crispy Chicken with rice and fried eggs. McDonald’s China has Taro Pie and Pineapple Pie. And
95 McDonald’s Saudi Arabia has McArabia Chicken with halal grilled chicken in flatbread (Konstantinides, 2020). As a global brand, it is understandable that McDonald’s exists worldwide. Localization is vital for a global company to ensure that it adapts to the local market. Effective communications are essential. Thus, a global company works with a professional translation services provider to ensure the accurate translation of documents, including advertising and marketing slogans and menus. It does not want its messages to be lost in translation, like some other global companies that failed to thoroughly understand their target markets and their various requirements (Racoma, 2019). From this example, the researcher feels that the SDA work culture operates based on trust – this is generally true for all SDA organizations. The controls are not tight because we do not operate under the assumption that fraud or misstatement may happen if we do not put controls in place. And even when it happens, we also apply a redemptive approach, where there are no serious penalties for minor offenses committed. There are deficiencies that are recurring even if the resolution appears very easy to implement, and the lack of initiative to fix the system/process appears to be attributable to the culture. However, I have observed that when the administration sets a different tone at the top, the rest of the members of the organization are held accountable for their performance and they are generally more compliant. Though SDA financial personnel are generally honest, schools must operate in a world that is not perfect, and some people may intentionally mislead others or manipulate financial statement figures in a way which may cause suffering to others. So SDA schools must avoid
96 issuing misleading financial statements. It is good to have audits, but the audit should have flexibility depending on the culture and situation of Thailand, and not fixed by the GCAS standard. What is the purpose of the audit? To improve? Some schools cannot afford the expenses entailed, so it becomes a financial burden to cover audit costs and Sun Plus expenses. The purpose is actually to help give improvement and directions and checking the work process for presentation of an accurate financial standing of the school for decision making. If this does not happen, why spend for the cost of audit? It is encouraged to make use of the cost, time, and the work intention for the audit reports. The duty of the auditors can only report, but cannot force management to comply. Auditors come to audit higher organizations and see how institutions in the cities and the country side differ. It would be good support to readjust the policies and how able can afford. One school cannot always be compared with another school because of their different financial capacities, and auditors need to take into consideration Thai practices, culture, and local government regulations. Best practices may not be practical or applicable to all organizations – it can be the job of the auditors to make recommendations based on best practices. However, the implementation of these recommendations may be viewed by management as impractical because the organization has limited resources. This is where auditors may understand the scenario, except that there may be a work-around to mitigate the risks associated with lack of a specific control, so if there was NO mitigating control in place, the auditors would still include a deficiency in their report. And the organization would simply stick to their opinion that it is impractical for them to comply with this standard or it does not apply to them. This is where it becomes important to have a discussion between management and GCAS
97 For example, the organizations audited are like students, and the auditors are like teachers. Teachers can teach and tell their students what to do, but cannot force them to obey. The parents will have the final say with their children. If the student is not doing well, the teacher will inform the parents how he/she may be successful, and the parent can work with the child - with the support of the teacher - for the success of the child. In a good relationship with the auditor, schools can work together to help improve the school’s internal control, which eventually leads to increased denominational policy compliance. For these recurring management issues, to apply for an exemption is necessary. And lastly, the researcher believes that in conclusion, as humans we are not perfect, and the mission, philosophy, and culture of SDAs is focused on redemption and to help every person in the organization move closer to the Lord Jesus Christ. Everyone continues to pray and to be guided by the Holy Spirit so that all will have the wisdom and knowledge from above to serve in God’s work. d. Directions for Future Research To better understand the noncompliance of the denominational policies in the Adventist schools in Thailand, there are issues that need to be addressed by the school management, higher organizations, and future studies. This study shows how the school boards and the school management can work together, which resulted in improvements and growth in the 2021 GCAS audit reports for Schools B and D. There is a need for continued support to develop the knowledge of the importance of compliance with denominational policies and strengthening internal control management.
98 Future studies may consider investigating how a more flexible approach to denominational policy might support Adventist schools in different settings around the world. For example, they may look more closely at local cultures, beliefs, laws, and lifestyle in the country. This study provides a basic assessment that identifies the reported challenges and suggested practical solutions for SDA schools in Thailand. Future research may consider the limitations of this study and attempt to employ more advanced methodologies, instruments, or a larger population.
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104 Appendices Appendix 1: Categories of Schools in the Seventh-day Adventist Educational System 1. Kindergarten/Pre-school The kindergarten/pre-school is a one-year or two-year pre-formal education program. This normally is a preparation for the first year of formal primary education. Primary education is defined as the first eight years of formal education. 2. Secondary Education The secondary education focuses of the formal preparation of students for university entrance. This includes years 9 through 12 or 13 of formal education. 3. Worker-training Education Worker-training education covers a diversity of non-traditional programs. These programs normally offer students training with a certificate or a diploma which is training with career expertise. These programs are usually not equivalent to a college or university. These programs are a minimum of one academic year in length. 4. Tertiary Education The tertiary education is divided into two different levels: the undergraduate and the graduate levels. The undergraduate programs are generally considered as college and/or university bachelor degree level. This also includes certificate, diploma, and associate degree programs. Graduate programs are generally considered as programs which require a student to have a bachelor’s degree as a minimum entry prerequisite. A student will usually graduate with a masters or doctorate degree upon completion of this course of studies. (Adventist Education, n.d.)
105 Appendix 2: The 17 Principles of Effective Internal Controls 1. Control environment 1. Demonstrate commitment to integrity and ethical values 2. Ensure that board exercises oversight responsibility 3. Establish structures, reporting lines, authorities and responsibilities 4. Demonstrate commitment to a competent workforce 5. Hold people accountable 2. Risk assessment 6. Specify appropriate objectives 7. Identify and analyze risks 8. Evaluate fraud risks 9. Identify and analyze changes that could significantly affect internal controls 3. Control activities 10. Select and develop control activities that mitigate risks 11. Select and develop technology controls 12. Deploy control activities through policies and procedures 4. Information and communication 13. Use relevant, quality information to support the internal control function 14. Communicate internal control information internally 15. Communicate internal control information externally 5. Monitoring 16. Perform ongoing or periodic evaluations of internal controls (or a combination of the two)
106 17. Communicate internal control deficiencies (The 17 principles of effective internal controls, 2020)
107 Appendix 3: Informed Consent E-mail for Participants Dear Participant, This is an e-mail consent for a research study interview conducted by Catherine Chulkasate, a Master’s of Business Administration student at Asia-Pacific International University. The main purpose of the study is to ask stakeholders for recommendations and suggestions to resolve ongoing financial policy compliance and internal control problems identified in four Adventist schools’ GCAS audit reports for the years 2016 to 2018. As a participant, your identity will remain confidential. To protect your identity, interview responses will only use code names rather than actual school or participant’s names. If you have any question about the research, or about your rights as a participant, your questions or concerns may be directed to Catherine Chulkasate by phone at 081 4226788 or by e-mail at [email protected]. The interview questions include a list of specific policy compliance and internal control problems. The interview questions begin with generic and the specific issues one by one with details to the person in charge. The interview questions will be conducted face-to-face or online, and may last from 30-60 minutes. You may discontinue participation at any time. Your reply to this email stating that ‘I Consent’ to be interviewed about this topic, verifying that participation in the study is voluntary. Sincerely, Catherine Chulkasate
108 Appendix 4: Cover Letter and Interview Questions Denominational Financial Policy Compliance and Internal Control Management Among Adventist Schools in Thailand: Recommendations and Suggestions Interview Questions Dear Participant, I am conducting a research study on the denominational financial policy compliance and internal control management as part of the course requirements for a Master’s degree in Business Administration at Asia-Pacific International University, and your participation would be greatly appreciated. The purpose of the study is to ask stakeholders for recommendations and suggestions to resolve the ongoing financial policy compliance and internal control problems identified in these four Adventist schools’ GCAS audit reports for the years 2016 to 2018. It may take 30-60 minutes to complete all parts of the interview. The information you provide in this interview is confidential. The analysis and evaluation will be interpreted from the different groups of data collected and recorded. Please note that you may withdraw at any time. I appreciate the valuable answers you will give in response to the interview questions. Your responses will contribute to the validity of this study. Thank you in advance for responding to these interview questions. Sincerely, Catherine Chulkasate Master of Business Administration student Asia-Pacific International University
109 Interview Questions Category 1 I am Catherine Chulkasate, a Master’s of Business Administration student at Asia-Pacific International University. The main purpose of this study is to ask TAM officers/Board members/GCAS auditors (external stakeholders) for recommendations, suggestions, comments, or feedback to improve or resolve ongoing financial policy compliance and internal control problems identified in four Adventist schools’ GCAS audit reports for the years 2016 to 2018. It may take 30-60 minutes to complete all parts of the interview. The information you provide in this interview is confidential. The analysis and evaluation will be interpreted from the different groups of data collected and recorded. Please note that you may withdraw at any time. I appreciate the valuable answers you will give in response to the interview questions. Your responses will contribute to the validity of this study. External Stakeholders – Core denominational financial policy compliance deficiencies as follows: Governance and Management Issues and Employee Wages and Benefits Issues 4 Thailand Adventist Mission officers (TAM) 4 School board members 2 GCAS auditors of Adventist schools in Thailand 1. How long have you been in this current position/role as a TAM officer/Board member/GCAS auditor? 2. How aware are you of Adventist schools’ recurring problems in complying with denominational financial policies?
110 3. How often have financial policy compliance deficiencies or GCAS management letters been discussed by the school board? 4. Which policy compliance issues were mentioned in the most recent GCAS audit report? 5. In the present school year, which policy compliance issues have been resolved or the in process of being resolved? 6. What challenges may cause these recurring violations of financial policies? (Governance and management issues list) List of issue in school A, B, C, D is prepared (Employee wages and benefits issues list) List of issue in school A, B, C, D is prepared 7. What specific remedial actions would you (TAM officer/Board member/GCAS auditor) suggest to deal with policy compliance issues in the schools? Governance and management issues: List of issues in school A, B, C, D is prepared o Audit committee appointments (meet once a year, after the GCAS audit report) o Compensation review committee appointment (meet once a year, beginning of the school year) o Financial statement regular review (nine out of 12 times a year for school admin and quarterly or four times a year for school board) o Unsigned conflicts of interest (once a year, beginning of the school year) o Inadequate building/equipment insurance (yearly insurance policy) Employee wages and benefits issues: List of issues in school A, B, C, D is prepared o Employee paid too much/too little (yearly) o Excessive tuition assistance (yearly)
111 o Excessive medical assistance (yearly) o Unorthodox vacation policy (yearly) 8. Is there anything else related to this topic that should be discussed?
112 Category 2 I am Catherine Chulkasate, a Master’s of Business Administration student at Asia-Pacific International University. The main purpose of the study is to ask Adventist school administration officers/finance office staff (internal stakeholders) for recommendations, suggestions, comments, or feedback to improve or resolve ongoing financial policy compliance and internal control problems identified in four Adventist schools’ GCAS audit reports for the years 2016 to 2018. It may take 30-60 minutes to complete all parts of the interview. The information you provide in this interview is confidential. The analysis and evaluation will be interpreted from the different groups of data collected and recorded. Please note that you may withdraw at any time. I appreciate the valuable answers you will give in response to the interview questions. Your responses will contribute to the validity of this study. Internal Stakeholders - Weak internal control as follows: Accounting and Administrative Functions 8 Adventist school administration officers 10 Finance office staff 1. How long have you been in this current position/role as Adventist school administration officer/finance office staff? 2. How aware are you of the internal control weaknesses identified by the GCAS auditors? 3. How often have these internal control weaknesses issues been discussed by the school administrative committee that deals with financial matters? 4. What are the recurring internal control weaknesses mentioned in the most recent GCAS management letter?
113 5. In the present school year, which internal control weaknesses have been resolved or are in the process of being resolved? 6. What challenges may cause these recurring internal control weaknesses? (Accounting and administration control issues list) List of issue in school A, B, C, D is prepared 7. What specific remedial actions would you (Adventist school administrator/finance office staff member) suggest to deal with these internal control weaknesses? Accounting Control Issues: List of issue in school A, B, C, D is prepared o Bank reconciliation not reviewed (monthly) o Department income/expense over-reported (yearly) o Erroneous calculation of cash position (yearly) o Inadequate allowance for doubtful accounts (yearly) o Journal vouchers not reviewed (monthly) o Reconciliation reports not reviewed (monthly) o Receivable and/or payable misstated (monthly/yearly) o Severance allowance lacking, not reviewed (monthly/yearly) Administrative Control Issues: List of issue in school A, B, C, D is prepared o Authorization problems (daily/approved actions) o Equipment general/subsidiary discrepancies (yearly) o Inadequate internal control of cash (monthly/yearly)
114 o Incompatible duties/no segregation of duties (yearly) o More frequent (daily) cash deposits (daily) o Miscellaneous problems with bank accounts (monthly/yearly) o Physical/recorded inventory values difference (yearly) o Policies: asset purchase/disposal, capitalization (daily, yearly, approved actions) 8. Is there anything else related to this topic that should be discussed? Thank you and God Bless!
115 Appendix 5: Table Summary for Information Collected from the Interview: Interview Information of Participant External / Internal Stakeholder Date: Duration: Method: Zoom call/Face to face Summary of the Interview