Effects of Internal Control Systems On Financial Performance in an Institution of Higher Learning in Uganda: A Case Study of Kampala International University

ABSTRACT

The study was made to investigate and establish the relationship between internal control systems and financial performance in an Institution of higher learning in Uganda. Internal controls were looked at from the perspective of Control Environment, Internal Audit and Control Activities whereas financial performance focuses on Liquidity, Accountability and Reporting as the measures of financial performance. The Research was set out to establish the causes of persistent poor financial performance from the perspective of internal controls. The research was conducted using both quantitative and qualitative approaches such as; Survey, Correlation and Case study as Research Designs. Data was collected using Questionnaires, Interview guide as well as review of available documents and records targeting basically Deans, Associate Deans, Heads of Departments, Management Committee members and Finance and Accounts staff as respondents from a population of 70 Kampala International University staff. Data been analysed using the Statistical Package for Social Scientists where conclusions were being drawn from tables and figures from the Package. The study was aimed at finding the commitment of the management of the institution to the control systems, active participation in monitoring and supervision of the activities of the University, as all the activities of the Institution are initiated by the top level management, since the internal audit department was not efficient, understaffed, doesn’t conduct regular audit activities and doesn’t produce regular audit reports although the few reports produced by the internal audit department address weaknesses in the system. it was further revealed that a clear separation of roles, weaknesses in the system need to be addressed, and there is a training program for capacity building in the institution. However, the study was intended find out limitations of information sharing and inadequacy of security measures to safeguard the assets of the University. It was also put on a note that there is a need for availability of cash to meet intended University goals, including the fees charged to students in relation to whether they are appropriate to cover costs or not. It will however, reveal all revenues and expenditures that are properly classified, and that whether the assets of the University have generally increased. The xii study was meant to establish a significant relationship between internal control system and financial performance. The investigation was to recommend competence profiling in the Internal Audit department which was based on what the University expects the internal audit to do and what appropriate number of staff was required to do this job. It was also recommended that the institution should establish and manage knowledge/information management system to enable all parties within the institution to freely access and utilize the official information. There should be a strategy to improve the generation of additional finances for the University. The Study therefore concluded that the internal control systems does function although with hiccups and that there is a significant relationship between internal control systems and financial performance in an Institution of higher learning.