Internal Control Systems and Financial Performance of Local Governments in Uganda. A case of Kapchorwa District

Abstract

Despite the existence of regulations and control measures to guide Local Governments operations in Uganda, mismanagement of funds and other resources persist. The study was aimed at establishing the relationship between Internal Control Systems (ICS) and financial performance in Kapchorwa District and specifically analysed the relationship between control environment, control activities and financial performance in Kapchorwa District, and further assesses whether management is committed to effective implementation of ICS. The study utilized both quantitative and qualitative approaches. Primary data was gathered on a sample population of 182 individuals comprising KLG staff at management level, district councillors, chairpersons of boards and commissions, Finance and Administration and other staff. Data is analysed using SPSS and results are presented in tables and figures. The study found that management of the institution is committed to the control systems and actively participates in monitoring and supervision of the activities of the District, It was further noted that there aren’t enough funds to meet intended objectives. The study established a significant positive relationship between internal control system and financial performance. The study concluded that internal control systems do function although with hiccups and that there is a significant relationship between internal control systems and financial performance in a Local Government. The investigation recommends that managers of public institutions should establish internal control procedures in order to eliminate, mitigate, or compensate for the risks and ensure regular performance reviews, appropriate separation of duties, and periodic reconciliations.