FINANCIAL DECENTRALIZATION AND QUALITY OF FINANCIAL REPORTING IN LOCAL GOVERNMENTS IN UGANDA: A CASE STUDY OF KAMPALA CITY COUNCIL

Abstract

This study examined the contributions and relationship between financial decentralization and quality of financial reporting in LG, Kampala City Council as the case study. The independent and dependent variable was the financial decentralization and quality of financial reporting respectively. A correlation design which was cross section in approach combined with descriptive design was used. The study population consisted 300 staff and councilors who have big interests in the problem under investigation. The required sample size consisted of 213 determined using Krejcie and Morgan method before simple random sampling and proportionate stratified random sampling techniques employed in selecting members of the required sample. Three methods namely questionnaire, interview and observation were used in collecting both primary and secondary data. A structured questionnaire with five point likert scale supplemented by an interview guide was administered to the indentified respondents. The data was presented in tables, charts and frequency tables before being analyzed using descriptive statistics, factor analysis, Pearson correlation Coefficient and Regression models with the help of SPSS. The study revealed that there was a significant positive relationship between independent and dependent variables. The dimensions of the independent variable accounts for 62% and can predict up to 45% variation in the quality of financial reporting. The study further discovered an improvement in quality of financial reporting after the implementation of financial decentralization due to improvement in book keeping, autonomy in financial planning and reporting, monitoring and measuring of performance, reduction in material mis- statements and strengthened internal controls. On the basis of study findings, the researcher recommends increased supervision, strengthening of internal controls, streamlining of recruitment of finance staff, training of key stakeholders on their roles and mandates, introduction of harsh penalties to law breakers in addition to conducting a comparative study before and after financial decentralization if all the weaknesses in the financial decentralization system that influence quality of financial reporting in LGs are to addressed.