Internal Controls and Performance of the Ministry of Foreign Affairs Kenya

Abstract

Internal control entails all procedures designed to protect assets and ensure that all financial transactions are recorded. Strong internal control therefore promotes institution’s ability to reach its objectives by providing reliable financial data and safeguarding assets and records. Most public institutions worldwide have poor performance compared to private sector institutions. Despite this significance of strong internal control, there are, however, limited empirical research on the relationship between internal controls and performance. As a result, the aim of this research is to find out more about effects of internal controls on performance of public institutions with focus on the Ministry of Foreign Affairs Kenya. In particular, the study examined the effects of control environment, control activities, risk assessment, communication systems and monitoring on performance at the Ministry of Foreign Affairs Kenya. The study was anchored on Agency theory, positive accounting theory and reliability theory and adopted descriptive research design. The study adopted a census approach to achieve its objectives since all seventy staff in accounts, finance and administration departments participated. Primary data was collected using semi-structured questionnaires and cover a period of five years from 2013 to 2018. A pilot study was conducted to test validity of the questionnaire and the Cronbach’s alpha was used in testing its reliability. Descriptive statistics was used in data analysis and presentation while inferential statistics of multiple regression analysis was used to establish the relationship between dependent and independent variables. An assessment of the model’s underlying statistical assumptions was conducted through tests for Homoscedasticity, Multicollinearity and Normality. All decisions about the hypotheses and the corresponding conclusions were made using the p-values. The null hypotheses were rejected for p-value < 0.05. That is, a significant effect of any independent variable on the dependent variable existed if the p-value for the corresponding coefficient is less than 0.05. The study concluded that all identified aspects of internal controls had positive influence on performance and are efficient at the Ministry of Foreign Affairs with control activities and monitoring controls having highest efficiency levels followed by control environment, communication systems and risk assessment had lowest efficiency level. The study recommends the Ministry to develop strong whistle blowing policy to protect whistle blowers, train staff on possible risks and how to assess them, review communication policy to allow free communication, ensure asset register is regularly update and review risk assessment tools to ensure that they are effective.