Effect of internal control systems on financial performance of public institutions of higher learning in Nairobi city county,Kenya
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Date
2018
Authors
Muhunyo, Benson Mugi
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Most public institutions in many parts of the world have poor financial performance compared to
private institutions. The poor financial performance can be attributed to financial management
practice. The sound financial management practices require the institutions of strong internal
control systems. However, there are limited empirical research findings regarding the
relationship between internal control system and financial performance. In public institutions,
there have been a lot of weaknesses in their policies and procedures and also in their Internal
Audit, the extent to which employee’s in positions handling cash fail to take regular leave and
lack of rotation of employees handling very sensitive areas in finance and administration
department. The main objective of the study was to establish the effect of internal control
systems on financial performance in public institutions of higher learning in Nairobi City
County. The study specific objectives were; to determine the effect of control activities, risk
assessment, control environment, information and communication and monitoring on financial
performance of institutions of higher learning in Nairobi City County. The study was anchored
on agency theory, stewardship theory, and positive accounting theory and attribution theory. The
study used a descriptive research design. This study took a sample study approach with its target
population being the different categories of staff in different departments of Public Institutions of
Higher Learning in Nairobi City County, Kenya. It took on a sample of 96 employees. Primary
data was collected from sample population using open and closed ended questionnaires.
Descriptive statistics was used in the data analysis and information presented in statistical forms.
A multiple linear regression was also used to analyze the relationship between the dependent and
independent variable. The study realized that the control environment, risk assessment, control
activities and information and communication as indicators of internal control systems have a
significant influence on the financial performance of the institutions of higher learning in Nairobi
City County, Kenya. The variables explained 99.1% of the changes in financial performance of
the institutions. The study recommends that internal control systems among the institutions need
to be improved and accountability of organizational resources be upheld.
Description
A research project submitted to the school of business in partial fulfillment of the requirements for the award of degree of master of business administration (finance option) of Kenyatta University. May, 2018