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
Jagongo, A. O.
Journal Title
Journal ISSN
Volume Title
Publisher
International Academic Journals
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
Research paper
Keywords
Financial performance, Nairobi City County, Higher learning, Internal control systems, Public institutions, Kenya
Citation
Muhunyo, B. M. & Jagongo, A. O. (2018). Effect of internal control systems on financial performance of public institutions of higher learning in Nairobi City County, Kenya. International Academic Journal of Human Resource and Business Administration, 3(2), 273-287