Internal Control Systems And Financial Performance Of Municipal Urban Councils In Northern Uganda: A Case Study Of Kitgum Municipal Urban Council

ABSTRACT

This study investigated the Internal Control System (ICS) that influenced financial performance

(FP) in Municipal Urban Councils in northern Uganda: a case of Kitgum Municipal Urban

Council (KMUC). The objectives of the study were: to explore the relationship between internal

control activities and FP in KMUC; to find out how the internal control environment affects FP in

KMUC; and, to assess the impact of auditing on FP in KMUC.

A descriptive research survey design was adopted using both qualitative and quantitative

methods. The study targeted 70 respondents but 58 returned the survey questions, indicating a

response rate of 83%. Stratified sampling techniques were used to select administrative staff, and

purposive sampling used to select political leaders and top-level administrators. Data analysis

involved frequencies, percentages and inferential statistics such as correlations, and coefficient of

determinations. Findings revealed a moderate positive relationship (0.271*) between internal

control activities and FP; significant relationship between internal control environment and FP

(0.335*); and moderate positive relationship between audit and FP (0.265*). The study concludes

that internal control activities, internal control environment and audit positively affected FP in

one way or the other. The study recommends that KMUC should employ professional members of

the Institute of Certified Public Accountants of Uganda in the Internal Audit Department since

36.2% of the respondents opposed sufficient staffing of the department which is the custodian of

the ICS. The environment for the implementation of ICS should be improved by ensuring that

Management is committed to the operation of the system, closely monitoring its implementation

and giving feedback to the staff. District Public Accounts Committee capacity should be built and

their office properly facilitated to enable them follow up on the internal audit reports so that

corrective measures are taken.