INTERNAL CONTROL SYSTEM AND FINANCIAL PERFORMANCE OF LOCAL GOVERNMENTS IN NORTHERN UGANDA: EVIDENCE FROM OYAM DISTRICT LOCAL GOVERNMENT
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Date
2026-04-26
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Gulu University
Abstract
Internal control system plays significant role in enhancing financial performance of institutions. This study investigated the effect of internal control system on financial performance of lower local governments with evidence from Oyam District Local Government. The aims of the study were: To assess the effectiveness internal control system; to examine the status of financial performance; to examine the relationship between internal control system and financial performance of lower local governments; to assess the moderating effect of IFMS on the relationship between the internal control system and financial performance of lower local governments the case of Oyam District Local Government. Cross-sectional research design was used in the study with purely quantitative approach. Data was collected using structured questionnaires from 174 staff of Oyam District Local Government. Data was analyzed using descriptive statistics (frequencies and percentages) and inferential statistics (correlation and regression) with the aid of Statistical Package for Social Sciences (SPSS) version 25.0. Study findings revealed: The study finding shows a high level of usage of internal control system in terms of control activities and control environment, and a high level of financial performance. The study finding shows a moderate level of usage of internal control system in terms of control activities, control environment and risk assessment by management of Oyam District Local Government and at the same time, a high level of financial performance in the forms of accountability, financial reporting and performance of revenue. They also show that all the dimensions of internal control system (control activities, control environment and risk assessment) have significant positive relationship with the financial performance of Oyam District Local Government. At the same time, they show that integrated financial management systems moderated the relationship between internal control system and financial performance in Oyam District Local Government. The study concluded that internal control system has a significant positive effect on financial performance. The study recommended that; strategies aimed at improving financial performance should focus on control environment, control activities and risk management; and the study recommended need to strengthen integrated financial management system while implementing internal control system in order to influence financial performance
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Internal Control System, Financial Performance, Lower Local Governments, Control Environment, Control Activities