The effect of internal auditing on financial performance of local governments in Uganda : A case of Mbale municipal Local Government

Abstract

The purpose of the study was to find out the importance of internal audit to the local government and the relationship between Internal Audit system and financial performance of Local Governments in Uganda. It was guided by four objectives namely; to find out the nature of Internal Audit and performance of Mbale Municipal Local Government, to find out the relationship between Internal Audit and performance of Mbale Municipal Local Government and to identify the challenges faced by the Internal Audit and performance of Mbale Municipal Local Government Local Government. The research design involved collecting of both primary and secondary data using a questionnaire and interviews, and during data collection stratified sampling methods was used. Both qualitative and quantitative were used to analyze data as sample of 40 respondents was selected at Mbale Municipal Local Government. The study was revealed by the respondents that checking of the totals in books of accounts was done by the people under the audit section in the study area to prove for the accuracy of the balances. From the study findings revealed corruption among the challenges of Internal Audit department and performance of Mbale Municipal Local Government. The respondents revealed that most of the Local Government officials are corrupt and tend to embezzle Government funds that impends performance. The study also established that there is a relationship between Internal Audit and performance of Mbale Municipal Local Government as indicated by the scores of roles of Internal Audit and financial performance. The researcher concluded that there was political interference, corruption, conflict of interest, inadequate skills, inadequate information, inadequate funds, and improper communication flow are the major challenges faced by Internal Audit and performance of Mbale Municipal Local Government. The researcher also recommended that there should be use of strong internal control system in Local Governments, careful selection of employees in Local Government and Local Governments’ to employees to always follow the drafted work plan in the departments if the auditing and performance is to be effective. Lastly that the influence of political structure and performance of Local Governments in Uganda and the relationship between employees experience and performance of audit department in Local Governments as areas for further studies.