Internal financial controls and financial sustainability in non governmental organizations (NGOS) in Uganda

Abstract

The study examined the effect of Internal Financial Controls on Financial Sustainability in Non Governmental Organizations (NGOs) in Uganda, a Case of Infectious Diseases Institute Limited (IDI) under four research objectives namely; i) to examine the effect of the control environment on financial sustainability, ii) to examine the effect of risk assessment on financial sustainability; iii) to examine the effect of monitoring and control activities on financial sustainability and iv) to examine the effect of information and communication on financial sustainability. Using a cross sectional design blended with both qualitative and quantitative research approaches on a sample of 297 respondents. The study collected data using questionnaires and an interview guide which was processed using SPSS and analyzed using Pearson’s two tail statistic and multiple regression models. The study registered a response rate of 84.8% and revealed that at a bivariate level of analysis, all measures on internal financial controls were positively associated with financial sustainability although they had differing degrees of association. Monitoring and control activities had a moderate significant relationship with financial sustainability (r = 0.570; p = 0.000), Information and communication was also moderate though significantly associated with financial sustainability (r = 0.499; p = 0.000) while both control environment and risk assessment had weak positive signification associations with financial sustainability indicated by correlation values of r = 0.249; p = 0.000 and r = 0.177; p = 0.000 respectively. At a multivariate level, results indicated that on the overall, internal financial controls explained 38.4% of the variation in financial sustainability at IDI and that individually, control environment positively affect financial sustainability (β = 0.215; p = 0.000), Monitoring and control activities positively affect financial sustainability(β = 0.46; p = 0.000), Information and Communication positively affect financial sustainability (β = 0.251; p = 0.000) while risk assessment negatively predicted financial sustainability (β = - 0.266; p = 0.000). The researcher concludes that internal financial controls are a weak predictor of financial sustainability and recommends that; since internal financial controls can’t individually result into higher levels of financial sustainability; management ought to define and implement other practices alongside such controls for sustainable financial operations.