Internal controls and financial performance of micro credit financial institutions in Uganda, a case study of noble unit Uganda

Abstract

The purpose of the study was to the influence of internal controls on financial performance in micro credit financial institutions in Uganda with a case study of Noble Unit Uganda. The objectives were to examine the influence of control environment on financial performance, to assess the influence of control activities on financial performance and to analyse the influence of compliance monitoring on financial performance. The study adopted a cross-sectional research design and employed a mixed methods research approach. Simple random sampling and purposive sampling techniques were used to select 133 respondents who were drawn from a population of 200 individuals. Results show that control environment had a positive statistically significant relationship with financial performance (r=.378, p=000), control activities had a positive statistically significant relationship with financial performance (r=.578, p= .001) and compliance monitoring had positive statistically significant relationship with financial performance (r=.538, p= .000). It was also revealed that control activities were found to be a stronger predictor of financial performance with an Adjusted R Square =.331 compared to control environment with a.204 and compliance monitoring .291. To that end, the study recommended that management should consistently model ethical leadership by ensuring that values such as integrity and accountability are reflected in decision-making and daily operations, closing the gap between stated ethics and actual practice. It was also suggested that accountants should maintain up to date, documented financial procedures, including workflows for payments, reconciliations, and reporting, to ensure consistency and eliminate ambiguity in processing transactions. Suggestion was also made that heads of departments should be tasked with the oversight of compliance with third-party agreements by conducting regular checks on vendor and contractor performance against agreed terms to reduce financial exposure