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MAKERERE UNIVERSITY
THE EFFECTIVENESS OF INTERNAL CONTROL SYSTEMS IN ACHIEVING
VALUE FOR MONEY IN SCHOOL FACILITIES GRANT
THE CASE OF KAMULI DISTRICT LOCAL GOVERNMENT
MOSES BYANGUYE
2007/HD10/11224U
A DISSERTATION SUBMITTED TO SCHOOL OF GRADUATE STUDIES IN
PARTIAL FULFILLMENT FOR THE REQUIREMENT FOR THE AWARD OF
DEGREE OF MASTER OF SCIENCE IN ACCOUNTING AND FINANCE OF
MAKERERE UNIVERSITY
August, 2011
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Declaration
This research work is original and has not been submitted for any other degree award to
any Institution before.
SIGNATURE:_____________________ DATE:______________________
NAME: MOSES BYANGUYE
REG. No: 2007/HD10/11224U
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APPROVAL
This is to certify that this thesis has been submitted with our approval as University
Supervisors.
SIGNATURE:_____________________ DATE:______________________
DR. ISAAC NKOTE NABETA
SIGNATURE:_____________________ DATE:______________________
MR. FRED LUGANDA
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Dedication
This work is dedicated to my dear mother Ms Proscovia Wotali Isabirye with whom our
father left us and she tirelessly sought and gave us the education so needed by the six of
us.
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Acknowledgement
I would like to extend my sincere gratitude to all those who helped me through this
period. I would like to thank my supervisors Dr. Isaac Nkote Nabeta and Mr. Fred
Luganda for guiding me through this ordeal. I wish also to thank Mr. Wilfred Magambo
for the technical support especially in data analysis.
I would like to thank my employers and fellow employees of Kamuli District Local
Government (KDLG) and special thanks go to my sponsors; the Belgian Technical
Cooperation (BTC) for the financial support extended to me through the Ministry of
Local Government.
Last but not least my gratitude goes to my family without whose support I would not have
done this Masters degree. Needless to mention are my children (with whom I have been
competing for reading space); Ivan, Rhona, Rodney and Rowena and above all my dear
wife Sarah. Thank you all for bearing with my absence from you in quest for completing
these studies.
For all the above various people, I owe this achievement and I will forever remain
sincerely indebted.
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Abstract
The purpose of this study was to examine the effectiveness of Internal Control Systems in
achieving Value for Money in SFG projects in Local Governments. A cross sectional
survey design was used. Data was gathered using a self administered structured
questionnaire. Respondents who directly and indirectly incharge of implementing the
SFG projects in Kamuli District Local Government filled the questionnaire. The
respondents were drawn from the elected and appointed staff, staff from the Office of the
Auditor General, members of the District Public Accounts Committee and the School
Managers for the schools that received SFG project by the Financial Year (FY) 2007/08.
The data was analyzed using SPSS.
The findings revealed that Internal Control Systems have a significant positive effect in
achieving Value for Money. The study further reveals that there a significant positive
relationship between the Control Environment, Control Activities, Risk Assessment,
Information and Communication and Monitoring and Value for Money in Local
Governments.
The findings revealed that Internal Control Systems have a significant positive effect in
achieving Value for Money. All the constructs of Internal Control Systems (Control
Environment, Control Activities, Risk Assessment, Information and Communication and
Monitoring) have a significant positive relationship with Value for Money in Local
Governments. This implies that the more sound the ICS, the more the ICS are adhered
too, the high the chances that LGs will achieve Value for Money.
Having known the significance of Internal Controls, LGs need to ensure that they
continuously review them and ensure that they are operational.
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TABLE OF CONTENTS PAGE
Declaration ...................................................................................................................... 2
Dedication ....................................................................................................................... 4
Acknowledgement ........................................................................................................... 5
Abstract6
List of Tables and Figures ............................................................................................... 9
List of Acronyms ..10
1.1. Background........................................................................................................ 12
1.2. Statement of the Problem ................................................................................. 133
1.3. Purpose of the Study .......................................................................................... 14
1.4. Objectives ........................................................................................................ 144
1.5. Research Questions ............................................................................................ 15
1.6. Scope of the Study ............................................................................................. 15
1.7. Significance of the study .................................................................................... 16
1.8 Conceptual Framework .17
2.0. Literature Review .............................................................................................. 18
2.2. Internal Control Systems(ICS) .......................................................................... 18
2.2.1Control Environment ................................................................................. 21
2.2.2Risk Assessment ....................................................................................... 22
2.2.3Control Activities .................................................................................... 233
2.2.4Information and Communication ............................................................... 23
2.2.5Monitoring ................................................................................................ 24
2.3. Value for Money.............................................................................................. 255
2.4. Conclusion ........................................................................................................ 26
Research Methodology .................................................................................................. 28
3.2. Research Design ................................................................................................ 28
3.3. Study Population .............................................................................................. 28
3.4. Sampling and Sample Size ................................................................................ 29
3.5. Data Sources ..................................................................................................... 30
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3.6. Data Collecton Instruments ............................................................................... 30
3.7. Measurement of Variables ................................................................................ 31
3.8. Validity and Reliability of Instruments ............................................................. 31
3.9. Data Processing and Analysis ........................................................................... 32
3.10. Limitations of the Study .................................................................................... 32
4.0 Data Presentation, Analysis and Interpretation .................................................. 34
4.2 Sample Characteristics ...................................................................................... 34
4.3. To examine Internal Control Systems in Local Governments...374.3.1 Rotated Component Factor Analysis for Internal Control Systems ..40
4. 4. To examine Value for Money in Local Governments...............42
4.4.1 Rotated Component Factor Analysis for Value for Money ..444.5. Correlation Analysis..46
4.5.1 Internal Control Systems and Value for Money in Local Government.46
4.5.2 Relationship between Control Environment and Value for Money in
Local Governments ..47
4.5.3 Relationship between Control Activities and Value for Money inLocal Governments47
4.5.4 Risk Assessment helps attain Value for Money484.5.5 The impact of Information and Communication on attainment of Value
for Money in Local Governments..48
4.5.6 The impact of Monitoring on the attainment of Value for Money in
Local Governments ...49
4.6 Regression Analysis...495.0 Summary of Findings, Discussion, Conclusions and Recommendations..52
5.1 Introduction52
5.2 Discussion of Findings ..52
5.2.1 Internal Control Systems in Kamuli District Local Government .52
5.2.2 Value for Money in Kamuli District Local Government...545.2.3 Relationship between Control Environment and Value for Money...54
5.2.4 Relationship between Control Activities and Value for Money555.2.5 Relationship between Risk Assessment and Value for Money.55
5.2.6 Relationship between Information and Communication and Value forMoney56
5.2.7 Relationship between Monitoring and Value for Money .56
5.3 Conclusion.56
5.4. Recommendations .............................................................................................. 58
5.5. Areas for further research ................................................................................... 58
Appendixes ................................................................................................................... 63
Appendix I: Questionnaire............................................................................................. 63
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LIST OF TABLES AND FIGURES
PAGES
Figure 1 Conceptual Frame Work .... 17
Table 3.1 Population and Sample Composition ... 29
Table 3.2 Reliability Statistics .. 31
Table 4.1 Gender of the Respondents ... 34
Table 4.2 Employment Status of Respondents . 35
Table 4.3 Duration of Employment with Organisation 36
Table 4.4 Age bracket of Respondents . 37
Table 4.5 Internal Control Systems in Local Governments .. 38
Table 4.6 Rotated Component Matrixafor Internal Control System ..... 40
Table 4.7 Value for Money in Local Governments 43
Table 4.8 Rotated Component Matrixafor Value for Money 45
Table 4.9 Zero Order Correlation Analysis .... 46
Table 4.10 Multiple Regression Analysis .. 50
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LIST OF ACRONYMS
AGAR - Auditor General Annual Reports
APB - Auditing Practices Board
CAIIP - Community Agriculture Infrastructural Improvement Programme
CE - Control Environment
COSO - Committee of Sponsoring Organisations
DEC - District Executive Committee
DPAC - District Public Accounts Committee
GoU - Government of Uganda
IAR - Internal Audit Reports
ICS - Internal Control Systems
IMF - International Monetary Fund
INTOSAI - International Organization of Supreme Audit Institutions
KDLG - Kamuli District Local Government
LGDP - Local Government Development Programme
LGFAR - Local Government Financial and Accounting Regulations
LGIAM - Local Government Internal Audit Manual
LGs - Local Governments
MoFPED - Ministry of Finance Planning and Economic Development
MoLG - Ministry of Local Government
NAADS - National Agriculture and Advisory Services
OECD - Organisation for Economic Co-operation and Development
PAF - Poverty Action Fund
PEAP - Poverty Eradication Action Plan
PERP - Primary Education Reform Program
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SFG - Schools Facilities Grant
SMC - School Management Committee
TPC - Technical Planning Committee
UPE - Universal Primary Education
VFM - Value for Money
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CHAPTER ONE
INTRODUCTION
1.1. Background
Local Governments (LGs) in Uganda have for many years been required to
develop and adhere to effective Internal Control Systems (ICS) in order to attain
Value for Money (VFM) from their development expenditures. These Internal
Control requirements have increased significantly since the implementation of the
Decentralization programme in 1993, the enactment of the 1995 Constitution of
Uganda and the implementation of the Local Government Act, (1997).
Decentralisation mandates LG councils to set up effective Internal Control
Systems (ICS) that ensure the reliability and integrity of information, compliance
with policies, plans, procedures, laws and regulations, safeguard of assets, check
on the misappropriation of their resources, as well as proper authorization of
expenditure and regular update of books of accounts in order to attain Value for
Money (Lubabah, 2009; Asiimwe & Nakanyike, 2007; LG Act 1997; Committee
of Sponsoring Organisations (COSO), 2009; Organisation for Economic Co-
operation and Development (OECD), 2005).
According to Davies, (2007), VFM is the assessment whether or not an
organisation is obtaining the maximum benefit from the goods and services it
acquires and/or provides, within the resources available to it. VFM demands for
effective use of government assets; which includes financial sustainability and the
economic, efficient and effective management of resources, (Davies, 2007).
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Primary education is one of the key sectors identified under the governments
Poverty Eradication Action Plan (PEAP) to benefit from the Poverty Action Fund
(PAF). PAF has guaranteed the success of the Primary Education Reform
Program (PERP) by providing resources (funds) to support Schools Facilities
Grant (SFG), (Mukunya, 1987). Under SFG, the Government of Uganda (GoU)
has funded the construction of classroom blocks, school toilets, teachers houses
and the provision of furniture in atleast every Universal Primary Education (UPE)
aided school in the LGs. But there several complaints that apart from these
buildings being of poor quality, some are incomplete and poorly built, yet the
furniture is of poor quality hence generally not meeting the desired quality
(Auditor General Annual Reports (AGAR), 2007).
According to the Technical VFM audit report on Kamuli District LG (2004), 49%
had good VFM, 38% had fair VFM and 13% achieved no VFM in all the projects
sampled. There are cases of incomplete/abandoned buildings, some payments lack
accountabilities, absence of monitoring and activity reports and some funds are
not signed for by the intended recipients; (quarterly Internal Audit Reports (IAR),
2007). Similarly the AGAR, (2007), highlights a case where UGX 3,758,999 was
drawn from an SFG Account without proper authorization and it remained un
accounted for and this left one to suspect that this was fraudulently spent.
1.2. Statement of the Problem
In spite of the Government of Uganda investing large sums of money under the
School Facilitation Grants (SFG), the output in terms of quality of classroom
blocks do not in most cases match with such development expenditures and are
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not up to the desired levels. The Auditor Generals reports highlight cases of weak
and / or ineffective Internal Control Systems in Kamuli District LG; where
expenditures lack receipts, supporting documents, activity reports and some funds
are not signed for by the intended recipients. There are cases of incomplete and
shoddily built classroom blocks and the furniture is of poor quality rendering
these SFG projects not to be used to the maximum benefit of the intended users.
This makes one doubt whether the various Internal Controls set up in LGs are
effective to achieve Value for Money in most of the SFG projects undertaken.
1.3. Purpose of the Study
The purpose of this study was to examine the effectiveness of Internal Control
Systems in achieving Value for Money in SFG projects in Local Governments.
1.4. Objectives
i. To examine Internal Control Systems in Kamuli District LocalGovernment.
ii. To examine Value for Money in Kamuli District Local Government.iii. To examine the relationship between Control Environment and Value for
Money in Kamuli District Local Government.
iv. To examine the relationship between Control Activities and Value forMoney in Kamuli District Local Government.
v. To examine the impact between Risk Assessment to Value for Money inKamuli District Local Government.
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vi. To examine the impact of Information and Communication to Value forMoney in Kamuli District Local Government.
vii. To examine the impact of Monitoring to Value for Money in KamuliDistrict Local Government.
1.5. Research Questions
i. What are the Internal Control Systems in Kamuli?ii. What is Value for Money in Kamuli?
iii. What is the relationship between Control Environment and Value forMoney in Kamuli District Local Government?
iv. What is the relationship between Control Activities and Value for Moneyin Kamuli District Local Government?
v. What is the impact between Risk Assessment to Value for Money inKamuli District Local Government?
vi. What is the impact of Information and Communication to Value forMoney in Kamuli District Local Government?
vii. What is the impact of Monitoring to Value for Money in Kamuli DistrictLocal Government?
1.6. Scope of the Study
Subject Scope
The study focused on the Effectiveness of Internal Control Systems in achieving
Value for Money of SFG projects in the Education sub-sector in Kamuli District
LG. Internal Control Systems consist of Control Environment, Control Activities,
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Risk Assessment, Information and Communication and Monitoring while Value
for Money constructs are Economy, Efficiency and Effectiveness.
Geographical Scope
The study was based on the Ugandas LG and took Kamuli District LG.
1.7. Significance of the study
The study will help the policy makers realize the need to have and implement
effective ICS in the implementation of development grants which in turn will help
achieve VFM to the intended users of these development programmes.
The study will generate knowledge to link Internal Control Systems and Value for
Money which will guide Policy makers in the planning for the public resources.
The study will be helpful to all academicians in finance and accounting,
management, legal and other fields in the furtherance of their studies in form of
future research and in the operations at their work places.
The study will help the researcher to acquire knowledge and understand the
techniques of doing research.
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1.8. Conceptual framework
The model explains the relationship amongst the variables under study; it explains
Internal Control Systems as the Independent variable while Value for Money as
the dependent variable. Government policies now promote effective control
particularly in the management of resources while stressing the values of
economy, efficiency and effectiveness (Value for Money) (Sanderson, 2001).
Effective; Control Environment, Control Activities, Risk Assessment, Information
and Communication, and Monitoring are a necessary to achieve the LG objectives
and should achieve Value for Money (INTOSAI 2004).
Internal Control Systems were studied under the constructs of Control
Environment, Control Activities, risk assessment, information and communication
and monitoring while Value for Money constructs were Economy, Efficiency and
Effectiveness. The model shows that effective Internal Control Systems influence
the achievement of Value for Money.
Figure 1: Conceptual Frame Work
Source:Developed from INTOSAI (2004)
Internal Control Systems
Value for Money
-
Economy- Efficiency- Effectiveness
Control Environment
Control Activities
Risk Assessment
Information and
Communication
Monitoring
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CHAPTER TWO
LITERATURE REVIEW
2.1. Introduction
This chapter focused on the effectiveness of Internal Control Systems (ICS) in
achieving Value for Money (VFM) and their constructs in view of what other
scholars have studied.
2.2. Internal Control Systems (ICS)
Internal control is a process, effected by an entity's board of directors (Council),
management and other personnel, designed to provide reasonable assurance
regarding the achievement of LG objectives in the effectiveness and efficiency of
operations, reliability of financial and management reporting, compliance with
applicable laws and regulations and protect the organisations reputation (Kaplan,
2008; Cunningham, 2004; INTOSAI, 2004; Committee of Sponsoring
Organizations (COSO), 1992; Auditing Practices Board (APB), 1999).
According to Cunningham (2004), Internal Control Systems begin as internal
processes with the positive goal of helping a corporation meet its set objectives.
Management primarily provides oversight activity; it sets the entity's objectives
and has overall responsibility over the ICS. Internal controls are an integral part of
any organizations financial and business policies and procedures (Kaplan, 2008;
Cunningham, 2004; INTOSAI, 2004). Internal controls consist of all the measures
taken by the organization for the purpose of; protecting its resources against
waste, fraud and inefficiency; ensuring accuracy and reliability of accounting and
operating data; ensuring compliance with the policies of the organization;
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evaluating the level of performance in all organizational units of the organization,
(Kaplan, 2008; Cunningham, 2004; INTOSAI, 2004).
ICS are applicable to each organisation in relation to key risks and are embedded
within the operations and not treated as a separate exercise. ICS should be able to
respond to changing risks within and outside the company and they are a means to
an end, not an end itself, (Cunningham, 2004). He further states that Internal
controls are effected by people not merely policy manuals and forms, butpeople
functioning at every level of the institution. Internal control only provides
reasonable assurance to an institutions leaders regarding achievement of
operational, financial reporting and compliance objectives; promoting orderly,
economical, efficient and effective operations; safeguarding resources against loss
due to waste, abuse, mismanagement, errors and fraud, (Kaplan, 2008;
Cunningham, 2004; INTOSAI, 2004). Internal controls lead to the promotion of
adherence to laws, regulations, contracts and management directives and the
development and maintenance of reliable financial and management data, and
accurately present that data in timely reports, (Kaplan, 2008; Cunningham, 2004;
INTOSAI, 2004).
According to the Combined Code on Corporate Governance, (2005); Council
should identify and manage all risks with in the LG and should maintain a sound
system of ICs to safeguard stakeholders interests and the council assets.
According to Treba (2003), a system of internal control is a tool for ensuring that
an organization realizes its mission and objectives. He further notes that much as
internal controls are often thought to be the domain of accountants and auditors; it
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is actually management that has primary responsibility for proper controls. A
critical element of any comprehensive Internal Control Systems is regular
monitoring of the effectiveness of internal controls to determine whether they are
well designed and functioning properly, Treba (2003).
Lawson A., De Renzio P. and Umarji M. (2006) noted that weaknesses in internal
control systems (control over the payroll, over expenditure commitments and over
procurement processes) lead to failure to ensure that resources are allocated to
defined priorities and to guarantee that there is value for money will be attained in
public spending.
ICS in organisations consist of five interrelated components; control environment,
control activities, risk assessment, information and communication and
monitoring (INTOSAI 2004). However, the COSO Framework of Internal
Control recommends the ICS to comprise two substantive components; control
environment and control activities (Thuy 2007).
LGs should have well-designed ICS that can give reasonable assurance that
irregularities can be detected, (Schaeffer,2005). Internal control is not one event
or circumstance, but a series of actions that permeate an entity's activities and
these actions occur throughout an entitys operations on an ongoing basis
(INTOSAI, 2004). INTOSAI observes that an ICS is intertwined within an entity's
activities and is most effective when it is built into the entity's infrastructure and is
an integral part of the LG system. INTOSAI further holds that public servants
should serve the public interest with fairness and manage public resources
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properly in that citizens receive Value for Money. Weak, non-compliance, non-
existent or absent public financial management functions (Internal Control
Systems) are likely to negate any benefits that are inherent in bringing services
closer to the people (Value for Money), (Schaeffer & Yilmaz, 2008).
2.2.1. Control Environment
Control Environment (CE) is the philosophy, style and supportive attitude, as well
as the competence, ethical values, integrity and morale of the people of the
organization (DiNapoli, 2007). The CE is further affected by the organizations
structure and accountability relationships. Control Environment (CE) is the
attitude and actions of Council and Management regarding the significance of
control within the LG (DiNapoli, 2007).
Control Environment provides the discipline and structure for the achievement of
the primary objectives of the System of Internal Control. According to INTOSAI;
control environment is the foundation of the ICS and sets the tone of an
organisation, influencing the control consciousness of its staff. This is the overall
LG attitudes, values, and philosophy of senior political and management
executives and the culture throughout the LG relating to the timeliness, integrity,
and accuracy of financial reporting, (Thuy 2007).
It provides the discipline and structure as well as the climate which influences the
overall quality of the Internal Control Systems. Elements of the control
environment are; the personal and professional integrity and ethical values of
management and staff, appropriate culture in the organisation, attitude towards
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internal control throughout the organisation; commitment to competence; the
tone at the top (i.e. managements philosophy and operating style); a good
organisational structure (an independent Internal Audit function and segregation of
duties), set up proper authorisation limits; and human resource policies and
practices (Kaplan, 2008; Thuy, 2007; INTOSAI, 2004; and Laura, 2002).
2.2.2. Risk Assessment
Risk assessment is the process of identifying and analysing relevant risks to the
achievement of the entitys objectives and determining the appropriate response
(DiNapoli, 2007, INTOSAI, 2004). It involves risk identification; risk evaluation
(estimating the Impact of a risk; assessing the likelihood of the risk occurrence);
assessment of the risk appetite of the organisation; and development of responses.
Risk assessment should be performed and should identify; controllable risks (risks
on which Internal Control procedures can be established) and uncontrollable risks
(risks that are caused by the external environment that the entity operated in).
According to the Cadbury Report (1992), risk management should be systematic
and also embedded in company procedures. And there should be a culture of risk
awareness in the organisation. As governmental, economic, industry, regulatory
and operating conditions are in constant change, risk assessment should be an
ongoing iterative process. Risk Assessment implies identifying and analysing
altered conditions and opportunities and risks (risk assessment cycle) and
modifying internal control to address changing risk. VFM analysis needs to pay
attention to total risks, which is sensitive to the choice of service delivery
mechanism (Heald, 2003).
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2.2.3. Control Activities:
Once the controllable risks have been identified, specific control activities can be
undertaken to reduce those risks (Kaplan, 2008). According to Thuy, (2007);
Sarbanes-Oxley Act (SOX, 2002); Control Activities are comprised of policies,
procedures, and systems relating to the reliability of financial reporting. They
include authorizations and approvals, verifications, reconciliations, reviews of
performance, security of assets, segregation of duties, and controls over
information systems (Laura, 2002). The elements of Control Activities include;
policies regarding reconciling bank statements with cheques issued, procedures
governing the counting and valuation of inventory, the procurement and disposal
systems, and codes of conduct to guide employee behavior (Kaplan, 2008; Thuy
2007, SOX, 2002). Control activities can be preventive and/or detective.
Corrective actions are a necessary complement to internal control activities in
order to achieve the organisations objectives hence realizing Value for Money.
2.2.4. Information and Communication
Information should be communicated to all stakeholders such as management,
council, line ministries, employees, e.t.c. who need it in the form and within a
time frame that helps them to carry out their responsibilities (DiNapoli, 2007;
INTOSAI, 2004). Information should be appropriate, timely, current, accurate and
accessible as such reliable and relevant therefore transactions should be promptly
recorded and proper classified (INTOSAI, 2004). The feedback from this
communication helps management and council to evaluate how well the systems
of internal control are working (DiNapoli, 2007). Information and
Communication (IC) are essential to realising the LG internal control objectives
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i.e. Value for Money. If all personnel understand their own role in the ICS and
they as well know how their individual activities relate to the work of others, a
clear message received from top management that control responsibilities, will be
taken seriously (DiNapoli, 2007).
2.2.5. Monitoring
Monitoring is the process that assesses the quality of the system's performance
over time, which includes ongoing monitoring activities, separate evaluations or a
combination of the two (INTOSAI, 2004; DiNapoli, 2007). Management should
focus monitoring efforts on internal controls and the achievement of the
organizations mission. For monitoring to be most effective, all employees need
to understand the organization's mission, objectives, risk tolerance levels and their
own responsibilities (DiNapoli, 2007). Monitoring is the review of an
organization's activities and transactions i.e. the ICS to assess the quality of
performance over time and to determine whether controls are effective (DiNapoli,
2007). Ongoing monitoring of internal control is built into the normal, recurring
operating activities of an entity it involves actions against irregular, unethical,
uneconomical, inefficient and ineffective Internal Control Systems (DiNapoli,
2007; INTOSAI, 2004). According to the LG Financial and Accounting
Regulations (2007); Council, DEC, standing committees and management are
supposed to monitor and review the performance of their respective sectors.
Monitoring involves separate evaluations which cover the evaluation of the
effectiveness of the ICS in achieving set objectives and any deficiencies should be
reported to the DEC for Councils action (INTOSAI, 2004).
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According to Kaplan (2008), failure to monitor risk correctly could lead to
financial collapse of an organisation. The Internal Audit function is often the key
monitor of the ICS, they examine the controls and control system, identify where
controls have failed so that these failures can be rectified and also make
recommendations to management for new and improved systems.
2.3. Value for Money
Value for Money (VFM) can be achieved by eradicating waste in benefits services
processes and systems. The critical success factor for a public sector
organisation is the degree to which it fulfills its set objectives and mission in
terms of being efficient, effective and economical. The Internal Control Systems
are key in achieving the organisational set mission and objectives; hence Value
for Money. The main approach to VFM is the LGs control over the use of
resources in order to achieve its set objectives, LGIAM, (2007). Regulation 106
of the LGFAR, (2007) requires the Head of Internal Audit to carry out regular
reviews to ascertain whether council receives VFM in all its activities. Heads of
Departments should establish sound arrangements for planning, appraising,
authorising and controlling operations in order to achieve Value for Money
LGFAR, (2007). Davies, (2007) holds that the public sector applies no
consistency in defining Value for Money (VFM), and the decision making
strategies of LGs are poorly defined and applied irregularly hence LGs are able to
exploit the definition of VFM to justify their actions.
However, many authors hold that Value for Money is a term used to assess
whether or not an organisation has obtained the maximum benefit from the goods
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and services it acquires and / or provides, within the resources available to it.
Value for Money is not paying more for a good or service than its quality or
availability justifies as well public spending implies a concern with economy
(cost minimisation), efficiency (output maximisation) and effectiveness (full
attainment of the intended results) (Glendinning, 1998; Davies, 2007; Deakin
1998 and LGIAM, 2007). The most effective way to improve Value for Money is
by reducing the level of irregularity and fraud through improvements in the
Government's systems of internal financial control (Kaplan, 2009; LGFAR,
2007). Communities need to be assured that their resources are being used
efficiently and effectively in providing the right service at the least cost. However,
Kerr (2005) observed that the will to provide Value for Money in Government
spending is weak because accountability to taxpayers and the public is generally
weak.
According to Heald (2003), VFM analysis needs to pay attention to total risks and
VFM is related to concepts of efficiency and effectiveness. Fryer, Jiju, & Ogden,
(2009) hold that despite a long period of implementing performance management
within the public sector, improvements in performance, accountability,
transparency, quality of service and Value for Money have not yet been achieved.
2.4. Conclusion
From the literature reviews done it has been found out that realisation of Value
for Money depends on whether LGs have Internal Controls. Non compliance to
the Internal Controls is one of the major hindrances to the attainment of VFM in
LGs as noted by most authors and academic researchers. Whereas a lot has been
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done on control environment and control activities there is little done about
internal audit in relation to VFM; what is greatly studied is Value for Money
audits. Weak, non-compliance, non-existent or absent public financial
management functions (Internal Control Systems) are likely to negate any
advantages that might be inherent in bringing public services closer to people
(Value for Money). Therefore there is need to establish the relationship between
the Internal Control Systems and Value for Money in LGs in Uganda. Therefore,
it can be concluded from the literature that Control Environment, Control
Activities, Risk Assessment, Information and Communication and Monitoring are
significant predictors of VFM.
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The study was carried out using purposive sampling as these respondents were
viewed as those involved directly in the management and use of SFG projects and
these were stratified depending on the responsibilities they carry out in the SFG
management (Sekaran, 2003; and Mugenda and Mugenda, 1999).
3.4. Sampling and Sample Size
Sekaran (2003), recommends that for research activities, educational and
psychological measurement, the sample size of respondents should be determined
using Krejcie and Morgan (1970) tables. According to the tables, the appropriate
sample size of a target population of 184 is 127 respondents.
Table 3.1: Population and Sample Composition
Category Population No. Expected Sample (No.)
Technical Planning Committee 42 29
Internal Audit Staff 04 04
Auditor General Staff 02 02
District Executive Council 05 03
Public Accounts Committee 05 03
School Management Committee 126 86
TOTAL 184 127
The study was carried out using simple random sampling where a list of all the
schools that had received an SFG project was generated. It was then the Head
Teachers and one member of the Schools Management Committee (who had a
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hands-on experience of running SFG projects) that was given a questionnaire to
fill in.
3.5. Data Sources
3.5.1. Primary DataBy use of self administered questionnaires, primary data was collected from a
selected sample of respondents in the TPC, Internal Auditors, Auditor Generals,
District Executive Committee members, District Public Accounts Committee
members and members of the Schools Management Committee. However,
because some of the targeted respondents (SMC members) were found to have
difficulty in filling the questionnaire, the researcher interviewed the respondents.
3.5.2. Secondary DataSecondary data was collected from journals, books, internet libraries, documents
and reports from Ministry of Education and Sports, World Bank/IMF, Audit
Reports, Ministry of Planning and Economic Development Uganda, and any other
published literature i.e. financial and management reports on top of
correspondences from the community. The researcher further used minutes,
circulars, records and reports about the SFG projects.
3.6. Data Collection Instruments
Questionnaires were used to collect data from the selected respondents using
structured questions. The questionnaire was developed on a five point Likert
scales measuring from Strongly Disagree as response 1 to Strongly Agree as
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response 5 (Sekaran, 2003). All questions were arranged in one direction and all
the constructs were operationally defined.
3.7. Measurement of Variables
The Internal Control Systems (as the independent variable) was measured by its
constructs of Control Environment, Control Activities, Risk Assessment,
Information and Communication, and Monitoring, (DiNapoli, 2007; INTOSAI,
2004).
Value for Money (as the dependent variable) was measured using Economy (was
measured by doing less with fewer resources), Efficiency (by doing the same as
before, but with fewer resources) and Effectiveness (by doing more than before
with the same resources as now or less), (Heald (2003), Fryer, Jiju, & Ogden,
(2009), Kerr (2005)).
These were measured using an instrument developed on a five point Likert scales
measuring from strongly disagree as response 1 to strongly agree as response 5.
3.8. Validity and Reliability of Instruments
To ensure accuracy, consistency and completeness, reliability of the instrument
was established using Cronbachs coefficient Alpha test and a coefficient of 0.6
and above was accepted as shown below;
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Table 3.2: Reliability Statistics
Variable Anchor Cronbach Alpha
Control Environment 5 point 0.6531
Control Activities 5 point 0.8239
Risk Assessment 5 point 0.7041
Information andCommunication
5 point0.8412
Monitoring 5 point 0.8924
Value for Money 5 point 0.7160
From table above all the reliability statistics measured well above the threshold
0.6 as recommended by Sekaran (2003).
3.9. Data Processing and Analysis
Data was collected, edited and was analyzed using Statistical Package for Social
Scientists (SPSS). Analysis output included; Descriptive statistics (means,
standard deviation, frequencies, percentages and factor analysis), and inferential
statistics (correlations, and regressions).
3.10. Limitations of the Study
The study was carried out in a short period of time i.e. not long enough to allow
an in depth study. Therefore data collected could be different from that which
could be got if a longer period was to be used.
The study was affected by non response from some of the respondents contacted
most especially the Head Teachers and School Management members who were
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either new in the Schools they headed (hence no hands on experience in SFG
project management) or they were completely new in service. Hence they could
not comprehensively give data on SFG.
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CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.1 Introduction
This Chapter presents and interprets the data collected and analysed in Chapter
Three. The presentation is guided by the objectives of the study.
4.2 Sample Characteristics
In the beginning of the chapter are the sample characteristics of the respondents
such as their age bracket, gender, level of education and duration in employment
of the respondents. Statistical tools such as, frequencies and percentages are
presented in Tables 4.1 4.4.
4.2.1 Gender of the respondents
Table 4.1: Gender of the Respondents
Frequency Percent
Male 76 80.0
Female 19 20.0
Total 95 100.0
Source: Primary Data
The results in Table 4.1 above reveal that the majority of the respondents were
male representing 80.0% and the females constituting 20.0%. This shows that the
views of the respondents were from both genders of civil service in LGs in
Uganda.
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4.2.2 Employment status of the respondents
Table 4.2: Employment status of the respondents
Category Frequency (F) Percent (%)
Political Leaders 5 5.3
Statutory/Commissioned/School
Mgt Staff
19 20.0
Permanent Technical Staff 55 57.8
Probationary Technical Staff 5 5.3
Pensioned Staff 11 11.6
Total 95 100.0
Source: Primary Data
According to Table 4.2 above; a majority of the respondents covered by the study
were Permanent Technical Staff forming a total of 57.8%, with the least being the
Political Leaders and Probationary Staff who each had a total of 5.3%. This shows
that the views of results of this study are representative of the Permanent
Technical Staff who are the direct implementers of SFG projects in LGs in
Uganda.
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4.2.3. Duration of Employment with organization
Table 4.3: Duration of Employment with organization
Frequency (F) Percentage (%)
Below 2 years 7 3.4
2-5 years 15 22.1
5-10 years 38 42.5
10-15 years 25 20.2
Above 15 years 10 11.8
Total 95 100
Source: Primary Data
According to Table 4.3 above; a majority of the respondents (42.5) covered by the
study had been in employment with the district between 5-10 years, followed by
those between 2-5 years constituting 22.1%, 10-15 years with 20.2% and the least
having been in employment for less than 2 years at 3.4%. This shows that the
views of results of this study are representative of the Staff who had experience in
running the affairs of projects in LGs in Uganda. Therefore they were in a good
position to assess the effectiveness of ICS to achieve Value for Money in SFG
projects in LGs.
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4.2.4 Age bracket of the respondents
Table 4.4: Age bracket of the respondents
Years Frequency Percent
0-20 years 0 0.0
21-40 years 38 40.0
41-60 years 57 60.0
Above 60 years 0 0.0
Total 95 100.0
Source: Primary Data
Results in Table 4.4 reveal that the majority of the respondents between 41 - 60
years of age with a percentage of 60.0% with those between 21 - 40 years being
40.0% years. There were no respondents below 20 years and above 60 years. The
results show that the respondents were in the good age bracket to make informed
decisions.
4.3. To examine Internal Control Systems in Local Governments
Descriptive statistics were used to examine Internal Control Systems in Local
Governments. The results were analyzed and interpreted basing on the anchor of
the instrument scale which was ordered such that a mean close to 5 represents
Strong agreement, 4- agreement, and 3-Undecided, 2disagreement and 1-Strong
disagreement. The findings are presented in Table 4.5 below;
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Table 4.5: Internal Control Systems in Local Governments
Internal Control Systems Min Max Mean Std.Deviation
The reporting structure is clearly stipulated. 1 5 4.03 .764
All staff in charge of the SFG programme perform theirresponsibilities as per the regulations and guidelines.
2 5 3.67 .893
School Management Committee members are trained in their rolesand responsibilities in SFG management.
1 5 2.83 1.098
Compliance to SFG guidelines can lead to reliable financialreporting.
1 5 4.17 .846
There is an enabling control environment at Kamuli District LocalGovernment.
1 5 3.74 .866
The control environment in KDLG is enough to attain the SFG set
objectives.
1 5 3.52 1.061
Accounting procedures of SFG are clearly segregated. 2 5 3.78 .671
SFG expenditures are duly approved in advance by appropriatelyauthorized persons.
1 5 3.96 .910
Authorization, processing, cheque signing and accounting functionsare clearly segregated under the SFG programme.
1 5 3.87 .948
All SFG invoices or requests for disbursements are backed byappropriate supporting documents.
2 5 4.08 .794
All SFG cheque payments are confirmed at the bank. 2 5 4.35 .809
There is an up-to-date SFG asset register at KDLG. 1 5 3.42 .974
SFG Asset movement is always recorded. 1 5 3.49 .836
Firms that poorly carry out SFG contracts are blacklisted. 1 5 3.07 1.013
SFG cash releases are published to the public. 1 5 3.27 1.056The SFG committee has designed an appropriate strategy of
identifying risks in SFG.
1 5 3.02 .911
The SFG Committee designed a system to offer appropriateresponse to risks.
1 5 3.16 .854
Involvement of the Internal Audit staff during SFG implementationreduces the occurrence of risk.
2 5 4.20 .738
Information received on SFG projects helps stakeholders to carry
out their responsibilities well.
2 5 4.28 .781
Monitoring is important if the SFG program is to achieve its setobjectives
2 5 4.55 .615
For monitoring to be effective, all stakeholders need to understandthe SFG guidelines.
4 5 4.58 .496
Monitoring of the SFG projects is built into the normal operating
activities.
2 5 3.78 .746
DEC handles deficiencies identified during SFG monitoring 1 5 3.75 1.000
Source: Primary Data
Results from Table 4.5 above revealed that for monitoring to be effective, all
stakeholders need to understand the SFG guidelines (Mean = 4.58), monitoring is
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important if the SFG program is to achieve its set objectives (Mean = 4.55), all
SFG cheque payments are confirmed at the bank (Mean = 4.35).
Respondents further agreed that involvement of the Internal Audit staff during
SFG implementation reduces the occurrence of risk (Mean = 4.20) and
compliance to SFG guidelines can lead to reliable financial reporting (Mean =
4.17). All SFG invoices or requests for disbursements are backed by appropriate
supporting documents (Mean = 4.08).
Results further revealed that SFG expenditures are duly approved in advance by
appropriately authorized persons (Mean = 3.96), authorization, processing, cheque
signing and accounting functions are clearly segregated under the SFG
programme (Mean = 3.87). Monitoring of the SFG projects is built into the
normal operating activities (Mean = 3.78), accounting procedures of SFG are
clearly segregated (Mean = 3.78) and DEC handles deficiencies identified during
SFG monitoring (Mean = 3.75). The respondents also agreed that there is an
enabling control environment at Kamuli District Local Government (Mean 3.74)
and all staff in charge of the SFG programme perform their responsibilities as per
the regulations and guidelines (Mean = 3.67).
However, respondents reported uncertainty as to whether the School Management
Committee members are trained in their roles and responsibilities in SFG
management (Mean = 2.83). Uncertainty was further observed as to whether the
SFG committees have designed an appropriate strategy of identifying risks in
SFG (Mean = 3.02) and the SFG Committee designed a system to offer
appropriate response to risks (Mean = 3.16).
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Uncertainty was further observed as to whether Firms that poorly carry out SFG
contracts are blacklisted (Mean = 3.07), there is an up-to-date SFG asset register
at KDLG (Mean = 3.42) and SFG Asset movement is always recorded (Mean =
3.49). Respondents further doubted whether SFG cash releases are published to
the public (Mean = 3.27).
4.3.1 Rotated Component Factor Analysisfor Internal Control Systems
Factor analysis was used to extract factors that measure Internal Control Systems
using the principal Component Analysis and Varimax Rotation Methods as shown
in Table 4.7 below;
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Table 4.6: Rotated Component Matrixafor Internal Control Systems
Rotated Component Matrixa
Component
1 2 3 4 5
All SFG invoices or requests for disbursements are backed by appropriate supportingdocuments.
.650
All SFG cheque payments are confirmed at the bank. .636
The Accounting Officer notifies the bank with changes in signatories to the SFG account. .631
Authorization, processing, cheque signing and accounting functions are clearly segregated
under the SFG programme..544
SFG expenditures are duly approved in advance by appropriately authorized persons. .518
The signatory to the SFG account reviews and initials the supporting documents forpayments.
.506
SFG Asset movement is always recorded. .687There is an up-to-date SFG asset register at KDLG. .679
The SFG Committee designed a system to offer appropriate response to risks. .666
SFG cash releases are published to the public. .636
The SFG committee has designed an appropriate strategy of identifying risks in SFG. .628
The Accounting Officer publicises the funds received under SFG .603
Firms that poorly carry out SFG contracts are blacklisted. .522
The reporting system on SFG projects spells out the responsibilities of each personnel in
that project..656
Information received on SFG projects helps stakeholders to carry out their responsibilities
well..580
Compliance to SFG guidelines can lead to reliable financial reporting. .579
The reporting structure is clearly stipulated. .577
There is a positive attitude by Council towards implementing the SFG guidelines. .518
Involvement of the Internal Audit staff during SFG implementation reduces the occurrenceof risk.
.722
Monitoring helps to assess the quality of performance of SFG over time. .624
SFG policies and procedures can lead to producing reliable financial reports. .597
Monitoring is important if the SFG program is to achieve its set objectives .544
SFG cash receipts are directly transferred to the SFG account intact. .681
School Management Committee members are trained in their roles and responsibilities inSFG management.
.617
Eigen Values 5.591 5.031 4.711 4.603 3.401
% of Variance 9.318 8.396 7.852 7.671 5.669
Cumulative % 9.318 17.714 25.566 33.237 38.906
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.a. Rotation converged in 13 iterations.
Source: Primary Data
Key1- Control Activities 2- Risk Assessment
3- Control Environment 4- Information & Communication
5- Monitoring
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From the table above results revealed that factor analysis yielded five components
which were interpreted as Control Activities (9.318%), Risk Assessment
(8.396%), Control Environment (7.852%), Information and Communication
(7.671%) and Monitoring (5.669%), and explaining 38.906% of the variance in
Internal Control Systems.
4.4 To examine Value for Money in Local Governments
Descriptive statistics were used to examine Value for Money in Local
Governments. The results were analyzed and interpreted basing on the anchor of
the instrument scale which was ordered such that a mean close to 5 represents
Strong agreement, 4- agreement, and 3-Undecided, 2disagreement and 1-Strong
disagreement. The findings are presented in Table 4.6 below;
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Table 4.7: Value for Money in Local Governments
Value for Money in Local Governments Min Max Mean Std.
Deviation
The success of the SFG programme is the
degree to which it attains its set objectives.
2 5 4.23 .721
The responsibility of SFG investment lies with
the TPC and Council.
1 5 3.69 .923
The attainment of VFM is based on the use of
SFG resources in order to achieve its set
objectives
2 5 4.02 .729
Internal Audit staff carry out regular reviews to
ascertain whether council receives VFM in all
its SFG activities
2 5 3.89 .722
TPC plan and appraise SFG projects in order to
achieve VFM
2 5 3.81 .657
Council authorise SFG work plans in order toachieve VFM
2 5 4.06 .580
DEC carries out Monitoring and Evaluation andcontrol operations in order to achieve VFM.
2 5 4.09 .701
VFM is improved by reducing the level of
irregularity and fraud under the SFG
programme.
1 5 3.95 .642
The quality of SFG projects assures the
community that SFG funds are well utilised.
1 5 3.98 .911
Communities get assured of VFM if costsincurred under SFG projects are reasonable. 1 5 3.72 .821
The quality of class room blocks and furnitureis good.
1 5 3.31 1.030
Source: Primary Data
Results in Table 4.6 above revealed that the success of the SFG programme is the
degree to which it attains its set objectives (Mean = 4.23), DEC carries out
Monitoring and Evaluation and control operations in order to achieve VFM
(Mean = 4.09). Respondents also agreed that Council authorise SFG work plans
in order to achieve VFM (Mean = 4.06), the attainment of VFM is based on the
use of SFG resources in order to achieve its set objectives (Mean = 4.02), the
quality of SFG projects assures the community that SFG funds are well utilised
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(Mean = 3.98) and VFM is improved by reducing the level of irregularity and
fraud under the SFG programme (Mean = 3. 95).
It was further observed that Internal Audit staff carry out regular reviews to
ascertain whether council receives VFM in all its SFG activities (Mean = 3.89),
TPC plan and appraise SFG projects in order to achieve VFM (Mean = 3.81), and
the responsibility of SFG investment lies with the TPC and Council (3.69). VFM
is improved by reducing the level of irregularity and fraud under the SFG
programme (Mean = 3.59) and Communities get assured of VFM if costs incurred
under SFG projects are reasonable (3.72).
However, respondents reported uncertainty as to whether the quality of class room
blocks and furniture is good (Mean = 3.31).
4.4.1 Rotated Component Factor Analysis
for Value for Money
Factor analysis was used to extract factors that measure Value for Money in Local
Governments using Principal Component Analysis and Varimax Rotation Method
as shown in Table 4.8 below;
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Table 4.8: Rotated Component Matrixafor Value for Money
Rotated Component Matrixa
for Value for Money
Component
/Dimensions
1 2 3TPC plan and appraise SFG projects in order to achieve VFM .766
The quality of class room blocks and furniture is good. .722
The quality of SFG projects assures the community that SFG fundsare well utilised.
.713
Council authorise SFG work plans in order to achieve VFM .592
Communities get assured of VFM if costs incurred under SFG
projects are reasonable..736
VFM is improved by reducing the level of irregularity and fraud
under the SFG programme.
.708
The responsibility of SFG investment lies with the TPC andCouncil.
.686
The success of the SFG programme is the degree to which it attains
its set objectives.
.764
The attainment of VFM is based on the use of SFG resources in
order to achieve its set objectives
.687
DEC carries out Monitoring and Evaluation and control operations
in order to achieve VFM..501
Eigen Values 2.395 1.998 1.650
% of Variance 21.769 18.166 14.997
Cumulative % 21.769 39.935 54.532
Source: Primary Data
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 6 iterations.
Key1- Economy
2- Efficiency
3- Effectiveness
From the table above results revealed that factor analysis yielded three
components which were interpreted as Economy (21.769%), Efficiency
(18.166%) and Effectiveness (14.997%) explaining 54.5% of the variance in
Value for Money.
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4.5. Correlation Analysis
The zero order correlations were used to establish the relationship between the
Independent and Dependent variables. The Pearson correlation test was employed
to execute this as shown in Table 4.9 below;
Table 4.9: Zero-order Correlation Analysis
1 2 3 4 5 6 7
Control Environment (1) 1.000
Control Activities (2) .531**
1.000
Risk Assessment (3) .330**
.377**
1.000
Information & Communication (4) .416**
.384**
.283**
1.000
Monitoring (5) .395**
.470**
.426**
.429**
1.000
Value for Money (6) .482** .339** .447** .317** .482** 1.000
Internal Control Systems (7) .512** .393** .300** .423** .460** .489** 1.000
**.Correlation is significant at the 0.01 level (2-tailed).
Source: Primary Data
4.5.1 Internal Control Systems and Value for Money in Local Government
The findings revealed a significant positive relationship between Internal Control
Systems and Value for Money (r = 0.489, P< 0.01). This means that when Internal
Control Systems improve, it may result into improvement in Value for Money in
Local Governments.
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The study further revealed that good Internal Control Systems only contribute
48.9% to Value for Money leaving 51.1% to other factors not included in this
study and need further studies to reveal them and their contributions.
4.5.2 Relationship between the Control Environment and Value for Money
in Local Governments
From Table 4.9, it is revealed that there is a statistically significant positive
relationship between the Control Environment and Value for Money in Local
Governments, (r = 0.482, P
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The study further revealed that Control Activities only contribute 33.9% to Value
for Money leaving 66.1% to other factors not included in this study and need
further studies to reveal them and their contributions.
4.5.4 Risk Assessment helps attain Value for Money in Local Governments
There is a statistically significant positive relationship between the Risk
Assessment andValue for Money in Local Governments (r = 0.447, P
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The study further revealed that good Information and Communication Systems
only contribute 31.7% to Value for Money leaving 68.3% to other factors not
included in this study and need further studies to reveal them and their
contributions.
4.5.6 The impact of Monitoring on the attainment of Value for Money in
Local Governments
Findings further reveals that there is statistically significant relationship between
Monitoring and Value for Money in Local Governments(r = 0.482, P
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Table 4.10: Multiple Regression Analysis
Coefficientsa
Model
Unstandardized
Coefficients
Standardized
Coefficients
t Sig.B Std. Error Beta
1 (Constant) .488 .443 1.100 .274
Internal Control Systems .254 .115 .226 2.197 .031
Control Environment .232 .102 .243 2.274 .025
Control Activities -.076 .125 -.064 -.608 .545
Risk Assessment .200 .080 .234 2.504 .014
Information & Communication -.012 .080 .015 -.151 .880
Monitoring .210 .100 .218 2.094 .039
R = .641a
R Square = .411
Adjusted R Square = .371
Std. Error of the Estimate = .31108
Sig = 0.000a
F = 10.233
a. Dependent Variable: Value for MoneySource: Primary Data
The regression analysis revealed the extent to which Internal Control Systems
predict Value for Money. Results from Table 4.10, show that the combination of
Control Environment, Control Activities, Risk Assessment, Information and
Communication, and Monitoring significantly predicated up to 37.1% of Value
for Money.
However, only Control Environment, Risk Assessment and Monitoring are a
significant predicator of Value for Money. It implies that a change in Control
Environment leads to (Beta = 0.243), Risk Assessment leads to (Beta = 0.234)
and Monitoring leads to (Beta = 0.218) positive change in Value for Money. The
overall model was significant at Sig = 0.000.
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The study further reveals that there a significant positive relationship between the
Control Environment, Risk Assessment and Monitoring and Value for Money in
Local Governments.
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CHAPTER FIVE
SUMMARY OF FINDINGS, DISCUSSION, CONCLUSION AND
RECOMMENDATIONS
5.1 Introduction
This study was designed and carried out to establish the effectiveness of Internal
Control Systems (ICS) in achieving Value for Money (VFM) in School Facilities
Grant (SFG). Attaining VFM was assumed to depend on the effectiveness of the
ICS. This chapter gives the discussions, conclusions and recommendation of the
research findings presented and interpreted in chapter four. Also suggested areas
for further research are also presented. All of which are presented in accordance
to the research objectives.
5.2
Discussion of Findings
5.2.1 Internal Control Systems in Kamuli District Local GovernmentResults revealed that the reporting structure is clearly stipulated in Kamuli
District Local Government. Results further revealed that Control Environment,
Control Activities, Risk Assessment, Information and Communication, and
Monitoring are the constructs of ICS. This is in line with the findings of
INTOSAI, 2004. It was further revealed that there are cheque confirmations,
supporting documents (such as invoices or requests for disbursements) to back up
payment requests, all payments are by bank, expenditures are duly approved in
advance; authorization, processing, cheque signing and accounting functions are
clearly segregated, all staff in charge of the SFG programme perform their
responsibilities as per the regulations and guidelines.
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The respondents also agreed that there is an enabling control environment at
Kamuli District Local Government and it is enough to attain the SFG set
objectives.
Information received and effective monitoring helps all stakeholders to
understand the SFG guidelines and carry out their responsibilities well.
Monitoring of the SFG projects is built into the normal operating activities and it
is important if the SFG program is to achieve its set objectives, (Kaplan, 2008;
Cunningham, 2004; INTOSAI, 2004). The District Executive Committee handles
deficiencies identified during SFG monitoring.
Respondents further agreed that involvement of the Internal Audit staff during
SFG implementation reduces the occurrence of risk; and compliance to SFG
guidelines can lead to reliable financial reporting and all SFG.
However, respondents reported uncertainty as to whether the School Management
Committee members are trained in their roles and responsibilities in SFG
management. Results further doubted whether the Works (SFG) Committee has
designed an appropriate strategy of identifying risks in SFG with appropriate
response to risks. SFG cash releases are not published to the public as per the
LGFAR (2003) requirements.
Uncertainty was further observed as to whether Firms that poorly carry out SFG
contracts are blacklisted, of the existence of an up-to-date SFG asset register at
KDLG and whether SFG Asset movement is always recorded.
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However, audit functions are primarily aimed at re - enforcing existing systems of
Internal Control and at re - enforcing the incentives to achieve Value for Money
Lawson A., De Renzio P., Umarji M. (2006) and Treba (2006).
5.2.2 Value for Money in Kamuli District Local GovernmentThe study revealed that the success of the SFG programme is the degree to which
it attains its set objectives by utilization of resources economically, efficiently and
effectively. It is further revealed that Value for Money is improved by reducing
the level of irregularity and fraud under the SFG programme. The quality of SFG
projects assures the community that SFG funds are well utilised.
The District Executive Committee carries out Monitoring and Evaluation and
control operations in order to achieve VFM. It was further reveled that TPC plan
and appraise SFG projects and Council authorises SFG work plans in order to
achieve VFM. It was further observed that Internal Audit staff carry out regular
reviews to ascertain whether council receives VFM in all its SFG activities. These
findings are in line with the findings of Glendinning, (1998); Davies, (2007) and
Deakin, (1998).
5.2.3 Relationship between Control Environment and Value for MoneyFindings revealed that there is an enabling control environment at Kamuli District
Local Government and that the control environment in KDLG is enough to attain
the SFG set objectives. This is in line with the findings of Thuy, 2007; Laura,
2002; Kaplan, 2008; and INTOSAI, 2004.
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5.2.4 Relationship between Control Activities and Value for MoneyJust in line with the findings of Kaplan, (2008); Thuy, (2007), Sarbanes-Oxley
Act (SOX, 2002) and Laura, (2002), the findings of the study revealed that SFG
expenditures are duly approved in advance by appropriately authorized persons.
Cheque authorization, processing, and signing and the accounting functions are
clearly segregated under the SFG programme. All staff in charge of the SFG
programme perform their responsibilities as per the regulations and guidelines.
It was further observed that Internal Audit staff carry out regular reviews to
ascertain whether council receives VFM in all its SFG activities, in line with the
findings of Thuy, (2007); INTOSAI, (2004); and Laura, (2002). TPC plan and
appraises SFG projects in order to achieve VFM, and the responsibility of SFG
investment lies with the TPC and Council. VFM is improved by reducing the level
of irregularity and fraud under the SFG programme. And Communities get
assured of VFM if costs incurred under SFG projects are reasonable. However,
respondents reported uncertainty as to whether the quality of class room blocks
and furniture is good.
5.2.5 Relationship between Risk Assessment and Value for MoneyFrom the results it is found out that there is a statistically significant positive
relationship between Risk Assessment and Value for Money in Local
Governments. This is in line with; Heald, (2003), the Cadbury Report (1992),
DiNapoli, (2007) and INTOSAI, (2004).
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5.2.6 Relationship between Information and Communication and Value forMoney
Findings further reveals that there is statistically significant relationship between
Information and Communication and Value for Money in local Governments.
This is in line with the findings of DiNapoli, (2007) and INTOSAI, (2004).
Information and Communication were revealed to have more significant
predicator on Value for Money.
5.2.7 Relationship between Monitoring and Value for MoneyFindings further reveals that there is statistically significant relationship between
Monitoring and Value for Money in local Governments. This is in line with the
findings of DiNapoli, (2007) and INTOSAI, (2004).
The results further reveal that Monitoring of the SFG projects is built into the
normal operating activities and DEC handles deficiencies identified during SFG
monitoring just like the findings of DiNapoli, (2007) and INTOSAI, (2004).
5.5 Conclusion
Generally, this research examined the effectiveness of Internal Control Systems in
achieving Value for Money in SFG projects in Local Governments. The findings
revealed that Internal Control Systems have a significant positive effect in
achieving Value for Money. This means that when Internal Control Systems
improve, there will be attainment of Value for Money in Local Governments.
The study further reveals that there a significant positive relationship between the
Control Environment, Control Activities, Risk Assessment, Information and
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Communication, and Monitoring and Value for Money in Local Governments.
Though Control Environment, Risk Assessment and Monitoring were revealed to
have more significant predicator on Value for Money. This implies that the more
sound the Internal Control Systems and the more the Internal Control Systems are
adhered too, the higher the chances that Local Governments will achieve Value
for Money.
The reporting structure is clearly stipulated in Kamuli District Local Government.
Information received and effective monitoring helps all stakeholders to
understand the SFG guidelines and carry out their responsibilities well.
Respondents further agreed that involvement of the Internal Audit staff during
SFG implementation reduces the occurrence of risk; and compliance to SFG
guidelines can lead to reliable financial reporting and all SFG.
The study revealed that the success of the SFG programme is the degree to which
it attains its set objectives. The attainment of VFM is based on the use of SFG
resources in order to achieve its set objectives, the quality of SFG projects assures
the community that SFG funds are well utilised and VFM is improved by
reducing the level of irregularity and fraud.
There is an enabling control environment at Kamuli District Local Government
and the control environment in KDLG is enough to attain the SFG set objectives.
The study revealed that SFG expenditures are duly approved in advance by
appropriately authorized persons. Control Activities such as cheque authorization,
processing, and signing and the accounting functions are clearly segregated in
Kamuli District Local Government and all staff in charge of the SFG programme
perform their responsibilities as per the regulations and guidelines. It was further
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observed that Internal Audit staff carry out regular reviews to ascertain whether
council receives VFM in all its SFG activities. The study found out that Value for
Money is improved by reducing the level of irregularity and fraud under the SFG
programme. It was further found out that communities get assured of Value for
Money if costs incurred on projects are reasonable. The study revealed that there
is a statistically significant positive relationship between Risk Assessment and
Value for Money in Local Governments. Just in line with DiNapoli, (2007) and
INTOSAI, (2004), there is statistically significant relationship between
Information and Communication and Value for Money in local Governments.
There is a statistically significant relationship between Monitoring and Value for
Money in local Governments and monitoring should be built into the normal
operating activities of the Local Government.
5.6. Recommendations
Having known the significance of Internal Control Systems, Local Governments
need to ensure that they continuously review these Internal Control Systems and
ensure that they are operational.
5.7. Areas for further research
The results from the study point out a number of opportunities for further research
into tax competencies, compliance costs and tax compliance. Future research
should attempt to collect data from other Local Governments in Uganda to find
out whether the effectiveness of Internal Control Systems in achieving Value for
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Money in SFG projects in Local Governments takes the same trend as that in
Kamuli.
This research concentrated on projects in LGs, yet further research could be
carried out among the projects in the Central Government Ministries to establish
the effectiveness of Internal Control Systems in achieving Value for Money.
In addition, further study should concentrate on the examination of other factors
that contribute to attainment of Value for Money not included in this study other
than Internal Controls.
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References:
Asiimwe, D., & Nakanyike, B. M. (2007). Decentralisation and transformation of
Governance in Uganda
Cunningham, L. A. (2004). The Appeal and Limits of Internal Controls to Fight Fraud,
Terrorism, Other Ills.
Davies, J. (2007). Alliances, Public Sector Governance and Value for Money.
Deakin, M. (1998). The financial instruments of capital accounting in local authorities
Department for Communities and Local Government, (2007). Delivering Value for
Money in Local Government: Meeting the challenge of CSR07.
DiNapoli, T. P. (2007). Standards for Internal Control; In
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