Internal Control Systems, Intensity of Innovation, and Financial Performance of Local Governments in Selected Districts of Ankole Sub Region Western Uganda.
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Date
2025-06-02
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Makerere University Business School
Abstract
This study investigates the relationship between internal control systems, innovation intensity, and the financial performance of local governments in the Ankole sub-region of Western Uganda. Local governments are crucial to national development, with effective financial management being key to delivering public services and infrastructure. The research explores how strong internal controls and a culture of innovation can improve financial performance, drawing on examples from successful local governments in Rwanda and Kenya. It identifies challenges in the Ankole sub-region, such as inconsistent internal control implementation and varying levels of innovation, which contribute to financial performance disparities. Employing a cross-sectional research design, the study surveyed 34 higher local governments, focusing on key personnel involved in financial management. Data collection was conducted through structured questionnaires, and the analysis included both descriptive and inferential statistical techniques, such as correlation and regression analysis. Key findings reveal a positive correlation between strong internal control systems and enhanced financial performance, emphasizing the importance of mechanisms such as financial reporting, segregation of duties, and regular audits in preventing fraud and ensuring compliance. Additionally, a higher intensity of innovation correlates with improved financial outcomes, suggesting that local governments that prioritize innovation through stakeholder engagement and inculcating a culture of continuous improvement experience better financial performance. The combined effect of Internal Control Systems and Innovation Intensity was found to significantly impact Financial Performance, accounting for 47.5% of the variation in financial outcomes. Recommendations include adopting advanced financial management technologies, enhancing staff training, and developing policies to mandate robust internal controls and innovation practices. The study's limitations include reliance on proxy measures, potential response bias, and the cross-sectional nature of the research. Future research should explore these dynamics longitudinally and examine sector-specific impacts within local governments.
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This is a master's thesis.
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Citation
Ayebazibwe, J. (2025). Internal Control Systems, Intensity of Innovation, and Financial Performance of Local Governments in Selected Districts of Ankole Sub Region Western Uganda. (unpublished master's dissertation). Makerere University Business School, Kampala, Uganda.