| dc.description.abstract | The impact of maintaining functioning internal control systems in organizations has been insistently and vastly
underscored due to its positive effects on financial performance. Several state firms in Kenya are characterized by monopolistic production, highly indigenized management, and appointments of a large number of top managers based on political considerations. Capacities exist for income generation through innovation and inventions in most public sector institutions in African countries. Internal controls provide practical but not total guarantee to an entity’s management and board of directors that the organization’s objectives will be realized.The probability of attainment is affected by limitations integral in all systems of internal control. However, realization of full potentials of these institutions may not be possible due to several failures in their internal control systems. A number of studies have been conducted to determine the impact of internal control systems on performance of the public sector in Kenya. The main goal of this study was to fill the conceptual, contextual and methodological gaps by examining the effect of internal control systems on financial performance of state corporations in Kenya. The specific objectives were to determine the effect of control environment, risk assessment, task control and monitoring and evaluation activities on the financial performance of state corporations in Kenya. Descriptive research design was adopted for this study. The target population consisted of 187 state corporations in Kenya. Using simple random sampling, 30% of the 187 state corporations, which had head offices in Nairobi were selected. Self-administered questionnaires were used to collect primary data. Statistics such as frequencies, percentages, mean scores and standard deviations were adopted. Findings are presented using tables and charts. To quantify the effect of each variable, the researcher used regression analysis. Testing the significance of the coefficients at 95% confidence level, the analysis indicate that all the variables had a significance value less than 0.05 (p<0.05) thus confirming the significance of the results. In addition, from the analysis, all the variables indicated a positive coefficient indicating a positive relationship between the dependent and independent variables. The study revealed that internal controls significantly affected financial performance of most of state corporations in Kenya. Internal control systems impacted on various aspects of performance such as development index, efficient operations, financial leverage, responding to risks, facilitates ethical values, organizational activities and objectives. The study concluded that there is a significant effect of control environment, risk assessment, task control and monitoring and evaluation on the financial performance of the state corporations in Kenya. The study recommended that state corporations should ensure that they have effective control environment and ensure that they establish relevant policies to ensure that their internal control environment is effective to enhance financial performance. The management of the state corporations should put in place relevant measures to determine the level of risk carefully. The management of state corporations and other public institutions should develop task control mechanisms to attract relevant feedback from the various stakeholders into their internal control system. The state corporations should develop a monitoring and evaluation system that determines compliance with internal controls and reports instances of noncompliance to the relevant authorities. | en_US |
