Internal Audit and financial performance in educational institutions of higher learning

CHAPTER FOURDATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS

4.0 IntroductionThis chapter focuses on the presentation and analysis ofdata according to the research questions and variables.The presentation follows the findings for each of thestudy objectives. The objectives under the study include how the InternalAudit has ensured integrity and reliability of financialand operational data in UCU Mbale Campus, how the internalaudit function has ensured conformity with financial andoperational policies in UCU Mbale Campus and examining therelationship between internal audit and financialperformance in UCU Mbale Campus.The study used both descriptive and regression analysisapproaches.

To test the hypothesis relating to this objective, anumber of approaches to data analysis were used. Theseincluded descriptive Statistics, Pearson Product Moment ofCorrelation, Regression Analysis and Analysis of Variances(ANOVA).

4.1 Descriptive Characteristics of RespondentsUnder this variable, the study was intended at finding outthe gender of respondents, education level of therespondents, respondents’ position held, age and durationof service and the findings were as follows;

4.1.1 Age of Respondents Table 4.1: The Gender of Respondents

Frequency PercentValidPercent

CumulativePercent

Valid Male 63 67.0 67.0 67.0Female 31 33.0 33.0 100.0Total 94 100.0 100.0

Source: Primary dataThe study aimed at finding out the gender of therespondents since both male and female participated in the

study and the research findings indicated that 67% of therespondents were male while 33% were female.

4.1.2 Highest level of education The analysis of the education level of the respondentswas done at all levels and these are certificate /diploma levels, Bachelors level, Masters’ level and PhDlevel. This was presented in table 4.2.

Table 4.2: Highest level of education


CumulativePercent

Valid Certificate/Diploma

15 16.0 16.0 16.0

Bachelor 48 51.1 51.1 67.0Masters 28 29.8 29.8 96.8PhD 3 3.2 3.2 100.0Total 94 100.0 100.0

Source: Primary data Study findings indicated that majority of the respondents (51.1%) were bachelors holders, while PhD holders comprised the least group with 3.2% and closely followed by the certificate/diploma holders with 16%.

Since most of the respondents were well educated, it can bededuced that they provided constructive responses thatdetermined the success of the research study. This scenariocould be because of the study population who are universitylecturers and therefore most likely to poses atleast bachelorsand above.

4.1.3 Position held in the organisation

Table 4.3: Position held in the organisation

Frequency Percent

ValidPercent

Cumulative Percent

Valid

Management Committee member

6 6.4 6.4 6.4

Departmental head 10 10.6 10.6 17.0Former Departmental head

26 27.7 27.7 44.7

Associate Head of department

29 30.9 30.9 75.5

Finance and Accounts staff

23 24.5 24.5 100.0

Total 94 100.0 100.0Source: Primary dataThe findings of the study indicated that most of therespondents held administrative/group employee positions whilemanagement committee members held the least positions (6.4%)and closely followed by heads of department with 10.6%.

This situation could be because of the study population ismade up of administrative and support staff and are mostlikely to exhibit financial and administrativeresponsibilities.

4.1.4 Age bracket The analysis of age distribution of the respondents wascarried out around five age group categories. The purpose wasto make sure that all major age group of the respondents aresystemically reflected in the analysis. The age groupdistribution of the respondents is shown in table 4.4;

Table 4.4: Age bracket


CumulativePercent

Valid 18-25 3 3.2 3.2 3.226-35 53 56.4 56.4 59.636-45 30 31.9 31.9 91.546-55 3 3.2 3.2 94.756+ 5 5.3 5.3 100.0Total 94 100.0 100.0

Source: Primary dataThe study findings show that majority of the respondents (56.4%) were of age between 26-45 years old while the age range18-25 years and 46-55 years had 3.2% as the least and wasclosely followed by those of 56+ years with 5.3%.

This state could be as it is due to the newness of the existence of the institution as it seems to have barely existed for 10 years.

4.1.5 Duration of Service

Table 4.5: Period served in your organization/Institution

Frequency PercentValid

PercentCumulativePercent

Valid 1-3 years 41 43.6 43.6 43.64-6 years 44 46.8 46.8 90.47-9 years 5 5.3 5.3 95.710+ years 4 4.3 4.3 100.0Total 94 100.0 100.0

Source: Primary data The findings of the study indicated that the majority of the respondents (90.4%) had served between 1-6 years in the institution while those who had served the organization for 10years and above comprised the least group with 4.3% and was closely followed with the group of 7-9 years group of respondents with 5.3%.

This case could be because of the study population whose organization has just existed for 10 years now and as a result

of high labour turnover and high dependence on part time lecturers to supplement on the full time staff.

4.2 How the Internal Audit has ensured integrity andreliability of financial and operational data in UCU MbaleCampusThis was the first objective of the study where it was aboutinvestigating the financial integrity, reliability, conformityto financial guidelines and financial performance where thefindings of the study have been discussed as follows;

4.2.1 Institution's Accounting and Financial Management

Table 4.6: Whether UCU Accounting and Financial ManagementData are of True Facts


CumulativePercent

Valid Disagree 3 3.2 3.2 3.2Not Sure 17 18.1 18.1 21.3Agree 53 56.4 56.4 77.7Strongly Agree

21 22.3 22.3 100.0

Total 94 100.0 100.0Source: Primary data From the study findings, the majority of the respondents(56.4%) agreed that UCU accounting and financialmanagement data are of true facts; this was followed by22.3% who strongly agreed, while 18.1% were not sure and 3.2%disagreed.

Through interviews with some of the respondents, it wasrevealed that the management computer accounting system usedis Pastel Accounting Package although the system is always offand on. It was also revealed that the financial data waspartially managed manually and computerized.

The above findings imply that financial data was managedpartially manually and computerized because the computersystems were oftenly off thus making data not 100% truthfully.

4.2.2 Management Commitment to the Openness of the Operations of the Institution

Table 4.7: Management Commitment to the Openness of theOperations of the Organization


CumulativePercent

Valid Strongly Disagree

1 1.1 1.1 1.1

Disagree 4 4.3 4.3 5.3Not Sure 14 14.9 14.9 20.2Agree 48 51.1 51.1 71.3Strongly Agree 27 28.7 28.7 100.0Total 94 100.0 100.0

Source: Primary dataRespondents were further asked whether management wascommitment to the openness of the operations of theinstitution and 51.1% who constituted the majority of therespondents agreed, 28.7% equally strongly agreed, while 14.9%were not sure, 4.3% and 1.1% who were the least number ofrespondents disagreed and strongly disagreed respectively.

According to the findings, the majority of the respondentsagreed that management was commitment to the openness of theoperations of the institution. This was further supported byone of the respondents through focus discussions who lamentedthat UCU is based on Christian values which must be followedby all staff members where openness is part of the values tobe followed.

Although the some respondents revealed that they are not openwhere some staff bring in children who are not theirbiological children and benefit from the medical funds of theUniversity.

The above findings show that there were some flaws in opennessin the access of university funds thus making openness beingquestionable.

4.2.3 Management Close Monitoring of the Implementation of Internal Control

Table 4.8: Management Close Monitoring of the Implementation of Internal Control


CumulativePercent


1 1.1 1.1 1.1


Source: Primary dataFurthermore, the study was about investigating whethermanagement was closely monitoring the implementation ofinternal control in the institution and 43.6% agreed, 38.3%strongly agreed, 12.8% were not sure, 4.3% disagreed and 1.1%strongly disagreed.

The majority of the respondents agreed that there was closemonitoring of the implementation of internal control in UCU.It was revealed that it was the accounts examiner who was incharge of monitoring and implementation of internal control.However, through interviews, some respondents revealed thatmanagement had left this responsibility to one individual theexaminer and is overwhelmed with work that there were caseslike overpayment of staff salaries. Thus this makes theinternal control system to perform below the desiredexpectations of management.

4.2.4 Management Provision of Feedback to the Junior Officers

Table 4.9: Management Provides Feedback to the Junior Officersabout the Necessary Action for Any Issue


CumulativePercent


5 5.3 5.3 5.3

Disagree 4 4.3 4.3 9.6Not Sure 8 8.5 8.5 18.1Agree 43 45.7 45.7 63.8Strongly Agree 34 36.

236.2 100.0

Total 94 100.0 100.0Source: Primary dataIt was further discovered that management provides feedback tothe junior officers about the necessary action for any issuein the organization as revealed by 45.7%% and 36.2% who agreedand strongly agreed respectively who constituted the majority.

Most of the respondents accepted that there is backwardfeedback from management to the low cadre staff and it wasfurther revealed that management had tried to give feedback tostaff on actions and decisions that was taken by it.

However, some respondents through focus group stated that thefeedback mechanism needed a lot of improvement as there wereflaws a case such as no management response on funds used onprocurement of the guild coaster by management as requested ina staff annual meeting has never come to pass.Thus,JJJJJJJJJJJJJJJGGGGGGGGGGGGGGGGGGG this implies that thefeedback mechanism is insufficient at UCU Mbale and therebyaffecting the effective internal control management system inUCU.

4.2.5 Appropriate Measures Taken to Correct Mischiefs in the Organization

Table 4.10: Appropriate Measures Taken to Correct Mischiefs inthe Organization


CumulativePercent


6 6.4 6.4 6.4


Source: Primary dataAppropriate measures taken to correct mischiefs in the organization as showed by 45.7% of the respondents who agreed,4.3% also agreed, 7.4% were not sure 4.3% disagreed and 6.4% strongly disagreed.

The study further revealed that some of the measures put inplace included reconciliation and counseling committees headedby the University Chaplain where complaints within themanagement staff are discussed and resolved.

4.2.6 Management Acts with a Great Degree of Honesty in Execution of Its Mandate

Table 4.11: Management acts with a great degree of honesty in execution of its mandate


CumulativePercent


6 6.4 6.4 6.4


Source: Primary dataFrom the study, 50% of the respondents strongly agreed thatManagement acts with a great degree of honesty in execution of

its mandate, 34% also agreed, while 7.4% were not sure, 2.1%disagreed and 6.4% strongly disagreed.

Some of the respondents revealed that the University was setupbased on Christian vales where management acting honestlywhile performing their duties is one of the basics on which itis to perform its duties.

However, some of the respondents 6.4% and 2.1% stronglydisagreed and disagreed respectively that Management acts witha great degree of honesty in execution of its mandate. Forexample management purchased two (2) vehicles for the academicregistrar and college secretary with inflated prices of Ugx38,600,000/= in the year 2011 implying that there isquestionable honesty in execution of management duties andmandate hence affecting financial performance negatively ofthe institution.

4.2.7 Upholding of Ethical Values in all Management Decisions

Table 4.12: Ethical Values are upheld in all Management Decisions


CumulativePercent


5 5.3 5.3 5.3


Source: Primary data 5.3% of the respondents strongly disagreed that ethical valuesare upheld in all management decisions at UCU institution,2.1% disagreed, 5.3% were not sure, 37.2% agreed and 50% whowere the majority strongly agreed that ethical values areupheld in all management decisions.

The majority of the respondents strongly agreed (50%) that theethical values of the University were upheld in all management

decisions and transactions. However, through interviews withsome respondents it was revealed that there is need formanagement to improve on the way they spend university fundsespecially allocation of funds on priority areas such asimprovement on the computer lab and library facilities of theUniversity first than spending on staff luxury vehicles.

According to Millichamp (2002), accounting literature likewiseemphasizes the importance of an organization’s integrity andethical values in maintaining an effective control system.Financial systems are established by management in order tocarry on the business of the enterprise in an ethical, orderlyand efficient manner, to ensure adherence to managementpolicies, safeguarding the assets and security as far aspossible the completeness and accuracy of the records.

4.2.8 Existence of Objective, Independent and Active Audit in UCU Table 4.13: Existence of Objective, Independent and Active Audit in UCU


CumulativePercent


4 4.3 4.3 4.3


Source: Primary dataThe findings revealed that there existed an objective,independent and active audit in UCU as agreed by 43.6% of therespondents who were the majority, 35.1% also strongly agreed,11.7% were not sure, 5.3% disagreed and 4.3% stronglydisagreed.

Most of the respondents (78.7%) agreed that there existed anobjective, independent and active audit in UCU. However, therewere some respondents (9.6%) who disagreed that there was anobjective and independent audit in UCU. They further argued

that objectivity and independence can not be realized when theauditor reports to the director which makes it impossible forthe auditor to check the performance of the directorobjectively.

Heruin (2009) noted that the purpose of professional internalaudit is to realize an independent objective assurance andconsulting activity designed to add value and improve anorganization’s operations and this helps an organizationaccomplish its objectives by bringing a systematic,disciplined approach to evaluate and improve the effectivenessof risk management, control and governance processes.

4.2.9 Independence of the Governing Council and Its Committees

Table 4.14: Our Governing Council and its Committees are Independent of Biasness


CumulativePercent


1 1.1 1.1 1.1


Source: Primary dataAccording table 4.14 above, % of the respondents stronglydisagreed that UCU governing council and its committees areindependent of biasness, 5.3% disagreed, 12.8% were not sure,43.6% who constituted the majority agreed and 37.5% stronglyagreed.

The findings implied that the governing council and itscommittee were independent of bias as agreed by the majority80.8% of the respondents. Contrary to the above, some respondents disagreed by the factthat some governing council and committee members exhibitedsome degree of biasness in performance of their duties forexample appoint to note a chairman and director then exhibited

biasness in the dismissal of the university bursar on falseallegations. The financial situation worsened with in threemonth barely after this decision as there many challenges suchas failing to pay PAYE, NSSF and other suppliers of theuniversity. Thus consequently affecting the financialperformance as result of misuses of funds by the director.

4.2.10 Reliability and Dependability of Internal AuditDepartment on Financial Data Table 4.15: Whether the Internal Audit Department on FinancialData Is Reliable and Dependable


CumulativePercent


31 33.0 33.0 100.0

Total 94 100.0 100.0Source: Primary dataAccording to the study, 8.5% of the respondents disagreed thatthe internal audit department on financial data is reliable and dependable, 13.8% of the respondents were not sure, 44.7% agreed and 33% strongly agreed the internal audit is reliable and dependable.

Audits are performed to ascertain the validity and reliabilityof information; also to provide an assessment of a system'sinternal control. The goal of an audit is to express anopinion of the person / organization / system in question,under evaluation based on work done on a test basis.

4.2.11 Staff of the Internal Audit Department

Table 4.16: Our Internal Audit Is Sufficiently Staffed With People of High Caliber


CumulativePercent


6 6.4 6.4 6.4


Source: Primary dataFrom the above findings in table 4.16 above, internal audit ofUCU is sufficiently staffed with people of high caliber asagreed by 54.3% of the respondents, this was followed by 17%who strongly agreed, 14.9% were not sure, 7.4% disagreed and6.4% strongly disagreed that the internal audit issufficiently staffed with people of high caliber.

4.2.12 Internal Audit Staff in UCU Conducts Regular Audit Activities

Table 4.17: Internal Audit Staff in UCU Conducts Regular AuditActivities


CumulativePercent


8 8.5 8.5 8.5


Source: Primary dataIt was revealed that the internal audit staff in UCU conductsregular audit activities as revealed by 42.6% who were themajority respondents who agreed. This was followed 33% whostrongly agreed, 9.6% were not sure, 8.5% strongly disagreedand 6.4% also disagreed.

The implication of the above table was that the internal auditstaff of UCU conducted regular audit activities as agreed bythe majority of the respondents (75.6%). On the contrary,through interviews, it was revealed that the internal auditactivity is no longer conducted regularly most especially atthe time when the finance board suspended the office of theinternal audit and transferred all the activities to theaccounts examiner under the office of the University Bursarmoreover the two offices had different roles to play.

4.3 To assess how the internal audit function has ensuredconformity with financial and operational policies in UCUMbale Campus The study was intended at assessing how the internal auditfunction ensured conformity with financial and operationalpolicies in UCU Mbale Campus and following findings werediscovered.

4.3.1 Following the Institutional Financial and Operational Policies

Table 4.18: The Institutional Financial and Operational Policies are Followed


CumulativePercent


4 4.3 4.3 4.3


Source: Primary dataFrom the study findings, the majority of the respondents (52.1%) agreed that the institutional financial and operational policies are followed, 34% strongly agreed, 6.4% were not sure, 4.3% strongly disagreed and 3.2% agreed.

Although the majority of the respondents agreed that theinstitution financial and operational policies were followed,

it was discovered through focus group discussions with somerespondents that some policies were not followed fully forexample the Chairman of the Finance Committee (2009) of UCUMbale during the finance, and planning and developmentcommittee meeting held on 4th December 2008, pointed out thatthe Principal and the Head of Department- Social Sciencescontravened the set rules and regulations when theyfraudulently procured a double Cabin at a cost of UGX30,000,000 without Board approval.

Reshnod (2009) also agues that internal audit activitiesshould ensure that employees abide by corporate policies andregulatory guidelines and consequently improves on thefinancial performance in an organization hence, the internalaudit function is necessary in an organization.

4.3.2 Staff in the Institution Conform to the Financial and OperationalTable 4.19: Staff in the Institution Conform to the Financial and Operational


CumulativePercent


3 3.2 3.2 3.2


Source: Primary dataTable 4.19 above also illustrates that staff in theinstitution conform to the financial and operational as agreedby the majority of the respondents (42.6%), 41.5% stronglyagreed, 10.6% were not sure, 3.2% strongly disagreed and 2.1%disagreed.

Guenji (1998), states that internal audits play a significantrole within an organization's governance systems. Employeesmust comply with management instructions, policies andguidelines. Managers receive additional help in checking

performance indicators within their departments. Theinstitution’s top management must learn major risks facing theinstitution by reading periodic reports.

4.3.3 Proper Formulation of Financial and Operational PoliciesTable 4.20: Financial and operational policies are properly formulated


CumulativePercent


3 3.2 3.2 3.2


Source: Primary dataFinancial and operational policies are properly formulated as agreed by 43.6% of the respondents in the study, 40.4% strongly agreed 10.6% were not sure, 3.2% strongly disagreed and 2.1% disagreed.

4.3.4 Staff Awareness of the Existing Financial and Operational PoliciesTable 4.21: Our Staff are Aware of the Existing Financial and Operational Policies


CumulativePercent


3 3.2 3.2 3.2


Source: Primary dataAccording to the study findings, 41.5% of the respondentsagreed that UCU staff are aware of the existing financial and

operational policies, 38.3% strongly agreed, 14.9% were notsure, 3.2% strongly disagreed and 2.1% disagreed.

4.3.4 Bursar Confirmation of Availability of Funds before Payment is made

Table 4.22: The Bursar confirms availability of funds before payment is made


CumulativePercent


36 38.3 38.3 100.0

Total 94 100.0 100.0Source: Primary dataTable 4.22 above shows 47.9% of the respondents who agreedthat UCU Bursar confirms availability of funds before paymentis made, 38.3% strongly agreed, 10.6% were not sure and 3.2%disagreed.

4.3.5 Management Acts with a Great Degree of Conformity in Execution of its Mandate

Table 4.23: Management Acts with a Great Degree of Conformityin Execution of Its Mandate


CumulativePercent


37 39.4 39.4 100.0

Total 94 100.0 100.0Source: Primary data45.7% of the respondents agreed that management acts with a great degree of conformity in execution of its mandate while

39.4% also strongly agreed, 10.6% were not sure and 4.3% disagreed.

URA Audit Report (2010) for the period covering 2008-2010, UCUMbale revealed a total of UGX 128,875,681 outstanding taxarrears in PAYE. Not only that but also the NSSF Audit Report(2009) for the period covering 2006-2009, UCU Mbale revealed atotal of UGX 78,634,000 as outstanding liability in arrears.

4.3.6 Accounting Officer Conformation of Transaction before making Payment Table 4.24: The Accounting Officer in UCU Mbale Campus Signs aPurchase and Payment Orders before Making Payments


CumulativePercent


43 45.7 45.7 100.0

Total 94 100.0 100.0Source: Primary dataResearch findings revealed that the accounting officer in UCUMbale Campus signs a purchase and payment orders before makingpayments as strongly agreed by the majority 45.7% of therespondents, 43.6% agreed, 7.4% were not sure and 3.2%disagreed. 4.3.7 Existence of Policies to Support the Audit Function

Table 4.25: There are Policies in place to Support the Audit Function


CumulativePercent


37 39.4 39.4 100.0

Total 94 100.0 100.0Source: Primary dataIt was further agreed by 41.5% of the respondents that thereare policies in place to support the audit function in UCUMbale, 39.4% strongly agreed, 16% were not sure and 3.2%disagreed.

4.4 Financial Performance

4.4.1 Existence of Sufficient Cash to Pay off Creditors

Table 4.26: The Institution has Sufficient Cash to Pay off Creditors


CumulativePercent


36 38.3 38.3 100.0

Total 94 100.0 100.0Source: Primary dataAccording to the findings, the majority of the respondents 50%agreed, 38.3% strongly agreed, 7.4% were not sure and 4.3%disagreed.

4.4.2 Revenue Increasing Table 4.27: The Revenue Trend is Increasing at a Steady Growth


CumulativePercent


33 35.1 35.1 100.0

Total 94 100.0 100.0Source: Primary dataThe majority of the respondents (52.1%) agreed that revenuetrend is increasing at a steady growth, 35.1% strongly agreed,9.6% were not sure and 3.2% disagreed.

4.4.3 Proper utilization of Organizational Financial ResourcesTable 4.28: Organizational Financial Resources are Properly Utilized


CumulativePercent


6 6.4 6.4 6.4


Source: Primary dataRespondents were asked whether the organizational financialresources are properly utilized and 43.6% who were themajority strongly agreed, 36.2% agreed, 9.6% were not sure,6.4% strongly disagreed and 4.3% disagreed.

4.4.4 Accounting for Funds once advanced to Staff for University Activities

Table 4.29: Staff Accountabilities are done once Funds are advanced to them for University Activities


CumulativePercent


1 1.1 1.1 1.1


Source: Primary dataTable 4.29 above shows that staff accountabilities are doneonce funds are advanced to them for university activities asagreed by 42.6% of the respondents, 41.5% strongly agreed,11.7% were not sure, 3.2% disagreed and 1.1% stronglydisagreed.

4.4.5 Sufficiency of the Assets TurnoverTable 4.30: Assets Turnover is Sufficient


CumulativePercent


3 3.2 3.2 3.2


Source: Primary dataFrom the findings, 33% of the respondents strongly agreed andthe same percentage were not sure that assets turnover issufficient in UCU Mbale, 27.7% agreed, 3.2% of the respondentsdisagreed and the same percentage strongly disagreed.

The above findings imply that a big percentage of therespondents were not sure that assets turnover in UCU Mbalewere sufficient since the majority of the respondents wereacademic staff.

4.4.6 Revenue Management

Table 4.31: Revenue is managed well with a Great Degree of Collection


CumulativePercent


1 1.1 1.1 1.1


Source: Primary dataRevenue in UCU Mbale was managed well with a great degree ofcollection as strongly agreed by the majority 43.6% of therespondents, 41.5% agreed, 11.7% were not sure, 2.1% disagreedand 1.1% strongly disagreed.

4.4.7 Reporting of Financial ResourcesTable 4.32: There is Sufficient Reporting of Financial Resources


CumulativePercent


3 3.2 3.2 3.2


Source: Primary data44.7% agreed that there is sufficient reporting of financialresources in UCU Mbale, 40.4% strongly agreed, 7.4% were notsure, 4.3% disagreed and 3.2% strongly disagreed.

It can therefore be concluded that internal controls providereasonable assurance that an organizations objective is

achieved through effective and efficient operations, reliablefinancial reporting and compliance with laws and regulations.Safeguarding of assets is an integral part of the aboveobjectives.

4.4.8 Managerial Control in Financial Operations

Table 4.33: There is Managerial Control in Financial Operations


CumulativePercent


1 1.1 1.1 1.1


Source: Primary dataResearch findings from table 4.33 above shows that there ismanagerial control in financial operations in UCU Mbale asstrongly agreed by 47.9%, 40.4% agreed, 7.4% were not sure,3.2% disagreed and 1.1% strongly disagreed.

4.4.9 Existence of a Good Revenue Base in UCU Mbale Campus

Table 4.34: UCU Mbale Campus has a good revenue base


CumulativePercent


2 2.1 2.1 2.1


Source: Primary data

UCU Mbale Campus has a good revenue base as showed by 45.7%who strongly agreed, 41.5% agreed, 7.4% were not sure, 3.2%disagreed and 2.1% strongly disagreed.

Internal Audit and financial performance in educational institutions of higher learning

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