The Effect of Internal Control Systems on the Financial Performance of a Revenue Collection Firm a Case Study Uganda Revennue Authority (Ura)

Abstract

The Uganda Revenue Authority was formed at a time when revenue collection was very low and the need to expand the tax base was necessary. URA then embarked on an ambitious project of reviewing its operations and coming up with internal control mechanisms to enhance revenue collection. The objective of this study therefore was to closely look at the internal controls in operation at Uganda Revenue Authority with a view to establish whether such internal controls have produced any meaningful results in increased collected revenue. The study was carried out to determine whether internal controls affect the financial performance of URA. The specific objectives were to examine the internal controls, assess the financial performance of URA, and establish the relationship between internal controls on performance of URA. Descriptive and analytical research designs were used to examine the findings to come up with conclusions. The research was conducted using both qualitative and quantitative approaches. Questionnaires were used on a population of 38 respondents in gathering primary data for the study. A cross sectional research survey design was used to employing both qualitative and quantitative techniques. Qualitative data was gathered using questionnaires while quantitative data was by extracts from secondary data for a period of 2016-2017.Stratified sampling was used and all the population was sampled

The data collected was then analyzed and findings have revealed that the five components of control environment, accountability, control activities, information and communication and monitoring must be available for internal controls to work. The study established that weak internal controls have encouraged collusion to fraud, loss of revenue and embezzlement of collected revenue. The study therefore concludes that internal controls do function although with hiccups and that there is a significant effect between internal controls and revenue collection in URA. Data was analyzed by use of SPSS. The effect of internal control on performance was performed. The main findings were that internal control had a significant positive effect on performance in terms of control environment, risk assessment, control activities, information and communication, monitoring and advisory services.

Lastly a few recommendations were given especially in the accounting department to further aid the organization in making improvements on the various weakness that were identified.

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