Authors : Hassan M. Lyawatwa; Dr. John B. Tlegray

Volume/Issue : Volume 10 - 2025, Issue 7 - July

Google Scholar : https://tinyurl.com/3rv6mp6d

Scribd : https://tinyurl.com/4jvnr2ym

DOI : https://doi.org/10.38124/ijisrt/25jul533

Note : A published paper may take 4-5 working days from the publication date to appear in PlumX Metrics, Semantic Scholar, and ResearchGate.

Note : Google Scholar may take 30 to 40 days to display the article.

Abstract : This study investigated the impact of internal control systems on the performance of Local Government Authorities (LGAs), a case study of Morogoro Municipal Council, Tanzania. This study was guided by the following hypothesis, there is a positive correlation between the MMC’s control environment and performance, there is a positive correlation between the MMC’s risk management activities and performance, there is a positive correlation between the MMC’s control activities and performance, there is a positive correlation between the MMC’s information and communication and performance, and there is a positive correlation between the MMC’s monitoring activities and performance. The study employed COSO’s ICS-Integrated Framework, introduced in 1992 and updated in 2013. The study adopted a pragmatism and mixed research approach. The sample size was 201 participants comprising 193 ordinary staff and 8 Heads of Departments (HoDs). Whereby, simple randomly and purposive samplings techniques were used to get the representatives. Questionnaires, interview and document analysis were employed to get the data. Validation of instruments was done by research experts and Cronbach alpha. The data were analysed quantitatively using descriptive and inferential statistical techniques while qualitative data were analysed using and thematic analysis. Correlation and regression analyses revealed strong, positive, and statistically significant relationships between internal control components and organizational performance, with Information and Communication (r = 0.808) and Monitoring Activities (r = 0.793) showing the highest correlations. The regression model confirmed these results, explaining 85.1% of performance variance (R = 0.923, R2 = 0.851; F = 214.114, p < 0.001), and identified Monitoring Activities, Risk Management, Control Environment, and Information and Communication as significant positive predictors. However, Control Activities had a negative and statistically insignificant effect (β = -0.049, p = 0.272), indicating its limited role when analyzed alongside other control components. The study recommends that, LGAs should prioritize strengthening key internal control components, especially Monitoring Activities, Risk Management, and Information and Communication, to enhance overall performance. Additionally, a review and redesign of Control Activities may be necessary to ensure their relevance and effectiveness within the broader internal control system.

References :

1. Abiola, B., & Oluwole, A. (2025). The Impact of Entrepreneurial Strategies on the Growth of Manufacturing Small and Medium Enterprises in Ogun State, Nigeria. International Journal of Strategic Research in Education, Technology and Humanities, 13(1), 171-203.
2. Abubakar, A. A., Dibal, N. A., Amade, P., & Joyce, P. (2017). Effect of internal control activity on financial accountability and transparency in local government areas of Borno State, Nigeria. European Journal of Business and Management, 9(30), 58–65.
3. Al-beity, S. (2022). Effects of internal control weaknesses, financial independence and size on quality of financial statements in the Tanzanian local government authorities. Business Management Review, 25(1), 60–74.
4. Amudo, A., & Inanga, E. L. (2009). Evaluation of internal control systems: A case study from Uganda. International research journal of finance and Economics, 27(1), 124-144.
5. Arens, A. A., Elder, R. J., & Beasley, M. S. (2012). Auditing and assurance services: An integrated approach. Pearson Education Inc.
6. Balaboniene, I., & Vecerskiene, G. (2015). The aspects of performance measurement in public sector organization. In 20th International Scientific Conference Economics and Management (pp. 314–320). Elsevier Ltd.
7. Bowen, G. A. (2009). Document analysis as a qualitative research method. Qualitative research journal, 9(2), 27-40.
8. Braun, V., & Clarke, V. (2006). Using thematic analysis in psychology. Qualitative Research in Psychology, 3(2), 77–101. https://doi.org/10.1191/1478088706qp063oa
9. Bravo, A. B., & Silvestre, A. L. (2004). Local government and principal-agency theory. In 44th Congress of the European Regional Science Association: "Regions and Fiscal Federalism" (pp. 1–13). European Regional Science Association.
10. Brown, S. R. (2019). Subjectivity in the human sciences. The Psychological Record.
11. CAG. (2020). Annual general report on the audit of LGAs for the financial year 2018/19. National Audit Office.
12. CAG. (2024). Annual general report of the Controller and Auditor General on the audit of regional administrations and local governments for the financial year 2022/23. National Audit Office.
13. Chalmers, K., Hay, D., & Khlif, H. (2019). Internal control in accounting research: A review. Journal of Accounting Literature, 42, 80–103.
14. Cheng, Q., Goh, B. W., & Kim, J. B. (2015). Internal control and operational efficiency. In European Accounting Association Annual Congress (pp. 1–54). Singapore Management University.
15. Committee of Sponsoring Organizations of the Treadway Commission (COSO). (2013). Internal control—Integrated framework: Illustrative tools for assessing effectiveness of a system of internal control. COSO.
16. Committee of Sponsoring Organizations of the Treadway Commission (COSO). (2013). Internal control—Integrated framework. COSO.
17. de Oliveira, C. B., & Filho, J. R. (2017). Agency problems in the public sector: The role of mediators between central administration of city hall and executive bodies. Brazilian Journal of Public Administration, 51(4), 596–615.
18. Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14(1), 57–74.
19. Eton, M., Mwosi, F., & Ogwel, B. P. (2022). Are internal controls important in financial accountability? Evidence from Lira District Local Government, Uganda. International Journal of Financial, Accounting, and Management, 3(4), 359–372.
20. Fakile, A. & Adegbie, F. (2021). Company Income Tax and Nigeria Economic Development. European Journal of Social Sciences, 309-320.
21. Fama, E. F. (1980). Agency problems and the theory of the firm. The Journal of Political Economy, 88(2), 288–307.
22. Field, A. (2013). Discovering Statistics Using IBM SPSS Statistics (4th ed.). Sage Publications.
23. Field, A. (2018). Discovering statistics using IBM SPSS statistics (5th ed.). Sage Publications.
24. Fjeldstad, O.-H. (2004). Local government finances and financial management in Tanzania: Baseline data from six councils. WP 2004: 7, 1–31. Chr. Michelsen Institute.
25. Fjeldstad, O.-H., Henjewele, F., Mwambe, G., Ngalewa, E., & Nygaard, K. (2004). Local government finances and financial management in Tanzania: Baseline data from six councils. WP 2004: 7, 1–31. Chr. Michelsen Institute.
26. George, D., & Mallery, P. (2003). SPSS for Windows Step by Step: A Simple Guide and Reference (11.0 update, 4th ed.). Allyn & Bacon.
27. Goh, S. C. (2012). Making performance measurement systems more effective in public sector organizations. Measuring Business Excellence, 16(1), 31–42.
28. Government Accountability Office. (2014). Standards for internal control in the federal government. https://www.gao.gov
29. Gray, D., & Ehoff Jr, C. (2015). Sarbanes-Oxley and Dodd Frank: Then there was fraud. Journal of Business & Economics Research, 13(1), 19–26.
30. Gu, J. (2022). An empirical study on the relationship between corporate internal control and financial performance of listed companies. In SHS Web of Conferences, 151, 01036 (pp. 1–6). Sun Wah International Business School.
31. Guba, E. G., & Lincoln, Y. S. (1994). Competing paradigms in qualitative research. In N. K. Denzin & Y. S. Lincoln (Eds.), Handbook of qualitative research (pp. 105–117). Sage Publications.
32. Gujarati, D. N., & Porter, D. C. (2009). Basic econometrics (5th ed.). McGraw-Hill/Irwin.
33. Gyimah, A. G., Addai, B., & Tetteh, D. D. (2024). Impact of internal control systems on financial irregularities in local governments: Insights from the developing world. Journal on Innovation and Sustainability, 15(2), 16–32.
34. Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2010). Multivariate Data Analysis (7th ed.). Pearson Education.
35. Hathaway, R. S. (1995). Assumptions underlying quantitative and qualitative research: Implications for institutional research. Research in Higher Education, 36(5), 535–562.
36. Henk, O. (2020). Internal control through the lens of institutional work: A systematic literature review. Journal of Management Control, 239–273.
37. Herimamy, R. (2021). Determinants of the internal control effectiveness of selected Seventh-day Adventist Church entities in Madagascar. Pan-African Journal of Education and Social Sciences, 2(2), 58–70.
38. Hinna, A., Homberg, F., Scarozza, D., & Verdini, V. (2021). Public service motivation and public sector employment preference: Comparing Italian and British students. Public Money & Management, 41(1), 46-54.
39. Hoai, T. T., Hung, B. Q., & Nguyen, N. P. (2022). The impact of internal control systems on the intensity of innovation and organizational performance of public sector organizations in Vietnam: The moderating role of transformational leadership. Heliyon, 8.
40. Hubbard, G. (2009). Measuring organizational performance: Beyond the triple bottom line. Business Strategy and the Environment, 177–191.
41. International Finance Corporation (IFC). (2021). Internal control handbook. IFC.
42. Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360.
43. Jordan, P. J., Troth, A. C., & Yan, H. (2024). Objective and subjective measurement in applied business settings: Improving research in organizations. Australian Journal of Management, 1–24.
44. Kline, R. B. (2015). Principles and practice of structural equation modeling (4th ed.). The Guilford Press.
45. Kothari, C. R. (2004). Research methodology: Methods and techniques. New Age International.
46. Lawrence, T. B., & Suddaby, R. (2006). Institutions and institutional work. In R. C. Steward, C. Hardy, T. B. Lawrence, & W. R. Nord (Eds.), Sage Handbook of Organizational Studies (pp. 215–254). Sage.
47. Lee, N., & Lings, I. (2008). Doing business research: A guide to theory and practice. Sage Publications.
48. Lenard, J. M., Petruska, K. A., Alam, P., & Yu, B. (2016). Internal control weaknesses and evidence of real activities manipulation. Advances in Accounting, Incorporating Advances in International Accounting, 1–12.
49. Local Government Finance Act. (2019). CAP 290 R.E. 2019. https://www.tra.go.tz
50. Louwers, T. J. (2015). The past, present, and future (?) of crime-related forensic accounting methodology. Accounting Research Journal, 28(1), 4-9.
51. Lu, Y., & Ma, D. (2019). Internal control weakness: A literature review. Accounting and Finance Research, 8(2), 121–142.
52. Mangena, M., & Pike, R. (2005). The effect of audit committee shareholding, financial expertise and size on interim financial disclosures. Accounting and business research, 35(4), 327-349.
53. Masanja, N. M. (2018). The impact of internal control challenges on organizational financial performance for selected local government authorities in Arumeru District Arusha Tanzania. International Journal of Research and Innovation in Social Science, 2(11), 206–211.
54. Mbogella, A. P. (2021). The effects of institutional capacity in utilizing the internal control systems on performance of projects in local government authorities in Tanzania. International Journal of Scientific & Engineering Research, 10(3), 453–464.
55. Muhtar, M., Winarna, J., & Sutaryo, S. (2023). Internal control weakness and corruption: Empirical evidence from Indonesian local governments. International Journal of Professional Business Review, 1–21.
56. Ngomuo, S. I., & Wang, M. (2015). Measuring performance in public sector organizations: Evidence from local government authorities in Tanzania. European Journal of Business and Management, 7, 184–194.
57. Nzewi, O.I., Nomarwayi, T. & Bradshaw, G. 2019. Between community protest and community trust: The scope of procedural justice in South African participatory local governance. The International Journal of Interdisciplinary Civic and Political Studies, 14(1), 1-19.
58. Odunko, S. N. (2022). Internal control and firm performance: Evidence from selected firms in Nigeria. International Journal of Innovative Finance and Economics Research, 10(1), 68–80.
59. Otley, D. (2011). Extending the boundaries of management accounting research: developing systems for performance management. The British Accounting Review, 33(3), 243-261.
60. Otoo, F. N., Kaur, M., & Rather, N. A. (2023). Evaluating the impact of internal control systems on organizational effectiveness. LBS Journal of Management & Research, 135–154.
61. Oyetunji, O. T., & Lawal, B. A. (2021). Internal control practices and financial management of local governments: A quantitative framework approach. African Multidisciplinary Journal of Development, 10(2), 42–53.
62. Pallant, J. (2016). SPSS survival manual: A step by step guide to data analysis using IBM SPSS (6th ed.). McGraw-Hill Education.
63. Panagora Group. (2021). Organizational performance index: Definitions and measurement. USAID.
64. Patton, M. Q. (2015). Qualitative research & evaluation methods. sage.
65. Pobric, A. (2022). Determinants of the quality of internal control over the financial reporting system. Economy and Market Communication Review, 12(2), 462–475.
66. Podsakoff, P. M., MacKenzie, S. B., Lee, J.-Y., & Podsakoff, N. P. (2003). Common method biases in behavioral research: A critical review of the literature and recommended remedies. Journal of Applied Psychology, 88(5), 879–903.
67. Public Audit Act. (2021). CAP 418 R.E. 2021. https://www.nao.go.tz
68. Romano, R. (2005). The Sarbanes-Oxley Act and the making of quack corporate governance. The Yale Law Journal, 114, 1521–1611.
69. Ronen, J. (2002). Policy reforms in the aftermath of accounting scandals. Journal of Accounting and Public Policy, 21, 281–286. https://www.elsevier.com/locate/jaccpubpol
70. Ross, S. A. (1973). The economic theory of agency: The principal’s problem. American Economic Review, 134–139.
71. Sahabi, I., Diibuzie, G., & Abubakari, M. (2017). The impact of internal control systems on financial performance: The case of health institutions in Upper West Region of Ghana. International Journal of Academic Research in Business and Social Sciences, 7(4), 684–696.
72. Sarbanes-Oxley Act. (2002). Public Law 107–204—July 30, 2002, 116 Stat. 745. https://Sarbanes-Oxley-Act.com
73. Schillemans, T., & Bjurstrøm, K. H. (2020). Trust and verification: Balancing agency and stewardship theory in the governance of agencies. International Public Management Journal, 23(5), 650–676.
74. Sekaran, U., & Bougie, R. (2010). Research methods for business: A skill building approach (5th ed.). John Wiley & Sons.
75. Shapiro, S. P. (2005). Agency theory. Annual Review of Sociology, 263–284. http://soc.annualreviews.org
76. Simangunsong, R. (2014). The impact of internal control effectiveness and internal audit role toward the performance of local government. Research Journal of Finance and Accounting, 5(7), 50–58.
77. Simon, E. (2021). The effect of internal control on organizational performance in the telecommunications industry in South South and South East Nigeria. International Journal of Social Sciences, 4(1), 78–97. https://doi.org/10.31295/ijss.v4n1.1361
78. Simons, R. (1995). Control in an age of empowerment. Harvard business review, 73(2), 80-88.
79. Singh, S., Darwish, T. K., & Potocnik, K. (2016). Measuring organizational performance: A case of subjective measures. British Journal of Management, 27, 214–224.
80. Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations: The electronic classics series (J. Manis, Ed.). Pennsylvania State University.
81. Tabachnick, B. G., & Fidell, L. S. (2013). Using multivariate statistics (6th ed.). Pearson.
82. Tavakol, M., & Dennick, R. (2011). Making sense of Cronbach’s alpha. International Journal of Medical Education, 2, 53–55. https://doi.org/10.5116/ijme.4dfb.8dfd
83. Uwineza, F., Maringa, E. K., & Mbanzamahoro, H. F. (2022). The effect of internal control system on the profitability of small medium enterprises in Rwanda: A case of Cetraf Ltd. The Strategic Journal of Business & Change Management, 9(2), 1–23.
84. Wooldridge, J. M. (2016). Introductory econometrics: A modern approach (6th ed.). Cengage Learning.
85. World Bank. (2007). Introduction to the public sector governance and accountability series. In A. Shah (Ed.), Public sector governance and accountability. World Bank.
86. Yamane, T. (1967). Statistics: An introductory analysis. Harper and Row.