Effect of Internal Control on Private Higher Learning Institutions’ Financial Performance in Arusha City, Tanzania

Abstract

This study was about the effect of internal control on private higher learning institutions’ financial performance in Arusha City, Tanzania. It was guided by the correlational study design, using a questionnaire as source of data with 40 respondents. Data was analyzed through descriptive statistics and regression analysis.  The study concluded that internal control functions very well in the private higher learning institutions since there are policies and procedures for authorization, there is segregation of duties, member know their responsibilities and boundaries, accounts are reconciled on monthly basis, financial transactions are properly recorded, payments are authorized and the universities provide training opportunities for improved performance. Risk management functions well since the universities follow established policies and procedures to avoid risks, there is compensation when risks emerge, workers and students are trained on what to do when danger comes and there are clear channels of communication. Regarding monitoring, each production unity understands the limits of their performance, project units provide reports on time and verification and authorization are ensured before transactions take place. The institutions perform well financially since they gain profits in their projects, there is enough liquid cash to cater for immediate expenses and there are adequate financial resources to run the institutions. Monitoring and risk management are significant predictors of financial performance as revealed by the multiple correlation coefficient results. The study recommends that monitoring and risk management have to be taken seriously as the two out of four independent variables enhanced financial performance.