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The Effectiveness of Internal Control System on The Efficiency of Financial

Management for Selected Training Institutions In Arusha Tanzania

Article · December 2020

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www.ijieb.co.tz/cjeb ISSN 2738-9294 (Online) Vol. 1 Iss. 1, 2020 (pp. 55-73)

The Effectiveness of Internal Control System Contemporary

Journal of
on The Efficiency of Financial Management
Education and
for Selected Training Institutions In Arusha Business (CJEB)
Tanzania

Ndalahwa Musa Masanja, PhD

Faculty of Business, University of Arusha

Aneth Masimba, MBA

University of Arusha

Received November 30, 2020; Revised December 6, 2020; Accepted December 9, 2020

Abstract
This study examines the effectiveness of internal control system on the efficiency of financial
management in selected training institutions. The study applied quantitative research approach
and the research design was descriptive and correlation in nature. The study was conducted at
MS-TCDC and University of Arusha. The research participants were all employees working in
those institutions who are affected by internal control systems and procedures. A questionnaire
was administered to all employees in the two institutions. At the same time, the questionnaire
was tested for reliability and validity. In addition, the study used descriptive and inferential
statistics to analyze the results from the data collected. The findings indicate that the research
participants agree that the components of internal control systems were implemented in the
organization. At the same time, respondents also strongly agreed or agreed that there efficiency
of financial management as a result of appropriate internal control systems. On the issue of the
relationship between internal control systems and efficiency of financial management, there
were mixed results. The study recommends that more efforts and resources should be dedicated
toward internal control systems since it is imperative for efficiency of financial management.

Keywords: internal control, Efficiency, financial management, Tanzania

1.0 Introduction organization decline or thrive. For instance,

Internal controls systems are an important
aspect of financial management in any
organization. This is due to the fact that
organizations with weak internal control
systems are bound to stagnate in the financial
operations while those with strong internal
control systems are destined to thrive
(Noorve, 2006). In other words, internal
control systems have the potential to make a
companies such as Kodak, Blackberry, sears
and Macy’s have currently suffered massive
financial losses due to failure of internal
controls while other companies such a as Uber
and Amazon have excelled due to strong
internal controls systems (Bubilek, 2017).
In light of the importance this subject, internal
control according to Committee of Sponsoring
Organizations of the Treadway Commission

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(COSO) is defined as a process developed to
guarantee with reasonable certainty that the
objectives are achieved. The process involves
efficiency and effectiveness in operations,
trust in financial records, and conformity with
laws and regulations (COSO, 2019). Internal
controls have several important components.
Mokgatho (2013) has outlined the
components of internal control to include five
components namely control environment,
control activities, risk assessment, information
and communication, and monitoring. So when
these components are internally controlled
and audited regularly, there is a relatively high
probability for any organization to thrive
regardless of sector (Vuai, 2014).
Internal control has been a subject of great
concern in the USA. It has been integrated in
the public policy to regulate the public
corporations. This is due to the fact that USA
has many public traded companies contribute
to the growth of the economy. For this reason,
the government introduced the Foreign
Corrupt Act (FCPA) of 1977 and the
Sarbenes=Oxley Act of 2002, which requires
the improvements in internal control systems
in United States Public Corporations (Luthan
and Doh, 2014). One of the key objectives of
these policies is to increase the efficiency of
financial management in public traded
companies and therefore the safeguard the
interest of the stakeholders in those
organizations.
Recent economic and current technological
development in Europe has influence the
internal control discussion. European Union
has realized and identified the importance of
institutionalizing strong internal control
system for the public sectors and public
traded companies. The reason behind these
policies is to ensure the efficiency of financial
management in the public sector but also for
public traded companies which serves the
interest of the public.
56
As argued by Public Internal control Systems in
the European (2019) that effective public
internal control is the heart of sound financial
and non financial management of both
domestic and European Union funds.
From an African perspective, internal control
system is an important aspect to ensure the
safety and efficiency of financial management
in the government sectors. Due to high
corruption and systemic problems which leads
to substantial loss in financial resources,
different government in African countries are
implementing stronger internal control system
as a strategy to solve rampant corruption and
systemic financial deficiencies. Specifically,
East African countries have their set of
problems in financial management in the
government and other sectors as well. This
has prompted the governments to implement
appropriate internal control systems to
increase efficiency of financial management in
the government and the public traded
companies.
Tanzania in particular has been struggling with
internal control problems. In adequate
internal control system has lead to looting of
public funds for a very long time. Although the
government is trying to implement strict
internal control system, it is still a serious
epidemic plaguing the financial management
in the public sector (Mbwanji, 2013). Likewise,
for public and private institutions in Tanzania,
there are several reports which indicate
misappropriation and misuse of funds due to
internal control problems in those
organizations (Masanja, 2018). In this case,
the government is implementing policies to
curb the problem.
When internal control systems have been
properly implemented in an organization,
these systems normally increase the efficiency
of financial management. Efficiencies of
financial management refer to ultimate
utilization of financial resources where by the
www.ijieb.co.tz/cjeb ISSN 2738-9294 (Online) Vol. 1 Iss. 1, 2020 (pp. 55-73)
organizations use less financial resources to
accomplish more. In other words, the
organization minimizes the use of financial
resources without compromising the
standards of goods and services provided. The
minimization of cost is made possible by
sound and strong internal control systems.
There are several studies which have
identified the importance of internal control
systems in the organizations operations
(Chang, 2019; Masanja, 2018; Lakis, 2012)
However specifically, there are no studies
which have assessed the effectiveness of
internal control systems on the efficiency of
financial management in training institutions
in Tanzania. For this reason, this study
explores the effectiveness of these systems on
the overall efficiency of financial management
at MS-TCDC and UOA in Arusha Tanzania.
1.1 Statement of the Problem
The application of internal control measures is
inevitable for maximizing the financial
performance of any organizations (Masanja,
2018). However, financial performance cannot
be achieved without efficient financial
management and this is a problem plaguing
most organizations in Tanzania (Vuai, 2014;
Ringo, 2013). Most organizations have a
problem in minimizing the overall running cost
of the organizations due to poor internal
control systems which do not ensure
efficiencies in financial management (Myula,
2011). For that reason, organizations are
losing or even wasting a lot of financial
resources without any accountability. This is a
financial epidemic in most of the institutions
in Tanzania.
Statistics also indicate the rise in this problem
in Tanzania. According to a study conducted
by Vuai (2014) the private and public
organizations have been losing billion of
57
shillings due to poor internal control practices.
As a matter of fact, some of the organizations
have been implementing internal control
systems without any realized success.
Additional statistics indicate that organizations
have not been efficient in the utilization of
their financial resources. There are many
organizations which are not getting the value
of money from the investment of their
financial resources although they have
internal control systems in existence (Munene,
2013; Mutua, 2017). In light of these
problems, it is important to determine the
effectiveness of internal control systems on
the efficiency of financial management in
training institutions located in Arusha,
Tanzania.
1.2 Research Questions
The following are the research questions for
this study
1. How is the implementation of internal
control components at selected
training institutions?
2. What is the efficiency of financial
management at selected training
institutions?
3. What is the relationship between
internal control system and efficiency
in financial management at private
training institutions?
2.0 Literature Review
The significance of internal control to an
organization has been acknowledged for a
long period of time. This is due to the fact that
internal control is an integral to ensure the
effective and efficient use of organizational
resources to meet the mission and vision of
the organization. In this regard, internal
control has been a subject of much discussion.
According to COSO (2013) internal control is
www.ijieb.co.tz/cjeb ISSN 2738-9294 (Online) Vol. 1 Iss. 1, 2020 (pp. 55-73)
the process effected by an organization’s
board of directors, management or other
employees designed to provide reasonable
assurance regarding the achievement of
objectives in the reliability of financial
reporting, compliance with applicable laws
and regulations, and effectiveness and
efficiencies in operations. In other words,
internal control ensures effectiveness and
efficiency in financial management.
To gain a broader and deeper perspective of
internal control, Hongming and Yanan (2012)
defines internal control resembles a human
nervous system which is spread throughout
the business carrying orders and reactions
from and to management. On the other side,
Hemed (2009) defines internal control as an
organized amalgamation of functions and
procedures with a complete system of
controls established by the management and
whose major aim is the successful function of
the business. For an Tanzanian point of view,
the subsidiary legislation passed in 2014
defines internal control as a concerted action
of the board of directors, senior management
and all level of personnel, designed to provide
reasonable assurance regarding the objectives
of effectiveness and efficient of operations. It
subsidiary legislation (2014) further explains
the importance of internal control for the
reliability of financial reporting and
compliance with applicable laws, regulations
and internal policies. To summarize, internal
control refers to policies and procedures
formulated and executed individually and
corporately to manage and control risks and
business activities and therefore improve the
efficiency and effectiveness of the
organizations operations.
Given the definition of internal control, it is
appropriate to discuss the importance of this
subject.
58
Internal control has gain significance in recent
years due to the fact that it plays an
instrumental part in the operations of an
organization. This is due to the fact that the
scope and size of the organization has become
complicated, complex and wide spread that
management must depend of a number of
reports and analysis to make appropriate
decisions (Boynton et al, 2006; Cruz, 2016;
Cheng, Goh & Kim, 2014). Consequently, the
check and review inherent in good internal
control system requires protection against
human weaknesses and therefore minimize
the likelihood of errors and irregularities. In
this scenario, it is not practical for auditors to
make audits of most organizations with
financial fee limitations without the reliance
on the clients internal control system. This
requires greater efforts placed on the
implication of strong internal control
mechanism to safeguard the wellbeing of the
organization.
Since internal control is inevitable in the
organization, the following are the objectives
of implementing a strong and sound internal
control system. First and foremost, Internal
control ensures that correct procedures are
established, maintained and followed in the
organization (Feng, Li & McVay, 2009;
Graham, 2015). Second, internal control
ensures that financial and management data
are disclosed at a timely manner (Schneider
Becker, 2011; Stephens, 2008). Third, internal
control safeguards the organizations assets
against obsolescence and deterioration
(Moeller, 2011; Mahsina & Hidayati, 2016).
Forth, internal control improves organization’s
efficiency in line with stated objectives
(Lambert and Verrecchia, 2018). Fifth, internal
control ensures that all employees comply
with all appropriate policies, directives, rules
and regulations (Hongming & Yanan, 2012).
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Lastly, internal control ensures the financial resource enables organizations to

completeness, accuracy and reliability of all maximize revenue and profits. Financial
records (Graham, 2015; Martin, Sanders & utilization ensures maximum returns,
Scalan, 2014). minimization of the cost of capital, improve
savings and better its value. In addition, when
2.1 Efficiency in financial Management funds are optimally utilized, it assists the
Efficiency in financial management is an organization grow and fulfill its long-term
important aspect of any business. This objectives (Eniola & Akinselure, 2016).
involves minimizing the utilization of the
organizational resources without Financial Appropriation
compromising the standards and goals of the Financial appropriation is the process of
organizations while maximizing the output of allocating funds or financial resources for a
the organization. In other words, Efficiency in specific purpose. A organization appropriates
financial management signifies a level of funds in order to delegate money for the
performance that describes using the least necessity of its business operations. An
amount of input to achieve the highest organization might appropriate money for
amount of output. It is a process which short-term or long-term needs which include
ensures the reduction in the number of employee salaries, research and development
resources utilized to produce a given output and dividends. Financial appropriation is
include money, time and other resources. effectively conducting using internal control
Form an financial point of view, efficiency in systems.
financial management can be a measurable Internal control creates a good mechanism
concept that can be determined using the and process for financial appropriation or
ration of useful financial output to total useful allocation. Internal control systems create
input. Furthermore, efficiency in financial boundaries and limitation to allocate funds
management minimize the waste or resources according to the policies and regulations
or wasteful spending such a physical materials, (Avery & Obah, 2018. This normally increases
money, energy and time but at the same time efficiency of financial management in the
accomplishing the desired output. Some of the organization.
Key components of efficiency of financial
management are financial utilization, financial Financial Accountability
appropriation, financial accountability and Financial accountability refers to holding the
financial maximization. The implementation of management and employees accountable for
internal control systems provides a effectively performing a financial activity such
mechanism for financial management systems as a key internal control procedure with a
(Nabende, 2017). financial transaction process. In simple terms,
financial accountability refers to the
Financial Utilization responsibility for the way financial resources
Although all the aspects of efficiency in such as money is utilized and managed. On a
financial management are important, special broaden the context, financial accountability is
emphasis is placed on financial utilization. This also concerned with tracking and reporting on
is due to the fact that efficient utilization of allocation, disbursement and utilization of

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financial resources using tools of auditing, researcher to collect raw and original data
budgeting and accounting (Joseph, 2018). from the research participants and therefore
increases the authenticity of the results. The
3.0 Research Methodology questionnaire was formulated based on the
Research approach is quantitative in nature. Internal control-integrated framework
Quantitative research uses numerical and developed by the Committee of Sponsoring
statistical data in investigating a phenomena Organizations of the Treadway Commission
and therefore it is less biased compared to (COSO). The questionnaire consisted of three
other research approaches (Masanja, 2018). basic sections. The first section was questions
Specifically, the research design is descriptive- about the demographic characteristics of
correlation. This means the study describes employees at the two institutions: UOA and
the internal control systems applied in MS TCDC. The second section inquired about
different training institutions in Arusha. At the the internal control system in the private
same time, the study was be correlation in institutions. The third section asked about
nature because it establishes the relationship efficiency of financial management in these
between internal control systems and organizations. In connection to this, the
efficiency in financial management at private questions were closed ended questions which
institutions located in Arusha. minimize bias.
The population was generated from the Data analysis is an integral part of any
employees working at UOA and MS-TCDC. The research. In light of the necessity, data was
researcher decided to select the population analyzed using descriptive and inferential
due to the convenience and easy accessibility statistics. Specifically, descriptive statistics was
for these training institutions located in used to analyze the demographic attributes of
Arusha. The following table provides a the research participants. Subsequently,
comprehensive description of the targeted descriptive statistics was employed in
population who are expected to participate in analyzing the internal control systems and
this study. efficiency in financial management for the
The researcher applied total population private institutions under investigation. These
sampling techniques. According to Masanja descriptive results included the presentation
(2019) total sampling technique refers to a of the mean, standard deviation and
non-probability sampling procedure where the interpretation of the results. In general,
entire population is recruited to participate in descriptive statistics was best approach
the study and it is normally applicable for a because it quantitatively describes or
small group of the targeted population in a summarizes the attributes of the demographic
study. Since this study involves employees characteristics and tend to measure the
from two institutions with a relatively small central tendency such as the mean, mode,
number of employees, this sampling median and standard deviation (Field, 2009,
technique is most appropriate. Masanja, 2018). The mean score results were
A survey or questionnaire was the main interpreted as follows: 4.50-5 = Strongly
research instrument for data collection. A Agree, 3.50-4.49 = Agree, 3.00-3.49 = Neutral,
questionnaire is the most appropriate data 2.00-2.99 = Disagree, 1.00-1.99 Strongly
collection method because it allows the Disagree.

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On the other side, inferential statistics is

4.1 Demographic Characteristics of the
important to establish the relationshipResearch Participants
between the variables. In this case, inferential
This section summarizes the background
statistics was applied to determine theattributes of the research participants of the
relationship between the components of the
study including gender, age, education, length
internal control systems and efficiency in
of employment and institution. Table 4.1
financial management. Specifically, Pearson
provides a summary of the demographic
correlation was employed to determine the
characteristics of the participants. The data
relationship between the internal control
has shown exhibit the following age
systems and efficiency in financial
distribution of the employees who
management. Normally inferential statistics
participated in the study. 18 to 24 (17.1%), 25
use a random sample of data collected from
to 34 years (35.7%), 35 to 44 years (30.0%),
the population to describe make inference
45-55 (10%) and Over 55 (7.2%). At the same
about the population (Newman, 2006). time, 36 employees were male (51.4%) and 34
female employees (48.6%). This implies that
4.0 Results and Discussion the majority were male employees who
This section provides the findings and participated in the study.
appropriate discussion of the results

Table 4.1: Demographic Characteristics of Participants

No Item Description Number Percentage
1. Age 18-24 12 17.1
25-34 25 35.7
35-44 21 30.0
45-55 7 10.0
Over 55 5 7.2

2. Gender Female 34 48.6

Male 36 51.4

3. Education Secondary Certificate 0 0

Diploma 4 5.7
Bachelor 37 52.9
Post-graduate 29 41.4

4. Length of Employment 1-5 years 26 37.1

5-10 years 31 44.3
Over 10 years 13 18.6

5. Institution University of Arusha 48 68.6

MS-TCDC 22 31.4

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As a far as education of the employees was
concerned, 37 (52.9%) had a bachelor degree,
29 (41.4%) had a postgraduate degree, 4
(5.7%) had a diploma and none had only
secondary certificate qualifications. On the
issue of length of employment or work
experience, 31 (44.3%) had worked between 5
to 10 years, 26 (37.1%) had worked between 1
to 5 years, and 13 (18.6%) had worked over 10
years. Concurrently, 48 (68.6%) of the
employees came from University of Arusha
while 22 (31.4%) of the employees came from
MS-TCDC.
4.2 Research Question 1: How is the
implementation of internal control
components at selected training institutions?
Descriptive statistics provide a clear analysis of
internal control components of systems at
selected training institutions located in
Arusha. These internal control components
include control environment, risk assessment,
control activities, information and
communication, and monitoring. This section
will provide a detailed account of data analysis
for each component applied in the selected
training institutions. The mean score results
were interpreted as follows: 4.50-5 = Strongly
Agree, 3.50-4.49 = Agree, 3.00-3.49 = Neutral,
2.00-2.99 = Disagree, 1.00-1.99 Strongly
Disagree
Control Environment
Table 4.2 provides the summary of the
responses on control environment as a
component of internal control systems. The
results indicate research participants agree
that board periodically review policies and
procedures to ensure proper controls have
been instituted (M = 4.24, SD = 1.03).
Concurrently, the research participants agree
that there is a system in place to monitor
62
compliance with policies and procedures to
report to the board for instances of non-
compliance (4.09, SD = 1.18). At the same
time, the respondents agree that the board
takes appropriate follow-up action and
ensures effecting action through testing when
non-compliance are reported (M = 4.24, SD =
0.98). In addition, research participants agree
that management provides the board and
board representatives complete access to
institutional records (M = 4.16, SD = 1.43).
The results reveal that research participants
agree that policies regarding the importance
of internal control and appropriate conduct
are communicated to all employees (M = 4.18,
M = 0.87). The findings also indicate research
participants strongly agree that audit or other
control systems exist to periodically test for
compliance with codes of conducts or ethics
policies (M = 4.56, SD = 2.01). The research
participants strongly agree that code of
conducts or ethical policies exist (M = 4.62, SD
= 0.88).
Generally these findings are consistent with
several studies which have identified the
relationship between control environment and
financial management (Ringo, 2013; Vuai,
2014). These studies have also identified that
there is a strong agreement with control
environment in relation to financial
management in any organization.
Risk Assessment
Table 4.3 provides a summary of the
respondents risk assessment responses in
relation to internal control system in selected
private institutions located in Arusha. The
results reveals the research participants agree
that the board and management appropriately
evaluate risks when planning for new products
or activities (M = 3.15, SD = 1.32).
Subsequently, the research participants also
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agree that the board and management discuss
and appropriately consider control issues
when planning for new products or services
(M = 4.48, SD = 1.18). The respondents
strongly agree that audit personnel and other
internal control experts involved in control
discussions when the institution is developing
new products or services (M = 4.79, SD =
1.10). Moreover, the research participants
agree that management and the board involve
audit personnel or other internal control
experts in the risk assessment process (M =
4.41, SD = 1.08). At the same time, the
research participants also agree that
technological issues considered and they are
appropriately addressed in the organization
(M = 4.21, SD = 1.87). Ultimately, the research
respondents agree that sufficient staff
members who are competent and
knowledgeable to manage current and
proposed institution activities are provided
with adequate resources (M = 4.24, SD = 0.19).
Since risks assessment is an integral part of
internal control systems as a strategy to
enhance financial management, a study
conducted by Njeri (2014) also supports the
same arguments. Specifically, risk assessments
is continous process which needs to be
implemented and reviewed perirodically to
ensure the efficiency of financial management
operations in any institution (Ngonyani, 2015)
Control Activities
This section provides a summary of the control
activities as part of the internal control
systems in training institutions located in
Arusha. According to the results, the
respondents strongly agree that policies and
procedures exist to ensure critical decisions
are made with appropriate approvals (M =
4.65, SD = 1.18). In addition, the research
participants agree that the processes exist to
ensure independent verification of an
appropriate sample of transactions to ensure
integrity and credibility (M = 4.23, SD = 0.98).

Table 4.2: The Control Environment Response for Internal Control Systems
S/N Variable Mean SD
1 Policies and procedures exist to ensure critical decisions are
made with appropriate approval 4.65 1.18
2 Processes exist to ensure independent verification of an
appropriate sample of transactions to ensure integrity and
credibility 4.23 0.98
3 Processes exist to ensure on-going and independent reconciliation
of asset and liability balances, both on and off balance sheet 4.11 1.37
4 Key risk-taking activities appropriately segregated from
reconciliation activities 4.02 1.16
5 Processes exist to ensure that policy overrides are minimal and
Exceptions are reported to management 4.93 0.91
6 Separation of duties and dual control over institutions assets
Emphasized in the organizational structure 4.43 2.23
7 Systems are in place to ensure that personnel abide by
separations of duty 4.14 1.09

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Furthermore, the results also revealed
employees agree that processes exist to
ensure on-going and independent
reconciliation of asset and liability balances,
both on and off balance sheet (M = 4.11, SD =
1.37). Subsequently, the research participants
also agree that key risk taking activities
appropriately segregated from reconciliation
activities (M = 4.02, SD = 1.16).
These results correspond with the literature
on internal control systems. According to Cruz
(2016) control activities are the core function
of internal control systems for the COSO
framework. This is due to the fact that they
help the implementation of internal control
systems in the organization. For this case, it is
was also important in this study as well.
The results also indicate respondents strongly
agree that processes exist to ensure that
policy overrides are minimal and exceptions
are reported to management (M = 4.93, SD =
0.91). Moreover, research participants agree
that separation of duties and dual control over
institutions assets emphasized in the
organizational structure (M = 4.43, SD = 2.23).
Finally, research respondents agree that
systems are in place to ensure that personnel
abide by separations of duty (M = 4.14, SD =
1.09). Generally, these findings are in harmony
will several studies which have established the
relationship between internal control systems
and financial management operations
(Parakevi, 2016; Ntongo, 2012).
Information and Communication
Table 4.4 provides a summary of responses on
information and communication in relation to
internal control systems implemented in
training institutions located in Arusha. The
results indicate respondents strongly agree
that accounting systems properly identify,
assemble, analyze, classify, record and report
an institution’s transactions in accordance
with GAAP (M = 4.51, SD = 1.92).

Table 4.3: Risk Assessment Response on Internal Control Systems

S/N Variable Mean SD
1 The board and management appropriately evaluate risks when
planning for new products or activities 3.15 1.32
The board and management discuss and appropriately consider
2
control issues when planning for new products or services
4.48 1.18
3 Audit personnel or other internal control experts involved in
control discussions when the institution is developing new
and services 4.79 1.10
4 Management and the board involve audit personnel or other
Internal control experts in the risk assessment process 4.41 1.08
5 Technology issues considered and appropriately addressed
in the organization. 4.21 1.87
6 The sufficient staff members who are competent and
Knowledgeable to manage current and proposed
Institution activities are provided with adequate resources 4.24 0.19

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On the other hand, respondents also agree communication is necessary component in

that the report generated for operational,
financial, managerial, and compliance-related
activities sufficient to properly manage and
control the institution (M = 4.06, SD = 1.41). At
the same time, respondents agree that
accounting information and communication
systems ensures that the institution’s risk-
taking activities are within the policy
guidelines (M = 4.16, SD = 1.41).
The findings also indicate research
participants strongly agree all personnel
understand their roles in internal control
systems (M = 4.93, SD = 0.16). In connection
to this, research participants strongly All
personnel understand how their roles and
activities relate to others (M = 4.71, SD =
1.22). Ultimately, research participants also
agree all personnel understand their
accountability for the activities they conduct
(M = 4.51, SD = 1.51).
These findings are supported by Brian (2013)
who solely suggested that information and
internal control system. As a matter of fact, it
is nearly impossible to have a sound internal
control system without proper communication
and information about the internal control
systems in the organization (Avery and Obath,
2018; Abdul, 2014; Bubilek, 2017).
Monitoring
Table 4.5 provides the monitoring responses
in relation to the implementation of internal
control systems for training institution located
in Arusha. As far as the results are concerned,
respondents agree that the board review the
actions management takes to deal with
material control weaknesses and verify that
those actions are objective and adequate. (M
= 4.01, SD = 3.29). Concurrently, the
respondents strongly agree that the audit
reports contains sufficient details for internal
control purposes (M = 4.71, SD= 2.92).
Expanding on the same issue, respondents
strongly agree that audit reports are timely

Table 4.4: The Information and Communication Responses on Internal Control Systems
S/N Variable Mean SD
1 Accounting systems properly identify, assemble, analyze,
classify, record, and report an institution’s transactions in
accordance with GAAP 4.51 1.92
2 The reports generated for operational, financial, managerial,
and compliance-related activities sufficient to properly
manage and control the institution 4.06 1.52
3 Accounting, information, and communication systems ensure
that the institution’s risk-taking activities are within policy
guidelines 4.16 1.41
4 All personnel understand their roles in the internal control
systems 4.93 0.16
5 All personnel understand how their roles and activities relate
to others 4.71 1.22
6 All personnel understand their accountability for the activities
they conduct 4.05 1.51

65
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enough to allow for resolution and conducted by management to implement

appropriate action (M = 4.52, SD = 2.67). The
respondents also strongly agree the board or
audit committee approve the selection of key
internal audit personnel (M = 4.68, SD = 2.36).
The research participants also strong agree
that the board or audit committee review
results of the audit periodically (M = 4.63, SD =
3.89). The respondents strongly agree that the
board or audit committee periodically reviews
audit and other key internal control systems
(M = 4.84, SD = 2.61). The respondents also
strongly agree that management held
accountable if they do not follow-up
satisfactorily or effectively on control
weaknesses (M = 4.69, SD = 1.04).
These results are similar to the discussion of
internal control systems in relation to financial
management in the organization (Boynton et,
al, 2006). These results are consistent with
efforts
internal control systems to rectify the
operations of financial management in the
organization. In turn, this is the whole activity
of monitoring the operations and activities in
the organization. As suggested by Lambert,
Leuz and Verrecchia (2017) monitoring is an
ongoing activity and can occur through
separate periodic evaluations with a conscious
control environment
4.3 Research Question 3: What is the
relationship between internal control system
and efficiency in financial management at
private training institutions?
The study applied correlation research design
to determine the relationship between
internal control systems and efficiency of
financial management at private training
institutions. Specifically, the study used
Pearson product correlation coefficient to

Table 4.5: The Monitoring Responses on Internal Control Systems

S/N Variable Mean SD
1 The board review the actions management takes to deal with
Material control weaknesses and verify that those actions are
Objective and adequate 4.01 3.29
The audit reports contains sufficient details for internal control
2
purposes
4.71 2.92
Audit reports timely enough to allow for resolution and
3
Appropriate action
4.52 2.67
4 The board or audit committee approve the selection of key
Internal audit personnel 4.68 2.36
5 The board or audit committee review results of the audit
periodically 4.63 3.89
6 The board or audit committee periodically reviews audit
and other key control systems 4.84 2.61
7 Management held accountable if they do not follow up
Satisfactorily or effectively on control weaknesses 4.69 1.04

66
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determine the underlying relationship 0.102, p>0.01).

between the independent and dependent Contrary there is a significant and strong
variable. positive relationship between control
Table 4.6 provides the relationship between environment and financial appropriation (r =
internal control systems and efficiency in 0.732, p<0.01). At the same time, there is a
management for selected private institutions significant and weak relationship between
located in Arusha. The first factors under control environment and financial
investigation are control environment and accountability for efficiency in financial
efficiency of financial management. There is management (r = 0.025, p<0.01).
no significant relationship control The results also revealed that there was no
environment and financial utilization (r = significant relationship between risk
0.032, p>0.01) or financial maximization (r = assessment with financial accountability,

Table 4.6: Internal Control System and Efficiency in Financial Management

Variable Financial Financial Financial Financial
Utilization Accountability Appropriation Maximization
Control Environment
Pearson Correlation 0.419 0.025 0.732 0.102
Sig. (2-tailed) 0.032 0.000 0.000 0.932
N 70 70 70 70

Risk Assessment
Pearson Correlation 0.192 0.632 0.423 0.537
Sig. (2-tailed) 0.000 0.631 0.023 0.865
N 70 70 70 70

Control Activities
Pearson Correlation 0.852 0.328 0.543 0.943
Sig. (2-tailed) 0.000 0.034 0.000 0.000
N 70 70 70 70

Information and
Communication
Pearson Correlation 0.758 0.690 0.504 0.622
Sig. (2-tailed) 0.765 0.000 0.453 0.000
N 70 70 70 70

Monitoring
Pearson Correlation 0.832 0.798 0.834 0.698
Sig. (2-tailed) 0.000 0.765 0.000 0.687
N 70 70 70 70

67
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financial appropriation and financial
maximization (p>0). However, there is a
significant and weak relationship between risk
assessment and financial utilization (r = 0.192,
p<0.01).
The findings further suggest that there was a
significant and strong relationship between
control activities and financial utilization (r =
0.943, p<0.01). At the same time, there was a
significant and strong relationship between
control activities and financial utilization (r =
0.852, p<0.01). Consequently, there is a
significant and moderate relationship between
control activities and financial appropriation (r
= 0.543, p<0.01). However there is no
significant relationship between control
activities and financial accountability (r =
0.328, p>0.01). this results are contrary to the
study conducted by Abubakar, Dibal, Amande,
and Pwagusadi (2017) who found a significant
relationship between internal control activities
and financial accountability in local
government areas of Borno State Nigeria.
According to these findings, it can be said that
the differences in results is a results of
differing perceptions and opinion on the
subject.
The data analysis further reveals that there is
significant and strong relationship between
information and communication, and financial
accountability (r = 0.690, p<0.01). Similarly,
there was a significant and significant
relationship between information and
communication, and financial maximization (r
= 0.622, p.0.01). However, there is no
significant relationship between information
and communication and financial utilization or
financial appropriation (p>0.01).
Finally, there is a significant and strong
relationship between monitoring and financial
utilization (r = 0.832, p<0.01). At the same
time, there is a significant and strong
68
relationship between monitoring and financial
appropriation (r = 0.834, p<0.01). However,
there is no significant relationship between
monitoring and financial maximization or
financial accountability (p>0.01).
These mixed results about the relationship
between internal control systems and
efficiency of financial management have been
exhibited in other studies as well. A study
conducted by Agung (2015) argues that
efficiency of internal control systems on issues
of financial management varies from situation
to situation in different organizations. This is
due to the fact that there are different
methods and techniques applied within a
different control environment which might
affect positively or negatively the efficiency of
internal control systems in efforts to improve
financial management in the organization. In
this case, it appropriate to conclude that
internal control will have different results on
efficiency of financial management in any
organization.
5.0 Conclusion and Recommendations
Based on the findings of study subjected to
empirical evidence, it is appropriate to
conclude that the effectiveness of internal
control system affects either directly or
indirectly the efficiency of financial
management for selected training institutions
in Arusha Tanzania. This is due to the fact that
the employees either agreed or strongly that
their organizations had a strong internal
control system with an efficient financial
management operations. At the same time,
the correlation measures attest to a significant
relationship between internal control systems
and efficiency of financial management.
Based on the research results, analysis and
conclusion, the following are the practical
recommendations for future studies.
www.ijieb.co.tz/cjeb ISSN 2738-9294 (Online) Vol. 1 Iss. 1, 2020 (pp. 55-73)
1. The institutions should invest
implement and update continuously
the internal control systems as a
method and strategy to improve
efficiency of financial management in
their organizations. This involves
creating and developing a conducive
control environment, a sound risk
assessment plan, appropriate control
activities, adequate communication
and information strategies and a
rigorous monitoring mechanism for
internal control operations in these
institutions.
2. The institutions should provide
appropriate and adequate training to
employees about the implementation
of internal control systems as a means
to improve efficiency in financial
management. This will create
awareness and adequate knowledge
and skills for employees to implement
appropriate internal control
procedures to maximize the efficiency
of financial management activities and
operation in the institutions.
3. The institutions should evaluate and
assess the internal control systems to
determine vulnerabilities and
weaknesses in the systems which
might threaten or jeopardize the
efficiency of financial management
operations in the organization. This will
help the institution address those
shortcomings in effort to improve the
efficiency of financial management in
their institutions.
69
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