Effect of Financial Control Mechanisms on Performance of Income Generating Units in Selected Public Universities in Kenya

Abstract

In an attempt to bridge the gap between the budgetary allocations and actual expenditures most universities have started income generating units with the aim of boosting their operational expenses. Whereas there is the potential of the use of Income Generating Units (IGUs) to generate additional funds, most universities still experience challenges in full implementation and realization of the revenue goal. This study therefore sought to determine the financial control mechanisms affecting performance of income generating units among selected public universities. The study sought to determine the effect of internal controls, credit policies, financial risk management and internal audit on performance of income generating units in selected universities. Targeted population was all the 290 employees in the IGU departments of selected public universities. The respondents were sampled using simple random sampling so as to enable equal representation of the target population without any biasness. Data collection was done using the questionnaire to ensure sufficient data was collected from the respondents. Descriptive statistics assisted in the determination of respondent’s views and opinions on every variable. Qualitative data was analysed using content analysis into meaningful, precise and comprehensive statements and presented in quotations. Data analysis was done using SPSS version 21 and data presented in form of figures and tables. The study ensured that all ethical considerations were considered by the study. The findings were that most employed Income Generating Units in Public Universities were Collection of rental fees, Evening and executive programs and Trainings of both short and long courses while the least was established to be Sales of memorabilia and books. All the financial control mechanism investigated namely internal audit, internal control measures, risk management strategies and credit policies had large extents of adoption in the selected universities. The results of the regression analysis showed that the financial control mechanisms investigated had a significant positive relationship on performance of the IGUs. Specifically, 47% of the variation of the performance of IGUs was established to be explained by the studied factors. The study concluded that the performance of the IGUs among the selected public universities was largely accounted for by the implemented financial control measures. Therefore effective financial control mechanisms is concluded to lead to better IGU performance whereas shortcomings in the financial control mechanisms is concluded to lead to diminished returns in the IGUs. The study recommended that the management in charge of the IGU department in the public universities to prioritize the formulation, implementation and monitoring of financial control mechanisms in the IGUs. To facilitate effective financial controls, the study recommended that the management especially those in the audit section to conduct regular checks and inspections on the IGUs. Additionally, frequent reforms were recommended to address the shortcomings experienced in integrating financial control measures in IGUs.

Internal control and financial viability: the moderating role of leadership qualities on management of income-generating activities at Indonesian higher education

“…Leadership quality can be a moderator of the ICS (Alam et al, 2019;Dangi et al, 2020) and FV (Imam and Reza, 2016;Miranda et al, 2016). Previous research has found a relationship between ICSs and MIG (Adora, 2019;Towett et al, 2019;Yemer, 2017) moderated by LQ. A good ICS in MIG encourages universities to be more optimal in overcoming financial management problems.…”

“…Internal control is a continuous operation and an integrated system at all levels in an organization. Indicators of internal control include the control environment, risk assessment, control activities, information, communication and controlling (Towett et al ., 2019). The items developed are in the Table 1.…”

“…Moreover, the income-generating unit that generates the most income in state universities comes from rental income, training and seminars. In contrast, the lowest income is sufficient to return library books (Towett et al ., 2019; Tsuma and Mugambi, 2014).…”

“…A good leader can encourage employees to complete their financial work quickly and accurately to achieve predetermined targets can be achieved (Panigrahi, 2018). If the target is achieved, then the financial performance is good (Towett et al, 2019).…”

“…All problems of poor resource mobilization and inappropriate handling of resources in universities revolve around the ICS, which can pose a serious threat to all functions and the existence of an MIG implementation strategy (Adora, 2019;Yemer, 2017). Internal controls, credit policies, financial risk management and internal audits affect income-generating performance (Towett et al, 2019). Furthermore, Karanja (2014) revealed that effective monitoring and evaluation affects the sustainability of income-generating projects in Kenya.…”