Internal controls and financial performance : a case study of Mugonero Hospital and its health centers, Rwanda

Abstract

Effective internal control systems can play a very crucial role in every organization to realize organizational goals, one of which is achieving financial performance objectives. The main objective of this study was to establish the relationship between internal control systems and the financial performance of Mugonero Hospital and its health centers. Specific objectives of the study included examining the existing internal control system in the organization and investigating the relationship between the five internal control elements and financial performance. A correlational research design was adopted for this study. The study used a sample of 80 respondents from a targeted population, which also served as the sample. The findings of this research revealed that financial performance is quite good where all operating costs were covered, profitability goal attainment, enough liquid cash to cover all expenses and working capital was above 100%. The findings also indicated that internal controls were somewhat practiced and this due to the shortage of training given to the staff, segregation and separation of duties and that all risks were not daily measured. Therefore, the health institutions have to invest in establishing strong internal control systems to realize better their financial performance. Strong internal control systems must be entrenched in all levels of the organization by the managers to improve institution’s financial performance.