AN ASSESSMENT OF THE EFFECTIVENESS OF INTERNAL AUDIT SYSTEMS IN THE MANAGEMENT OF DECENTRALIZED FUNDS IN KENYA: A STUDY OF LOCAL AUTHORITY TRANSFER FUND IN KISII MUNICIPAL COUNCIL

Abstract

LATF was established in 1999 through the LATF Act No. 8 of 1998, with the objective of improving service delivery, financial management, and reducing outstanding debts of Local Authorities. Through LATF, the government transfers 5% of the income tax revenues to 175 LAs annually. Despite the huge sums of money they receive, 77% of the LAs are unable to meet their recurrent expenditures among other obligations. This questions the effectiveness of internal audit systems in the management of LATF. The general objective of this study was to assess the effectiveness of the internal audit systems in the management of LATF in Kisii Municipal Council. A descriptive study design was adopted in the study. The targeted population of the study was 124 upper and middle cadre employees and councilors, with sample size of 62 respondents. The data were collected using structured questionnaires. The data were analyzed using descriptive statistics such as frequency distributions, percentages, weighted averages, and results were presented using tables and graphs. The study established that the internal audit systems were averagely effective in the management of LATF funds. The study recommended that Kisii Municipal Council should establish an independent internal audit department. The study concluded that the internal audit systems need to be improved, following the recommendations of research. The findings of the research can be used by municipal councils, academicians, and researchers as a source of knowledge.