ABSTRACT Abstract The study examined the effect of internal control on financial performance of selected federal parastatals with emphasis on educational institution. The main objective of the study was to establish the effect of internal control systems on financial performance in federal parastatals. The study specific objectives were; to determine the effect of control activities, risk assessment, control environment, information and communication and monitoring on financial performance of the parastatals. The study was anchored on agency theory, stewardship theory, positive accounting theory and attribution theory. The study used a descriptive research design. This study took a sample study approach with its target population being the different categories of staff in different departments of the federal parastatals. It took on a sample of 73 employees. Primary data was collected from sample population using open and closed ended questionnaires. Descriptive statistics was used in the data analysis and information presented in statistical forms. A multiple linear regression was also used to analyze the relationship between the dependent and independent variable. The study realized that the control environment, risk assessment, control activities and information and communication as indicators of internal control systems have a significant influence on the financial performance of the federal parastatals. The variables explained 99.1% of the changes in financial performance of the institutions. The study recommends that internal control systems among the federal parastatals need to be improved and accountability of organizational resources be upheld.

TABLE OF CONTENTS

Title Page - - - - - - - - - - i

Declaration - - - - - - - - - - ii

Certification - - - - - - - - - - iii

Dedication- - - - - - - - - - - iv

Acknowledgements - - - - - - - - - v

Abstract - - - - - - - - - - - vi

Table of Content - - - - - - - - - vii

CHAPTER ONE: INTRODUCTION

1.1 Background to the Study - - - - - - - 1

1.1.1 Internal Control Systems - - - - - - 2

1.1.2 Financial Performance - - - - - - - 5

1.1.3 Internal Control and Financial Performance - - - - 6

1.2 Statement of the Problem - - - - - - - 7

1.3 Research Questions - - - - - - - 9

1.4 Objectives of the Study - - - - - - - 9

1.4.1 General Objective - - - - - - - - 9

1.4.2 Specific Objectives - - - - - - - 10

1.5 Research Hypothesis - - - - - - - 10

1.6 Significance of the Study- - - - - - - 11

1.7 Scope of the Study - - - - - - - 12

1.7.1 Time Scope - - - - - - - - 12

1.7.2 Geographical Scope - - - - - - - 12

1.7.3 Content Scope - - - - - - - - 13

1.8 Limitations of the Study - - - - - - - 13

1.9 Organization of the Study - - - - - - - 14

1.10 Justification - - - - - - - - 14

1.11 Operational Definition of Terms - - - - - - 15

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1 Introduction - - - - - - - - 17

2.1.1 Classification of Internal Controls - - - - - 18