Effects of internal controls on liquidity among public universities in Kenya

Abstract

Public Universities have come under sharp criticism as a result of consistent concern on their liquidity. These institutions are facing liquidity constraints, situations that have made them unable to settle their short-term obligation in salary and wage payment. Thus, the present study sought to establish the effect of internal controls on liquidity of public universities in Kenya. More specifically, the study seeks to establish the effect of control environment, control activities as well as monitoring activities on liquidity. The study was guided by the agency theory, stewardship theory and control environment theory. Descriptive survey and correlational designs was adopted. The study will target 39 public universities in Kenya and from each, an internal auditor or his/equivalent was unit of observing. Census was adopted because of its relatively low population size and information is to be gathered from primary sources through questionnaire and from secondary sources through financial statements of the institutions. The gathered information was analyzed through means and standard deviations, correlation and regression and presented through tables and figures. The study reveals that a robust control environment (β = 0.339, p < 0.001), effective control activities (β = 0.317, p < 0.002), and enhanced monitoring systems (β = 0.256, p < 0.001) significantly improve liquidity in public universities. These findings underscore the importance of ethical standards and systematic measures for effective financial oversight, highlighting the crucial role of these components in promoting overall financial health.