INTEGRATED FINANCIAL MANAGEMENT INFORMATION SYSTEM AND FINANCIAL REPORTING EFFECTIVENESS

KYAMBOGO UNIVERSITY

INTEGRATED FINANCIAL MANAGEMENT INFORMATION SYSTEM (IFMIS) AND

FINANCIAL REPORTING EFFECTIVENESS OF LOCAL GOVERNMENT IN

UGANDA: A CASE STUDY OF WAKISO DISTRICT

BY

MUGABA MUHAMAD MUHAMUD

(BSWASA, KYU)

A RESEARCH REPORT SUBMITTED TO GRADUATE SCHOOL IN FULFILLMENT

OF THE REQUIREMENTS FOR THE AWARD OF MASTER OF SCIENCE IN

ORGANISATION AND PUBLIC POLICY MANAGEMENT OF KYAMBOGO

UNIVERSITY

NOVEMBER, 2016

i

DECLARATION

I hereby do declare that this research report is my own effort and it has never been produced

anywhere in Kyambogo University or any other institution of higher learning before.

SIGNATURE……………………………………………….DATE…………………………...….

MUGABA MUHAMAD MUHAMUD

14/U/12863/GMOP/PE

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APPROVAL

This dissertation has been developed and submitted with the approval of the following

supervisors;

SIGNATURE………………………………………………DATE…………………………….

DR. MARY MAURICE MUKOKOMA (PhD)

SIGNATURE………………………………………………DATE…………………………….

DR. TEOPISTA N. KYAMANYWA (PhD)

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TABLE OF CONTENTS

DECLARATION......................................................................................................................................... ii

APPROVAL............................................................................................................................................... iii

List of Table...............................................................................................................................................vii

DEDICATION..........................................................................................................................................viii

ACKNOWLEDGEMENT.......................................................................................................................... ix

ABBREVIATION……………………………………………………………………………………..……x

ABSTRACT...............................................................................................................................................xi

CHAPTER ONE:........................................................................................................................................1

INTRODUCTION.......................................................................................................................................1

1.0 Introduction..........................................................................................................................................1

1.1 Background to the Study......................................................................................................................1

1.2 Statement of the Problem.....................................................................................................................4

1.3 Objectives of the Study........................................................................................................................4

1.3.1 General Objective.........................................................................................................................4

1.3.2 Specific Objectives.......................................................................................................................4

1.4 Research Questions..............................................................................................................................5

1.5 The Scope of the Study........................................................................................................................5

1. 6 Significance of the Study....................................................................................................................6

1.7 A Conceptual framework.....................................................................................................................7

CHAPTER TWO:........................................................................................................................................8

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LITERATURE REVIEW............................................................................................................................8

2.0 Introduction..........................................................................................................................................8

2.1 The Concept of IFMIS.........................................................................................................................8

2.2 Financial Reporting Effectiveness.......................................................................................................9

2.3 Budgeting preparation and financial reporting effectiveness............................................................10

2.4 Transactions Processing and Financial Reporting Effectiveness.......................................................13

2.5 Report preparation and financial reporting effectiveness..................................................................18

CHAPTER THREE:..................................................................................................................................24

RESEARCH METHODOLOGY..............................................................................................................24

3.0 Introduction........................................................................................................................................24

3.1 Research Desigsn...............................................................................................................................24

3.2 The Target Population........................................................................................................................24

3.3 Sampling Size and Sampling Technique...........................................................................................24

3.4 Data Collection Methods and Tools..................................................................................................25

3.5 Data Collection Procedures................................................................................................................26

3.6 Data Quality Control..........................................................................................................................26

3.7 Reliability and Validity......................................................................................................................26

3.7.1 Reliability....................................................................................................................................26

3.7.2 Validity.......................................................................................................................................27

3.8 Measurement of Variables.................................................................................................................27

3.9 Data Analyses Methods.....................................................................................................................27

3.10 Ethical Considerations.....................................................................................................................28

3.11 Limitation to the Study....................................................................................................................28

CHAPTER FOUR:....................................................................................................................................29

PRESENTATION AND ANALYSIS OF RESULTS...............................................................................29

4.0 Introduction........................................................................................................................................29

4.1 Demographic Characteristics of Respondents...................................................................................29

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4.1.1 Gender of Respondents...............................................................................................................29

4.1.2 Age of Respondents....................................................................................................................29

4.1.3 Level of Education of Respondents............................................................................................30

4.1.4 Department of Respondents........................................................................................................30

4.1.5 Number of years spent in the Department..................................................................................31

4.2 Frequency of IFMIS Use...................................................................................................................31

4.3 IFMIS budget preparation and financial reporting effectiveness of Local Governments.................32

4.5 Transactions Processing and Financial Reporting Effectiveness of Local Governments..................35

4.7 Report Preparation and Financial Reporting Effectiveness of Local Governments..........................40

4.9 IFMIS and Financial Reporting Effectiveness...................................................................................43

CHAPTER FIVE:......................................................................................................................................47

DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS...........................................................47

5.1 Introduction........................................................................................................................................47

5.2 Summary............................................................................................................................................47

5.3 Discussions........................................................................................................................................48

5.3.1 The Effect of IFMIS budget preparation on Financial Reporting effectiveness.........................48

5.3.2 The Effect of Financial Transactions Processing on Financial Reporting Effectiveness...........50

5.3.3 The Effect of IFMIS financial report preparation on financial reporting effectiveness.............52

5.4 Conclusions........................................................................................................................................54

5.4.1 The Effect of IFMIS budgeting system on Financial Reporting effectiveness...........................54

5.4.2 The Effect of IFMIS financial transactions system on financial reporting effectiveness...........55

5.4.3 The Effect of IFMIS Report preparation on financial reporting effectiveness...........................55

5.5 Recommendations..............................................................................................................................55

5.6 Recommendation for Further Studies................................................................................................56

REFERENCES/BIBLIOGRAPHY...........................................................................................................57

Appendix 1: Questionnaire........................................................................................................................60

Appendix 2: Krejcie and Morgan Table (1970) For Determining Sample Size.........................................63

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Appendix 3: Frequency table of IFMIS Budget preparation on financial reporting effectiveness.............63

Appendix 4: Frequency table of transaction processing on financial reporting effectiveness....................64

Appendix 5: Frequency table of IFMIS report preparation on financial reporting effectiveness...............65

Appendix 6: Frequency table of IFMIS on financial reporting effectiveness.............................................65

Appendix 7: Introductory letter.................................................................................................................66

LIST OF TABLE

Table 1: Showing the Sample size

Table 2: Showing Gender of Respondents

Table 3: Showing Age of Respondents

Table 4: Showing Level of Education of Respondents

Table 5: Showing Department of Respondents

Table 6: Showing Period spent in the department

Table 7: Showing Frequency of IFMIS Use

Table 8: Showing budget preparation and financial reporting Effectiveness (n=104)

Table 9: Showing correlation between IFMIS budget and financial reporting effectiveness

Table 10: Showing Transactions Processing and Financial Reporting Effectiveness (n=104)

Table 11: Showing the correlation between IFMIS transaction processing and financial reporting

effectiveness

Table 12: Showing Report Preparation and Financial Reporting Effectiveness (n=104)

Table 13: Showing correlation between IFMIS Report preparation and financial reporting effectiveness

Table 14: Showing IFMIS and Financial Reporting Effectiveness (n=104)

Table 15: Showing a multi-variate Logistic Regression of Financial Reporting Effectiveness and IFMIS

Budget Preparation, Transaction Processing and Report Preparation

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ABBREVIATIONS

IFMIS: Integrated Financial Management Information System

USAID: United State Aid for International Development

IMF: International Monetary Fund

MTEFs: Medium Term Expenditure Frameworks

PEM: Public Expenditure Management

MFPED: Ministry of Finance, Planning and Economic Development

FMIS: Financial Management Information System

PFM: Public Fund Management

G2C: Government to Citizens

G2B: Government to Business

G2G: Government to Government

CVI: Content Validity Index

SPSS: Statistical Packages for Social Sciences

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ABSTRACT

The study sought to examine the effect of Financial Integrated Management Information System

on Financial Reporting Effectiveness of District Local Governments in Uganda. The main

objectives of the study was to assess the effect of Budget Preparation on Financial Reporting

Effectiveness of District Local Governments, to analyse the effect of Transaction Processing on

Financial Reporting Effectiveness of District Local Governments, and to examine the effect of

Report Preparation on Financial Reporting Effectiveness of District Local Governments.

The study adopted a descriptive case study research design due to its ability to provide a

snapshot of the current state of affairs. Data was collected using a questionnaire and structured

interviews and collected data was analysed using quantitative and qualitative method of data

analysis.

The study found that IFMIS system positively affected and improved the financial reporting

effectiveness of district local government by ensuring consistency in reporting with mean

support of 3.30, accuracy 4.19, timely reporting 4.39, transparency 4.32 and ensuring relevancy

of the report 4.23. This overwhelming support for the system reflect that IFMIS has great effect

on financial reporting of effectiveness of Wakiso district. This positive effect is achieved through

effective budget preparation, transaction processing and effective report preparation of the

system meaning that, this discovery fulfils one of the objective for the introduction of Integrated

Financial Management Information System (IFMIS) in district local government which is

improving financial reporting effectiveness.

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The study therefore recommended that district managers need to continuously train its staff on

the use this information to plan and formulate budgets; examine results against budgets and

plans; manage cash balances; track the status of debts and receivables; monitor the use of fixed

assets and monitor the performance of specific departments or units for effective financial

reporting effectiveness.

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CHAPTER ONE

INTRODUCTION

1.0 Introduction

A well-designed Integrated Financial Management Information System (IFMIS) contains the

characteristics that include management function that provides a wide range of non-financial and

financial information and the system affects the reporting effectiveness (Hendriks, 2012). IFMIS

is meant to be used as a common system across government institutions, including Local

Governments. The integration of IFMIS across the board ensures that all users adhere to

common standards, rules and procedures, with the view to reducing risks of mismanagement of

public resources through automated reporting of financial matters.

Financial reporting effectiveness provide information about the financial position, performance

and financial adaptability of an institution that is useful to a wide range of users for assessing the

stewardship of management and for making economic/financial decision. Therefore, financial

reporting effectiveness is crucial to financial decision-makers to make decision on investment,

policy, and marketing strategies. Decisions are made out of available information; hence,

financial reports should be made available to users periodically (Maidoki, 2013).

Timeliness principle in accounting refers to the need for accounting information to be presented

to the users in time to fulfil their decision making needs. The timeliness of accounting information

refers to the provision of information to users quickly enough for them to take action. The timeliness

concept is of particular importance in four areas of a business (Diamond & Khemani, 2005). Many of the

public sector institutions do not timely release the financial information due to the nature of the systems

used to generate financial information. This make financial reporting effectiveness very hard when there

is no timely financial information and therefore hard to make financial decisions (Hendriks, 2012).

Timeliness of accounting information is highly desirable since information that is presented

timely is generally more relevant to users while conversely, delay in provision of information

tends to render it less relevant to the decision making needs of the users. Timeliness principle is

therefore closely related to the relevance principle. It is also important to protect the users of

accounting information from basing their decisions on outdated information (Brown, 2008).

Accuracy: is freedom from error (correctness), or closeness to truth or fact, resulting from

exercise of painstaking care or due diligence. According to auditor general report (2015)

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observed that accuracy in financial reports in public sector is still a problem, because accuracy

has been depends on how the data is collected, and is usually judged by comparing several

measurements from the same or different sources and yet public sector has been lacking a system

to collect uniform data. Coupled with accuracy is consistency which means that accounting

methods once adopted must be applied consistently in future (World Bank, 2013). This has been

a challenge to almost public sector institutions, because of the manual approach public sector use

in reporting financial report, they have not been consistent in reporting as advanced by (Bragg,

2013). Transparency is the extent to which investors have ready access to required financial

information about a company, such as price levels, market depth and audited financial reports

(Karatsi, 2015). Transparency helps reduce price volatility, because all the market participants

can base decisions of value on the same data. Local government also have a strong motivation to

provide disclosure, as transparency is generally rewarded through the stock's performance.

1.1 Background to the Study

Over the past decade, developing, transition and post-conflict countries have increasingly

embarked on efforts to computerize their government operations, particularly with respect to

Public Financial Management and reporting. Most common among these have been the effort to

introduce Integrated Financial Management Information Systems (IFMIS) that computerize and

automate key aspects of budget execution and accounting operations across the institutions of

government (Rozner & Gallagher, 2008).

There has been a growing interest in the quality of public sector financial management in

developing countries with developing countries being encouraged to reform their expenditure

management and accountability systems and increasingly embark on major projects to

computerize their public institutions financial operations (Bason, 2010). Introducing Integrated

Financial Management Information Systems (IFMIS) in developing countries has been the most

popular among those projects to computerize public institutions’ accounting and payment

operations aimed at improving financial reporting (International Monetory Fund, 2010).

IFMIS refers to the use of information and communications technology in financial operations to

support management in budget decisions making, transaction processing, fiduciary

responsibilities, and preparation of financial reports and statements of the organisation (Rozner

& Gallagher, 2008). Its scope covers accounting, budgeting, cash management and debt

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management and related core treasury systems, and reporting. In its basic form, an IFMIS is little

more than an accounting system configured to operate according to the needs and specifications

of the environment in which it is installed (Brown, 2008).

As advanced by Meigns (1998) and cited by Maidoki (2013), financial reporting effectiveness is

the process of communicating financial information that is accurate, transparent, and consistent

within time bound to decision-makers. It provides information useful for making investment

decisions. Its disclosure provides both quantitative and qualitative information for its user’s

effective use and reliable decisions. In other words it presents information in a way that can be

understood by users. However Larson (1999), view financial reporting effectiveness as the

communication of relevant financial information to decision- makers (Maidoki, 2013).

IFMIS can enable prompt and efficient access to reliable financial data and help strengthen

government financial controls, improving the provision of government services, raising the

budget process to higher levels of transparency and accountability and expediting government

operations (Isidore, 2012). Donors and international institutions like the International Monetary

Fund (IMF), the World Bank, and USAID have played a critical role, and will continue to do so

in supporting and shaping developing countries’ financial management systems through projects

that provide a combination of technical assistance, training, financial resources and procurement

support to partner governments (Rozner & Gallagher, 2008). This is due to a broad agreement

that freely functioning IFMIS can improve financial management by providing real time

information that financial and other managers can use to administer programs effectively,

formulate budget and manage resources.

Institutional-centric theory of finances proposed by Stein and Rosefielde in 2005 as an

alternative to the flawed financial liberalization theory that increased the instability of

developing countries during the 90s. Based on the theory of imperfect markets, it acknowledges

the existence of imperfect information in the informal and formal institutions, which efficiency is

the engine of development (Stein &Rosefielde, 2005; Dornbusch&Reynoso, 2003). This

therefore highlighted the need to have an integrated system that supports real time financial

information access. An integration of financial functions was proposed by Demaestri and

Guerrero (2003) and theoretically suggests that effectiveness and efficacy are achieved when

financial information is integrated. In relation to this study, adoption of IFMIS in the districts is

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aimed at enhancing information access through integration of various functions thereby

removing information asymmetry. This as suggested by Demaestri and Guerrero (2003) will

enhance effectiveness and efficacy of district treasury and therefore ensure effective public

financial reporting (Wamuyu, 2013).

The middle late 1990s saw the proliferation of Medium Term Expenditure Frameworks (MTEFs)

throughout the developing world. About 25 countries in Africa including Kenya, South Africa,

Uganda, Asia (eastern, central, and southern), Latin America, and Eastern Europe are at various

stages in the process of adopting MTEFs and other countries are seriously considering it. This

proliferation has occurred over a relatively short period of time. Of the 25 existing MTEFs,

nearly 90% were adopted over the five-year period 1997-2001. It is not premature to say that

MTEFs are a trend in developing country public expenditure management (PEM), and the trend

shows no signs of cresting” (Wynne, 2005).

Since 2002, the Government of Uganda has been installing a number of stand-alone

computerised systems in various Government Ministries, Agencies and Local Governments in an

attempt to plug these deficiencies and for the strengthening of government finance and

accounting functions (Diamond & Khemani, 2005). The system was first extended to 22

ministries and 25 districts, by 2014 IFMIS had been operationalized in 77 districts to manage

public funds Wakiso district inclusive ( (Nabuukera , 2014). This is being done for the purpose

of improving management, reporting and transparency of public funds for effective service

delivery. The establishment of an IFMIS has become an important benchmark for the country’s

budget reform agenda often regarded as a precondition for achieving effective management of

budgetary resources (Muigai, 2012).

Wakiso district is among the districts that have been using IFMIS since 2014 and its focus is not

only on efficiency and effectiveness but also ensuring management and interactive access of

information on their expenditure by the public and improvement to service delivery (MoFPED,

2015). The ambition to adopt the system was influenced by the benefits advanced by Hendriks

(2012) that IFMIS forms part of the financial management reform practices of developing

countries globally and holds benefits such as effective control over public finance, enhance

transparency and management and serves as a deterrent to corruption and fraud through

reporting.

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1.2 Statement of the Problem

Auditor General Report (2015) observes that Wakiso district failed to effectively report for

finances worthy Ush. 30,092,483,676 in financial year ended 30th June 2015 and it’s not only

Wakiso but other district as well. As a way to improve district financial reporting. IFMIS was

introduced in the district as a tool to cushion the district against loss of revenue through

unauthorized expenditure so as to improve financial reporting (Munyambonera & Lwanga,

2015). Despite the existence of the system for three years, the financial misappropriation has

remained unchanged which affects service delivery and value for money (Dener & Young, 2015)

and (Karatsi, 2015). This calls for an investigation about the system in regard to ensuring

financial reporting effectiveness of the district if local government funds are to achieve its goal

and ensure future financial management.

1.3 Objectives of the Study

1.3.1 General Objective

To determine the effect of Integrated Financial Management Information System (IFMIS) on

Financial Reporting Effectiveness of Wakiso District Local Government

1.3.2 Specific Objectives

The study was guided by the following three specific objectives;

i. To assess the effect of budget preparation on financial reporting Effectiveness of Wakiso

District

ii. To establish the effect of transaction processing on financial reporting effectiveness of

Wakiso District

iii. To examine the effect of report preparation on financial reporting effectiveness of Wakiso

District

1.4 Research Questions

The study was tasked to answer the following question below:

i. What is the effect of budget preparation on financial reporting effectiveness of Wakiso

District?

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ii. How does IFMIS transaction processing affect financial reporting effectiveness of

Wakiso District?

iii. What is the effect of report preparation on financial reporting effectiveness of Wakiso

District?

1.5 The Scope of the Study

This study was limited to assessing the effect of Integrated Financial Management Information

System (IFMIS) on Financial Reporting Effectiveness of district Local Governments taking a

case study of Wakiso District Local Government. This study was guided by key components

IFMIS components that include budget Preparation, transaction processing and report

preparation with emphasis on objectives that include; To assess the effect of Budget Preparation

on Financial Reporting Effectiveness of District Local Governments, analyzing the effect of

Transaction Processing on Financial Reporting Effectiveness of District Local Governments and

examining the effect of Report Preparation on Financial Reporting Effectiveness of Wakiso

District Local Governments. This is because they are the key areas that can leads to effective

financial reporting and management.

The study was carried out at Wakiso District Local Government. Wakiso District lies in the

Central Region of the country, bordering with Nakaseke District and Luweero District to the

north, Mukono District to the east, Kalangala District in Lake Victoria to the south, Mpigi

District to the southwest and Mityana District to the northwest. This was due to the fact that

Wakiso district is one of those that has been using IFMIS in executing its financial activities

The study was limited to three years between 2014 and 2016. This is because this is the period

that the IFMIS has been operating in Local Government.

1. 6 Significance of the Study

This research was important because it investigated and provided answers to issues that were

becoming more applicable in the increasingly information systems environment; leadership and

financial management of District Local Government. The findings of this study would be

important to managers in Local Government because it could be used to make major

improvements to managerial deficiencies that may exist within their respective Districts.

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https://en.wikipedia.org/wiki/Mityana_District

https://en.wikipedia.org/wiki/Mpigi_District

https://en.wikipedia.org/wiki/Mpigi_District

https://en.wikipedia.org/wiki/Lake_Victoria

https://en.wikipedia.org/wiki/Kalangala_District

https://en.wikipedia.org/wiki/Mukono_District

https://en.wikipedia.org/wiki/Luweero_District

https://en.wikipedia.org/wiki/Nakaseke_District

District Local Governments servant have new channels of record keeping and they will be in a

position to use IFMIS to provide timely, accurate and consistent data for management and

budget decision making. It also provided them with means that provides value for money.

The Wakiso District Local Government benefited from the information on the effects of IFMIS

on Financial Management in Local Governments, its importance and how to successfully use the

system to ensure financial efficiency and effectiveness and improve service delivery

The study stimulated academic interest in the whole aspect of integrated financial management

information system in the District Local Governments because it was a relatively new field hence

forming a basis for future research in IFMIS both in private and public sectors.

Guide policy makers in Local Governments, implementers and other public agencies on refining

IFMIS if gaps exist to achieve accurate financial management and provide information to

donors and citizens on how to mitigate challenges faced in implementation of IFMIS in district

local governments in Uganda

1.7 A Conceptual framework

Independent Variables Dependent Variable

Moderating variables

Source: Adapted from Rozner & Gallagher (2008)& Maidoki, (2013) and modified by the

researcher.

The study conceptualises that there is an effect between IFMIS and financial reporting

effectiveness of local governments. According to Rozner & Gallagher (2008), an IFMIS assists

management in ensuring financial reporting and accountability for the deployment and use of

public resources and in improving the effectiveness and efficiency of public expenditure

programmes for effective service delivery

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- Budget preparation- Transaction processing - Report Preparation

- Operating Environment

- Timeliness- Accuracy- Consistency- Transparency

IFMIS Financial Reporting Effectiveness

In the above conceptual framework the success or failure of IFMIS in ensuring financial

reporting effectiveness is dependent Budget preparation, Transaction process, and Financial

Report Preparation and moderating variable like operating environment also contribute to the

success of the system. By tracking financial events through an automated financial system,

district management is able to exercise improved control over expenditure and to improve

transparency through reporting in the budget cycle as a whole (Diamond & Khemani, 2006),

(Rozner & Gallagher, 2008).

In conclusion this chapter provides background information on integrated financial management

information systems, trends and implementation issues underpinning financial reporting

effectiveness in Wakiso District Local Governments. The chapter discusses the problem and

raises the research questions. Further, it provides the scope and explains the significance of the

study.

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CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction

This chapter presents the research design and techniques that were used in collecting and

analyzing data towards the achievement of the stated objectives. These include; area of study,

study population, sample size, study variables, sources of data collection, data collection

methods, data analyses, ethical consideration and the limitations of the study.

3.1 Research Design

Descriptive Case study research design was adapted for the study. This refers to an empirical

inquiry that investigates a single phenomenon within its real-life context; when the boundaries

between phenomenon and context are not clearly evident; and in which multiple sources of

evidence are used. It was used because case study research design allows the examination of the

data is most often conducted within the context of its use, that is, within the situation in which

the activity takes place (Zainal, 2007).

Descriptive case study research design was used because of its ability to provide a real situation

of the current state of affairs and the major variables to be studied include: financial budget

planning, financial transaction processing and financial report preparation and the research was

both qualitative and quantitative approaches and it was interactive with a number of departments

in the district (Zainal, 2007)

3.2 The Target Population

The target population were employees of Wakiso Districts Local Government in department that

includes finance, internal audits, and at Public works department where the financial system is in

use. According to Auditor General report, (2015) Wakiso district has about 150 staffs. The

researcher ascertained this population with the human resource department of the district council

on the possible number of employees in each of the department under study.

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3.3 Sampling Size and Sampling Technique

The sample size in this study was 108 respondents determine using Krejcie and Morgan table

(1970) which was obtained from the target population.

Table 1: Showing the Sample size

Department Population Sample size Sampling strategy

Finance 16 15 Systematic

Audit 18 16 Systematic

Procurement and Marketing 22 20 Stratified

Accounts 23 20 Stratified

Education 11 9 Systematic

Health 12 9 Systematic

Planning 13 11 Systematic

Administration 9 8 Systematic

Source: Krejcie & Morgan, (1970).

Both Stratified random sampling and systematic technique was used because the study

population is heterogeneous as it comprises of employees from different departments. After

stratification of the respondents, purposive sampling was used to select the sample elements from

each stratum to get the actual number of 108 respondents that represented the target population.

This technique also ensured fair and accurate representation of the general target population. In

research, at least 30% of the target population is a recommended size to study the population

(Kothari, 2014). A sample size of 108 respondents therefore is enough to be studied in this study.

3.4 Data Collection Methods and Tools

The questionnaire was used to collect data and the questionnaire was structured in nature in order

to ensure data collection validity and reliability and deep insight on the statistical variables and it

was used to collect information from the rest of the respondent in the selected departments. In

this study, the questions sought answers to the research questions and the respondents were

provided with a list of close-ended questions based on each specific objective.

10

The questionnaire was divided into five sections. The first section sought respondents’

demographic profile such as gender, age, education, years of service at the district, among others.

The second section comprised of Likert Scale questions about the effect of IFMIS budget

preparation on financial reporting effectiveness in district local governments. The third section

comprised of questions about the effect of IFMIS transactions processing on financial reporting

effectiveness in district local governments. The fourth section had questions about the effect of

IFMIS report preparation on financial reporting effectiveness in district local governments, and

the last section contained questions concerning the effect of IFMIS on financial reporting

effectiveness in district local governments. Structured interviews were also used

3.5 Data Collection Procedures

Upon the approval of the topic, the researcher wrote a proposal which was approved by the

supervisor and graduate school for data collection. The researcher obtained an introduction letter

from Graduate school which was presented to district authorities for permission to collect data.

Upon acceptance, the researcher begun to identify the respondents who are in this case

employees of the district. The researcher introduced himself to the respondent and explain how

he/she was selected to be part of the study. The researcher asked for consent from the respondent

to participate in the study. Upon respondent acceptance, the research administered a

questionnaire to the respondent or begun an interview with the respondent. Upon completion of

the interview or filling of the questionnaire, the researcher collected the questionnaires and

thanked the respondents for participating in the study

3.6 Data Quality Control

After the collection of raw data with the relevant research instruments, the researcher ensured

that he cross checked the questionnaires to ensure that also questions are answered before

leaving the field. This was coupled with supervision of the research assistants by the team leader

in this case the researcher during data collection to ensure that everything is done as planned

3.7 Reliability and Validity

3.7.1 Reliability

Reliability is the measure of the degree to which a research instruments yields consistent results

or data after repeated trials. A pilot study was conducted on a few personnel of Mukono district

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to measure the validity and reliability of the research instrument. Those selected for piloting

were not selected again for the main study.

The reliability (internal consistency) of the collected data in this study was assessed by

calculating the Cronbach’s Alpha coefficient using statistical package for social sciences (SPSS).

Although several measures of reliability can be ascertained in order to establish the internal

consistency of an instrument, this method was considered to be the most general form of

reliability estimation. In this method reliability was operationalized as internal consistency,

which is the degree of inter correlations among the items that constitute a scale. An alpha value

of 0.895 was obtained hence demonstrating internal consistency of new scales.

3.7.2 Validity

Content validity was used to determine the extent to which the items in the questionnaire provide

adequate coverage of the investigative questions. It was used through the judgments and

guidance that made by supervisors on the items included in the instrument. To measure this

validity, this formula was applied

CVI = Number of items rated relevant by all experts = 32 = 0.821

Total number of in terms in the instrument 39

The CVI was 0.821 and therefore the instrument was considered valid and was taken on for data

collection

3.8 Measurement of Variables

Budget preparation was assessed in terms of flexibility, realistic and ability to track expenses and

incomes. Transaction processing was measured in regard to rapid response, reliability,

inflexibility and controlled processing while Report preparation was measured in terms of

straight forwardness, structure and organised, relevancy, clarity, comprehensive and factual. And

financial reporting effectiveness was assessed in regard to accuracy, transparency, consistency,

timeliness

Likert scale of measurement of 1-5 dimensions (Strongly Agree (5), Agree (4), Neutral (3),

Disagree (2) and Strongly Disagree (1)) was used to measure the opinions of on various aspects

of IFMIS on financial reporting effectiveness to draw conclusion on the study.

3.9 Data Analyses Methods

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The procedure for data analysis began by first coding and entering the data in the Statistical

Package for the Social Sciences (SPSS), computer software used for analysing data. Coding, in

essence, entails the attribution of a number to a piece of data, or group of data, with the express

aim of allowing such data to be analysed in quantitative terms and the analysis was done using

SPSS at two levels. First, Descriptive summary of the findings was analysed and presented using

mean, standard deviation, maximum and minimum distribution and findings were presented in

tables.

Secondly a multi-variant logistic regression was used to determining the net impact of

independent variable on dependent variable that IFMIS budget preparation, transaction

processing and report preparation on financial reporting effectiveness. This was because logistic

regression has been proven to be efficient in the analysis of data where response variable is

categorical.

3.10 Ethical Considerations

The researcher sought the consent of the respondents before the information is collected from

them regarding the study objectives by making them aware of the type information required.

The researcher ensured confidentiality about the information to be obtained from the

respondents.

3.11 Limitation to the Study

Because financial reporting effectiveness is a very sensitive subject. There was some resistance

by respondents to offer information which made data collection a challenge especially because

investigations in the system was misconstrued to be investigations on the users and managers of

the system. This was especially so in the wake of recently unearthed high profile financial

mismanagement cases that have earthed in many district of Uganda (Auditor General, 2015).

However the researcher minimised this by ensuring that the purpose of research and what the

data is intended for was explained to the respondents before the interviews commenced and

questionnaires administered to put the respondents at ease.

13

CHAPTER FOUR

PRESENTATION AND ANALYSIS OF RESULTS

4.0 Introduction

The purpose of the study was to determine the effect of Integrated Financial Management

Information System on Financial Reporting Effectiveness of District Local Governments in

Uganda. This chapter presents the results and findings of the study. The chapter begins by

analysing the general information of the respondents, and then presents the analysis of the effect

of Effect of IFMIS Budget Preparation and Financial Reporting Effectiveness of Local

Governments. The chapter then presents the analysis of the effect of Effect of IFMIS

Transactions Processing and Financial Reporting Effectiveness of Local Governments and then

ends with the analysis of the effect of Effect of IFMIS Report Preparation and Financial

Reporting Effectiveness of Local Governments. The total number of questionnaires distributed

were 108.

In this section, the general information/demographic characteristics of respondents such as

gender, age bracket, education level, the department the respondents worked in and period

respondents have worked the department was analysed. The section also analyses the frequency

of the usage of IFMIS in their departments.

4.1 Demographic Characteristics of Respondents

4.1.1 Gender of Respondents

14

The distribution of the staff according to their gender is as shown in table 4.2. The table shows

that 50.9% of the respondents were of female gender while 49.07% of the respondents were of

the male gender. Therefore, both male and female respondents were adequately represented.

Table 2: Showing Gender of Respondents

Gender Frequency Percentage

Male 55 50.9

Female 53 49.07

Total 108 100.0

Source: Primary data

4.1.2 Age of Respondents

The distribution of respondents by age is shown in table. The table shows that 38.0% of the

respondents were in the 40-49 years age bracket while those over 50 years were 7.4% of the

respondents. The table also shows that the respondents in the 30-39 age brackets were 23.1%

whilst those in the 18-29 age brackets were 31.5% of the respondents. Therefore, the majority

(38.0%) of the respondents were 40-49 years old.

Table 3: Showing Age of Respondents

Age category Frequency Percentage

18-29 34 31.5

30-39 25 23.1

40-49 41 38.0

50 and above 8 7.4

Total 108 100.0


4.1.3 Level of Education of Respondents

15

The distribution of respondents by their level of education is shown in table below. The table

shows that 82.4% of the respondents were undergraduates while 17.6% had done their Diploma

postgraduates and certificate holders were not there. Thus, the majority of the respondents were

University graduates.

Table 4: Showing Level of Education of Respondents

Level of Education Frequency Percentage

Certificate 0 0%

Diploma 19 17.6

Degree 89 82.4

Postgraduate 0 0%

Total 108 100.0


4.1.4 Department of Respondents

The respondents were asked to indicate the departments where they were working. The

distribution is shown in table. The table shows that 13.9% of the respondents were working in

the Finance department while 11.1% were working in the Audit department. Those who were

working in the procurement department were 18.5%, those working in Education department

were 9.3%, and those working in Health were 9.3%, respondents working in the Accounts

department were 19.4%, respondent working in planning were 11.1% while those respondents

working in Administration were 7.4%. Therefore, the majority of the respondents were working

in the accounts and procurement department.

Table 5: Showing Department of Respondents

16

Department Frequency Percentage

Finance 15 13.9

Audit 12 11.1

Procurement and Marketing 20 18.5

Accounts 21 19.4

Education 10 9.3

Health 10 9.3

Planning 12 11.1

Administration 8 7.4

Total 108 100.0

Source: Krejcie & Morgan, (1970).

4.1.5 Number of years spent in the Department

The respondents indicated their tenure as captured in table below. The table shows that 2.9% of

the respondents had worked for less than a year while those who had worked for 1-3 years were

32.4% of the respondents. The respondents who had worked for 4-10 years were 56.5% of

whereas those who worked for over ten years were 8.3%. Therefore, majority of the respondents

worked with the district for at least four years.

Table 6: Showing Period spent in the department

Period spent in the department Frequency Percentage

Less than 1 year 3 2.8

1-3 years 35 32.4

4-10 years 51 56.5

More than 10 years 9 8.3

Total 104 100.0


4.2 Frequency of IFMIS Use

17

The respondents were asked to indicate the frequency with which they used IFMIS. Table shows

that 49.1% of the respondents used IFMIS daily whereas 9.3% of the respondents used the

software weekly. The table also shows that 24.1% of the respondents used IFMIS monthly while

17.6% of the respondents used the software quarterly and lastly, 0.0% of the respondents used

IFMIS annually. Therefore, the majority of the respondents used IFMIS daily.

Table 7: Showing Frequency of IFMIS Use

The level of IFIMIS usage Frequency Percentage

Daily 49.1 49.1

Weekly 10 9.3

Monthly 26 24.1

Quarterly 19 17.6

Annually 0 0%

Total 108 100.0


4.3 IFMIS budget preparation and financial reporting effectiveness of Local Governments

The study sought to assess the of IFMIS budget preparation on financial reporting in district

local government as an objective and the findings presented in the table below relates to this

objective.

Table 8: Showing budget preparation and financial reporting Effectiveness (n=108)

StatementMean

Standard

DeviationMin Max

It is easy to prepare a budget using IFMIS 4.56 0.636 2 5

IFMIS is realistic to resources available for spending easily 4.06 0.537 2 5

IFMIS ensures Equity and makes budget priorities easy 4.08 0.664 3 5

IFMIS enables us to determine budget costs so easily 3.43 1.172 2 5

IFMIS makes it easy to integrate all departmental budget together

including the ranking of their projects and activities for funding (flexible)3.90 0.757 2 5

It enable public to offer budget guidance and proposals before approval 3.47 1.222 1 5

It easy tracks income and expenditure of the district using IFMIS 3.77 1.072 1 5

18

IFMIS enables the district to update its budget quickly 3.84 0.915 2 5

IFMIS makes presentation and discussion of the budget so convenient 3.82 1.155 1 5

IFMIS makes sharing of budget information so quick and easy 3.54 1.042 1 5

Authorization of the budget is quick 4.27 0.672 3 5


The study sought to assess the respondents’ views on whether IFMIS enabled them to prepare a

district budget with ease. Table 8 indicates that the mean support on this view was 4.56 which

implies that the majority of the respondents supported that the view that IFMIS eases budget

preparation process. However 0.636 of the respondents deviated from the mean on the view that

IFMIS eases budget preparation process. The minimum response rate on whether IFMIS enabled

easy budget preparation was 2 and the maximum was 5. This therefore means that, majority of

the respondents were in support of the view that IFMIS helped them to easily prepare a district

budget.

About whether IFMIS is realistic to available resources for spending, table 8 indicates that the

mean support on this view was 4.06 which expressed that the majority of the respondents

supported that the view that IFMIS is realistic to available resources for spending. 0.537 of the

respondents deviated from the mean of 4.06 on the view that IFMIS is realistic to available

resources for spending. The minimum response rate on this view was 2 and the maximum was 5.

This picture therefore implies that, majority of the respondents were in support of the view that

IFMIS is realistic to available resources for spending.

The study sought to examine the respondents’ views on whether IFMIS ensures equity in budget

priorities. Table 8 indicates that the mean support for this view was 4.08 and this is far away

from the real mean which indicated that the majority of the respondents supported that the view

that IFMIS ensures equity in budget priorities. However 0.664 of the respondents deviated from

that mean on the view that IFMIS ensures equity in budget priorities. The minimum response

rate on this view was 3 and the maximum was 5. The results therefore shows that, majority of the

respondents were in support of the view that IFMIS ensures equity in budget priorities.

The study sought to analyse the respondents’ views on whether IFMIS determines budget costs.

Table 8 indicates that the mean support on this view was 3.43. This mean show that the majority

19

of the respondents supported that the view that IFMIS determines budget costs. The results. The

findings also reflected 1.172 of the respondents deviated from the mean on this view that IFMIS

determines budget costs. The minimum response rate on this view was 1 and the maximum was

5. These results therefore means that, majority of the respondents were in support of the view

that IFMIS determines budget costs.

The respondents were also asked about whether IFMIS integrates and ranking departmental

budget. Table 8 results indicates that the mean support for this view was 4.56. This mean is

stretching to 5 which showed that the majority of the respondents supported that the view that

IFMIS integrates and ranking departmental budget. However 0.636 of the respondents deviated

from that mean on the view that IFMIS integrates and ranking departmental budget process but

this is too low. The minimum response support rate was 2 and the maximum was 5. The results

therefore means that, majority of the respondents were in support of the view that IFMIS

integrates and ranking departmental budget.

The study aimed at examining the respondents’ views on whether IFMIS makes quick budget

authorization. Findings from table 8 showed the mean support of 4.27 which show that the

majority of the respondents supported that the view that IFMIS makes quick budget

authorization although 0.672 of the respondents deviated from the mean on the view that IFMIS

makes quick budget authorization. The minimum response support rate was 3 and the maximum

was 5. These results therefore implies that, majority of the respondents were in support of the

view that IFMIS makes quick budget authorization.

Table 9: Linear regression of Budget preparation and financial reporting effectiveness

Model Summary

R R Square

Adjusted

R Square

.325(a) .106 .097

a Predictors: (Constant), Uses IFMIS to prepare Budget

Coefficients (a)

Mode Coefficients Sig.

20

Constant .975 .000

Uses IFMIS to prepare Budget .325 .001

a Dependent Variable: Financial Reporting Effectiveness

Findings from the model summary 1 above, indicate that there is a significant and positive

correlation between IFMIS budget preparation and financial reporting effectiveness (r=0.325**

p=0.001) and the extent to which this variable affect the financial reporting effectiveness is r2=¿

0.106 which is below 0.01 (p<0.01). The finding show that there is a significant relationship

between budget preparation using IFMIS and financial reporting effectiveness. These results

have often been experience with the introduction of IFMIS in local government which was one

of the objective of IFMIS in Ugandan district.

The study sought to assess the effect of IFMIS Budget preparation on Financial Reporting

Effectiveness. The findings indicate that departments that use IFMIS in preparing budgets are

0.325 times more likely to be effective in reporting financial matters than those departments that

used IFMIS to prepare budgets. The findings also show a significance level of 0.001 meaning

that departments that used IFMIS to prepare budgets lead to effective financial reporting in the

district. The results therefore show that there is significant effect of IFMIS budget preparation

and financial reporting effectiveness in the district. These results were are attributed to the strict

follow of the budgeting rules

4.5 Transactions Processing and Financial Reporting Effectiveness of Local Governments

The study sought to analyse the of IFMIS transaction process on financial reporting in district


objective.

Table 10: Showing Transactions Processing and Financial Reporting Effectiveness (n=10)

Statement MeanStandard

DeviationMin Max

All district’s transactions both receipts and payments are processed

through IFMIS4.42 0.569 3 5

IFMIS offers rapid and quick response to the concerned parties 4.26 0.483 3 5

Only budgeted activities and authorized ones for funding is processed 4.13 0.654 3 5

21

IFMIS detects the error in process of authorization so quickly 3.59 1.137 1 5

IFMIS organizes and structure information about spending of the district 3.62 1.232 1 5

Only captured and validated transactions are allowed for processing 3.76 1.102 1 5

IFMIS allows only factual information to be processed 4.19 0.966 1 5

IFMIS makes it to trace all stages of transaction processing in the district 4.15 0.498 3 5

IFMIS allows timely sharing of transaction information to all concerned

parties in the district3.92 0.844 2 5

IFMIS makes bank reconciliation automatically and offers information 3.71 0.982 2 5

IFMIS makes transaction process participatory in the district 3.77 1.184 1 5

IFMIS keeps the transaction and database information for reference. 4.12 0.910 2 5


The study sought to examine the respondents’ views on whether IFMIS processes all transaction

receipts and payments of the district. Table 10 indicates that the mean support on this view was

4.42. This mean support indicates that the majority of the respondents supported that the view

that IFMIS processes all transaction receipts and payments of the district. The findings also

indicates 0.569 of the respondents deviated from the mean on the view that IFMIS processes all

transaction receipts and payments of the district. The minimum response support rate was 3 and

the maximum was 5. These finding therefore indicated that, majority of the respondents were in

support of the view that IFMIS processes all transaction receipts and payments of the district.

The study sought to analyse the respondents’ views on whether IFMIS offers rapid and quick

response of the transaction. Table 10 indicates that the mean support on this view was 4.26. This

mean was stretching next to greater 5 which show that the majority of the respondents supported

that the view that IFMIS offers rapid and quick response of the transaction, although there were

about 0.483 of the respondents deviated from the mean on the view that IFMIS offers rapid and

quick response of the transaction. The minimum response support rate was 3 and the maximum

was 5. The results therefore indicated that, majority of the respondents were in support of the

view that IFMIS offers rapid and quick response of the transaction.

The study sought to establish the respondents’ views on whether IFMIS allows only budgeted

activities are processed for funding. Table 10 indicates that the mean support was 4.13. This

22

mean if great which show that the majority of the respondents supported that the view that

IFMIS allows only budgeted activities are processed for funding. But 0.654 of the respondents

deviated from the view that IFMIS allows only budgeted activities are processed for funding

despite high support for the view. The minimum response support rate was 3 and the maximum

was 5. This therefore means that, majority of the respondents were in support of the view that

IFMIS allows only budgeted activities are processed for funding.

The study sought to determine the respondents’ views on whether IFMIS quickly detects errors

in the authorization process. Table 10 indicates that the mean support was 3.59 which show that

the majority of the respondents supported that the view that IFMIS quickly detects errors in the

authorization process. 1.137 of the responses from the respondents deviated from the view that

IFMIS quickly detects errors in the authorization process. The minimum response support rate

was 1 and the maximum was 5. This therefore means that, majority of the respondents were in

support of the view that IFMIS quickly detects errors in the authorization process.

The study sought to examine the respondents’ views on whether IFMIS organizes and structures

information about district spending. Table 10 indicates that the mean support was 3.62. This

mean is great which show that the majority of the respondents supported that the view that

IFMIS organizes and structures information about district spending. However 1.232 of the

respondents deviated from that mean on the view that IFMIS organizes and structures

information. The minimum response support rate was 1 and the maximum was 5. This therefore

means that, majority of the respondents were in support of the view that IFMIS organizes and

structures information about district spending.

The respondents were also asked about whether IFMIS organizes and structures information

about district spending. Results in table 10 indicates that the mean support on this view was 3.62

which show that the majority of the respondents supported that the view that IFMIS organizes

and structures information about district spending. However 1.232 of the respondents deviated

from the mean on the view that IFMIS organizes and structures information. The minimum

response support rate was 1 and the maximum was 5. These results therefore implies that,

majority of the respondents were in support of the view that IFMIS organizes and structures

information about district spending.

23

The views of the respondents were also sought as to whether IFMIS processes only captured and

validated transactions. Results in table 10 indicates that the mean support on this view was 3.76

which showed that the majority of the respondents supported that the view that IFMIS processes

only captured and validated transactions. The findings also indicated 1.102 of the respondents

who deviated from the mean on the view that IFMIS processes only captured and validated

transactions. The minimum response support rate was 1 and the maximum was 5. This therefore

means that, majority of the respondents were in support of the view that IFMIS processes only

captured and validated transactions.

The opinions of the respondents were also sought as to whether IFMIS allows only factual

information to be processed. Table 10 indicates that the mean is 4.19 which show that the

majority of the respondents supported that the view that IFMIS allows only factual information

to be processed. However 0.966 of the respondents deviated from the view that IFMIS allows

only factual information to be processed. The minimum response support rate was 1 and the

maximum was 5. This therefore means that, majority of the respondents were in support of the

view that IFMIS allows only factual information to be processed

The study sought to establish the respondents’ views on whether IFMIS can trace all the stages

of the transaction processed. Finding from table 10 indicates that the mean support on this view

was 4.19 which show that the majority of the respondents supported that the view that IFMIS can

trace all the stages of the transaction processed. However 0.966 of the respondents deviated from

the view that IFMIS can trace all the stages of the transaction processed. The minimum response

support rate was 1 and the maximum was 5. These results therefore means that, majority of the

respondents were in support of the view that IFMIS can trace all the stages of the transaction

processed.

About whether IFMIS can trace all the stages of the transaction processed. Results from table 10

indicates that the mean support on this view was 4.15 which is close to greater 5 indicating that

the majority of the respondents supported that the view that IFMIS can trace all the stages of the

transaction processed. However 0.498 of the respondents deviated from the view that IFMIS can

trace all the stages of the transaction processed. The minimum response support rate was 1 and

the maximum was 5. These findings therefore means that, majority of the respondents were in

support of the view that IFMIS can trace all the stages of the transaction processed

24

The study sought to analyse the respondents’ views on whether IFMIS allows timely sharing of

the transaction information. Findings from table 10 indicates that the mean support on this view

was 3.92 which show that the majority of the respondents supported that the view that IFMIS

allows timely sharing of the transaction information. However 0.844 of the respondents deviated

from the view that IFMIS allows timely sharing of the transaction information. The minimum

response support rate was 2 and the maximum was 5. This therefore means that, majority of the

respondents were in support of the view that IFMIS allows timely sharing of the transaction

information

The study sought to examine the respondents’ views on whether IFMIS makes automatic bank

reconciliation. Table 10 indicates that the mean support on this view was 3.71 which show that

the majority of the respondents supported that the view that IFMIS makes automatic bank

reconciliation. However 0.982 of the respondents deviated from the view that IFMIS makes

automatic bank reconciliation. The minimum response rate was 2 and the maximum was 5. This

therefore indicated that, majority of the respondents were in support of the view that IFMIS

makes automatic bank reconciliation.

About whether IFMIS makes the transaction process participatory. Table 10 indicates that the

mean is 3.71 which show that the majority of the respondents supported that the view that IFMIS

makes the transaction process participatory. 0.982 in this respect shows responses of the

respondents deviated from the mean on the view that IFMIS makes the transaction process

participatory. The minimum response rate was 1 and the maximum was 5. These finding

indicated that, majority of the respondents were in support of the view that IFMIS makes the

transaction process participatory

The study sought to establish the respondents’ views on whether IFMIS keeps transaction and

database information for reference. Table 10 indicates that the mean support was 4.12 which is

close to the 5, this indicated that the majority of the respondents supported that the view that

IFMIS keeps transaction and database information for reference. However 0.910 of the

respondents deviated from the view that IFMIS keeps transaction and database information for

reference. The minimum response rate was 2 and the maximum was 5. This therefore implies

that, majority of the respondents were in support of the view that IFMIS keeps transaction and

database information for reference.

25

Table 11: Linear regression of Transaction processing and financial reporting effectiveness

Model Summary

R R Square Adjusted R Square

.537(a) .289 .282

a Predictors: (Constant), Used IFMIS for transaction processing

Coefficients (a)


Constant .571 .000

Used IFMIS for transaction processing .545 .000


The findings indicate that there is a great effect between IFMIS transaction processing and

financial reporting effectiveness r=0.537** p= 0.000, and the extent to which IFMIS transaction

processing affect the financial reporting effectiveness is r2=0.289 which p<0.01). These finding

therefore indicated that when using IFMIS in any transaction in the district paves higher chance

of being effective in reporting financial matters.

The study sought to establish the effect of IFMIS Transaction Processing on Financial Reporting

Effectiveness. The findings indicate that departments that use IFMIS in processing transaction

are 0.545 times more likely to be effective in reporting financial matters than those departments

that did not use IFMIS in processing transactions in the district. The findings show 0.000

significance level which implies that departments that used IFMIS to process transaction were

effective in reporting financial transactions in the district. The findings in the regression 0.000

significance level implying that there is a significant effect of IFMIS Transaction processing on

financial reporting effectiveness in the district. This great effect is attributed to the fact that after

the information has been fed into the system it is easier to monitor and quickly process any

transaction using the system so the system can only release what has been fed in it for a

particular item.

4.7 Report Preparation and Financial Reporting Effectiveness of Local Governments

26

The study sought to examine the of IFMIS report preparation on financial reporting in district


objective.

Table 12: Showing Report Preparation and Financial Reporting Effectiveness (n=108)

Statement MeanStandard

DeviationMin Max

It is easy to prepare a financial report using IFMIS 4.23 0.937 1 5

It is easy to organize and structure a report using IFMIS 4.20 0.597 2 5

The system produces a report timely and friendly for the user 3.64 0.775 2 5

IFMIS help to derive the specific information required to carry out duties 3.73 0.895 2 5

Reports produced using the system are straight forward and facilitates

analysis3.75 0.693 2 5

IFMIS presents reports in a purposeful way as required by the district 3.75 0.983 2 5

IFMIS ensure release of comprehensive but compact report for the 3.80 1.028 2 5

Factual and accurate reports are prepared through IFMIS 4.02 0.945 2 5

IFMIS reports accurately discloses the financial position of the district 4.39 0.793 2 5

The report prepared with IFMIS is clear and relevant to the district 4.26 0.557 2 5


Respondents were asked whether IFMIS ease budget preparation. Findings on table 12 indicates

that the mean support on this view was 4.23 which show that the majority of the respondents

supported that the view that IFMIS ease budget preparation. However 0.937 of the respondents

deviated from the view that IFMIS ease budget preparation. The minimum response support rate

was 1 and the maximum was 5. This therefore, means that majority of the respondents were in

support of the view that IFMIS ease budget preparation

The study also sought whether IFMIS organizes and structures financial report. Table 12

indicates that the mean is 4.20 which show that the majority of the respondents supported that

the view that IFMIS organizes and structures financial report. However 0.597 of the respondents

deviated from the view that IFMIS organizes and structures financial report. The minimum

response rate was 2 and the maximum was 5. This therefore, means that majority of the

respondents were in support of the view that IFMIS organizes and structures financial report

27

The views of the respondents was sought as to whether IFMIS produces timely and friendly

reports to the user. Table 12 indicates that the mean is 3.64 which show that the majority of the

respondents supported that the view that IFMIS produces timely and friendly reports to the user.

However 0.775 of the respondents deviated from the view that IFMIS makes the transaction

process participatory. The minimum response rate was 2 and the maximum was 5. This

therefore, means that majority of the respondents were in support of the view that IFMIS

produces timely and friendly reports to the user

The opinion of the respondents was sought as to whether IFMIS helps to derive at specific

information in the report for duties. Table 12 indicates that the mean is 3.73 which show that the

majority of the respondents supported that the view that IFMIS helps to derive at specific

information in the report for duties. However 0.895 of the respondents deviated from the view

that IFMIS makes the transaction process participatory. The minimum response rate was 2 and

the maximum was 5. This therefore, means that majority of the respondents were in support of

the view that IFMIS helps to derive at specific information in the report for duties.

The study sought to determine the respondents’ views on whether IFMIS produces straight

forward reports which enable analysis. Table 12 indicates that the mean is 3.75 which show that

the majority of the respondents supported that the view that IFMIS produces straight forward

reports which enable analysis. However 0.693 of the respondents deviated from the view that

IFMIS makes the transaction process participatory. The minimum response support rate was 2

and the maximum was 5. This therefore means that, majority of the respondents were in support

of the view that IFMIS produces straight forward reports which enable analysis.

The study sought to determine the respondents’ views on whether IFMIS reports only purposeful

reports required by the district. Table 12 indicates that the mean is 3.75 which show that the

majority of the respondents supported that the view that IFMIS reports only purposeful reports

required by the district. However 0.983 of the respondents deviated from the view that IFMIS

reports only purposeful reports required by the district. The minimum response support rate was

2 and the maximum was 5. This therefore means that, majority of the respondents were in

support of the view that IFMIS reports only purposeful reports required by the district

The opinion of the respondents was sought as to whether IFMIS releases comprehensive and

compacted financial reports. Table 12 indicates that the mean is 3.80 which show that the

28

majority of the respondents supported that the view that IFMIS releases comprehensive and

compacted financial reports. However 1.028 of the respondents deviated from the view that

IFMIS releases comprehensive and compacted financial reports. The minimum response support

rate was 2 and the maximum was 5. This therefore showed that, majority of the respondents were

in support of the view that IFMIS releases comprehensive and compacted financial reports.

The study sought to determine the respondents’ views on Whether IFMIS prepares only factual

and accurate reports. Table 12 indicates that the mean is 4.02 which show that the majority of the

respondents supported that the view that IFMIS prepares only factual and accurate reports.

However 0.945 of the respondents deviated from the view that IFMIS prepares only factual and

accurate reports. The minimum response support rate was 2 and the maximum was 5. This

picture reflected that, majority of the respondents were in support of the view that IFMIS

prepares only factual and accurate reports.

The study question also sought to determine whether IFMIS accurately discloses financial

position of the district. Table 12 indicates that the mean is 4.39 which show that the majority of

the respondents supported that the view that IFMIS accurately discloses financial position of the

district. However 0.793 of the respondents deviated from the view that IFMIS accurately

discloses financial position of the district. The minimum response support rate was 2 and the

maximum was 5. This therefore revealed that, majority of the respondents were in support of the

view that IFMIS accurately discloses financial position of the district.

About whether IFMIS whether IFMIS prepares clear and relevant financial reports for the

district. Table 12 indicates that the mean is 3.75 which show that the majority of the respondents

supported that the view that IFMIS prepares clear and relevant Financial reports for the district.

However 0.693 of the respondents deviated from the view that IFMIS prepares clear and relevant

financial reports for the district. The minimum response rate was 2 and the maximum was 5. This


prepares clear and relevant financial reports for the district.

Table 13: Linear regression between Report preparation on financial reporting

effectiveness

Model Summary

29

R R Square

Adjusted

R Square

.539(a) .291 .284

a Predictors: (Constant), Used IFMIS for report preparation

Coefficients (a)


(Constant) .685 .000

Used IFMIS for report preparation .582 .000


About the effect of IFMIS financial report preparation on financial reporting effectiveness, the

results indicate that there is a significant positive relation between the two variables with

r=.0.539**, and the extent to which financial report preparation affect the reporting effectiveness

was 0.29 (r2=0.29¿ withp=0.000 which p<0.01. This findings shows that there is an

improvement of financial reporting effectiveness when districts use the system to prepare

financial reports. This means that if district can fully use the system in all it financial business,

there will be limited loss of money hence effective service delivery in the district.

The study sought to examine the effect of IFMIS Report preparation on Financial Reporting

Effectiveness. The findings indicate that departments that use IFMIS in preparing financial

report were 0.582 times more likely to be effective in reporting financial matters than those

departments that did not use IFMIS in preparing financial reports in the district. The findings

show 0.000 significance level which implies that departments that used IFMIS to preparing

financial reports were effective in financial reporting in the district. The findings in the

regression tables therefore implies that there is a significant impact of IFMIS financial report

preparation on financial reporting effectiveness in the district and significant 0.000 were constant

variable or unexplained figures in the study. Because is already with information that is required

to prepare a financial report, it is easy prepare a report which increases the system’s effectiveness

in reporting financial matters.

4.9 IFMIS and Financial Reporting Effectiveness

30

The study sought to determine the impact of IFMIS on financial reporting in district local

government as an objective and the findings presented in the table below relates to this objective.

Table 14: Showing IFMIS and Financial Reporting Effectiveness (n=108)

StatementMean

Standard

Deviatio

n

Min Max

IFMIS is consistent in reporting District financial matters 3.30 1.013 1 5

Reports prepared using IFMIS are accurate/systematic 4.19 0.986 1 5

IFMIS ensures timely reporting of the transaction made as required 4.39 0.674 3 5

The system is transparent when reporting financial matters 4.23 0.727 2 5

IFMIS reports on required information asked by the user 4.32 0.579 3 5


The study sought to examine the respondents’ views on whether IFMIS produces complete and

self-explanatory financial reports. Table 14 indicates a mean of 3.30 which show that the

majority of the respondents supported that the view that IFMIS produces complete and self-

explanatory financial reports. However 1.013 of the respondents deviated from the view that

IFMIS produces complete and self-explanatory financial reports. The minimum response rate on

this view was 1 and the maximum was 5. The findings therefore shows that, majority of the

respondents supported view that IFMIS produces complete and self-explanatory financial

reports.

About whether IFMIS is consistent in reporting district financial matters, Table 14 indicates that

the view attracted much support with a mean of 4.19 which implies that the majority of the

respondents supported that the view that IFMIS is consistent in reporting district financial

matters although the same table 9 shows that 0.986 of the respondents deviated from the view

that IFMIS is consistent in reporting district financial matters. The minimum response rate on

this view was 1 and the maximum was 5. This therefore implies that, majority of the respondents

supported the view that IFMIS is consistent in reporting district financial matters which is a very

important component of financial reporting effectiveness.

The study also sought to determine the respondents’ views on whether IFMIS prepares accurate/

systematic financial reports of the district. Table 14 indicates that the mean was 4.39 which show

31

that the majority of the respondents supported that the view that IFMIS prepares accurate/

systematic financial reports. In this respect 0.674 responses of the respondents deviated from the

view that prepares accurate/ systematic financial reports. The table also shows a minimum

response rate of 3 and the maximum was 5. These findings therefore implies that, majority of the

respondents were in support of the view that IFMIS prepares accurate/ systematic financial

reports.

The study also sought to analyse the respondents’ views on whether IFMIS ensure timely

reporting of the transaction made in the district. Table 14 indicates that the mean is 4.23 which

show that the majority of the respondents supported that the view that IFMIS ensure timely

reporting of the transaction made in the district while 0.727 of the responses deviated from the

view that ensure timely reporting of the transaction made in the district. The minimum response

rate was 2 and the maximum was 5. This therefore means that, majority of the respondents were

in support of the view that IFMIS ensure timely reporting of the transaction made in the district.

The study sought to analyse the respondents’ views on Whether IFMIS is transparent when

reporting financial matters. Table 14 indicates that the mean is 4.32 which show that the majority

of the respondents supported that the view that IFMIS is transparent when reporting financial

matters. However 0.579 of the respondents deviated from the view that IFMIS is transparent

when reporting financial matters. The minimum response rate was 3 and the maximum was 5.

This therefore, means that majority of the respondents were in support of the view that IFMIS is

transparent when reporting financial matters.

The study sought to assess the respondents’ views on whether IFMIS reports on information as

asked by the user. Table 14 indicates that the mean is 4.16 which show that the majority of the

respondents supported that the view that IFMIS reports on information as asked by the user.

However 0.860 of the respondents deviated from the view that IFMIS reports on information as

asked by the user. The minimum response rate was 2 and the maximum was 5. This therefore

showed that, majority of the respondents were in support of the view that IFMIS reports on

information as asked by the user.

Table 15: Summary table of Regression of Financial Reporting Effectiveness and IFMIS

Budget Preparation, Transaction Processing and Report Preparation

32

Variables R Coefficient Significance

IFMIS budget preparation .325 .325 .001

IFMIS transaction processing .537 .545 .000

IFMIS report preparation .539 .582 .000


The study sought to assess the effect of IFMIS Budget preparation on Financial Reporting

Effectiveness. The findings indicate that departments that use IFMIS in preparing budgets

are .325 times more likely to be effective in reporting financial matters than those departments

that used IFMIS to prepare budgets. The findings also show a significance level of 0.001

meaning that departments that used IFMIS to prepare budgets lead to effective financial

reporting in the district. The results therefore show that there is significant effect of IFMIS

budget preparation and financial reporting effectiveness in the district. These results were are

attributed to the strict follow of the budgeting rules

The study sought to establish the effect of IFMIS Transaction Processing on Financial Reporting

Effectiveness. The findings indicate that departments that use IFMIS in processing transaction

are .545 times more likely to be effective in reporting financial matters than those departments

that did not use IFMIS in processing transactions in the district. The findings show 0.000

significance level which implies that departments that used IFMIS to process transaction were

effective in reporting financial transactions in the district. The findings in the regression tables

implies that there is a significant impact of IFMIS Transaction processing on financial reporting

effectiveness in the district. This great effect is attributed to the fact that after the information has

been fed into the system it is easier to monitor and quickly process any transaction using the

system so the system can only release what has been fed in it for a particular item.

The study sought to examine the effect of IFMIS Report preparation on Financial Reporting

Effectiveness. The findings indicate that departments that use IFMIS in preparing financial

report are .582 times more likely to be effective in reporting financial matters than those

departments that did not use IFMIS in preparing financial reports in the district. The findings

show 0.000 significance level which implies that departments that used IFMIS to preparing

financial reports were effective in financial reporting in the district. The findings in the

regression tables therefore implies that there is a significant impact of IFMIS report preparation

33

on financial reporting effectiveness in the district and significant 0.000 were constant variable or

unexplained figures in the study. Because is already with information that is required to prepare a

financial report, it is easy prepare a report which increases the system’s effectiveness in reporting

financial matters.

In conclusion, the findings show that IFMIS has great effect on financial reporting effectiveness

in the district given the fact that the budgeting follow the law and rules that guide budgeting in

the district and therefore the system is an asset in improving financial reporting of the district and

achieve value for money.

CHAPTER FIVE:

34

DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

This chapter discusses the findings, makes conclusions and recommendations. This chapter starts

with a simple summary of the study. The chapter then proceeds to discuss the study findings

according to the set objectives. Conclusions are then drawn in view of the discussion under each

objective and finally, the chapter makes recommendations for improvement in financial reporting

effectiveness of the district as well as suggestions for future study.

5.2 Summary

The purpose of the study was to assess the effect of IFMIS on the financial reporting

effectiveness of district local governments in Uganda. The three specific objectives of the study

were: to assess the effect of Budget Preparation on Financial Reporting Effectiveness of District

Local Governments, to establish the effect of Transaction Processing on Financial Reporting

Effectiveness of District Local Governments, and to examine the effect of Report Preparation on

Financial Reporting Effectiveness of District Local Governments.

Descriptive case study research design was employed due to its ability to provide a snapshot of

the current state of affairs. The study population were staffs of Wakiso district local government.

The sample population comprised of 108 staff working in the finance, accounts, procurement and

audit departments, Health, community based and office of the Chief Administrative Officer and

Stratified and purposive sampling technique were used. Questionnaire and non-structured

interview schedule were used to collect the data and the response rate of 100% was recorded.

The data was analysed using SPSS for descriptive and linear regression and the findings were

presented in tables.

5.3 Discussions

The discussion in this section related to the objectives of the study that include; the effect of

IFMS budget preparation on financial reporting effectiveness, effect of IFMIS transaction

processing on financial reporting effectiveness, and the effect of IFMIS report preparation on

financial reporting effectiveness. The discussion was expresses in terms of description and

regression in relation to the literature advanced about the system in ensuring financial reporting

effectiveness in district local governments as seen below;

5.3.1 The Effect of IFMIS budget preparation on Financial Reporting effectiveness

35

The study findings indicate that many of the respondents were of the view that IFMIS budgeting

enabled them to ensure equity in budgeting and being realistic to resources available for the

district. These findings indicate that the IFMIS budgeting system improve the reporting

effectiveness of financial matters in the district. These findings were also reflected in the positive

correlation between the IFMIS budget preparation on financial reporting effectiveness (r=0.

325**, p=0.001 which p<0.01). This offer a consensus agreement with the views of Hendricks

(2012) who argue that IFMIS allow a more standardized and realistic budget formulation across

government, while promoting better control over budget execution through the full integration of

budget execution data. The findings informs that IFMIS improves financial reporting

effectiveness of the public sector specifically local governments. It also allow for the

decentralization of financial functions and processes under the overall control of the Ministry of

Finance, enhance financial discipline and control operating costs by reducing administrative

tasks and civil servants’ workload. In line with this argument, the findings show that majority of

the respondents (73%) agreed that it is very simple to tracks income and expenditure of the district

using IFMIS as seen in appendix 3. These findings were in line with Braggs (2013) who suggested

that Budgeting system plays an important role to Organisation management, especially in

decentralized agencies and that company/District needs budget to translate all the company's

strategies into short-term and long-term plans and objectives. These results do not differ from the

observations of one the respondent who reported that

“Because the system’s operation is linked to computer technology, it has a provision

which you click after all the budget details has been captured to prepare a full budget

and the whole budget will be summarized in a few hours as long as the systems network

is strong”.

Another respondent from the accounts department reported that

“As long as the environment is conducive with no interruption from anywhere the system

is the best to use in budgeting because if programmed and follow the budgeting rules and

regulations, it improve the information generation financial matters which later we use

in financial reporting for any financial decision to be made”

36

Following the discussion and interaction with officials in the district, there is a clear picture that

IFMIS is appreciated and what the district need to do to make the system more fruitful is

capacity building of the staff that use the system.

The respondents were also asked about whether IFMIS integrates and ranking departmental

budget. Table 8 results indicates that the mean support for this view was 4.56. This mean is

stretching to 5 which showed that the majority of the respondents supported that the view that

IFMIS integrates and ranking departmental budget. However 0.636 of the respondents deviated

from that mean on the view that IFMIS integrates and ranking departmental budget process but

this is too low. The minimum response support rate was 2 and the maximum was 5. The results


integrates and ranking departmental budget. These findings agree with Allen and Tommasi

(2011) description of the system as to openness, communication and accountability. When

transparency is achieved in budget reports, the reliability of information is enhanced; in turn

financial reporting is improved. This disagreement may associated to the fact that the system is

new in districts and the respondents have not been trained on how to use it effectively. The study

findings also showed that majority of the respondents 74.0% agreed that using IFMIS make it

easy to integrate all departmental budget together including the ranking of their projects and

activities for funding as in in appendix 3. This was obtained from finding that the IFMIS was

effective in improving district financial budgeting and ranking. These findings were also

reflected in the positive correlation between the IFMIS budget preparation on financial reporting

effectiveness (r=0. .291**, p=0.003 which p<0.01).

The findings were consistent with the views of Dener and Young (2015) that the system

allocates resources fairness is referred to the extent in which a firm identify allocating resources

policy and procedures with emphasizes on equity and transparency principles. Transparency can

be defined as "the essential condition for a free and open exchange whereby the rules and

reasons behind regulatory measures are fair and clear to all participants”. The study also showed

that majority 73% of the respondents agreed that IFMIS enabled them to tracks income and

expenditure of the district easily as reflected in appendix 3. This corresponded to positive

correlation between the effects of IFMIS on improved financial reporting and IFMIS enabling

37

them to tracks income and expenditure of the district easily, which implied improved financial

reporting effectiveness in districts by the system.

Similarly, findings showed that majority of the respondents supported that the view that IFMIS is

realistic to available resources for spending. 0.537 of the respondents deviated from the mean of

4.06 on the view that IFMIS is realistic to available resources for spending. The minimum

response rate on this view was 2 and the maximum was 5. This therefore implies that, majority

of the respondents were in support of the view that IFMIS is realistic to available resources for

spending. Appendix 3 indicate that majority of the respondents 63.0% agreed that IFMIS

provides real time sharing of budget information so quick and easy. The results were consistent

with the observation put forward by Wamuyu (2013) that making budget data publicly available

is necessary to enable transparent reporting of the government’s financial intentions and of its

use of taxes. The study also found that majority 92.3% of the respondents agreed that it easy to

make a district budget based on resources available using IFMIS and presents the budget in a

way that enable analysis. This agrees with the views of Karatsi (2015) who argued that IFMIS

can facilitate timely and accurate reporting.

These findings move hand in hand with the response made by one of the respondent who

commented that

“The system is so reliable because when a transaction is made, it provides a notification

message to the concerned parties and the amount is has released. This message comes

immediately the transaction is made. So it gives quick update of the amount paid”.

Results from the regression indicate that using IFMIS for budget preparation may lead to

effective financial reporting. The regression findings also show a significance level of 0.002

meaning that departments that used IFMIS to prepare budgets are more likely to achieve

effective financial reporting in the district. The finding therefore shows that there is significant

effect of IFMIS budget preparation and financial reporting effectiveness in the district and 0.705

in this respect means the level of error that was cited in the data. These results are attributed to

the fact that the system follow rules and regulation during the budgeting process which positively

affects the system’s performance in ensuring financial reporting effectiveness. These findings are

supportive with views of Karatsi (2015) who argued that IFMIS can facilitate timely and

accurate reporting.

38

5.3.2 The Effect of Financial Transactions Processing on Financial Reporting Effectiveness

The study established the majority of the respondents supported that the view that IFMIS

processes all transaction receipts and payments of the district. These findings agree with the

observation sighted by Diamond and Khemani (2005) who emphasized that it was essential that

both receipts and payments are processed by the FMIS, including the payroll payments to ensure

that the budget and accounts are comprehensive. The implication of these results is a reduction in

wastage and irregular/illegal payments which makes the correlation coefficient (r=0.521**,

p=0.000) which p<0.01) significant. This indicate that the system has helped to reduce instances

of unauthorized, unnecessary or irregular expenditure, suggesting that public money was being

appropriately managed through IFMIS which improves financial reporting effectiveness.

The research findings show that the majority of the respondents supported that the view that

IFMIS offers rapid and quick response of the transaction, although there were about 0.483 of the

respondents deviated from the mean on the view that IFMIS offers rapid and quick response of

the transaction. The appendix table 4 about frequencies also indicate that majority of the

respondents 98.1% agreed that the system is good at providing rapid and quick transaction

responses to the concerned parties in the district. These findings were in line with the benefits

outlined by proponents of automation cited by Simon et al. (2011). The mean support of 4.13 on

this view showed that the majority of the respondents supported that the view that IFMIS allows

only budgeted activities are processed for funding. The study also study established that majority

of the respondents 84.6% agreed that IFMIS allows only authorized budgeted activities and

projects for funding. This means that the IFMIS encourages due diligence in its users which is

consistent with sound financial reporting principles as emphasized by Moeti, Khalo and

Mafunisa (2007) the system offers rapid response and this has to do with quick information

available to the public. The system said to be responsive if we can produce the maximum and

quick amount of financial information for a given and fixed transaction or payment made.

The study established that the system quickly detects errors in the authorization process and that

majority of the respondents supported that the view that IFMIS quickly detects errors in the

authorization process. This was not different from the findings indicated in the frequency results

in appendix 4 which indicate that majority of the respondents 67.3% agreed that there were

39

inbuilt analytical tools within IFMIS that detects the error in process of authorization so quickly.

This suggest that the objective of better financial reporting as outlined by Isidore (2012) was

fulfilled through IFMIS. In terms of transaction processing, it is expected that the automation

and interlinking of procurement processes such as requisition, tendering, contract award and

payment has yielded dividends for districts. One of the issued that manifests in the finding which

showed that 79.8% of the respondents agreed that IFMIS allows timely sharing of transaction

information to all concerned parties which promote transparency and effective financial

reporting. This is one of the gains which motivated the introduction of the IFMIS and the

positive correlation between the system and improvements in financial transaction processing

suggest that all procuring entities within the district buy the right products and or services at the

right prices. This is done by availing information to potential buyers and such instances financial

reporting effectiveness is improved.

This agreement is in line with the response of one respondent who observed that

“You see that it has with it a component which quickly tell if the amount being paid is

above or less than what it has so if you entered for example 50,000 on a certain item, it

cannot allow you to pay over or less than that amount, it will inform you that the order is

out of proportion, so the system easily detect the mistake”

The study findings established that majority of the respondents supported that the view that

IFMIS processes only captured and validated transactions which looked not different from

frequency that majority of the respondents 78.9% agreed that IFMIS processes only captured and

validated transactions of the district as shown in appendix 4. The results shows a significant

correlation coefficient (r=0.521**, p=0.000) which p<0.01) between IFMIS transaction

processing on financial reporting effectiveness and validated transactions of the district. This is

consistent with the observation of Simson, Sharma, & Aziz (2011) who notes that the various

public financial reporting processes are structured around the budget cycle. This annual cycle

aims to ensure that public expenditure is well planned executed and accounted for.

The findings in the Pearson correlation on this objective correspondents with regression result

which shows that that departments that use IFMIS in processing transaction are 2.326 times more

likely to be effective in reporting financial matters than those departments that did not use IFMIS

in processing transactions in the district. The findings show 0.000 significance level which

40

implies that departments that used IFMIS to process transaction were effective in reporting

financial transactions in the district implying that there is a significant impact of IFMIS

Transaction processing on financial reporting effectiveness in the district and 0.625 in this

respect means the level of standard error that was cited in the data. This great impact is attributed

to the fact that after the information has been fed into the system it is easier to monitor and

quickly process any transaction using the system so the system can only release what has been

fed in it for a particular item. The results therefore indicated that IFMIS transaction processing

impact positively on the financial reporting effectiveness in the district.

5.3.3 The Effect of IFMIS financial report preparation on financial reporting effectiveness

Regarding the financial report preparation, the study findings revealed that majority of the

respondents were in support of the view that IFMIS ease budget preparation with mean support

of 4.23. This agrees with the arguments of Thurakam (2007), who observed that the statements

which are prepared from accounting information are known as financial statements. Most

countries require the preparation of at least four statements: an operating statement reflecting

revenues and expenses; a statement of assets and liabilities of the entity; a cash flow statement

related to operating, investment, and financing activities; and a statement presenting additional

information on a disaggregated basis (Hoek, 2010). They are the end products of accounting

process in an enterprise. The appendix 5 also established that 88.4% of the respondents agreed

that it is easy to prepare a district financial report using IFMIS which simplifies the financial

reporting of the district. This is linked to further findings which showed that that majority of the

respondents were in support of the view that IFMIS organizes and structures financial report as

with majority (64.4%) of the respondents agreed that financial reports produced using the system

are straight forward and facilitates analysis which facilitated effective financial reporting of the

district which has a positive correlation between IFMIS transaction processing and financial

reporting effectiveness with r=.0.509**, p=0.000 which p<0.01. as well as producing purposeful

reports required by the district which was within the expectations for the introduction of the

system hence improving financial reporting effectiveness

The study established that majority of the respondents were in support of the view that IFMIS

prepares only factual and accurate reports which is not different from the frequency results of

79.9% respondents agreed that IFMIS Financial reports prepared through IFMIS are factual and

41

accurate which promote effective financial reporting as seen in appendix 5. This means that that

users of financial reports were able to access and analyse only factual information concerning

financial management at the district which enhanced financial reporting effectiveness. This is

one of the benefits anticipated with the introduction of IFMIS by the district. These findings

depicts the positive correlation IFMIS transaction processing and financial reporting

effectiveness with r=.0.509**, p=0.000 which p<0.01. The findings agree with the observation

made by Simson et al., (2011) that the system has to gain an understanding of how public funds

have been utilized, and how they contribute to government policies, it is important to monitor the

results of expenditure. This has led to the establishment of government monitoring and

evaluation systems for factual and comprehensive reporting. These systems are used to measure

the quantity, quality and targeting of goods and services that the state provides and to measure

the outcomes and impact resulting from them.

The study established that on aggregate majority of the respondents were in support of the view

that IFMIS accurately discloses financial position of the district with a mean support of 4.39.

these findings were not different from the results produced by the frequency table appendix 5

which established also that majority of the respondents 92.3% agreed that IFMIS prepared

financial reports accurately discloses the financial position of the district. The study also

established findings therefore indicate that many of the respondents 97.3 agreed that IFMIS

produces financial reports that are clear and relevant to all stakeholder in the district as indicated

in appendix 5. These results agreed with the observation of Ministry of Finance (2015) that for

this purpose it is anchored in the district accounting system and should be designed to perform

all necessary accounting functions as well as generate custom reports for internal and external

use. For example, the component of reporting of district transactions encompasses all activities

that include the updating and maintenance of the general ledger, the reconciliation of sub ledgers

to the general ledger and closing of books. It also includes recording, control and reporting on

fixed assets at both National and district level. The findings agree with the correlation results

which showed that there is a positive significant correlation between IFMIS transaction

processing and financial reporting effectiveness with r=.0.509**, p=0.000 which p<0.01. This

correlation picture shows that there is a likelihood of improving financial reporting effectiveness

when districts use the system to prepare financial reports. This means that if district can fully use

the system in all it financial business, there will be limited loss of money hence effective service

42

delivery in the district. The finding on this objective is not different from what one the

respondent that

“The system has got quick responsive mechanism immediately after the transaction has

been made, it briefly brings a message to the concerned parties about what transaction

has been made, for what purpose to who and the time of transaction”

The findings in the Pearson correlation about this objective correspondents with regression result

which shows use of IFMIS in preparing financial report put them at 2.546 times more likely to be

effective in reporting financial matters than those departments that did not use IFMIS in

preparing financial reports in the district. The findings show 0.001 significance level which

implies that departments that used IFMIS to preparing financial reports were effective in

financial reporting in the district. Implying that there is a significant impact of IFMIS Report

Preparation on financial reporting effectiveness in the district. This is because the system is

already with information that is required to prepare a financial report, it is easy prepare a report

which increases the system’s effectiveness in reporting financial matters.

5.4 Conclusions

5.4.1 The Effect of IFMIS budgeting system on Financial Reporting effectiveness

Using IFMIS in budget preparation positively affect the financial reporting effectiveness in local

governments. These results are attributed to the fact that the system follow rules and regulation

during the budgeting process which positively affects the system’s performance in ensuring

financial reporting effectiveness. This means that the introduction of the system in the district led

to improvement in the budgeting and financial reporting of easy costing of the activities in the

budget, improved equity in budget priorities, easy integration of all departmental budgets in the

district including their cost ranking, easy tracking of the income and costs of the district budget,

easy updating of the budget, ensuring convenience in making budgets of the district, quick

sharing of budget information and quick authorization of the budgeting process and that IFMIS

helped the district Transparency, accuracy and relevancy which are critical in promoting

financial reporting effectiveness which was one the objective for the introduction of IFMIS.

5.4.2 The Effect of IFMIS financial transactions system on financial reporting effectiveness

Using IFMIS in transaction processing significant improvements in financial reporting

effectiveness in district local governments. This was shown by offering rapid and quick financial

43

transaction responses/ messages to various stakeholders in the district, provision of receipts of

the payment transacted, processing of only budgeted and authorized activities, detecting of errors

in the authorization process, structuring information about the spending made, validation of

transactions before processing, tracing of all stages of transaction processing in the district,

automatic reconciliation of bank statement, making transaction processing participatory and

keeping transaction database information for reference in the district. The findings were also

Pearson correlation and multivariate logistic regression results. This therefore meant that the

objectives of improve rapid response, reliability, inflexibility, controlled processing were

achieved.

5.4.3 The Effect of IFMIS Report preparation on financial reporting effectiveness

In terms of using IFMIS to prepare report, IFMIS has led to improved Organisation and structure

of the financial report, timely release of financial report which is friendly to the user, helping to

derive the specific information required to carry out duties, release of straight forward financial

reports that facilitate analysis, accurate disclosure of the district financial position, enhanced

transparency, increased accountability, auditable financial statements and enhanced credibility of

the reports of the district and improve financial reporting. Therefore IFMIS report preparation

positively effects financial reporting effectiveness of the districts and the objective for the

introduction of the system was achieved.

5.5 Recommendations

In order to help achieve the objective of realizing the full benefits of a fully integrated end-to-end

financial management information system, the district should both appeal to and support the

adoption of the system within the district local government system. This may require advocacy

and capacity building by the national government to influence policy development that embraces

the system at district level.

Local governments should leverage on the efficiency and effectiveness gains of the IFMIS to

consolidate stakeholder confidence through more awareness and publicity of the achievements.

For example, they should explore opportunity for partnership with the private sector and

nongovernmental actors to support their agenda as a way of promoting sustainability of the

respective agencies.

44

The government should integrate non-financial information into the system so that other

functions within the organizations can also benefit from the advantages of IFMIS. Such functions

include information technology, security and maintenance, human resource and other peripheral

functions. This recommendation is subject to cost-benefit analysis.

5.6 Recommendation for Further Studies

The purpose of this study was to determine the effect of IFMIS on the financial reporting

effectiveness of district local governments in Uganda. The three specific objectives of the study

were: to assess the effect of Budget Preparation on Financial Reporting Effectiveness of District

Local Governments, to analyse the effect of Transaction Processing on Financial Reporting

Effectiveness of District Local Governments, and to examine the effect of Report Preparation on

Financial Reporting Effectiveness of District Local Governments. Therefore, the study

recommends that in future, a study be conducted on the effectiveness of IFMIS of financial

reporting effectiveness in private Organizations. This study will be key in identifying whether

the IFMIS adopted by organizations are important in improving the financial reporting

effectiveness and what other strategies can be adopted so as to improve financial reporting.

45

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