Management control system, interpersonal trust and financial management in Busoga sub-region local governments

Abstract

This study examined the mediating role of interpersonal trust in the relationship between management control system and financial management in Local Governments in the Busoga sub- region, Uganda; relying on the agency and stewardship theories. A cross-sectional survey approach was adopted targeting 120 local governments. Data were analyzed using SPSS v.27 and MedGraph v3. The study found a relationship between management control systems and financial management, established that interpersonal trustpartially mediated the link between management control systems and financial management, and lastly, found that management control systems correlated with interpersonal trust. This study makes the following important contributions to the financial management literature: organisational leadership should endeavor to reinforce the existing management control systems because they are strong pillars that contribute to the stability and success of financial management in Local Governments, institutional managers should ensure that the interpersonal is promoted, since it builds group cohesion and later, galvanises teamwork that if it is well harnessed, heightens the existing quality of institutional financial management. The study limitations and areas for further research were: common method bias in self-reported data makes it challenging to accurately determine causal- effect relationships. Future research should use multiple source data, such as supervisor- subordinate dyads, to obtain independent ratings on management control systems, interpersonal trust, and financial management; also, the study's findings, based on Accounting Officers, which may not apply to other organisations or local populations, prompting future research with employees in other sectors, and finally, the research used a quantitative approach to explain financial management in Local Governments, but a hybrid approach with qualitative elements could provide deeper insights. Keywords: Management Control Systems, Interpersonal Trust; Financial Management