Effective internal controls play an important role in preventing and minimizing occurrence of errors, wastage and fraud in different organisations. Many devolved units in Kenya known as county governments have consistently failed to fully account for collected revenues and the spending of funds that they receive from the national treasury according to reports by the Auditor General and the Controller of Budget of Kenya. Kakamega county was one of the counties with questionable revenue collection performance and spending in the financial year 2015-2016. The county collected only about 25 percent of the estimated revenues while resource allocation was also inconsistent with planned spending. Hence this occurrence motivated the study to investigate effectiveness of existing internal controls in managing devolved revenue fund in the county government of Kakamega. The study used a survey method to collect and analyse cross-sectional data from a sample of 56 Accounting, Auditing and Revenue Officers spread out in the sub units of the county. A Committee on Sponsoring Organization (COSO) on the Trademill Framework Questionnaire was administered to the sampled respondents. Five components of internal controls; control environment, control activities, risk assessment, information communication and monitoring activities were tested by correlation and regression techniques using SPSS 21. The results of analysis show that while all the five components of internal control are directly and significantly associated with an effective internal control system, control environment had the strongest relationship and also the only predictor of an effective system of internal control in the county government of Kakamega. It explained about 70 percent of the variation in the effectiveness of internal control in the Kakamega county government. Therefore the paper recommends that county governments should lay more emphasis on the control environment in order to mitigate risks of fraud, corruption and wastage of the revenue fund.
