iarjbmIARJBMIARJBM2708-5147https://doi.org/10.47310/iarjbm.2020.v01i01.020Internal Control System and Performance of State Departments in the Upper Eastern Region of KenyaKendiDoreenShanoMohhamedGuyoHukaState departments are required to adhere to the stipulated guidelines, be accountable to the state on the funding, safeguard resources and use them economically and effectively against stated objectives while ensuring risks are appropriately identified, analyzed and managed. To ensure compliance and accountability, the national treasury has instituted an internal control system to ensure compliance by all Authority to Incur Expenditure (AIE) holders with all requirements as provided for in the Public Financial Management Act. This study therefore intended to evaluate how effective the internal control system has been in enhancing performance of the state departments. The study was guided by various theories, namely, the agency theory, contingent theory and the stewardship theory. The study adopted a survey design targeting all the state departments in all sub counties in the upper Eastern region of Kenya (Meru, Tharaka Nithi, Embu, Isiolo and Marsabit counties). All the 276 departmental heads, otherwise called Authority to Incur Expenditure (AIE) holders were included in the study. However, a representative sample of 110 respondents were obtained using stratified random sampling. Data was collected using a self-administered questionnaire. A pilot study was conducted by issuing 10 questionnaires to the members of the population who were not in the sample. The instrument was validated by seeking expert opinion. Data was analyzed using descriptive analysis and correlation analysis. The analyzed data was presented using tables and pie charts. The study established a strong positive relationship correlation between internal control system and the departmental performance. There was a general trend of improvement in performance of the various departments over the three years period. It was concluded that the independent variable had positive influence on the dependent variable. It was recommended that the departmental managers should ensure internal control system is functional all the time.