Dissertation (MA Business Administration)The main objective of the study was to assess the factors that determine the effectiveness of internal audit in managing public funds. The study was conducted in Dodoma Municipal Council (DMC) using a case study approach. The study attempted to combine all perspectives for evaluation of internal audit effectiveness in the Municipal Councils. The study involved 25 respondents from three occupations that were selected purposively. The occupations were internal auditors, external auditors and non auditor employees. 3 respondents were internal auditors selected from internal audit department at DMC, 7 respondents were external auditors selected from the CAG office and 15 respondents were non auditor employees selected from DMC. The research involved collection of data and information using several approaches; these included personal interview, group discussion, observation, and questionnaire administration. The findings show that internal audit highly contributes to the adaptation of accountability in most LGAs and it helps to improve governance quality of an organization. Research findings further show that the factors that influence the effectiveness of internal audit in managing public funds are: internal audit quality, management support, actions on internal audit report and auditee attributes. The study recommends that the best strategies to promote effective internal audit are: to increase the number of qualified staff to enable efficient regular review of records and to implement policies and procedures necessary to prevent occurrence of losses of public funds based on internal auditor‟s observations and recommendations.