Internal Controls and Financial Performance of Deposit Taking Savings and Credit Co-Operative Societies in Nairobi City County, Kenya
Loading...
Date
2023-09
Authors
Sandimba, David James
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Savings and credit cooperatives play an important role to the financial wellbeing of this country by promoting savings as well as provision of loans which can be easily accessed by members regardless of their social class. However, despite their importance and growth, they have been facing a myriad of challenges key amongst them being poor financial performance characterized by declining member dividends and failure to meet key ratios as prescribed by the regulator. This perhaps could be because of poor or weak internal controls within the SACCOs. The general objective of the study was to investigate the effect of internal controls on the financial performance of SACCOs operating in Nairobi County, Kenya. Specifically, the study was anchored on the following objectives: to find out the effect of segregation of duties, approval controls, physical controls, arithmetic controls, and organization plan on financial performance of deposit taking SACCOs in Kenya. The study was anchored on the Agency theory, stakeholder’s theory as well as the systems theory. The study adopted a descriptive survey design with a target population of 42 registered deposit taking SACCOs. We adopted a census survey technique where all the 42 registered deposit taking SACCOs operating in Nairobi County were considered. Primary and secondary data were collected using structured questionnaires and administered through the drop and pick method. The data collected was analyzed using the statistical package for social sciences version 26 software. In the development of this project, materials and ideas from other scholars was acknowledged to ensure there was no plagiarism while in the data collection phase of the study, the reason for the study was made clear to the respondents and introductory letters from the university and NACOSTI adduced to add voice to persuasion to the respondents that the information will be used for the purpose of the study and thus academic purpose only. The validity and reliability of the questionnaire was tested before conducted the actual study. The reliability results revealed that the questionnaire was reliable as the Cronbach alpha for all the study variables was more than 0.8. Data analysis was done using descriptive statistics such as mean and standard deviation and inferential statistics which included correlation and regression analysis. From the findings, y an R square of 0.625 was the output which shows that segregation of duties, approval of accounting transactions, physical controls, arithmetic controls, and plan of organization account for 62.5% of changes in financial performance of deposit taking SACCOs in Nairobi County. The findings indicated that segregation of duties significantly and positively influenced financial performance (β =.500, p<.05). Further, approval of accounting transactions had a positive and significant effect on financial performance (β =.297, p<.05); physical controls had a positive and significant effect on financial performance (β =.604, p<.05); arithmetic controls had a positive and significant influence on financial performance (β =.813, p<.05) and plan of organization had a positive and significant influence on financial performance (β =.018, p<.05). The study concludes that segregation of duties, approval of accounting transactions, physical controls, arithmetic controls, and plan of organization have a significant effect on performance of deposit taking SACCOs in Nairobi County. The study recommends the need for the government through its various agencies such as SASRA to develop policies aimed at guiding deposit taking SACCOs on improving segregation of duties, approval of accounting transactions, physical controls, arithmetic controls, and plan of organization as this will go a long way in enhancing financial performance of these firms.
Description
A Research Project Submitted to The School of Business, Economics and Tourism in Partial Fulfillment of the Requirement for the Award of the Degree of Master of Business Administration (Finance Option) of Kenyatta University, September 2023
Keywords
Internal Controls, Financial Performance, Deposit Taking Savings, Credit Co-Operative Societies, Nairobi City County, Kenya