Internal Controls and Financial Accountability of Selected Humanitarian Organizations in Nairobi City County, Kenya.
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Date
2021
Authors
Muithya, Michael Ngumbi
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Humanitarian organizations are mandated to ensure efficient financial accountability so as to enable efficiency in their operations, hence, maximum utilization of resources to the intended purpose, which is not always the case. Furthermore, it is their work to ensure internal control systems are well integrated into their operations so that the organizational resources are utilized as intended and efficiently. Most of the humanitarian organizations have largely developed inculcated internal controls, however it is largely unclear to what extend the operationalization of internal controls has taken place since we continuously witness some organizations still struggling to fulfil their mandate due on their financial accountability in regard to budgetary allocation and financial reporting. The study’s main objective was to determine how internal controls affects financial accountability of selected humanitarian organizations based in Kenya, specifically in Nairobi City County. The specific objectives include establishing preventive, detective, and corrective controls effects on financial accountability in the selected humanitarian organizations in Nairobi City County, Kenya. Three theories namely, Positive Accounting Theory, Stewardship Theory and the Agency theory guided the study. Additionally, the researcher adopted a descriptive research design, whereby 70 employees from three different Humanitarian organization in Kenya namely, World Vision, Compassion International Inc and Give Directly Kenya formed the target population. The three organizations have their offices based in Nairobi County. The study employed a census survey method to interview the entire population, since the targeted population in the study is of a small size and manageable. Semi structured self-administered questionnaire was used and filled by all respondents in the targeted study population to collected information. Piloting was conducted with a sample size of 7 individuals who were selected by the researcher to pretest and validate the questionnaire. The instrument’s reliability was tested by checking the internal consistency of the items of the questionnaires from a pilot study. The four independent variables all had alpha coefficient values higher than 0.7 (α>0.7). This confirmed the research instrument’s reliability. Moreover, expert opinion in the field of finance was sought in addition to comprehensive literature review to ascertain content validity. The data from the main research was entered into a statistical package for social sciences (SPSS) for analysis within the framework of multiple linear regression model and relative frequencies. To enhance ease in results readability and understanding by a wider range of users of the statistical information, the researcher presented them in bar charts and in tables. From the findings, internal controls positively and significantly affect financial accountability of the humanitarian organizations in Nairobi City County. The recommendation is that to improve their financial accountability, there is need for organisations to put in place preventive controls such as having a cheque co-signing policy, segregation of duty, having a chart where the lines of authority and responsibility are clearly defined and an organization structures to point out all responsibilities of each section. There is also need to have a clear understanding of importance of internal controls and division of responsibility among all the employees to mitigate possibility of fraud and also create common awareness of the expectation in adhering to set standards.
Description
A Research Project Submitted to Kenyatta University, the School of Business Department of Accounting and Finance in Partial Fulfilment of the Requirements for the Award of the Degree of Master of Business Administration (Finance Option), May, 2021
Keywords
Internal Controls, Financial Accountability, Selected Humanitarian Organizations, Nairobi City County, Kenya.