Effect of Internal Accounting Monitoring and Control Activities on Financial Performance of Saccos in Kenya

Abstract

<p>Internal accounting monitoring and control activities are important tools for enhancing the management of resources in any financial institution. That is monitoring and control activities enhance the prudent use of resources, and accountability and improve institutional efficiency. However, there are numerous cases of poor management, fraud and poor governance of Savings and Credit Cooperative Organizations (SACCOs) as reported by SACCO Societies Regulatory Authority (SASRA) despite the existence of internal accounting control systems required by SASRA. The study sought to examine the effect of monitoring and control activities on the financial performance of SACCOs in Kenya. The study employed a mixed research design targeting 175 SACCOs with 875 respondents. A purposive sampling technique was used. The participants were chosen based on the purpose, hence the chief executive officers, finance managers, risk managers, information communication technology managers and internal auditors. Data was collected by the use of both primary and secondary techniques. A pilot study was conducted to establish the validity and reliability of research instruments. Primary data collection was by use of questionnaires, while secondary data involved documentary analysis to capture information on financial performance. A pilot study was conducted in Nairobi County. Validity was achieved using content and construct validity, where monitoring and control activities yielded an average factor loading of 0.606 and financial performance yielded 0.838. Cronbach's Alpha was applied to establish reliability, which had a range between 0.896 for monitoring and control activities to 0.916 for financial performance. Data was analyzed by use of descriptive and inferential statistics. Descriptive analysis included; frequencies, mean, standard deviation and percentage while inferential analysis involved regression analysis. From the results, there was a significant positive relationship between monitoring and control activities and financial performance (r=0.656, P=0.000), monitoring and control activities explain 43.0% (R<sup>2</sup> =0.430) of variance in financial performance, the beta value for monitoring and control activities from the regression model was 0.526 at p< 0.05. The study concluded that monitoring and control activities have a significant positive effect on financial performance. This study recommends that SACCOs should constantly monitor their financial performance by implementing audit reviews as well as performance reviews to make sure that SACCO objectives are achieved accordingly.<em> </em><em></em></p><p><em> </em></p><p><strong>JEL: </strong>M40; M41; G20<strong></strong></p><p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/edu_01/0767/a.php" alt="Hit counter" /></p>