Effect of Internal Controls on Operational Efficiency of Saccos Registered by Sacco Society Regulatory Authority in Nairobi County

Abstract

The study sought to determine the effects of internal controls on operational efficiency of SACCOs registered by SASRA in Nairobi County. The study is significant in that SACCOs have an important role in social and economic development in our country. These SACCOs in essence face many challenges including mismanagement, corruption and poor governance. Operational efficiency of these SACCOs is greatly affected by lack of proper internal controls. The research objective was to find the effect of internal controls on operational efficiency of the SACCOs registered by SASRA in Nairobi County. The design adopted for this study was descriptive research design. The target population was the 42 registered SACCOs. The study used primary and secondary data. Primary data was collected using interviewer administered questionnaires while secondary data were obtained from annual financial statements of SACCOs. Data obtained was analysed using SPSS version 23. Linear regression model was used to find the relationship between internal controls variables and operational efficiency variable and the strength upon which the independent variables affect the dependent variable. The conclusions from the findings indicate that employing control environment has a significant and favourable impact on operational efficiency of the selected SACCOs. It was also deduced that employing risk assessment has positive and significant relationship with operational efficiency. There is also a positive and significant relationship between control activities and operational efficiency of all the SACCOs. Lastly, the study also established a significant and positive relationship between monitoring and operational efficiency. Overall regression analysis established that internal controls have a strong positive correlation with operational efficiency. The study recommends that to obtain the gains linked with successful internal controls, the SACCOs in Nairobi County need to employ control environment. The organization should ensure they adopt sound human resource practices, a strong presence of tight controls of budgets, and the effectiveness of a well-functioning audit with suitable members of staff in the audit committee, commitment to competence and structure of organization and embrace the new practices brought about by new technology. Regardless of the fact that some SACCOs don’t employ risk assessment, efforts should be taken into consideration to have presence of mechanisms in place for minimizing risks, have risk and compliance department in the SACCOS and make SACCO objectives known to everyone. To improve the operational efficiency, there is need to employ control activities in SACCOs. This should embrace practices such as conducting of reviews in regard to performance operations, authorization and approval of transactions by relevant persons.