Corporate Governance and Financial Sustainability of Non-governmental Organizations in Kisumu County, Kenya

Abstract

The cumulative funding received by Kenyan NGOs plummeted to roughly 70 per cent from 95% thereby leading to closure of NGO programs and total disruption of beneficiary support services. This situation has been exacerbated by the COVID-19 pandemic which made the donor community to become wary of releasing donations. NGOs in Kisumu County have encountered additional challenges such as; poor fund management, poor financial reporting, inadequate capacity building and unethical practices targeting the beneficiaries. Consequently, this investigation sought to determine the nexus between corporate governance and financial sustainability of non-governmental organizations in Kisumu County, Kenya. The findings of this investigation may be beneficial to board of management in various NGOs in highlighting the prominence of corporate governance and its related relationship to financial sustainability. This investigation focused on the agency theory, transaction cost theory and the stewardship theory. Several studies were reviewed and they elicited gaps in the methods, contexts and concepts. This investigation espoused a correlational research design. The research targeted 650 director/managers of registered and active NGOs in Kisumu County. Krecjie and Morgan (1970) formulation was used to sample 242 respondents. A semi-structured questionnaire was used for primary data while an information gathering form was used to collect secondary data. Cronbach’s alpha of 0.87 was obtained confirming reliability. The investigation adopted Pearson’s correlation and simple linear regression for analysis. A correlation coefficient of 0.368 was obtained indicating a positive correlation for the nexus between transparency and financial sustainability. The F calculated value of 24.764 was greater than the f critical value of 3.89, and the resulting equation was; Y=2.333+0.4X1. A correlation coefficient of 0.235 was obtained signifying a positive correlation for the nexus between accountability and financial sustainability. The F calculated value of 11.139 was greater than the f critical value of 3.89, and the resulting equation was; Y=3.011+0.207X2. A correlation coefficient of 0.483 was obtained signifying a positive correlation for the nexus between security and financial sustainability. The F calculated value of 58.081 was greater than the f critical value of 3.89, and the resulting equation was; Y=2.135+0.473X3. In conclusion, there exists a positive and significant nexus between corporate governance and financial sustainability of non-governmental organizations in Kisumu County, Kenya. The research recommends the espousal of people, purpose, performance and progression in implementing any initiative that enhances accountability within the NGOs. This investigation recommends the embracing of transparency policies by NGOs to ensure that there is a structure to be followed when implementing openness and effective communiqué. This analysis recommends the embracing of modern risk assessment systems in the NGOs to help the managers and directors enhance security