EFFECT OF INTERNAL CONTROLS ON PERFORMANCE OF SAVINGS AND CREDIT COOPERATIVE SOCIETIES IN KAKAMEGA TOWN, KAKAMEGA COUNTY

Abstract

Saccos need to implement internal controls throughout their operation to ensure accuracy in financial reporting, safeguarding of organizations assets and elimination of fraud. Lack of internal controls in organization implies that organizations need to solely rely on competency and morality of their employees or use of expensive restrictive supervisions so as to prevent both intentional and unintentional errors that might occur. Internal controls should be cost efficient, proactive and value adding because poor internal control leads to a loss of funds, increased bureaucracy, reduced productivity and reduced efficiency in operations such as increased time of transactions process. Internal controls play an important role in detecting, preventing and controlling fraud and protection of organization resources. In Kenya fraudulent cases are still reported hence the study sought to assess the effect of internal controls on the performance of Saccos in Kakamega County. The objectives of the study were to examine the effect of corrective controls on performance of Saccos; to assess the effect of detective controls on performance of Saccos and to determine the effect of preventive controls on performance of Sacco’s in Kakamega County. The theories underpinning the study were policemen theory, internal auditing theory and management control theory. To address the objectives, Questionnaires were administered to collect primary data among General Manager, finance manager, Accountant, Auditor and Human Resource manager in 4 Saccos in Kakamega County sampled randomly. This study adopted descriptive research design. The study targeted a sample size n=13, respondents were arrived by multiplying 5 respondents in 4 Saccos randomly sampled as a basis of analysis. The data was descriptively analyzed and outputs presented statistically by use of frequencies and percentages in tables form. The finding revealed that both corrective controls, detective controls and preventive controls significantly affect performance of Saccos in Kakamega County. Thus, the study brings into limelight the operations needed for a successful internal control and performance to take place. The study concluded that the Saccos in Kakamega County generally had functional internal control in place and this positively affected their performance. The study recommended that the management should set aside rules and effectively employ the consequences accompanied with going against the rules; they should conduct auditing regularly and comply with reports given by auditors and also train their employees to help them understand the importance of internal controls.