Thesis:

Assessment of the contribution of internal control systems on financial performance of savings and credit co-operative organizations in Meru county, Kenya

In the corporate world, internal control systems (ICS) are invaluable assets, particularly for financial institutions aiming to enhance performance and competitiveness. Savings and Credit Cooperative Organizations (SACCOs) in Meru County, Kenya, have increasingly recognized that robust internal control mechanisms are essential for sustainable financial success. This study examined the impact of key internal control components—control environment, internal control activities, risk assessment, and auditing—on the financial performance of SACCOs in Meru County. The study's objectives were to analyze how the control environment influenced SACCOs’ financial performance, examine the effects of control activities, assess the role of risk assessments, and evaluate the impact of auditing. Employing a descriptive research design, the study focused on a target population of 175 SACCO stakeholders, from which a sample of 140 respondents was selected through random and purposive sampling techniques. Primary data were collected through semi-structured questionnaires, and a pilot study was conducted to ensure data reliability and validity. Data analysis included frequencies, proportions, multiple linear regression, and correlation analysis to determine the strength and direction of relationships among the variables. The findings revealed a significant positive correlation between robust internal control systems and improved financial performance of SACCOs. Specifically, effective risk management practices and consistent auditing were associated with enhanced financial outcomes, underscoring the importance of these controls for financial stability and growth. Based on these insights, the study recommended that SACCOs in Meru County strengthen their internal control frameworks, particularly through comprehensive risk assessments and regular audits, to ensure improved governance and financial sustainability. In conclusion, this research underscored the necessity for SACCOs to adopt tailored internal control strategies that not only safeguard assets but also enhance overall financial performance. These findings contribute valuable knowledge to the field of financial management within SACCOs and provide a foundation for policy adjustments to strengthen governance practices in similar financial institutions.