A survey of the impact of internal controls on operational efficiency among non-governmental-organizations in Nairobi

Abstract

The study aimed at investigating the impact of internal control on the operational efficiency of NGOs based in Nairobi. A sample of fifty NGOs was selected and interviewed to form the basis of this project. Information was collected by use of a questionnaire which made use of both open and closed ended questions. The questionnaire used a three point likert scale which ranged from ‘Yes’, ‘No’, and ‘I don’t know’. The collected data was entered into a statistical package for social sciences for analysis. The analysis indicated that internal controls in the NGOs based in Nairobi were determined largely by the organization structure. It is the top management that decided on how the resources received from donors and other financiers were to be allocated and distributed to the beneficiaries. Cash management was ranked second internal control factor affecting NGOs operational efficiency. NGOs with good cash management were in a position to attract many sources of funds for their operations and as such, this called for proper use of resources at their disposal. They ensured this by putting in place proper policies and procedures to guide their operations. NGOs with well structured organizational structures had well structured policies and procedures on how activities were run. Higher operational efficiency was registered in big well known NGOs which lead to controlled internal controls by the funding partners. The findings indicate that the five factors which include organization structure, payroll management, procurement, cash management and asset management affect operational efficiency to 82.5% as depicted by the correlation and coefficient of determination. The other factors not investigated in this study, constitute the remainder 17.5%. From these findings, it is clear that internal control impacts operational efficiency.