The relationship between effectiveness of the accounting functions and the financial performance of Savings and Credit Cooperative Societies in Nairobi county

Abstract

In the recent past Savings and Credit Co-operatives (SACCOs) have witnessed faster growth than other co-operatives. Most Sacco’s, especially during their early years of operation, employ Semi skilled personnel in the finance department and this is partly due to the low scale of remuneration. Consequently, Poor record keeping and accounting information makes it difficult for financial institutions to evaluate potential risks and returns (World Bank 1978). The purpose of this study was to determine the relationship between financial performance and Accounting functions of deposit taking Sacco’s in Nairobi. Accounting practices examined in the study include those that facilitate budgeting, review of balance sheet, internal audit function, working capital management and credit management. In this study, Causal research design was used. The population of study comprised all deposit taking Sacco’s in Nairobi County. Primary data was collected using questionnaires that were dropped at the respondent’s premises and collected thereafter. Regression analysis was used to analyze the relationship. The study found a positive relationship between ROA and all other accounting functions studied except internal audit function that has a negative relationship. The relationship was however found to be insignificant. The study therefore concluded that there is no significant relationship between ROA and accounting practices of deposit taking Sacco’s in Nairobi County