Internal Control Systems and Financial Performance of Savings and Credit Cooperative Societies in Bushenyi- Ishaka Municipality: A Case Of Saccos In Ishaka Division

Abstract This study was about internal control systems and financial performance of SACCOs in Bushenyi-Ishaka municipality; a case study of SACCOs in Ishaka division. It was guided by three objectives which include; to find out the relationship between risk assessment and financial performance of SACCOs in Ishaka Division, to establish the relationship between control activities and financial performance of SACCOs in Ishaka division and to determine the relationship between control environment and financial performance of SACCOs in Ishaka division. The study adopted descriptive cross sectional and correlational designs with both quantitative and qualitative approaches. A total population of 122 was involved which included employees, supervisory committee, loan committee and board members from which a sample of 93 respondents were selected using Slovene’s formula. Out of 93 respondents, 90 respondents responded positively. Data was collected using questionnaire and interview guide and analyzed using descriptive statistics, chi-square and regression analysis for quantitative data and thematic analysis was used for analyzing qualitative data The study findings established a significant relationship between risk assessment and financial performance of SACCOs and a unit increase in risk assessment affect the financial performance of SACCOs in Bushenyi-Ishaka municipality by 15%, there was also a significant relationship between control activities and financial performance of SACCOs and control activities contributes 35.6% to the financial performance of SACCOs in Bushenyi-Ishaka municipality. Finally the study found out a significant relationship between control environment and financial performance of SACCOs and it contributes 20.7% to the financial performance of SACCOs in Bushenyi-Ishaka municipality From the study findings, recommended that SACCOS in Bushenyi-Ishaka municipality should start investing in risk assessment, insure the risks of unpaid loans include communication as part of internal control systems, increase on supervision and put in place disciplinary committee to handle disciplinary issues. 

TABLE OF CONTENTS

Contents

DECLARATION I

APPROVAL Ii

DEDICATION

ACKNOWLEDGEMENT v

TABLE OF CONTENTS vi

LIST OF TABLES x

LIST OF FIGURES xi

LIST OF ABBREVIATIONS AND ACRONYMS xii

CHAPTER ONE 1

GENENAL INTRODUCTION 1

I .0 Introduction 1

1,1 Background ofthe Study 1

1.1 .1 Historical perspective 1

1 .1.2 Theoretical perspective 3

1.1 .3 Conceptual perspective 4

1.1.4 Contextual perspective~ 6

1 .2 Problem Statement 7

1.3 Purpose of the study 8

1 .4 Objectives of the study 8

1 .5 Research Hypothesis 8

1.6.1 Content scope 9

1.6.2 Area scope

1.6.3 Time scope 9

vi

1.7 Significance ofthe study .9

1 .8 Conceptual Framework ii

CHAPTER TWO 12

LITERATURE REVIEW 12

2.0 Introduction 12

2.1 Risk Assessment and Financial Performance 12

2.2 Control Activities and Financial Performance 14

2.3 Control Environment and Financial Performance 16

2,4 Knowledge gap 18

CHAPTER THREE 20

METHODOLOGY 20

3.0 Introduction 20

3.1 Research Design 20

3.2 Study population 21

3.3 Sampling Techniques and Sample Size 21

3.4 Data Sources 23

3.5 Data Collection methods 23

3.5.1 Interview 23

3.5.2 Survey 24

3.5.3 Documentary study 24

3.5 Research Instruments 24

3.5.1 Questionnaire 24

3.5.2 Interview Guide 24

3.6 Quality Control 25

3.6.1 Validity 25

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VII

Table 3.3: Ratings on Interview Guide .25

3.6.2 Reliability 26

3.7 Data Collection Procedure 27

3.8 Data Processing 27

3.8.1 Normality Test 27

3.8.2 Linearity Test 27

3.9Data Analysis 28

3.10 Ethical consideration 28

3.1 1 Limitations of the study 29

CHAPTER FOUR 30

DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF FINDINGS 30

4.0 Introduction 30

4.1 BIO DATA OF THE RESPONDENTS 30

4.1 .1 Gender of the Respondents 30

4.1.2 Marital Status of the Respondents 31

4.1.3 Age of the Respondents 31

4.1.4 Education Level of the Respondents 32

4.1 .5 Period Spent in the SACCO 33

4.1.6 Position of the Respondents in the SACCOs 33

4.2 Risk Assessment and Financial Performance of SACCOs 34

4.2.1 Descriptive Statistics 34

4.3.2 Bi-variate analysis (Hypothesis testing) 35

4.3 Control Activities and Financial performance of SACCOs in Ishaka Division 36

4.3.1 Descriptive Statistics 36

4.3.2 Bi-variate analysis (hypothesis testing) 38

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4.4 Control Environment and Financial Performance of SACCOs in Ishaka division 39

4.4.1 Descriptive Statistics 39

4.4.2 Bi-variate analysis (Hypothesis testing) 40

4.5 Financial Performance 41

4.6 Multi-variant Analysis (Regression Analysis) 42

CHAPTER FIVE

DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS 45

5.0 Introduction 45

5.1 Discussion 45

5.1.1 Risk Assessment and Financial Performance of SACCOs 45

5.1.2 Control Activities and Financial Performance of SACCOs 46

5.1.3 Control Environment and Financial Performance of SACCOs 47

5.2 Conclusions 48

5.2,1 Risk assessment and financial performance of SACCOs 48

5.2.2 Control Activities and Financial Performance of SACCOs 49

5.2.3 Control Environment and Financial Performance of SACCOs 49

5.3 Recommendations 49

5.4 Areas for Further Studies 50

REFERENCES 51

APPENDIX 1: QUESTIONNAIRE FOR EMPLOYEES,SUPERVJSQRy AND LOAN COMMITTEE

MEMBERS 56

APPENDIX 2: INTERVIEW GUIDE FOR KEY INFORMATS/ ENGENDER WAHO YEBIBUZO

OKUZA HA BAKURUBASAKO 60

‘~PPENDIX 3: INFORMED CONSENT FORM! ENDAGANO YOKWIKIRJZA KWA TABA

~MUKUKYONDOZA 62

~PPENDIX 4 : LINEALITY TESTS 67