INFLUENCE OF RISK BASED INTERNAL AUDIT ON FINANCIAL SUSTAINABILITY OF NON-GOVERNMENTAL ORGANIZATION IN NAKURU COUNTY, KENYA
OGEGA, ELIZABETH KEMUNTO
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Financial sustainability requires appropriate risk based audit practice hence effective and efficient internal audit. Most non-governmental organizations are faced with sustainability challenges which can be attributed to difficulties in the design, monitoring and implementation of project financing strategies which may impact negatively on overall sustainability. The financial sustainability of an organization is a measure of the organization‘s ability to meet its financial obligations. Many Non-Governmental Organizations (NGOs) in Kenya largely depend on foreign funding. The declining state of foreign funding coupled with the Miscellaneous Amendment Bill of 2013 imposes a strain to an already constraining situation. The study was to determine the influence of risk based internal audit on financial sustainability of non-governmental organization. The study was specifically looking at the influence of Internal Audit Transparency, Internal Auditors Competency, Internal Auditors Independence and Management Support on financial sustainability of NGOs in Nakuru County Kenya. Theories underpinning this study were: Auditing Theory, Stakeholder Theory and Theory of Budgeting. Descriptive research design was used. The researcher used a sample frame of 79 NGOs. From each NGO the researcher targeted three officials namely program managers, grants managers and accountants. This gave a total of 237 officials who were the targeted population. A sampling technique was used where 115 officials were selected. Data collection was done through use of questionnaires constructed on a likert scale. Questionnaires were tested for validity and reliability. Statistical package for social sciences (SPSS) IBM software was used for analyzing the collected data. Data was analyzed using descriptive statistics which included frequency, percentages, mean and standard deviation and inferential statistics which included regression and correlation analysis and was presented in tables and figures. The study established that audit transparency, auditor competency, auditors‘ independence and management support had significant relationships with financial sustainability of non-governmental organization in Nakuru County. Correlation analysis showed that auditors‘ competence had a significant influence on financial sustainability of NGOs in Nakuru County. On the other hand audit transparency, auditors‘ independence and management support did not significantly influence financial sustainability of non-governmental organization in Nakuru County. The study was of significant to Government as it would assist in formulating effective policies on issues appertaining to the NGOs finances also it was significant to academicians and researchers. The study concluded that audit transparency, auditor competency, auditors‘ independence and management support had significant relationships with financial sustainability of non-governmental organization in Nakuru County. The study recommended that the organizations should ensure that internal auditors department operates independently without undue influence to ensure that the internal auditors perform their duties confidently without fear and favor. Also the researcher recommended that the internal auditors department should ensure they recruit competent auditors in the organizations with sufficient knowledge and skills in auditing to ensure that the audit process is accurate giving an accurate position of the financial standing of the organization.