EFFECT OF BUDGETARY CONTROL ON FINANCIAL PERFORMANCE OF SAVINGS AND CREDIT COOPERATIVE ORGANIZATIONS IN NAIROBI COUNTY

Abstract

Savings and credit cooperative societies have in the past experienced harsh economic conditions due to poor management caused by incompetent employees who misappropriated approved loans leading to members receiving less. In most organizations, budgetary process is important in financial performance of firm. However, it is not clear as to how performance of Savings and Credit Cooperative Organizations (SACCOs) is affected by budgetary control. The main purpose of this study was to determine effect of budgetary control on financial performance of savings and credit cooperative organization in Nairobi County. The specific objectives of the study were; to determine the effect of human capital budgetary control on financial performance of savings and credit cooperative organizations and to establish effect of cash flow budgetary control on financial performance of savings and credit cooperative organizations. Theory of budgeting and budgetary control model informed the study. This study employed explanatory research design. The target group of the study was 40 Savings and Credit Cooperative Organizations (SACCOs) in Nairobi County registered under Sacco Societies Regulatory Authority (SASRA). The study used questionnaire to collect data. Findings showed that human capital budgetary control and Cash flow budgetary control had significant effect on financial performance of savings and credit cooperative organization. The research recommended the need for communication of details of human capital budget policy and guidelines to the individuals tasked with the preparation of the budget. It also recommended the need for SACCOs to have a database of the daily cash flow to enable tracking against departments’ profiles and major divergences. There is need for the SACCOs to have network of contacts, voice and electronic with the main spending and revenue departments tasked with developing forecasts of current and prospective cash flows. In addition, further research need to be done on other geographical dimensions as well as similar research using different methodology.