Influence of fraud on operational performance in non-governmental organizations within Nairobi County

Chesimo, Clare Cheptegen
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Strathmore University
Fraud is a global trend that has existed for long and it increases every day. This study sought to investigate the factors that influence of fraudulent transaction and effect on operational performance in NGOs within Nairobi County. Different findings have been found by various researchers on the same area of study but with conflicting findings. Some concluded that only three factors lead to fraud (Pressure, Rationalization and Opportunity) while others found that there are more other factors that influence the fraud occurrence. The aim of the study was to identify factors that influence fraudulent transactions within NGOs and to examine their impact on operational performance of NGOs. The study was anchored on the Agency theory, Fraud Triangle Theory, Fraud Diamond Theory and Fraud Pentagon Theory. It adapted a descriptive research design and a positivism philosophy with a target population of 702 for the registered NGOs operating within Nairobi County and recognized by the NGOs Board. Slovin’s formula was adapted for a sample size which was 87. The study used primary data gathered through structured questionnaires. Sampling was done using Slovin’s formula. The factor analysis results show that although several fraud variables impact the operational performance of NGOs, only regulations and rationalizations are significant. The major effect identified were loss of future donors, bankruptcy, inability to meet the project objectives and job loss among employees as a result of any fraudulent transaction discovered within NGOs. The limitation encountered was by use of questionnaire which promotes anonymity that may result in totally dishonest respondents. The findings of the research are beneficial to policy makers within the context of the NGOs and on the growing debate concerning accountability and responsibility of employees within NGO sectors and guide the management on the need to emphasize the reinforcement of internal controls implementation and monitoring. Future studies may be done on the same with focus on quantifying the impact caused by fraudulent transactions.
A Thesis submitted in partial fulfillment of the requirement for the Degree of Master of Commerce at Strathmore University
Fraud, Operational performance, NGOs