Effect of Internal Controls on Financial Performance of Public Technical and Vocational Education and Training Institutions in Nairobi County, Kenya

Abstract

Technical and Vocational Education and Training (TVET) institutions are key drivers of skills development and employability in Kenya. They play a critical role in shaping educational landscape by equipping learners with practical and technical skills needed in the labor market. However, concerns regarding financial performance of these TVET institutions persist despite increased government funding and policy reforms such as the TVET Act (2013) and the formation of Technical and Vocational Education and Training Authority (TVETA). This study examined the effect of financial management practices, and specifically the influence of internal controls, on the financial performance of public TVET institutions in Nairobi County, Kenya. This research was guided by Contingency Theory and adopted a correlational research design. Structured questionnaires were used to collect data from 133 respondents drawn from principals, accountants, finance officers, and internal auditors in the 38 accredited public TVETs in Nairobi County, representing an 87.5% response rate. Data collected was analyzed by descriptive statistics, Pearson correlation, and regression analysis. Results of the study showed a strong positive and statistically significant correlation between internal control practices and financial performance (r = 0.729, p < 0.01), with internal controls explaining 53.1% of the variation in financial performance. Descriptive results indicate that internal controls are moderately effective, with strengths in authorization procedures and internal auditing, while weaknesses exist in the clarity and adequacy of financial policies. The study concludes that effective internal control systems significantly enhance financial performance in public TVET institutions. It recommends strengthening internal audit functions, improving financial policy implementation, enhancing staff capacity, and adopting integrated financial management systems to improve accountability and sustainability.

Keywords:       Internal Controls, Financial Performance, TVET Institutions, Accountability.