Asian Research Journal of Current Science

Non-governmental organisations (NGOs) play a critical role in supporting social service delivery and development initiatives in Nairobi County, Kenya. However, many organisations in this sector continue to experience financial sustainability challenges associated with weak governance structures, donor dependence, and inadequate internal control systems. This study examined the relationship between internal control systems and the financial performance of NGOs in Nairobi County. The study focused on four internal control dimensions: control environment, risk assessment, control procedures, and continuous monitoring. An explanatory cross-sectional research design was adopted. Structured questionnaires were administered to a stratified sample of 372 NGOs, and 275 valid responses were analysed using descriptive statistics, correlation analysis, and multiple regression analysis. Reliability testing confirmed acceptable internal consistency for all study constructs, with Cronbach’s alpha values exceeding the recommended threshold of 0.70. The correlation results indicated positive and statistically significant relationships between all internal control dimensions and financial performance (p < .05). Regression analysis revealed that the internal control variables jointly explained a substantial proportion of the variation in financial performance (R² = 0.755). Control procedures had the strongest effect on financial performance (β = 0.314, p < .001), followed by continuous monitoring (β = 0.268, p < .001), control environment (β = 0.231, p < .001), and risk assessment (β = 0.223, p < .001). The findings suggest that effective internal control systems enhance financial accountability, resource utilisation, and overall financial stability among NGOs. The study concludes that strengthening governance structures, risk assessment practices, formalised control procedures, and monitoring mechanisms is important for improving financial performance in the NGO sector.