EFFECT OF AUDIT COMMITTEE INDEPENDENCE ON THE FINANCIAL PERFORMANCE OF NON-GOVERNMENTAL ORGANIZATIONS IN RWANDA: THE CASE OF WORLD VISION RWANDA.

Abstract

This study investigates the effect of audit committee independence on the financial performance of non-governmental organizations (NGOs) in Rwanda, with a specific focus on World Vision Rwanda. Recognizing the critical role of governance in enhancing transparency and accountability, the research examines key dimensions of audit committee independence, including the absence of financial ties, non-executive membership, and the presence of an independent chairperson. 133 employees of World Vision Rwanda made up the population of interest for this study, which used a descriptive and explanatory research approach. To determine the sample size, the study used both purposive and stratified random sampling techniques. A sample size of one hundred respondents was obtained using Slovin's statistical technique. The study included both primary and secondary data. Surveys with a semi-structure were used to gather primary data. The Statistical Product and Service Solution (SPSS) version 25 tool was used to quantitatively evaluate and verify the collected data. To ascertain the validity and reliability, Care International Rwanda conducted a pilot study. Model summary, ANOVA, and regression coefficients were used to determine regression analysis, whilst mean and standard deviation were used to determine descriptive analysis. To ascertain the type of link between the variables, correlation analysis was calculated. The majority of participants expressed agreement with statements highlighting the committee's independence from management influence, with 64.3% strongly agreeing that audit committee members operate free from such pressures (Mean = 4.63, Std Dev = 0.505). Additionally, 56.1% affirmed that the committee possesses the authority to oversee financial reporting processes independently (Mean = 4.55, Std Dev = 0.520), while 67.3% reported that members have the necessary expertise and skills to fulfill their oversight responsibilities effectively (Mean = 4.66, Std Dev = 0.496). Notably, a significant 69.4% of respondents strongly agreed that audit committee members have no financial or personal relationships with the NGO's management or stakeholders (Mean = 4.67, Std Dev = 0.513), reinforcing the committee's integrity. Furthermore, 54.1% indicated that the audit committee operates autonomously from management (Mean = 4.54, Std Dev = 0.500), and 62.2% agreed that it has the authority to hire external auditors without management influence (Mean = 4.62, Std Dev = 0.487). In conclusion, the study highlights the critical role of audit committee independence in enhancing the financial performance of non-governmental organizations, particularly within World Vision Rwanda. It is recommended that NGOs strengthen their governance frameworks by ensuring the appointment of independent audit committee members and providing ongoing training to enhance their oversight capabilities. Future studies should explore the long-term effects of audit committee independence across various NGO sectors and consider the influence of other governance factors on financial performance to develop a more comprehensive understanding of effective organizational oversight.