manuscript (edited)

THE EFFECT OF INTERNAL CONTROL PRACTICES TOWARDS

ORGANIZATIONAL PERFORMANCE AMONG OFFICERS OF
AGRICULTURAL COOPERATIVES IN DAVAO DEL NORTE

A Research Study
Submitted to
The Research Panel
Department of Accounting Education
UM Tagum College, Tagum City

In Partial Fulfillment
Of the Requirements for the Degree
Bachelor of Science in Accountancy

LANCE ALEC C. CATUGAL

ERIKA L. CERVANTES
JOSHUA JAMES I. RUBILLA

December 2024
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INTRODUCTION

Effective organizational performance is essential for Agricultural

Cooperatives to fulfill their objectives. However, they also strive for positive

economic outcomes to ensure continuity in accordance with the

going-concern principle, all while meeting the needs of their members.

Balancing these objectives possess a challenge in enhancing organizational

performance, as focusing solely on economic results may neglect member

needs, and vice versa. Thus, these dual goals may appear conflicting

(Martínez-López, Fernández-Barcala, and Gonzáles-Díaz, 2023, p.27). It is

recognized that the obstacles to sustainability faced by cooperatives are

primarily within their control (Cammayo 2021, p.2217), and like any other

entities, agricultural cooperatives are affected by economic realities — while

some thrive, some also do not. Improving organizational performance is

crucial for further development to effectively serve their stakeholders and the

society.

Agricultural Cooperatives serve as a medium for farmers to pool their

produce for various purposes: (1) marketing products to major retailers; (2)

facilitating convenient transactions with agricultural industries; and (3)

ensuring the orderly enforcement of regulations and processing subsidies —

beneficial for policymakers and the government (Ajates 2020, Conclusion,

para.3). These cooperatives play a pivotal role in promoting and adopting

eco-friendly farming methods and sustainable agriculture. They reflect the

significance of private initiatives and genuine commitment in complementing

public policies (Candemir, Duvaleix, and Latruffe, 2021, p. 1128).

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The study explores the role of Agricultural Cooperatives, particularly

within the agriculture sector in promoting responsible and sustainable

practices and their contributions to the accomplishment of the Sustainable

Development Goals (SDGs) supported by the United Nations (UN). While

cooperatives are not inherently obligated to be responsible, their core values

emphasize accountability, solidarity, and democratic governance — creating a

culture that prioritizes social and environmental considerations. Through the

application of cooperative principles — by promoting principles like voluntary

membership, democratic governance, and for community focus, cooperatives

can facilitate the transition to an alternative economic model that is more

democratic, equal, and sustainable, thus aligning with the objectives outlined

in the SDGs.

Specifically, within the agricultural industry, Agricultural Cooperatives

serve a crucial role in addressing food insecurity, enhancing economic

empowerment, and fostering collaborative partnerships for inclusive

development. By providing farmers with access to markets, supporting

sustainable farming practices, and forging partnerships with diverse

stakeholders, Agricultural Cooperatives contribute significantly to the

realization of SDGs related to Hunger Eradication, Economic Growth, and

Collaborative Partnerships for Global Progress. Therefore, recognizing and

supporting the role of cooperatives is essential for fostering a more equitable,

democratic, and sustainable future for all.

This study will utilize the indicators for Organizational Performance

suggested by Wu (2009, p.71). Wherein, he categorizes Organizational

Performance using seven indicators: Capability, Resource, Environment

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Strategy, Process, Measure and Analysis, and Innovation and Learning, which

this research will employ for assessment.

Supervising Organizational Performance is crucial for an organization

to guarantee the attainment of organizational objectives. Assessing

Organizational Performance in Agricultural Cooperatives possess additional

challenges due to the complex and rapidly changing nature of agri-food

market environment (Markcis, et. al 2019, [no pagination]). Organizational

Performance is described as the effectiveness and quality of executing the

organization’s goal, tasks, and operation (Pap et al. 2022, p1). Meanwhile,

Kennedy et al. (2020, p.42) believe that it is the organization’s progress

towards its vision, mission, and goals. Therefore, evaluating Organizational

Performance is crucial for strategic management in all types of entities,

including Agricultural Cooperatives.

An article proposed to build and examine the research landscape for

agricultural cooperatives, using a systematic review of literature. Capitalizing

on ProKnow-C and Snowball methods, the study offers a holistic examination

of Organizational Performance within Agricultural Cooperatives through the

lens of sustainability. The study emphasizes a significant gap in the research:

the lack of focus on evaluating Organizational Performance, particularly in

terms of sustainability, within Agricultural Cooperatives. Despite their

significant role in the society, the study sees that there has been limited

exploration of how well these cooperatives are performing, as evidenced by

the absence of prominent authors in this area. Some authors who published

articles contribute only one publication to their portfolio, which indicates a lack

of attention to this crucial aspect. This concludes the urgent need to dig
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deeper into assessing the Organizational Performance of Agricultural

Cooperatives, ensuring they thrive economically while also promoting

sustainability (Marcis 2019, [no pagination]).

On the other hand, amidst the challenges possessed by COVID-19,

organizations are striving to maintain and improve their performance. HR

managers are faced with issues such as aligning employees with company

goals, optimizing recruitment, ensuring engagement, and effective training, all

while adapting to remote work. A study explores how engagement influences

Organizational Performance, particularly through knowledge sharing.

Research from Karachi, Pakistan and Bangkok, Thailand reveals that

engaged employees who share knowledge contribute positively to

Organizational Performance. Despite pandemic-induced disruptions, this

presents an opportunity for companies to enhance performance by fostering

engagement and knowledge sharing among employees (Ahmed et al. 2020,

p. 589).

Moreover, a study aims to develop a conceptual framework to

understand how Entrepreneurship, Organizational Culture, and Job

satisfaction impact the Organizational Performance of the International Bank

of Yemen. The study discloses the critical importance of Organizational

Performance, which draws considerable attention from practitioners and

academics. These factors are instrumental in enhancing Organizational

competitiveness, stability, and ultimately, in achieving high-quality

performance and organizational goals (Alrazehi et. al, p.1).

Evaluating Internal control serves as the foundation of organizational

governance, providing a systematized approach to manage risk and ensure

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the achievement of organizational objectives. Yahya (2015, p.16) categorized

internal control using four (4) indicators: Control Environment, Risk

Assessment, Information and Communication, and Monitoring, which this

study will utilize in measuring. According to COSO, an organization's system

of internal control is a process utilized by managers and staff to reasonably

ensure the achievement of the organization's objectives while complying with

relevant laws and regulations, particularly ensuring accuracy of financial

reporting (Sofyani et al., 2021, p.66). Internal control comprises a series of

interconnected activities integrated into the standard operating procedures of

an organization, aiming to protect assets, reduce errors, and ensure that

operations adhere to established protocols (Chang et al., 2019, p. 2715).

Furthermore, control activities are present across all levels and

functions within organizations, encompassing the policies and procedures

implemented to ensure the execution of management directives and the

mitigation of risk to achieve organizational objectives (Ratcliffe & Landes,

2019, p. 2715). Moreover, insights from a study in Meru County, Kenya

highlights that internal control systems present a hurdle for the effectiveness

of Dairy Cooperative Societies in Kenya, there has been a rise in instances of

neglecting regulations and procedures, along with a lack of adherence to

cooperative management standards. Consequently, it is recommended that

internal control mechanisms be implemented across all Dairys’ Cooperative

Societies in Meru County. This recommendation aligns with the earlier

suggestion to ensure effective internal control systems are established and

adhered to, alongside measures aimed at enhancing profitability (Nyaga et al.,

2021, Abstract, 1).

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The rapid evolution of rules, standards, and regulations underscores

the importance for companies to closely examine their implementation of

internal controls. Businesses need to evaluate whether their internal control

system contributes to operational efficiency and effectiveness, thereby

ensuring accurate financial reporting. The nature of the Internal Control

System may vary depending on the type of business. According to Sukarma,

Hendra, Effendi, and Mohamad (2020, p. 23), a manufacturing company must

prioritize effectiveness before pursuing efficiency and adaptability. An effective

internal control system assists management in achieving three primary

objectives related to organizational performance measurement: operating

effectively and efficiently, providing reliable financial reporting, and adhering to

applicable laws and regulations.

In this study, there are two theories that will be used. First, the Total

Quality Management philosophy developed by Juran (1993) emphasizes

quality planning, control, and improvement. This theory emphasizes the

importance of setting objectives, gaining managerial support, and cultivating a

knowledgeable workforce. It was chosen for its focus on internal control and

its influence on organizational performance. Second, the Agency Theory,

defined by Jensen and Meckling (1976) in corporate governance. This theory

is important to the study as it addresses the agency problem by lowering the

agency cost through techniques like internal control, which in turn affects

organizational performance and benefits for principals.

In addition, the researcher concludes that internal control systems and

organizational performance exhibit a significantly positive correlation. This

means that as internal control measures within an organization improve, the

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overall organizational performance also improves. This is supported by

Maaroufi and Hajar's, E.L., ( 2022, p18) findings, which show a significant

positive relationship between internal control system and organizational

performance. This indicates that when an organization implements internal

control mechanisms, it tends to enhance performance across various aspects

of strategy. Essentially, strong internal control systems serve as a foundation

for organizational success by fostering effectiveness, and responsibility

leading to better performance.

The researchers enlisted key informants to interview officers from

agricultural cooperatives in Davao del Norte, who discovered that internal

control practices greatly affect the effectiveness and efficiency of an

organization, which influence organizational performance. Moreover, there are

no researchers who have come across any study regarding the effect of

internal control practices towards organizational performance specifically

among the officers of agricultural cooperatives in Davao del Norte. This

absence prompts the researchers to initiate the present study. The existing

literature concerning internal control and organizational performance within

agricultural cooperatives is limited, with few studies exploring the correlation

between cooperative internal control and organizational success.

This research gap presents a valuable opportunity to explore how

these factors affect the effectiveness and sustainability of cooperatives, which

play crucial roles in agriculture, finance, and consumer services. It's essential

to investigate how internal control measures align with cooperative principles

and impact organizational outcomes. This study not only highlights potential

opportunities and challenges but also explore the relationship between

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internal control systems and organizational performance in cooperatives.

Furthermore, it provides practical recommendations for improving operational

efficiency and ensuring long-term viability.

Moreover, the practical implications of this study are significant to the

following: Cooperative Development Authority, Agricultural Cooperatives,

Cooperative Officers, and Future Researchers. This research provides

valuable insights into how internal control affects organizational performance.

By leveraging this knowledge, agricultural cooperatives can empower

employees to make better internal decisions and enhance their overall

management. Additionally, understanding the relationship between the two

variables discussed in this study will have a profound impact on cooperative

development, as it can strengthen internal control and organizational

performance, as well as measure business satisfaction. This enables

cooperatives to create effective strategies and valuable activities that help

improve their internal control and organizational performance in terms of

efficiency and effectiveness.

First, it benefits the CDA to function as a highly efficient regulatory and

support body that leads to improved the performance of cooperatives.

Second, this benefits Agricultural Cooperatives, which are crucial to the

economies of different countries. Hence, this research contributes to internal

management and can offer valuable perspectives to multiple stakeholders.

Third, this research will help the Cooperative Officers, and those in charge of

the management by enhancing effectiveness and efficiency and minimizing

the number of unnecessary errors. The competence of the employees,

organizational structures, management philosophy and operating approach,

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distribution of duties and responsibility, personnel policies and practices, and

Board of Directors (BODs) or audit committee activities to achieve

organizational goals. Lastly, this study paves the way for Future Researcher,

which inspires and motivates researchers to broaden the scope of their

research based on the variables discussed in this study, as well as increase

the credibility of their research.

Generally, this study is essential not only for cooperatives and their

employees but also for the general public, as it provides a deeper

understanding of the issues at hand. This research also provides knowledge

to researchers and ensures that the problem being studied is relevant to the

environment.

This study seeks to answer the following questions: First is to assess

the level of internal control practices among officers of agricultural

cooperatives in terms of Control Environment, Risk Assessment, Information

and Communication, and Monitoring. Second, is to determine the level of

organizational performance among officers of agricultural cooperatives in

terms of Capability, Resource, Environment, strategy, process, measure and

analysis, and innovation and learning. Third, to ascertain if there is a

relationship between internal control practices and organizational

performance. Lastly, it is to determine what specific domain of internal control

practices has a significant influence on organizational performance.

Moreover, the study will utilize the 0.05 significance threshold in testing

the following null hypothesis. First, whether there is no significant relationship

among internal control and organizational performance in agricultural

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cooperatives. Second, if there is no domain between internal control practices

and organizational performance in agricultural cooperatives.

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METHODS

Presented below the various methods used for gathering and analyzing

data pertinent to the study. Research methods include areas such as

Research Participants, Research Instruments, Research Design, and

Procedure.

Research Participants

The study gathered data from minimum of 200 officers who came from

52 Agricultural Cooperatives available in Davao del Norte – identified as

Board of Directors (including the Chairperson and Vice-chairperson),

Secretary, Treasurer, and the Audit Committee – who are mainly responsible

for the internal control management and organizational performance of the

cooperative. According to the study of Dhakal and Mueser (2023) that 200

respondents is sufficient to get reliable data. The sampling technique utilized

in this study is a simple random sampling method in which each person within

the population has an equal opportunity of being selected using an unbiased

selection process (Simkus, 2022, p.1). To identify the respondent, the officer

must be managing a term for at least one (1) to two (2) years in an agricultural

cooperative. This targeted sampling ensures that only officers with relevant

experience and expertise participate, enhancing the quality of insights

gathered for the study.

Research Instrument

The researcher of this study used a quantitative approach using an

adapted questionnaire as a research instrument. Hence, the five likert scale is

utilized as a standardized measure to assess the independent variable and

the dependent variable of the study. According to Yahya (2018), the adapted
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survey questionnaire for the independent variable (Internal Control Practices)

comprises four (4) indicators, which are Control Environment, Risk

Assessment, Information and Communication, and Monitoring. Additionally,

there are seven (7) indicators in the dependent variable ( Organizational

Performance), as per Wu (2009), which are Resource, Environment,

Capability, Strategy, Process, Measure and Analysis, and Innovation and

learning.

Research Design and Procedure

The researcher employed descriptive correlational methods to conduct

quantitative non-experimental research that aims to understand how internal

control practices affect organizational performance in an agricultural

cooperative. Kotronoulas, G. & Papadopoulou, C., (2023, p.1) mentions that

“non-experimental research is used to measure the cause-and-effect

relationship of the study without using experimental research, which is

regarded as unethical”. Non-experimental research can be utilized in

situations when modifying the independent variable is not viable or ethical.

Furthermore, descriptive research design depicts the target group's attributes,

features, or characteristics or the examined phenomenon (Masanja, N.M.,

2019, p. 65-67).

Moreover, non-experimental research, also called correlational

research, involves measuring two variables and examining their statistical

associations to ascertain whether they are related. Afterwards, the researcher

evaluates the correlation without regard to any peripheral variables. Also, it is

important to note that in correlational research, measurements are made

without manipulating two or more variables (LaVigne-Jones, D., 2023, p. 11).

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The data collected for this study are taken into account: Firstly, a

permission letter containing the signatures of the advisor, panelist, research

coordinator, and the dean of the university to conduct the study are issued,

which are considered official documentation that UM Tagum College has

approved the research. The study intentionally selected Agri-Coops within the

province of Davao del Norte. Secondly, in the research process, researchers

first obtained permission from the representatives of these Agricultural

cooperatives. Afterwards, questionnaires are distributed to the selected

respondents, who are the officers who play a vital role in this research. It

involved the collection of responses, which are tabulated and sent to a

statistician for proper handling of identified concerns. Lastly, the final phase

included analysis and interpretation, where the outcomes of this significant

study are examined and interpreted.

The researchers utilized statistical tools such as mean, pearson-r and

multiple regression analysis in analyzing the data gathered. In this study,

mean is used to assess the level of internal control practices and

organizational performance, pearson-r is used to ascertain if correlation exists

between internal control practices and organizational performance, and

multiple regression analysis is used to determine what specific domain of

internal control practices that significantly influence organizational

performance.
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RESULTS AND DISCUSSION

This chapter presents the data results of the study. The findings are

organized according to the level of effectiveness and efficiency of the internal

control practices towards the organizational performance among the officers

of agricultural cooperatives in Davao del Norte. The data collected from the

participants are summarized in the following subheadings.

Level of Internal Control Practices

Table 1. Level of Internal Control Practices Among Officers of

Agricultural Cooperatives in Terms of Control Environment, Risk Assessment,
Information and Communication, and Monitoring Level of Internal Control
Practices

Indicator Mean SD Descriptive

Level
Control Environment 4.49 0.44 Very High
Risk Assessment 4.18 0.60 High
Information and Communication 4.37 0.46 Very High
Monitoring 4.39 0.47 Very High
Overall 4.36 0.38 Very High

Table 1 displays the level of Internal Control Practices of the

participants which are the officers of agricultural cooperatives in Davao del

Norte. With an overall mean score of 4.36 and a standard deviation of 0.38,

which falls under the “Very High” category. This indicates that the surveyed

officers view the Internal Control Practices in their cooperatives as highly

effective. While the overall score reflects a positive evaluation of internal

controls, the slightly lower rating for Risk Assessment compared to other

areas highlights a potential opportunity for improvement.

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As stated by COSO's on internal control, emphasizing the importance

of adhering to both internal policies and external statutory requirements.

Internal control can be understood as the combination of financial and

non-financial measures established by top management to ensure compliance

with company policies, safeguard assets, and enhance the accuracy and

completeness of records (Adekunle et al., 2021).

Moreover, a study conducted in Meru County, Kenya, reveals that

internal control systems pose significant challenges to the efficiency of Dairy

Cooperatives Societies. The findings highlight increasing cases of

non-compliance with regulations and procedures, as well as deviations from

cooperative management standards. To address these issues, it is advised

that comprehensive internal control mechanisms be implemented and

enforced across all Dairy Cooperative Societies in the region. This aligns with

previous recommendations to prioritise the establishment and maintenance of

effective internal control systems, alongside strategies to improve profitability

(Nyaga et al., 2021, Abstract).

Among the different indicators, Control Environment achieved the

highest mean score of 4.49 with a standard deviation of 0.44, which is

categorized as "Very High." This suggests that participants view that the level

of internal control practices in Agricultural Cooperatives is effective and

efficient. Following closely is Monitoring, with a mean score of 4.39 and a

standard deviation of 0.47, which also falls under the "Very High" category.

Information and Communication ranked third, obtaining a mean of 4.37 with a

standard deviation of 0.46, indicating a significant impact on Internal Control

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Practices. Among the indicators of Internal Control Practices, only the Risk

Assessment showed a “High” descriptive level of mean score which was 4.18

and standard deviation of 0.60.

Control Environment

Among all of the indicators, Control Environment received a mean

score of 4.49, classified as “Very High”. This implies that the respondents view

the organization's overall tone, structure, and culture as highly beneficial to

effective internal controls. Such a positive assessment reflects strong ethical

standards, effective governance, focus on competence, and well-defined

accountability within these cooperatives. This result conforms with Chen et al.

(2020) and Gao and Zhang (2019) that Control Environment reflects attitude,

philosophy, and approach of individuals associated with the organization, as

well as their competence, morale, integrity, and ethical principles.

Similarly, some scholars argue that the Control Environment signifies

management's commitment to ethical business practices, which positively

influence employee behavior and improve Organizational Performance (Gal &

Akisik, 2020).

Monitoring

Monitoring received a mean score of 4.39, also classified as “Very

High”. This reflects that the surveyed officers believe that the Agricultural

Cooperatives have highly effective monitoring processes. In the context of

internal controls, Monitoring involves regularly evaluating whether controls are

functioning as intended and addressing any weaknesses or areas for

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improvement. A very high rating indicates that these cooperatives have a

strong monitoring system in place, consistently reviewing their controls and

making necessary adjustments to ensure effectiveness.

As cited by Wali & Masmoudi (2020) Monitoring involves assessing

how well control systems are functioning. Some researchers emphasize that

Monitoring evaluates the quality of controls and their effectiveness in

managing identified risk (Dowdell et al., 2020).

Information and Communication

Moreover, a mean score of 4.37 for Information and Communication

was also classified as “Very High” indicates that the officers of the Agricultural

Cooperatives generally view their organizations Information and

Communication processes as effective in supporting their internal control

efforts. Thus, this suggests good communication channels and access to

relevant information within the cooperatives. This is aligned by Frazer (2020)

and Vu & Nga (2022) that the Information and communication are processes

used in the location, collection, and properly disseminating essential

information within the limit set by management to fulfill the organization’s

financial reporting purpose.

Hamdan (2019) also asserts that effective communication is predicated

on disseminating relevant information with every significant organizational

division. Several authors assert that the effectiveness of Information and

Communication in an organization reflects the organization’s Control

Environment.
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Risk Assessment

Lastly, Risk Assessment showed a mean score of 4.18, which was

classified as “High”. This suggests that the surveyed officers generally view

the cooperative's Risk Assessment processes as effective, though not as

effective as the other areas of internal control. A high rating doesn't mean

poor performance but indicates there is still room for improvement. This may

reflect inconsistencies in how risk is identified, analyzed, and managed across

different cooperatives. As cited by Chen et al. (2020) Risk Assessment plays

a key role in identifying significant risk that may hinder the achievement of

management objectives.

Other researchers argue that risk attitude and management are vital for

enhancing organizational effectiveness (Chiu & Wang, 2019, and Musah et

al., 2022). Similarly, it is proposed by various authors that Risk Assessment

helps prioritise specific objectives that significantly influence an organization’s

control systems (Hamdan, 2019). Emphasize that Risk Assessment Is

essential for reducing and mitigating the cost of risk while contributing to

society well-being.

The results demonstrate that the level of Internal Control Practices are

perceived as pivotal across all of its four indicators among the participants of

Agricultural Cooperatives in Davao del Norte.

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Level of Organizational Performance

Table 2. Level of Organizational Performance Among Officers of

Agricultural Cooperatives in Terms of Capability, Resource, Environment,
Strategy, Process, Measure and Analysis, and Innovation and Learning

Indicator Mean SD Descriptive

Level
Capability 4.40 0.46 Very High
Resource 4.28 0.50 Very High
Environment 4.29 0.45 Very High
Strategy 4.33 0.43 Very High
Process 4.33 0.53 Very High
Measure and Analysis 4.30 0.45 Very High
Innovation and Learning 4.37 0.48 Very High
Overall 4.33 0.37 Very High

Organizational Performance

Table 2 displays the level of Organizational Performance among the

officers of agricultural cooperatives in Davao del Norte. The data reveals an

overall mean score of 4.33, this score shows a “Very High” level of

performance, indicating that the cooperatives are functioning exceptionally

well. Additionally, the standard deviation of 0.37 highlights a consistent

perception among officers regarding their cooperatives’ performance, with

minimal variation in their assessments. The combination of a high mean score

and low standard deviation indicates that the officers collectively view their

cooperatives as highly capable and effective, demonstrating a strong

management practices and organizational strength.

For instance, a study on agricultural managers in Chinese farm

cooperatives found that strong leadership and managerial competency

positively influenced organizational performance (Yu et al., 2023 p.12).

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Moreover, other studies emphasize the role of cooperative performance in

terms of financial viability, sustainability, and farmer’s satisfaction, all of which

are tied to effective governance and organizational practices (Martinez-Lopez,

Fernandez-Barcala, and Gonzales-Diaz, 2023, p. 43). This study collectively

suggests that high Organizational performance in cooperatives often reflects a

well-coordinated effort and management practices that align with the needs of

their members (Ando, E., Clarin, A., and Clarin, A., pp. 107-108).

Capability

Among all the indicators, Capability of agricultural cooperatives

achieved the highest mean score of 4.40 with the standard deviation of 0.46,

indicating a strong collective commitment in the officers’ abilities to effectively

manage and contribute to the success of the cooperatives. This emphasized

the role of leadership competency and managerial capabilities in driving the

performance of agricultural cooperatives. Chen and Zheng (2022, p.14)

emphasized that dynamic capability and its dimensions significantly enhance

organizational performance.

Innovation and Learning

The Innovation and Learning indicator, with a mean score of 4.37 and a

standard deviation of 0.48, highlights the cooperative’s commitment to

fostering a culture of continuous improvement and innovation. This high score

shows that the officers perceive their cooperative that they accept new ideas

to improve its operations and remain resilient in a constantly changing

industry. Since, innovation and learning is an essential role for business

success. According to this study, a progressive dynamic environment and

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increasing competitive advantage, makes companies more innovative,

including open innovation (Mulyono and Syamsuri, 2023 p. 273).

Strategy

Furthermore, the Strategy indicator resulted in a mean score of 4.33

and a standard deviation of 0.43, indicating that officers in agricultural

cooperatives view their strategic planning and direction of the cooperative as

both strong and effective. This high level indicates that the officers believe the

cooperative has a clear and well established strategy that helps guide their

operations and decision making. Effective Strategy is vital, particularly in the

agricultural sector, where market conditions and other environmental factors

can change unexpectedly. A well-defined Strategy allows the cooperative to

guide these challenges and adapt to evolving circumstances with confidence.

For instance, the adoption of strategic planning techniques in cooperatives

plays a vital role in enabling organizations to adapt to dynamic market

conditions and environmental challenges. Furthermore, the application of

management accounting information in decision making also enhances

strategic planning, enabling cooperatives to make data driven decisions

regarding resource allocation and performance measurement (Nhung, Lan

and Huyen, 2024 p.69).

Process

The Process indicator, which resulted in a mean score of 4.33 and a

standard deviation of 0.53, indicates the agricultural cooperatives strong

operational efficiency and the effectiveness of their internal processes. It

highlights that the officers perceive the cooperative's workflows, procedures,

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and system as well-organized and capable of supporting the organization’s

objectives. Effective processes, such as risk management and resource

utilization, lead significantly to achieving organizational objectives while

ensuring adaptability to challenges in the agricultural sector. By maintaining

these high performing processes, the agricultural cooperatives were able to

deliver quality services, uphold their commitments, and sustain their overall

success. According to Oliveira & Wander (2021) emphasizes the efficient

management practices, professionalism, and operational strategies are critical

factors influencing cooperative success.

Measure and Analysis

The Measure and Analysis indicator, which resulted in a mean score of

4.30 and a standard deviation of 0.45, reflects the agricultural cooperative

officers’ belief that performance metrics and data analysis are being utilized

effectively to support informed decision making. This result suggests that the

agricultural cooperatives prioritize their key performance and evaluating

outcomes to drive their actions and strategies. The ability to measure and

analyze performance is vital for identifying areas of success ensuring that

strategies remain aligned with the cooperative's goals. By emphasizing this

indicator, the agricultural cooperatives demonstrate a commitment to constant

improvement and adaptability, which are vital for navigating challenges and

sustaining long-term success. Measuring how well an organization is

performing is crucial for staying competitive and spotting areas that need

improvement. According to this study, using a balanced and thorough

approach to performance measurement, organizations can reach their goals,

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strengthen trust with stakeholders, and create lasting value (Bozic and Poola,

2023, p.14).

Environment

The Environment indicator, which resulted in a mean score of 4.29 and

a standard deviation of 0.45, indicates that officers believe both the external

and internal environments in which the agricultural cooperatives operate are

highly supportive of the cooperative’s goals. This comprises a range of

factors, including favorable market conditions, stable regulatory frameworks,

and strong relationships with stakeholders such as suppliers, customers, and

local communities. In instance, studies emphasize the role of environmental

factors in cooperative survival, with cooperatives often adapting to external

changes such as industry consolidation and policy shifts to maintain their

viability (Ibourk and El Aynaoui, 2023). It underlines how both internal and

external environments can significantly enhance a cooperative's success,

aligning with the positive feedback seen in Davao del Norte’s agricultural

cooperatives. In essence, the positive evaluation of the environment in the

study reflects a broader trend where cooperatives strategically adapt to their

external surroundings to enhance sustainability and success.

Resource

Furthermore, the indicator of Resource resulted in a mean score of

4.28 with a standard deviation of 0.50, making it the lowest among all the

Organizational Performance indicators for agricultural cooperatives among

officers in Davao del Norte. Despite having the lowest mean score, it still falls

within the “Very High” category, reflecting that officers continue to perceive the
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availability and management of resources as a strength, though slightly less

so than to other indicators. And resources may not be rated as highly as other

aspects, it is still seen as an area of strong performance that supports the

cooperative’s overall success. Moreover, studies suggest that even when

resource management is perceived as a strength, the ability to effectively

leverage these resources varies. This might be influenced by factors such as

cooperative size, external market conditions, and the overall quality of

governance and member engagement. Despite these challenges, the general

perception of resources as a strength in agricultural cooperatives shows their

capacity to support sustainable agricultural practices and growth (Christian et

al., 2024).

Thus, this interconnected analysis of all the seven indicators

(Capability, Resource, Environment, Strategy, Process, Measure and

Analysis, and Innovation and Learning) affirms the high level of Organizational

Performance observed among officers in agricultural cooperatives in Davao

del Norte.

Significant Relationship Between Internal Control Practices and

Organizational Performance

Table 3. Significant Relationship Between Internal Control Practices

and Organizational Performance

Variable r-value p-value

Internal Control Practices 0.694* 0.005

Organizational Performance

*p<0.05
 25

Through Pearson correlation, Table 3 exhibited results of overall

r-value and p-value of 0.694 and 0.005 respectively between variables.

Findings obtained mark both strong positive and significant relationship

between the Internal Control Practices (independent variable) and the

Organizational Performance (dependent variable) as for the officers of

Agricultural Cooperatives in Davao del Norte. Consequently, the null

hypothesis is rejected.

The strong positive and significant relationship results align with the

two theories that guided the conduct of this study. TQM philosophy by Juran

(1993) mentioned control, among other elements of emphasis that influence

Organizational Performance which, accordingly is translated on the findings of

this study through the independent variable of Internal Control Practices.

Furthermore, the study supports the Agency Theory by Jensen and Meckling

(1976) since internal control, represented by the independent variable

(Internal Control Practices), under analysis in this study shows positive results

which then can lower agency costs and affect Organizational Performance,

eventually benefiting the principals of an agency.

In Addition, research by Maaroufi and Hajar (2022) mentioned in Chapter

1 agrees with these findings, emphasizing that the improvements in the

Internal Control Practices possess significant relationship with the

Organizational Performance of a firm. Likewise, a study conducted in South

and Southeast Nigeria confirmed that applying the COSO framework

(including Control Environment, Risk Assessment, Information &

Communication, and Monitoring) significantly enhances organizational

 26

performance by preventing errors, fraud, and inefficiencies. This leads to

better resource optimization, goal achievement, and a reduction in operational

challenges (Simon, 2021).

Other studies utilizing the COSO model also support these conclusions,

showing that strong internal controls contribute to both financial and

non-financial performance improvements. Statistical evidence, particularly

highlighting the increased emphasis on monitoring activities, emphasizes its

essential role in enhancing organizational success (Adejuwon & Hassan,

2022).
 27

Regression Analysis

Table 4. Specific Domain of Internal Control Practices that has a

Significant Influence on Organizational Performance
Independent Unstandardized Standardized t-value p-value Decision
Variable: Coefficient Coefficient
INTERNAL β
CONTROL β SE β
PRACTICES
Constant 1.501 0.213 7.054 0.001
Control 0.095 0.047 0.114* 2.012 0.045 Reject
Environment

Risk 0.222 0.034 0.364* 6.463 0.001 Reject

Assessment

Information and 0.309 0.049 0.384* 6.331 0.001 Reject

Communication

Monitoring 0.027 0.048 0.034 0.565 0.573 Accept

Dependent Variable: ORGANIZATIONAL PERFORMANCE
R= 0.722 R²= 0.522
f-ratio=58.05 p-value= 0.001

*p<0.05

Results in Table 4 showed that the indicators corresponding to the five

domains of Internal Control Practices (Control Environment, Risk

Assessment, Information and Communication, and Monitoring) were

individually aggregated and used as independent variables.

Organizational Performance is the dependent variable, measured

through indicators such as Capability, Resource, Environment, Strategy,

Process, Measure and Analysis, and Innovation and Learning. The various

indicators were aggregated into a single overall score to represent

Organizational Performance. To analyze how the independent variables

influence the dependent variable, a regression analysis was performed. This

included examining t-value, and p-value, partial correlation coefficients, and

 28

the coefficient of determination, along with their significance levels. A

significance level of 0.05 was used as the threshold for determining statistical

significance.

In this analysis, the p-value for the F-ratio of 58.05, is significantly

below 0.05 (p<0.001). This indicates that the correlation (R) and the

coefficient of determination (R²) between Internal Control Practices and the

Organizational Performance of Agricultural Cooperatives are significant.

The model's correlation coefficient of 0.722 indicates a strong positive

relationship between the dependent and independent variables. The R² value

represents the proportion of variance in the dependent variable explained by

the model. Therefore, an R² value of 0.522 suggests that the model explains

52.2% of the variation in the Organizational Performance of Agricultural

Cooperatives. On the other hand, Risk Assessment and Information and

Communication shows significant positive relationships with t-value and

p-value of 6.463 and 0.001, as well as 6.331 and 0.001 respectively are less

than 0.05 (p<0.05). This means that increases in this variable are associated

with increase in Organizational Performance, thus the null hypothesis is

rejected. While the Control Environment showed a positive but only marginally

significant relationship with the t-value and p-value of 2.012, and 0.045, thus

the null hypothesis is rejected.

On the other hand, Monitoring showed no statistically significant

relationship with the t-value and p-value of 0.565, and 0.573, this means that

monitoring does not significantly affect organizational performance, thus the

null hypothesis is not rejected. This was aligned with the study of Nana, Kaur
 29

and Rather (2023, p.8) that the three key aspects of internal control which

control activities, control environment, and risk assessment had a strong

influence on how effective organizations were. On the other hand, the

monitoring indicator does not have a significant influence on organizational

performance. This study aligned with the findings that the monitoring

component of internal control and operational performance of cooperatives

are not significantly related (Makut and Ibrahim, 2021). Monitoring may not

have a significant impact on Organizational Performance because its main

role is to ensure compliance with policies and regulations, rather than directly

improving performance outcomes.

Thus, the overall regression analysis resulted in the indicators of

Internal Control Practices significantly affecting Organizational Performance

except for Monitoring, wherein the null hypothesis is accepted due to its

p-value exceeding the threshold of p<0.05. As a result, the overall regression

analysis Indicates that Risk Assessment, Information and Communication,

and Control Environment are the key domains of Internal Control Practices

that influence Organizational Performance, as their p-values are below the

significance threshold of p<0.05.

As stated by Tabachnick and Fidell (2029), this suggest that the

independent variables (Control Environment, Risk Assessment, Information

and Communication) collectively and significantly predict or explain the

dependent variable, the Organizational performance of agricultural

cooperatives.
 30

CONCLUSION AND RECOMMENDATION

Conclusion

Organizations, especially agricultural cooperatives in Davao del Norte

consider Internal Control Practices valuable for Organizational Performance.

This leads to these cooperatives fulfilling their financial objectives, while

meeting the needs of their members. The study concludes four propositions.

First, the level of Internal Control Practices among officers of agricultural

cooperatives in terms of Environment, Risk Assessment, Information and

Communication, and Monitoring is very high – revealing the effectiveness and

efficiency of their operations. Second, the level of Organizational Performance

among hi officers of agricultural cooperatives in terms of Capability, Resource,

Environment, Strategy, Process, Measure and Analysis, and Innovation and

Learning is very high which demonstrates that organizational objectives are

attained by these cooperatives. Third, there is a significant relationship

between Internal Control Practices and Organizational Performance, identified

as strong positive. And lastly, Risk Assessment, Information and

Communication, and Control Environment are the specific domains of Internal

Control Practices that have significant influence on Organizational

Performance.

The TQM theory by Juran (1993) validates the conclusions drawn,

stressing the effect of control as one of its emphasis that can influence

Organizational Performance which in this study is represented by Internal

Control Practices. Similarly, the Agency Theory of Jensen and Meckling

(1976) which aims to reduce agency costs, beneficial for the principals of an
 31

organization, nods to the conclusions made as the study – through Internal

Control Practices, gives an idea to improve agency’s efficiency. As a result of

improved Organizational Performance through Internal Control Practices,

agricultural cooperatives can help attain Zero hunger (SDG 2), Decent Work

and Economic Growth (SDG 8), and Partnership for the Goals (SDG 17)

from the Sustainable Development Goals (SDGs) proposed by the United

Nations (UN), ultimately making contributions to the society.

Recommendation

Based on the findings of the study, recommendations are drawn in

order to improve Internal Control Practices: (1) the Cooperative Development

Authority (CDA) may develop a comprehensive framework that establishes

performance targets, risk assessments, and its respective reporting protocols

that can help organizations pinpoint its weak points in order to identify correct

actions to address issues; (2) Agricultural Cooperatives can provide trainings

and programs to employees, making sure that duties are properly segregated

and carried out, reducing the risk of fraud and errors; (3) the Cooperative

Officers may decide to invest on much reliable software, designed specially

on inventory management and financial reporting to efficiently monitor the

organization real-time and; (4) Future Researchers can dwell more on

studying best practices from well-performing cooperatives and apply

recreatable actions to provide useful information in improving agricultural

cooperatives' internal control. Finally, the study has limitations as to the

exploration of how internal control can be improved. Future researchers can

close the unaddressed gaps left by this study through further research.
 32

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