Budgetary control as a measure of financial performance of State Corporations in Kenya

Abstract

The importance of financial stability in enabling an organization to function efficiently and maximize the potential for service delivery cannot be underestimated. The quest for better service delivery under new public management in public organizations in Kenya necessitates the need for public organizations to have proper financial standing in order to run operations and motivate workers through better remuneration as well as improved working conditions. Critique of literature on factors affecting financial performance reveal that gaps remain on the influence of budgetary control on financial performance of public institutions. This study sought to investigate the relationship between budgetary controls and financial performance of state corporations in Kenya. The study sought to determine the salient features of budgetary controls in state corporations, establish the human factors within budgetary controls, establish the process of budgetary control in public organizations, and determine the challenges affecting budgetary control. A descriptive survey design was used to gather data from the state corporation’s managers of the sampled state corporations. 14 corporations were selected from the 138 to participate in the study. Purposive sampling was used to select 42 corporate services manager, finance manager and budget officer from each corporation to participate in the study. A questionnaire, whose content validity was checked through an expertise opinion and reliability through test pre-test methods, was used to gather information. Findings indicate that a positive significant relationship exists between budgetary control and financial performance of state corporations. Budgetary features reflect ability to predict financial milestones of organizations. Human factors within budgetary controls thus managerial commitment, employees’ motivation, employee training, competence as well as the attitude affect the budget control process. Budgetary control process exhibited a positive significant influence on financial performance of state corporations through influence on financial objectives, the allocation of funds as well as investment ventures that organization undertakes. The study recommends sensitization of management and employees of state corporations on the importance of budgetary controls in enhancing financial performance, avoidance of political interference in the budgetary process and use of budgets as tools for management efficiency. Key words: Budgetary control, budgetary process, financial performance, state corporations