Financial Management Systems and Performance of Kenya State Corporations: Case of Kenya Rural Roads Authority
Kamau, Muthoni Monica
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There is a rise on demand for better transparency; coherence and answerability in the administration of public’s funds. Therefore, transformation in Government’s financial management systems and techniques is becoming wanting. As it is extensively accorded in the Government of Kenya, there are basic problems that hinder efficiency and effectiveness of its financial and accounting roles, this is due to weak performance of key financial duties; inadequate financial information to support decisions; insufficient or inadequate supervision of the employees involved in ensuring success of the financial management system; poor or inadequate financial reports, mismanagement of assets, lack of adherence to the set laws and regulations as well as negative attitude to accounting and accountability leading to slow progress of KeRRA. The general Objective of this study was to determine the effect of financial management system on the performance of Kenya State Corporations. The specific objectives were to establish how laws and regulations; internal controls; cash management and accounting system affect performance of Kenya Rural Roads Authority. Three theories were used in this study for the theoretical review; Agency Theory, Contingency Theory and Resource Based Theory. A descriptive research design was utilized where a questionnaire was used to collect primary data. Secondary data was used to validate the realistic and communicative validity of primary data. The study target population was 102 employees at Finance Department at Kenya Rural Roads Authority. Purposive sampling method was utilized to come up with a sample of 53 respondents. The data gathered from the respondents was analysed by use of SPSS. Multiple regression analysis was utilized to analyse data to establish the effect that financial management system has on the performance of Kenya State Corporations case study being KeRRA. Cronbach’s Alpha was used in reliability. Findings revealed that Financial Reporting quality of KeRRA was reliable, efficient and effective. It was further noted that Laws and Regulations are verified and monitored thus indicating systematic stability is maintained. The Internal Control Variable findings indicated that positive effect on performance at KeRRA is achieved where problems are predicted before they occur, errors adjusted and malicious acts prevented and cambered. It was further noted that mismanagement of funds is well prevented since a favourable cash management system is maintained. The findings of KeRRA Accounting System indicated that sufficient management reporting is supported as well as policy decisions. Based on these findings, it can be summarized that financial reporting, internal controls, cash management as well as Laws and Regulations all affect the performance of Kenya State Corporations positively. Adoption of a more advanced technology is however recommended for Kenya State Corporations to ensure efficiency and effectiveness of financial management system. Since only 64.2 percent of the findings were defined by the independent variables, suggestions for further research should be undertaken on more elements that may affect performance of Kenya State Corporations.