Internal Controls and Revenue Collection in the County Government of Marsabit, Kenya

Abstract

Many organizations within different sectors of the economy continue to face poor levels of revenue collection. This leads to the inability of the organizations to realize the set target of the revenue collection on annual basis and the limited overall annual growth in revenue collection which could be attributed to the effectiveness of the internal control system in place. The County Government of Marsabit being tasked with the duty of collecting its own source revenue has been doing quite well compared to other counties within the Republic of Kenya yet has been unable to meet the annual set target for the period between 2017 to 2020. This tendency puts into doubt internal control systems and prudential guidance's capacity to steer organizations toward their goals. This research investigated the effects of internal control adopted by the County Government of Marsabit on revenue collection. The study sought to determine the effect of the control environment, risk assessment, control activities, information and communication as well as monitoring on revenue collection in the County Government of Marsabit. The research was anchored to contingency theory, agency theory, and attribution theory which supports the variables used for this study. The research assessed how the control environment, risk assessment, control activities, information and communication and monitoring affected revenue collection in the County Government of Marsabit in terms of annual collection, revenue growth and target realization. Secondary data was gathered from the department of finance and economic planning's audited financial reports. This study focused on the 129 employees who work in the revenue department of the County Government of Marsabit. A stratified sampling technique was used to select the study's sample. Both descriptive and inferential statistics were generated. Frequencies, percentages, means, and standard deviation were used to describe the data. Primary data was collected using questionnaires from 80 respondents working with the revenue section in the department of Finance and Economic planning and qualitative data was collected from the available literature. The data collected from the respondents was analyzed using the SPSS and the findings presented in tables, pie charts and graphs. Multiple linear regression was used to determine the extent to which the internal control affects the collection of revenue in the County Government of Marsabit. The research revealed that the control environment, risk assessment, monitoring, control activities, and information and communication had a positive and significant effect on revenue collection in the County Government of Marsabit. Control activities were discovered to have the greatest effect on county revenue collection. The study, therefore, recommends that the County Government of Marsabit should ensure a suitable environment where internal controls are supported for the improved revenue collection and realization of annual targets. The County Government of Marsabit should support the internal control systems by allocating funds for monitoring and ensuring the control environment and control activities are enhanced. In addition, the study recommends the enhancement of information and communication through automation of the revenue collection process. Training of staff on integrity and financial management should also be done to improve the capacity of the employees within the department dealing with revenue collection.