Internal Controls and Financial Performance of County Government of Lamu, Kenya
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Date
2023-11
Authors
Ahmed, Salma Omar
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
Satisfactory performance of Kenyan county governments financially is of great essence for accelerated economic development particularly in the grassroot level. A major concern several years after transition in to devolution has been the increasingly dismal financial performance of several county governments especially when assessed in terms of their own source revenues, pending bills and also the capacity to fund county services among other performance measures. The County Government of Lamu is among the county governments that have witnessed financial performance challenges and a key contributor to such concerns is weak internal control systems within the county government. Yet, research on how internal controls effect on county government’s performance is not exhaustive. It is on this basis that the study sought to assess the effect of internal controls on the financial performance of the County Government of Lamu. The study sought to ascertain the effect of control environment, risk assessment, information and communication, monitoring activities and control activities on the financial performance of the County Government of Lamu. The study was underpinned by the agency theory, the stewardship theory and the positive accounting theory. The study used an explanatory research design. The study targeted 6 executive committee members, 13 chief officers, 20 county directors and departmental/unit heads as well as 726 middle management level employees. To select the sample, stratified sampling method was used. The sample consisted of 2 executive committee members, 4 chief officers, 7 county directors and departmental/unit heads and 249 middle level staff, all totaling to 262. The study employed primary data and this was gathered through a questionnaire. Secondary data on own source revenue was collected using a secondary data collection template. Informed consent and voluntary participation, confidentiality and anonymity, and seeking approval and authorization to carry out the study are ethical issues that were considered. To analyze the data, both descriptive and inferential analysis were undertaken. Diagnostic tests consisted of normality, multicollinearity and heteroscedaciticity tests were conducted. Multiple linear regression analysis was conducted to compute regression estimates to be used in testing the outlined hypotheses. The results obtained was presented using tables. The study showed that control environment, information and communication, monitoring activities and control activities, all above had the significance threshold of p< 0.05 hence all had statistically significant effect on financial stability of County Government of Lamu. The study concluded that popular of the responders established to abundant magnitude with the fact that control environment, information and communication, monitoring activities and control activities indeed affected the financial health of County Government of Lamu. The study recommended that County Government of Lamu should ensure that all staff show their commitment and competence on their responsibilities and should perform their duties as per laid out standards. It also recommends that all activities and operations in this county should be guided by high level of integrity and ethical values among the county employees. Furthermore, specific lines of authority and responsibilities should be checked to confirm adherence to the set policies and procedures. It also recommends that information should be shared openly with the county officers and there be timely flow of this information to enable county staffs to perform their responsibilities. There should be regularly, timely and reliable provisions of reports from county units to county employees to enhance decision making as well as regular monitoring of the efficiency of county government operations and alignment to set objectives as well as regular self-assessment of quality and effectiveness of internal control systems across all units.
Description
Research Project Submitted to the School of Business, Economics and Tourism in Partial Fulfillment of the Requirement for the Award of the Degree of Master of Business Administration of the Kenyatta University, November, 2023
Keywords
Internal Controls, Financial Performance, County Government of Lamu, Kenya