An investigation of capital budgeting procedures and practices of the public secondary schools in Kenya. ( A case study of Meru North District)

Abstract

School principals in their executive management of Educational Institutions take the position of financial managers. Due to this, it was imperative to evaluate the procedures and the rules they employ to allocate school funds to various viable capital projects. The Financial Management Handbook for Educational Institutions (1999) and (2003) respectively had shown that there was minimal implementation of financial management procedures and systems in Public Secondary schools. There was a concern that many school principals do not adhere to financial management procedures and systems stipulated by the Ministry of Education. Factors leading to the current state of affairs had not been adequately investigated and understood.

Extensive studies relating to working capital management and financing in educational institutions had been undertaken. For example, Ngaba (1990) undertook study on working capital management and Muthaa (2004) undertook a study on alternative sources of finance. The little done on capital budgeting was mainly in public limited companies and government parastatals. For instance, Olum (1979) studied capital investment appraisal techniques employed by ICDC and KTDC which are both government related companies.

Hadgu, (2005) studied capital budgeting practices of companies quoted in the Nairobi Stock Exchange. Government, educational institutions seemed to have been neglected in this area of concern. In this respect, the researcher addressed the little covered areas, in particular capital budgeting practices in public schools in Meru North District. The literature review outlined major areas of capital budgeting procedure & practices and related them to the school situation. The study also looked at various capital budgeting procedures & practices recommended by the MOE. This being a case study, all public secondary schools of Meru North district were studied.

The researcher considered secondary as well as primary data. Secondary data assessed schedules of capital expenditures in each of the schools over the years and was ascertained from the books of accounts and other related documents. Primary data was collected by means of a questionnaire. The "drop and pick" method was used to administer the questionnaire to all respondents. Primary data assessed the extent to which capital budgeting procedures and practices were employed in each of the school. The data was analyzed using descriptive statistics and inferential statistics. Based on result of analysis, presentations, findings and discussion was made. Finally, the case study ended with summary, conclusion and recommendations.