Factors affecting the financial management systems in county governments in Kenya (a case study of South Eastern Region)

Abstract

Financial position of Local authorities (LAs) has been considerably strengthened in the past ten years as a result of the transfers made through the Local Authority Transfer Fund (LATF). However in almost all LAs, there is a huge gap between the formally approved budget and what actually happens. This is mainly because revenues are forecast unrealistically, in order to show a balanced budget and most of the local authorities are faced with financial problems due to failure to make realistic budgets, lack of control and poor financial management practice. This study focused on the factors affecting financial management systems of local authorities in Kenya. The specific purpose of the study was to investigate the effect of budget preparation process on financial management systems in local authorities, to establish the effect of local authority funding on the financial management systems in local authorities, to identify the effect of management practices on the financial management systems in local authorities, and to establish the effect of employee capacity on the financial systems in local authorities. The study will assist the management to realize the importance of proper financial management and create awareness among the stakeholders on the services provided and the best and efficient management practice of giving out the services. It was based on the south eastern counties with a greater emphasis on the municipal councils in the region. The study used descriptive design where by a survey method was applied. The study used stratified and purposive technique to sample the target population of 75, who are the management of the councils in the South Eastern Region. Questionnaires were prepared and face to face interviews contacted by the researcher from a sample size of 30 respondents. The data collected was analyzed using percentages and presented in tabular and pie-chart forms. It was found that budget preparation, local authorities funding, management practices and employee capacity had a great effect on the management of finances in local authorities in Kenya.