FINANCIAL MANAGEMENT PRACTICES AND GOVERNMENT PERFORMANCE: A CASE OF TAITA TAVETA COUNTY, KENYA

Abstract

Public financial management acts as a lever to economic development since it ensures revenues
are raised effectively and at the same time budget decisions planning and execution is done
transparently and reliably. In Kenya, public financial management has faced grave challenges
since creation of devolved units. This is despite dynamic and strong institutional and legislative
frameworks designed to make the public financial management systems to work effectively and
efficiently. Reports by the Audit General have indicated mismanagement of public funds by
county governments leading to poor service delivery to the public. Therefore, this study
purposed to assess financial management practices and its effects on government performance
with a focus on Taita Taveta County government. The research objectives guiding the study
were; to establish the effect of internal monitoring, working capital management, budgeting
practices and financial reporting analysis on performance of county governments in Kenya. The
study was grounded on the theory of agency theory, participative budgeting and trade-off
theory. The study employed descriptive research design to investigate the relationship between
financial management practices and performance. The study targeted senior staff derived from
trade department, finance and planning department, county director of revenue management
and County Executive Committee Members (CECMs). Census research method was employed
by targeting all participants. The study employed purposive sampling technique to select the
target population among the county government officials who are conversant with the affairs of
the county. Primary data was collected using structured questionnaire whereas secondary data
was obtained from county financial reports. A Multivariate regression model was used to
estimate the effect of financial management practices on the county government performances.
Data was analyzed using descriptive statistics and this was facilitated by the Statistical Package
for Social Science (SPSS) version 25 in order to give quantifiable statistics and the results were
presented in frequency tables. The study findings established that the County government has a
working capital management system and it was established that the county government has
implemented programs to reward staff who proactively find and report internal control
vulnerabilities and loopholes. Continually the county government of Taita Taveta maintains
optimal cash balances and this provides smooth operations of the county government by
ensuring sufficiency of revenue flow. Finally, it was shown that the county government
forecasts the county future cash flow so as to take corrective measures