INTERNAL CONTROLS AND FINANCIAL PERFORMANCE OF COUNTY GOVERNMENT OF LAMU, KENYA
INTERNAL CONTROLS AND FINANCIAL PERFORMANCE OF COUNTY GOVERNMENT OF LAMU, KENYA
Salma Omar Ahmed - Department of Accounting and Finance, Kenyatta University, Kenya
Dr Margaret Kosgei - Department of Accounting and Finance, Kenyatta University, Kenya
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. Specifically the study sought to ascertain the effect of control environment on the financial performance of the County Government of Lamu. The study was underpinned by the agency theory and the stewardship 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 had the significance threshold of p< 0.05 hence had statistically significant effect on financial performance of County Government of Lamu. The study concluded that population of the respondents established to abundant magnitude with the fact that control environment indeed affected the financial performance 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.
