Influence of Financial Sustainability Strategies on Performance of Counties in Kenya

Abstract

Financial sustainability measures an organization’s ability to meet all its financing obligations, whether these funds come from user charges or budget allocations to fulfil its mission and serve its stakeholders over time. Sustainability is also seen as a measure of an organization’s ability to fulfil its mission and serve its stakeholders, including county residents in the context of this study, over time. The establishment of county governments is a new governance system in Kenya’s post-independence era. This is a system, to many Kenyans, that presents an opportunity to address the diversity of local needs, choices and constraints while at the same time it carries the promise of a more equitable system of sustainable economic growth for the whole nation. This can only be achieved if financial sustainability of counties is achieved and sustained over time. This study examined the influence of financial sustainability strategies on performance of counties in Kenya. The target population of the study was the Forty-Seven Counties in Kenya as contained in the Kenyan Constitution of 2010 and the CRA report of 2011. A survey research design was adopted in the study. A combination of probabilistic and non-probabilistic sampling techniques was employed in determining the sample size of the study. Stratified sampling was applied to first group the Forty-Seven counties into eight geographic regions, equivalent to the defunct eight Kenyan provinces. Twenty-five counties were selected from the forty seven counties, from which respondents were determined per county on the basis of the proportionate county population sizes the CRA publication of 2011. A total of 350 (91.14%) of the expected 384 respondents participated in this study. Primary data was collected using questionnaires and was analysed using the SPSS software version 21. Spreadsheets were used in presenting the results using. Specifically, bar graphs, pie charts, frequency tables were among the presentation tools used in presenting results. The study revealed that county budget planning was an effective strategic tool for achieving financial sustainability and development coordination in the counties and that this is achieved best with strict adherence to budgeting procedures outlined in the PFM Act of 2012. It was also revealed that there was a strong positive relationship between budget planning, financial sustainability and performance of the counties. The study further revealed that most of the counties had diversified into other revenue streams as financial sustainability strategies for enhanced county performance. In addition, the study findings indicated that Public Private Partnerships are critical to the financial sustainability of counties. Paying strong attention to anti-corruption operations came out as a critical governance factor for the success of Public Private Partnerships. The study, xxiii further, revealed that lean management structures enhance effective performance and decision making in counties and management should keep a close check. A rather surprising result from the study was that governance structures had a negative influence on performance of counties, a contradiction to some of the empirical studies reviewed. The rest of the study variables revealed that they had a direct positive influence of county performance. The study, therefore, recommends that a similar study be conducted, specifically on the influence of governance structures on county performance to validate the outcome of this study. Secondly, similar studies could be conducted elsewhere outside the geographical scope of this study, including additional variables discussed in section 5.5 so as to validate the findings of this study.