Relationship between Fiscal Governance and Performance of County Governments in Kenya

Abstract

Fiscal Governance and prudent Management of Public resources contributes to improved performance of public institutions. The General objective of the study was to establish the relationship between fiscal governance and performance of County Governments (CGs) in Kenya. The Specific objectives were to assess the relationship between funding from National Government, Locally generated revenues, loans, grants and borrowings and budget control function and the overall performance of county governments in Kenya. The study also tested the Null hypothesis that funding from National Government, locally generated revenues, borrowings, loans and grants and budget control function have no relationship with the performance of County Governments in Kenya. The study covered the period of three years that devolution had been in existence in Kenya. The study population comprised of 2,858 County Government officers from County Governments in Kenya. A descriptive research design was used to conduct the study. The study used Stratified random sampling and simple random sampling techniques to get a sample of counties and County government officials to be included in the study .A sample of 288 respondents from the 5 Counties was selected for the study. This data was collected using semi – structured questionnaires with a response rate of 70.1% with 202 respondents returning questionnaires. The data was analyzed using descriptive statistics and multiple linear regression models as an inferential analysis. The study used regression analysis and moderated multiple regressions to analyse the relationship between the funding options available to county governments and performance of county governments. The study findings revealed that Fiscal Governance had a statistically significant relationship with performance of county governments in Kenya. The study specifically found out that Funding from National Government, Locally generated revenue, borrowings/grants/loans and budget control function had positive and significant relationships with performance of county governments. The findings of the study concludes that fiscal governance can affect the performance of county governments and due to their geographical closeness to the population which fosters stronger accountability and enhancement of efficiency in the delivery of public goods and services. As such, the alternative hypothesis in relation to fiscal xxi governance and performance in County governments in Kenya is accepted. The variables tested had a significant relationship with performance of county governments in Kenya. The study recommends that the enhancement of revenue decentralization to county governments is worthwhile in improving performance of county government. The study also recommends that while conditional grants are important, its allocations should be equitable and should not compromise the independence of the county government as regards budgeting, planning and budget execution. The study also recommends that fiscal governance can improve the fiscal balance of county governments as they are under strong pressures than the national government to provide more public goods with limited resources However, the study also recommends fiscal decentralization alone is not sufficient in improving performance and that political and administrative decentralizations need to be enhanced for improved performance of county governments in Kenya.