Effect of Budgeting Process on Financial Performance of County Government of Kwale in Kenya

This study was to assess the effects of budgeting process on financial performance of \nCounty Government of Kwale in Kenya. Research design adopted was Descriptive and a \ncensus of the 13 departments in the county was conducted, collecting data from the \nCounty Executive Committee members and Chief Officers of the respective departments \nusing a structured questionnaire. Secondary data on financial performance of the county \nwas also collected through a review of financial documents obtained from the department \nof finance and economic planning. Cronbach's alpha was used to measure Internal \nconsistency of the questionnaire items yielding a reliability index of 0.985. Data was \nanalyzed with the help of IBM SPSS statistics for windows, version 21. The relationship \nbetween the budgeting process and financial performance was tested using correlation \nand Chi-square. On average, the respondents were in agreement with the various \nstatements on attainment of targets, program based budgeting, budgetary control and \ncounty legislations. The findings also indicated that a significant majority of the \nrespondents agreed that budgeting process has an impact to improved financial \nperformance at the county. However, the opinion on whether county legislations \ncontributed towards improved financial performance seemed to be equally divided \n(54%). In spite of the irregular trend in financial performance between 2014/2015 to \n2017/2018, a significant majority of the respondents perceived improved financial \nperformance which they attributed to improved budgeting process at the county (77% or \n20; X2 (3) = 10.615, p = 0.014). Chi-square and Cramer’s tests indicated significant and \nstrong associations between various variables of this study. Further, the results of \nPearson’s Correlation at 5% level of significance indicated significant correlation \nbetween financial performance and budgeting process. ANOVA test of deviation from \nlinearity and Shapiro-Wilk test of normality both yielded p> 0.05 indicating that the \ncorrelation model was linear in parameters and that the residuals followed a normal \ndistribution. Therefore, the study concluded that there was a significant moderate \npositive relationship between financial performance and budgeting process. The study \nrecommends that the County Government of Kwale should put in place sound cash flow \nmeasures in order to sustain its operations, develop realistic budget projections, link \nbudget programs and budget activities to set goals and targets, comply with budget \ntimelines as per the Public Finance Management Act 2012 and conduct regular checks \nand assessments to ensure efficient and effective programs and projects execution. In \naddition, the national treasury should disburse funds to county governments in \naccordance with the prepared schedule, in consultation with intergovernmental budget \nand economic councils, and in accordance with approved published gazette. The \nresearcher suggests that the study should be replicated in other counties in order to \ncompare findings with an aim of developing national policies that will promote effective \nbudgeting process in all the county governments.