Governance, Internal Audit, Financial Reporting And Performance Of National Government Constituencies Development Funds In Kenya

Abstract

The study conceptualized a relationship between governance, internal audit, financial reporting and organizational performance. The performance of most National Government Constituencies Development Funds (NG-CDFs) has been poor and the role of internal audit and financial reporting in the relationship between governance and NG-CDFs performance has been lacking. A census survey was carried out on all the 290 NG-CDFs performance in Kenya. A positivistic research philosophy and a descriptive cross-sectional survey design were used. Data was collected using structured and unstructured questionnaire. Simple, stepwise, hierarchical and multiples regression analysis were then used to test the hypotheses at 95 percent confidence level. The results of the study were established and compared to various theories anchoring the study and conceptual, contextual and empirical evidence. It was established that there is a statistically significant relationship between governance and NG-CDFs performance. The introduction of internal audit as an intervening variable has statistically significant effect on the relationship between governance and NG-CDFs performance. Financial reporting as a moderating variable also had a significant effect on the relationship between governance and NG-CDFs performance. Finally the study established that there is statistically significant combined effect of governance, internal audit and financial reporting on NG-CDFs performance. The study benefits policy makers and managerial practise in both public and private sector. At policy level the unnecessary bureaucracy common in the governance of public sector needs to be looked at to reduce its negative relationship between governance and performance. Further, formulators of policy in the NG-CDF regarding governance, internal audit and financial reporting can benefit from the findings of this study. Managerial practitioners especially in NG-CDF may consider strengthening governance interaction and combination with the other variables of the study to enhance performance. The study also made contributions to knowledge in the use of DEA technique to measure performance in NG-CDFs. The study enhanced building of existing theory by confirming theoretical postulations of agency theory. The study can also be used in different contexts in order for researchers to draw different patterns showing the effect of governance on organisational performance outcome. In addition future studies need to use similar variables in the other funds such as youth fund, women fund among others.