Budgetary Control and Financial Sustainability of Local Non-governmental Organizations in Kenya

Abstract

Budgetary control is a critical component in the effective management of the organization’s finances. Budgetary control is the process by which an organization plans for its resources by allocating to specific cost centers, monitoring the progress in terms of utilization by comparing the standard against the actual and effecting the proposed controls in line with the financial goals and priorities of the organization. The financial sustainability of Local Non-Governmental Organizations in Kenya remains a concern as available data shows over-dependence on a limited number of donors and failure to utilize the resources efficiently. The main objective of this study was to determine the relationship between budgetary control and financial sustainability in the context of Local Non-Governmental Organizations in Kenya and to determine the budgetary control techniques employed by the selected organizations. The study was guided by specific objectives; to determine the relationship between planning and financial sustainability components (fund utilization, revenue growth, and diversification of funds), establish the association between monitoring and financial sustainability components, and examine the relationship between control and financial sustainability. Anchored in the theories of budgeting and responsibility accounting, the study employed a conceptual framework where the independent variables and dependent variables were related. The study adopted the top 30 organizations using registration status and fund utilization within the period 2017-2021 targeting 60 respondents from Finance Managers, Senior Finance Officers, Budget Officers, and Financial Analysts. The choice of the Local NGOs in Kenya was found to be fit because they face unique financial sustainability challenges. The researcher collected primary and secondary data using structured questionnaires that were issued to 60 respondents but only 48 were filled and returned. The study used descriptive statistics to analyze the data and establish patterns and trends. Regression analysis was used to determine the relationship between budgetary control and financial sustainability at a confidence level of 95%. The findings showed that there is a positive relationship between budgetary control and financial sustainability by an R square of 56%. The findings also indicated that planning had a significant influence on financial sustainability at p 0.001<0.005 due to a higher R square compared to other variables. The findings may guide managers in controlling their budgets and provide a ground for future studies.