Effect of Corporate Governance on Budgetary Control Among Government Agencies in Kenya

Abstract

Good corporate governance practices are critical for both private and public sector organizations. This study was prompted by the inability of government agencies to operate within their approved budgets. It is in the public domain that the services offered by most of these public entities do not commensurate with the tax-payers burden. Reported corporate accounting and financial scandals in public sector have been on rise as reported by Governance institutions such as Ethics and Anticorruption Commission, Controller of Budgets and Office of the Auditor General. The main intention of this research was to examine corporate governance influence on budgetary control of government agencies in Kenya. Agency theory, stakeholder theory and stewardship theory were adopted to anchor the study. A descriptive research design was used in this research. The target population was the 94 government agencies in Kenya. Secondary data was obtained from the Office of the Auditor General and individual government agencies annual reports for a 5 year period (2017 to 2021). Upon collection of the data, inferential as well as descriptive statistics generated included frequencies and percentages and simple and multiple linear regression respectively. The regression results produced an R square of 0.2836 which implies that 28.36% of the changes in budgetary control among government agencies in Kenya can be explained by the six selected variables for this study. The overall model was found to be statistically significant as exhibited by a p value of 0.000 which was less than 0.05. The study further revealed that board independence, board meetings and firm size had a positive and significant effect on budgetary control of government agencies in Kenya while financial leverage has a significant negative effect. Gender diversity and management efficiency had no significant effect on budgetary control. This study concluded that corporate governance practices are essential for government agencies to use in their endeavor to improve on their budgetary control. The study recommends that management of government agencies should ensure their boards are independent and there are adequate board meetings as this will enhance budgetary controls. It is further recommended that policy makers should come up with sound policies to guide government agencies on corporate governance practices.