Effect of Capital Budgeting Process on Financial Performance of Kilifi County Government

Abstract

The government budgeting refers to the allocation of revenues and the borrowed funds in order to achieve the social, political and economic objectives of the country. Budgeting process involves four phases, preparation, authorization, execution and accountability. The main purpose of budgeting in the county governments is to aid in the management of the public and donor resources that are limited in order to achieve efficiency in service delivery to the public. Therefore, capital budgeting fuels the firms’ performance, survival and the profitability. Additionally, it reinforces capital budgeting expenditures that call for immense funds outlay. A government has greater responsibility of ascertaining the superior way to source, raise and repay the finance. The main aim of the examination was to assess the effect of budgeting processes on the financial performance of Kilifi County Government. In a nutshell, the researcher was motivated to utilize descriptive research design to promote accuracy. A research design is a strategic metric portraying how data is garnered for computation and quantification. As a consequence, the target population was 5 officials from each of the 7 Kilifi sub counties and 5 officials from Kilifi County headquarters. Furthermore, the study contacted the 35 ward administrators from all the 35 wards in Kilifi County. Therefore, the information was collected from the county officials who participated in the study. The officials were drawn from Kilifi County headquarters and sub-county headquarters. The participants were drawn majorly from the department of finance and budget planning. Furthermore, some data was collected from staff of the County Government of Kilifi. Subsequently, it was subjected to SPSS to arrive at an authentic and verifiable outcome. From the results presented, it can be observed that budget planning, controlling, coordinating and evaluation jointly explained 70.7% of the total variations in financial performance of Kilifi County government. This is indicated by the value of R in the model (0.707). This therefore means that the variables chosen in the study are significant in explaining the variations in financial performance and hence are relevant in the study. Furthermore, the coefficient of budget planning is statistically significant and positive (β=0.271, P=0.008<0.05). In addition, budget controlling had a statistically significant and positive coefficient (β=0.16, P=0.035<0.05). Moreover, budget coordinating on the other side registered a statistically significant and positive coefficient β=0.257, P=0.011<0.05). Finally budget evaluation had a positive and statistically significant coefficient (β=0.271, P=0.009<0.05). The study recommended that the county government should enhance its budget planning process to capture the priority projects as well as utilizing the limited county financial resources. In addition, proper budget coordination should also be carried out between the various county departments. Quality of budget control should be taken into consideration and finally upon completion of every project, the county government should invest in the evaluation of the actual budget against the planned budget.