Budgeting practices and absorption rate of devolved funds by County Government of Nyeri

Rhoda Kawira Ngai Rhoda Kawira Ngai,Antony Kimathi Antony Kimathi,Moses Kithinji Moses Kithinji

doi:10.30574/wjarr.2021.11.3.0395

Rhoda Kawira Ngai Rhoda Kawira Ngai, Antony Kimathi Antony Kimathi + Show 1 more

Open Access

https://doi.org/10.30574/wjarr.2021.11.3.0395

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Abstract

Absorption rate is a vital tool in determining the efficiency and general performance of the counties as regards utilization of the intended funds. A majority of counties absorbed less than 50 percent of their budgets in the first nine months of the 2018-2019 financial year. Nyeri County had a development absorption rate of only 21.1%. This study therefore sought to establish the influence of budgeting practices on absorption rate of devolved funds by county government of Nyeri. This study used descriptive survey design. The target population for this study comprised 34 senior officers in the department of finance and economic planning in Nyeri County. A census of all 34 senior officers in the department of finance and economic planning was conducted. A self-administered questionnaire was used to collect data. Descriptive statistics such as frequencies, percentages, mean and standard deviation was used to describe the results in the study. Chi-square tests were used to find the relationships with the help of statistical package for social sciences. The findings show that the county government of Nyeri had good budgeting practices. There was a significant relationship (χ2= 44.316, df=21, p=0.02) between budgeting practices and absorption rate of devolved funds by county government of Nyeri. The study concludes that budgeting practices influence absorption rate of devolved funds by county government of Nyeri. The study therefore recommends that the county government ought to pass budgets in conformity with the cash disbursement schedules.

Highlights

Absorption rate refers to the share of the actual expenditure out of the budgeted expenditure (KersanŠkabić & Tijanić, 2017)
This was good for the study as it means that majority of the respondents in the study are well experienced and knowledgeable of the county government roles, processes and activities which would enable them give reliable information on the subject matter of the study
The first hypothesis (H01) is rejected and the study concludes that there is a significant relationship between budgeting practices and absorption rate of devolved funds by county government of Nyeri

Summary

Introduction

Absorption rate refers to the share of the actual expenditure out of the budgeted expenditure (the target) (KersanŠkabić & Tijanić, 2017). According to Achim and Borlea (2015), a higher absorption rate is preferred since it means that counties are close to their target. A low absorption rate implies that counties are performing below par in terms of utilization of the intended expenditure. The average absorption rate in the European Union is 27% (Zaman & Cristea, 2011). With an absorption rate of 100 per cent for the European Regional Development Fund (ERDF), the Cohesion Fund (CF) and the European Social Fund (ESF), Malta registered the highest level of success in the use of EU funds as it utilized fully the €987 million allocation for the 2007-13 period. Romania's total absorption rate at the end of 2018 was 26 percent (Kersan-Škabić & Tijanić, 2017)

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Conclusion