Effect of Integrated Financial Management Information System on Public Expenditure Management in Kenya

Abstract

Kenyan public sector has been recording an increase in the misuse of public funds through fraud and corruption over the years. Public expenditure amounting to Kshs.66.7 billion incurred for the financial year 2013/14 was not fully accounted for and a further Kshs.24.5 billion unapproved excess expenditure. This represents 4.6% and 1.7% respectively of the actual net expenditure of that financial year. The unaccounted amount was due to expenditure in the government without adequate authentication. Part of the excess expenditure was also due unapproved utilization of public expenditure in various ministries. Misuse of public funds has been derailing government service delivery and economic development. If integrated financial management information system (IFMIS) was fully operational and its components interlinked, it would ensure transparency and accountability in all the public units, that is, procurement, budgeting and accounting. This would enhance expenditure management in public sector if the three systems are well coordinated. Automating and linking these processes would result to a sound public finance management since managers in each unit can communicate easily in case a fraud is detected in the system. The linking of the three modules would also improve on public expenditure management since each unit will stick and adhere to the itemized budget estimate without diversion of finances to other unplanned expenditure. This study sought to establish the effect of electronic procurement, electronic budgeting and automated cash management on public expenditure management in Kenya. The study adopted descriptive research design and the target population was 140 respondents drawn from five ministries in the National Government. Primary data collected using a structured questionnaire was coded and analyzed using multiple regression analysis and correlation analysis. The study found out that there is a significant positive relationship between electronic procurement, electronic budgeting, automated cash management and public expenditure management in Kenya. According to the study findings, Kenyan IFMIS modules are inadequately interlinked and this creates a loophole for fraud and misuse of public funds. This study recommends the linking of the electronic procurement, electronic budgeting and cash management modules so as improve on public expenditure management since each unit will stick and adhere to the itemized budget estimate without diversion of finances to other unplanned expenditures. Keywords : Electronic Procurement, Electronic Budgeting, Automated Cash Management, Public Expenditure Management in Kenya. DOI: 10.7176/IKM/12-1-01 Publication date: January 31 st 2022