Effect of Integrated Financial Management Information System on Revenue Collection in County Governments in Kenya: The Case of Nairobi County

Abstract

The devolved governments were established with the expectation that County Governments would collect their own Revenue and as such reduce dependency on the central Government to meet their recurrent and development needs. Records show that Nairobi County is the richest County with a Gross Domestic Product (GDP) of 27.5%.Despite this, revenue collection in Nairobi County has been minimal such that to get sufficient funds to meet expenditure like salaries and many others has been a concern. Consequently, this study sought to investigate the effect of integrated financial system on revenue collection at Nairobi County, Kenya. Further, explanatory survey research design was adopted and the population of the study comprised of the 150 management staffers working at Nairobi County and who directly used IFMIS in the management of funds. Consequently, simple random sampling procedure was used to access 107 staff from Nairobi County. Secondary data to access data on revenue collection in Nairobi County augmented by primary data from questionnaires were collected from the respondents and those instruments were computed through the Cronbach Coefficient Alpha formula to tests their reliability and the piloted results show an acceptable reliability index for all variables that are a>0.7. On the other hand, experts from JKUAT determined the validity of the instruments by examining the content of the instruments and consequently advised the researcher appropriately. Quantitative data was analyzed using descriptive analysis in form of percentages, frequencies and means while inferential statistics in the form of Pearson’s correlations and linear regression were done to test the hypotheses. The study found that while the county had a clear budgeting policy through IFMIS, the policy was only on paper and not effectively implemented which had negatively affected revenue collection at Nairobi City County. Also, ineffective internal control and records management done through IFMIS has a negative effect on revenue collection in Nairobi County Government. However, financial reporting via IFMIS has had a positive effect on revenue collection as in Nairobi County. The study thus recommends that the County Government of Nairobi in conjunction with National Treasury should initiate a robust review of the IFMIS system to ensure that it is improved if it is to meet the budgeting, internal control, financial reporting and records management requirements for effective revenue collection.