FACTORS DETRIMENTAL TO MANAGEMENT OF DEVOLVED FUNDS IN KENYA. A CASE OF NAIROBI COUNTY

Abstract

Decentralization is meant to improve public services, but relatively few studies examine this question empirically. Poverty, inequality and social exclusion are deeply-rooted structural and historical phenomena in Kenya. Successive Kenyan governments have attempted fiscal decentralization as a way of ensuring the country achieves equitable development across the many regions. Fiscal decentralization consists primarily of devolving revenue sources and expenditure functions to lower tiers of government. By bringing the government closer to the people, fiscal decentralization is expected to boost public sector efficiency, as well as accountability and transparency in service delivery and policy-making. Decentralization also entails greater complexity in intergovernmental fiscal relations. Coordination failures in fiscal relations are likely to have a bearing on the fiscal positions, nationally and sub nationally. The purpose of this project was to find the factors that are detrimental to the management of the devolved funds in two levels of government. Increased local financing after fiscal decentralization has opposite two effects, that is, (1) the local finance derives incentive for effective management, and (2) it may induce the lack of public resource for managing public expenditure, which is particularly needed in the basics of managing the lower levels of government. This project analyzed the detrimental factors that affect management of fiscal funds by a county government. The objectives used by this study were; To establish the effects of corruption in the management of devolved funds in Nairobi City County, to determine the effect of accountability in the management of devolved funds in Nairobi City County, to determine the effect of financial regulations in the management of devolved funds in Nairobi City County and to establish the effects of adoption of IFMIS in the management of county funds in Nairobi City County. The study adopted a descriptive research design. From the findings, Accountability, Adoption of IFMIS, and Financial Regulations were found to have positive and significant effect on Financial Management while the effect of corruption was found to have a negative relationship with financial management. From the findings and conclusions therefore, this study recommended that Nairobi County Government consider Accountability, Adoption of IFMIS, and Financial Regulations as the key factors that could determine the management of devolved funds.