The Relationship Between Budgetary Control And Financial Performance Of State Corporations In Kenya

ABSTRACT

Theimportance of fmancial stability in enabling an organization to function efficiently and

maximizethe potential for service delivery cannot be underestimated. The quest for better

servicedelivery under new public management in public organizations in Kenya necessitates

theneed for public organizations to have proper financial standing in order to run operations

andmotivate workers through better remuneration as well as improved working conditions.

It is however disheartening that despite many measures undertaken to examine financial

performanceissues in public organizations, problems related to financial performance such as

workersstrikes due to unmet salary demands as well as poor working conditions continues to

bewitnessed.A scan through literature on factors affecting financial performance reveal that

gaps remain on the influence of budgetary control on financial performance of public

institutions.This study therefore sought to investigate the relationship between budgetary

controlsand financial performance of state corporations in Kenya. The study sought to

accomplishthe following objectives; determine the salient features of budgetary controls in

state corporations, establish the human factors within budgetary controls, establish the

processof budgetary control in public organizations, and determine the challenges affecting

budgetarycontrol. A descriptive survey design was used to gather data from the state

corporation'smanagers and officers of the sampled state corporations. Stratified random and

systematicsampling was used to select 14 corporations out of 138 to participate in the study.

Purposivesampling was used to select 42; corporate services manager, finance manager and

budgetofficer from each corporation to participate in the study. A questionnaire, whose

contentvalidity was checked through an expertise opinion and reliability through test pre-test

methods, was used to gather information. Data analysis was done qualitatively and

quantitatively to generate statistical" parameters such as mean, standard deviation. The

relationshipbetween budgetary control and financial performance was undertaken through

carryingout a correlation analysis of the dependent and independent variables. This was done

withhelp of Statistical package for Social Sciences (SPSS). Discussions of the results were

madebased on the research objectives, then conclusions and recommendations drawn.

Findings indicated that a positive relationship existed between budgetary control and

financialperformance of state corporations. Budgetary features reflect ability to predict

financialmilestones of organizations. Human factors within budgetary controls has to do with

managerialcommitment, employees motivation, employee training and competence as well

asthe attitude between managers and other employees towards the budget process Budgetary

control process as positive influence on financial performance of state corporations. It

influencesthe financial objectives, the allocation of funds as well as investment ventures that

organizationundertakes. It is a process prone to political influence whose implications can

spiralto financial performance. Budgetary controls are prone to challenges with may marred

effectiveachievement of budgetary objectives. The study recommended sensitization among

management and employees of state parastatal on the importance of budgetary controls in

enhancingfinancial performance, avoidance of political interference in the budgetary process

anduse of budgets not only be used as tools for management and indicators of management,

they should also be viewed as practical tools within which organizations should used to

enhance their fmancial goals. Further study should be undertaken on factors affecting

employeesand management commitment to organizational budgets.