Public Finance Management Practices, Capacity Development and Service Delivery of County Governments in Nairobi Metropolitan Area, Kenya

Abstract

Financial management in county governments plays a crucial role in promoting good governance. The national government allocates county governments more than stipulated 15% of national revenue yearly yet majority of them are classified as very poor, 53.0% fall below the national poverty rate of 36.1% and 34% fall below the national hardcore poverty line. From the past studies, there are mixed findings in the literature on relationship between public finance management practices and service delivery. Furthermore, the moderating effect of capacity development on the relationship between public finance management practices and service delivery is limited necessitating the need for this study. The general objective for this study was to determine the relationship between public finance management practices, capacity development and service delivery of County Governments in Nairobi Metropolitan Area, Kenya. More specifically, the study sought to establish the relationship between budgeting practices, internal control practices, resource mobilization practices and service delivery of county governments in Nairobi Metropolitan Area. It also assessed the moderating effect of capacity development on the relationship between public finance management practices and service delivery of county governments in Nairobi Metropolitan Area, Kenya. Budget theory, agency theory, optimal tax theory, and capacity building theory served as the foundational frameworks for this research. These theories guided the formulation of conceptual framework, informed the study design and methodology, and aided in the interpretation of findings. A cross sectional correlation research design grounded in the philosophy of positivism was employed in this study. Primary data was collected using structured questionnaire. The study’s target population was 163 directors from Counties in Nairobi Metropolitan Area, Kenya. Multistage sampling approach was employed to get a sample of 116 respondents. The validity of the research instrument was tested using construct, content and face validity while the reliability was assessed using Cronbach’s Alpha coefficient. A pilot study was done in Muranga County. The data was analyzed using descriptive and inferential statistics. Descriptive statistics was used to describe the data while correlation, regression and moderated regression analyses were used to address the objectives of the study. The study found that budgeting practices had a significant positive relationship with service delivery, as evidenced by a correlation coefficient (r) of 0.587, a beta coefficient (β) of 0.593 (p<0.05). Internal controls practices also demonstrated a significant positive relationship with service delivery, with a correlation coefficient (r) of 0.607, a beta coefficient (β) of 0.776 (p<0.05). Resource mobilization practices were found to have a significant positive relationship with service delivery, indicated by a correlation coefficient (r) of 0.557, a beta coefficient (β) of 0.311 (p<0.05). Capacity development significantly moderated the relationships between budgeting practices, internal controls, resource mobilization practices, and service delivery, with R-squared changes of 0.11 (p<0.05), 0.143(p<0.05), and 0.094(p<0.05), respectively. The study concludes that effective public financial management practices, including budgeting, internal controls, and resource mobilization, are crucial for enhancing service delivery in the County Governments of the Nairobi Metropolitan Area. Capacity development plays a vital role in amplifying the positive effects of these public financial management practices on service delivery. This study therefore recommends that, to ensure service delivery, public institutions should focus on effective budgeting practices, internal control and resource mobilization practices coupled with capacity development in each of the focus areas. This study makes important contribution to knowledge as it provides additional evidence on the role of capacity development in enhancing the relationship between public financial practices and service delivery, hence advances the knowledgebase for future studies.