THE EFFECT OF PUBLIC FINANCIAL AUDITS ON FINANCIAL PERFOMANCE AMONG COASTAL COUNTY GOVERNMENTS IN KENYA

Abstract

The government of Kenya recognizes the importance of the financial management aspects within the county governments as indicated through Public Finance Management County Government Regulations of 2015. However, the auditor general continue to observe financial performance challenges within the county governments in Kenya that put at risk the service delivery aspects to Kenyan citizens. In Kwale County Government, the Auditor General found unexplained variance in the audited financial reports of the 2015/2016 financial year. The Auditor General indicated that revenue collection decline of 2% in the 2015/2016 financial year compared to the 2014/2015 financial year indicated possibility of income leakage. Similar findings were also reported in Kilifi and Mombasa County, for the 2015/2016 financial year with irregular payments being made from the retention account. The study therefore sought to examine the role of audit queries closure, public financial audits recommendations, public financial audits reports attitudes and enforcement capacity on the arising issues from public financial audits on financial performance among county governments in Kenya This study utilized a descriptive research with a target population of sixty respondents composed of fifty chief officers, five director of accounting services and five heads of internal units from Mombasa, Kilifi, Lamu, Kwale and Tana River counties. This study used census method to select all individuals in the target population employing a structured questionnaire to gather data. Data was analysed using Statistical Package for Social Sciences (SPSS) version 22 for data analysis. The study established that 71.4% of the variance in financial performance can be explained by audit queries closure, audits recommendations, audits reports attitudes and enforcement capacity. The study further concluded that the all the independent variables had positive and significant influence on the financial management within county government due to positive beta coefficients and p values below 0.05. The study findings will help county finance officers take into consideration public financial audits recommendations in managing county finances. The County Finance Officers benefit from this study in the way they regard public financial audits reports and also in enforcement of the arising issues from public financial audits with a view of managing county finances more efficiently. Future researchers in this particular concept benefit much for they can base their studies on the findings of this particular study.