Factors Affecting The Quality Of Financial Reporting Of County Governments In Kenya

Abstract

Demand for transparency and accountability in Kenya’s county governments and public sector in general has been piling up in higher magnitudes. Quality, transparent and comprehensible financial information is important for the county governments to express their accountability to Kenya’s general public and development partners who finance various undertakings in the county governments. Quality financial data is requisite for in house financial management and decision making. This study endeavored to study the factors influencing the quality of financial reporting of county governments in Kenya. The study objectives included finding the effect of staff capacity, IFMIS, top management expertise and internal audit quality on the quality of financial reporting. This study adopted descriptive research design where data was collected by use of questionnaires. The target population was the accounting officers for finance for the 47counties in Kenya. Data collected was analyzed using both quantitative and qualitative methods and by use of descriptive analysis and content analysis respectively. The researcher performed exploratory research to find out whether county governments staffing capacity needs has been assessed and that the counties have the right staff for the right job; the top management of the county governments support quality financial reporting and use of IFMIS system. The study performed regression analysis to test the relationship of each of the four independent variables to the quality of financial reporting. Analyzed data was presented in form of tables and explanations given for each of the tables. The study found out that counties have effective and efficient recruitment systems in place and that staff were best suited to perform the job. Top management professional background and previous experience has significant influence on the quality of financial reporting according to the study. IFMIS system was found to be reliable in the production of financial data for reports preparation. The regression analysis revealed that staff capacity significantly influenced the quality of financial reporting. All the other three variables, had an influence on the quality of financial reporting but not as significant as staffing capacity. The study revealed that adequate training on IFMIS system is necessary for the attainment of quality financial reporting. The study recommends regular trainings on IFMIS system and PFM laws and regulations to enhance compliance in financial management and reporting in the public sector. Key words: Financial reporting, financial reporting quality, county governments, audit opinion, internal audit.