EFFECT OF RISK ASSESSMENT AND MONITORING ACTIVITIES INTERNAL CONTROL SYSTEMS ON MANAGEMENT OF LOCAL REVENUE BY COUNTY GOVERNMENTS OF KENYA

Ayao Evans Onsindu, Prof. Willy Muturi, Prof. Christopher Kanali

Abstract


An adequate and effective internal control system is necessary for better organizational performance. Studies show that an effective internal control mechanism prevents and detects fraud which then enables management to take necessary steps to remedy the situation. This study attempted to examine the effect of internal control systems on the management of local revenues by the county governments of Kenya. The study was guided by the COSO (1992) integrated framework.  The components of the internal control system framework included risk assessment and monitoring activities and their effect on revenue management. Statistical data was collected by a COSO questionnaire that was adapted for use in public entities. The County Chief Officers for finance from all counties provided information on the adequacy and effectiveness of their internal controls respectively. The purpose was to address the problem of poor revenue management cited by the controller of the budget in the most recent report. Perennial revenue losses and the inability to meet revenue targets motivated the study. Data was processed and analyzed using descriptive statistics such as frequencies, percentages, mean and standard deviation and inferentially using correlation and regression to describe characteristics and show relationships that predict the effective management of revenue in county governments. The final results of the analysis were presented by summary tables. The hypotheses were tested statistically at the 0.05 level of significance. Risk assessment and monitoring activities were found to have a significant positive relationship with the management of local revenue. Therefore county governments have to put more effort in mainstreaming these aspects to improve their revenue management systems so that budget items can be well financed for better outcomes. The county governments in Kenya should embrace enterprise risk assessment and good monitoring activities to maximize on the financial benefits of internal control systems.

Keywords: Risk Assessment, Monitoring Activities, Management of Local Revenue, County Governments 


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