The Effect of Internal Control Systems on the Management of Revenue Funds in the County Government of Nakuru, Kenya

Abstract

Internal control systems are tools that monitor an organization's progress toward its objectives. The study sought to evaluate how internal control mechanisms influence revenue management in Kenya's Nakuru county administration. In specifically, this article investigated how control activities, risk assessment, control environment, information and communication, and monitoring activities connect to revenue management in Nakuru County. The study was grounded in the agency theory, the new public management theory and the financial control theory. The descriptive method of study was applied where 504 employees in the Nakuru County Treasury Department were the targeted population. On a simple random sampling, a sample of 84 workers was obtained. The sample size was calculated through a formula Nassiuma 2000. Primary data were collected in the form of closed questionnaires that were processed by SPSS (Version 23) to give the descriptive statistics, correlation analysis, simple and multiple regression. The study established significant positive relationships between the control activities and the revenue management (r = 0.656, p < 0.05), and the control environment and revenue management (r = 0.694, p < 0.05). Risk assessment and monitoring had a positive relationship with revenue management (r = 0.669, p < 0.05) and information and communication (r = 0.736, p < 0.05). As per the regression study, the control activities, risk assessment, control environment, information and communication, and monitoring had a significant effect on the revenue management. Internal control system significantly affected it (R2 = 0.0703, F = 36.908, p < 0.05). The study revealed that the revenue management of the Nakuru County depends on the internal control system a great deal. Nakuru County should ensure that there are proper monitoring strategies such as budgetary allocations to facilitate proper management of revenues through strict scrutiny of financial operations, transactions and compliance. The research has a positive impact on governance since it offers suggestions on how to improve financial management systems.