The Effect of Corporate Governance on Financial Management in Constituency Development Funds in Kenya

Abstract

The study is an assessment of the effect of corporate governance on financial management in constituency development funds in Kenya. There is an emerging need for CDF in Kenya to improve their financial management system .This has been demonstrated by the many complaints from stake holders such as citizens who have complained that there is misuse of the funds that have been allocated for particular projects.The objective of this study was to investigate the effect of corporate governance on effective financial management in CDF funds in Kenya. The study adopted a descriptive survey design. The survey population was drawn from the eight 8 CDF committees within Nairobi county consisting of 15 members each. This is the number of CDF committees that was in place prior to the March 2013 election. A census of the 120 CDF committee members was conducted. The preferred data collection instrument for primary data was a questionnaire. Descriptive analysis techniques were used to produce frequencies, descriptive and inferential statistics. Specifically, regression modelling was used. The findings indicated there was an overall goodness of fit. An Analysis of Variance (ANOVA) results indicated that the overall model was significant. Regression results indicate that there is a positive relationship between Financial Management and Corporate Governance. Overall results indicate that a unit change in budget, internal control and financial reporting led to a positive change in Financial Management. The study recommends that CDFs should improve the budgeting practices as doing so would improve the financial management effectiveness. Study also recommends that the CDF committees should enhance their internal control practices since doing so would improve the financial management effectiveness. Finally, the study recommends that financial reporting of CDFs should be enhanced as doing so would improve the financial management.