The effects of Local Authority Budget guidelines on administrative efficiency: The case of the former City Council of Nairobi

Abstract

The Local Authorities Budget Guidelines (LABG) was one of the major reform agendas undertaken by the Kenyan government in the mid nineteen nineties. The objective was to overhaul the local government sector and make local authority services more reliable and council operations more professional and transparent. The LABG reform was preferred because the council’s annual budget was the basis for planning and implementing all council operations. LABG was to initiate international performance standards and financial controls in the preparation and administration of the annual budgets of local authority to enhance administrative efficiency and service delivery. The study sought to assess the effect of LABG on administrative efficiency in the former City Council of Nairobi by determining the effects of: (i) LABG standards and performance guidelines, (ii) LABG financial accountability guidelines and (iii) LABG financial disbursement guidelines on administrative efficiency. The study was underpinned by the institutional theory. Primary data was the main basis of the study. It was gathered through administration of questionnaires, oral interviews and discussions with a sample of senior officers of the present Nairobi City County. The selection of the respondents utilised the stratified sampling design to obtain proportionate allocations from each of the County’s departments and fair representation of the overall population and key sub groups. The data analysis involved computation of the Pearson correlation coefficients. The results of the study showed that the LABG reform had moderately enhanced administrative efficiency in the former city council of Nairobi. Thus, whereas prior to the LABG reform the council’s annual budget was prepared as a routine to comply with requirements of the local government Act, through LABG the annual budget was transformed into a performance based budget that correctly reflected the council’s financial situation. Consequently, the administrators and policy makers were able to use the annual budget as a reliable tool for directing operations and making policy decisions. The study concluded by recommending that LABG should continue to be applied by the County governments for attainment of transparency and accountability in utilization of the scarce resources and continual improvement of local government performance and service delivery