The effect of performance contracting on internal revenue collection at Nairobi city county government

Abstract

This study sought to establish the effects of performance contracting on internal revenue collection at Nairobi City County. This research adopted descriptive research design through correlational study. The study targeted the staff of Nairobi City County that consisted of the top management, middle level management and the lower level management with a total population of 105. The study used 50% of the total population to obtain sample size of employees and stratified random sampling design was applied. The study collected both primary data and secondary data. Primary data was collected through the use of questionnaires administered to the respondents. Secondary data covered a period of five FYs before implementation from 2002/2003 to 2006/2007 and five years after implementation of performance contract from 2010/2011 to 2014/2015. The data was obtained from the performance contract records from the then City Council of Nairobi and Nairobi City County budgets. Data analysis was done using descriptive and inferential statistics. The study findings revealed that there was a sharp increase in internal revenue collection after implementation of performance contracting as compared to five years before implementation of the same. The results also revealed that investment in control systems significantly and negatively affected internal revenue collection after implementation of performance contracting. Risk assessment and revenue budgets positively affected internal revenue collection after implementation of performance contracting but were not statistically significant. This study concluded that performance contracting had significant impact on internal revenue collection at Nairobi City County. Its implementation has seen a sharp rise in internal revenue collection for the five years it has been in place as compared to five years before its implementation. Investment in control systems were found to be negatively correlated to internal revenue collection which could imply that perhaps the NCC invested in wrong control systems. NCC therefore, should review its investment in control systems to ensure that they impact internal revenue collection positively. Risk assessment and revenue budget targets although positively affecting internal revenue collection, they were not statistically significant. This study, therefore, concluded that risk assessment and revenue budget targets are not significant predictors of internal revenue collection. This study recommends that the Nairobi City County should retain and if possible emphasize on performance contracting in all its operations. Performance contracting has shown a positive impact on internal revenue collection. The study recommends that the Nairobi City County should review its control systems to ensure that they not only support performance contracting but also positively impact internal revenue collection. This will consolidate gains made after implementation of performance contracting. The study recommends that the Nairobi City County should work on its risk assessment function as well as how revenue budgets are set. In this way, risk assessment and revenue budget targets will be done in a manner to support performance contracting and significantly impact internal revenue collection. Further research should consider other external factors that affect internal revenue collection at Nairobi City County. Future scholars should consider control policies, procedures, rules and regulations as separate variables in studying their impact on internal revenue collection.