Effect Of Revenue Collection Techniques On Financial Performance Of County Governments

ABSTRACT

Revenue collection techniques are the various methods which an organization may use to collect sufficient revenue to enable them achieve good governance and efficient service delivery. Financial performance is measuring the results of a firm’s policies and operations in monetary terms reflected in the firm’s return on investment, return on assets and value added. Kisumu County Government has a potential to collect Kshs.7 Billion annually to support and facilitate service delivery, socio-economic development and growth. However, in the last four years statistics indicated that Kisumu County Government collected 65%, 53%, 63% and 76% revenue respectively which is far much below its projections. The dwindling trend showed inadequacy of revenue collections which would have been attributed to inefficient revenue collection techniques. The current study sought to establish the effect of revenue collection techniques on financial performance of Kisumu County Government. Specifically, the study sought to: Determine the effect of contracting-out revenue collection to agencies on financial performance of Kisumu County Government and assess the effect of electronic revenue collection on financial performance of Kisumu County Government. The study was anchored on revenue diversification and optimal taxation theories. Correlation research design was used. The study targeted 577 personnel under Directorate of Revenue, Department of Finance and Planning Kisumu County Government. Stratified random sampling technique was used to select a sample of 82 personnel out of which the response rate was 67 respondents. Both Primary and Secondary data was used in the study. Primary data was collected using self-designed questionnaire while secondary data was obtained from 2014-2018 audited financial reports of Kisumu County Government using data collection sheet between 2014 and 2018. A pilot study of eight (8) was conducted while the remaining 74 was retained for the main study. The data collected was analyzed by inferential descriptive statistics using the mean and mode respectively. Pearson product moment correlation was used to establish the association between the independent and dependent variables while multiple regression was used to determine the magnitude and direction of effect of revenue collection techniques and financial performance. Findings of the study revealed that revenue collection techniques are significant predictors of financial performance with electronic revenue collection (β=1.138, p=0.000) having higher effect than contracting-out revenue collection (β= -0.218, p=0.011) on financial performance. This implies that a change in contracting–out revenue collection leads to -0.218 decrease in financial performance while a change in electronic revenue collection leads to 1.138 increases in financial performance. Contracting-out revenue (p=0.011) and Electronic revenue collections (p=0.000) made the relationship with financial performance significant. The study concludes that contracting-out revenue collection had a negative and significant effect and electronic revenue collection had a strong positive and significant effect on financial performance of Kisumu County Government. The study recommends that ICT department to ensure effective coordination of electronic revenue collection process to help the County achieve its revenue potential. It is envisaged that results may be of use to policy makers and stakeholders in designing advanced electronic systems to enhance optimal revenue collections and also serve as a basis for further research to academicians.