Effect Of Budget Absorption On County Revenue Collection Amongst County Governments In Kenya

Abstract

Budget absorption is the rate of real expense out of the budgeted or planned expense of the budget allocation. A budget is a component that ensures that planned or budgeted expense is utilized or implemented. The study focused on the budget absorption constituted by budget allocation and execution of expenditures, and revenue collection amongst county governments. In the context of this study, expenditure was categorized into development and re-current expenditure. Budget allocation refers to the funds released by the national government annually for the county governments to spend on various sectors of its operations. Revenue collection was considered as the total funds each county government collects annually as its own source of funds. Budget absorption is related to the overall budgeting process hence it explains the rate at which each county government distributes the allocated resources from the national government to various cost centers. Secondary data was sourced from annual county governments’ budget implementation reports from office of controller of budgets. Descriptive research design was used to analyze the panel data collected using STATA software and the fixed effects model was considered as appropriate to use. This study established that budget allocation is not significant but positively related to revenue collection amongst county government. The study found out that recurrent and development expenditure are significant on revenue collection. Development expenditure has negative relationship to revenue collection while recurrent expenditure has a positive relationship. The study recommended that the county governments should have clear policies to guide on priority of expenditure. It also recommends that Development and recurrent expenditure are significant on revenue collection hence there is need to have clear roadmap to balance resource allocations.