Effect of electronic revenue collection on financial performance of county government of Siaya

Abstract

Revenue collection among the devolved units has drawn interest from around the world. Some developing African nations like Ghana introduced devolved governments with collection of own source revenue as part of their functions. East African nations, such as Rwanda, saw establishment of local governments and own source revenue collection as an urgent and necessary corrective action in response to their economic challenges. In Kenya, County Governments were established in 2013 with Article 209 of the Constitution of Kenya (2010) providing for collection of own source revenue by the county governments. The County Government of Siaya utilized manual revenue collection systems until 2015 when the POS gadgets, ECR and Mobile payment system were introduced in the 2015/2016 F/Y. County Fiscal Strategy Papers show that during the 2013/2014, 2014/2015 and 2015/2016 F/Y, the County Government recorded negative deviations of -34, -52% and -41% in Own Source Revenue respectively. In 2017/2018, 2018/2019, 2019/2020, and 2020/2021, the County Government of Siaya also had negative deviations in Own Source Revenue of -53%, -42%, -56%, and -19% respectively. F/Y 2021/2022 recorded a positive deviation of 0.21%. Inadequate and inefficient electronic revenue collection system has been cited as the major contributor to the continued underperformance in collection of revenue. Despite the county having a partially automated system of revenue collection, it must be noted that the revenue collected has remained significantly low over the past five years. This means that the systems may be inadequately utilized thus the need to carry out an assessment with a view of increasing the revenue collection and financial performance. Research findings on effect of use of automated revenue collection on financial performance showed inconsistent results. Against this backdrop, the purpose of the study was to establish the effect of electronic revenue collection on financial performance of County Government of Siaya. Specifically, the study was to determine the effect of Point of Sale machine on financial performance of County Government of Siaya, establish the effect of Electronic Cash Register system on financial performance of County Government of Siaya and asses the effect of Mobile Payment System on financial performance of County Government of Siaya. Two theories supported the study, Expediency Theory of Taxation and Technology Acceptance Model Theory. The correlation research design was used during the study and targeted 98 personnel under the department of finance in the County Government of Siaya. Taro Yamane formula was employed to select a sample of 79 respondents. The study used primary data which was collected using questionnaire. A pilot study of eight (8) respondents was administered in Siaya County where the analysis revealed an alpha value of 0.81, above Cronbach‟s alpha coefficient of 0.7, therefore the instruments were reliable. The 8 respondents did not form part of the sample size hence 71 respondents were used for the study. Validity was determined by applying expert judgment. The data collected was analysed using multiple regression and Pearson product moment correlation to establish the relationship between the independent and dependent variables. The findings showed that the use of point of sale machines had the strongest positive impact on financial performance (β=.886, p=.000), followed by the use of electronic cash registers with a beta value of β=.197, p=.000 then the use of mobile payment systems (β=.093, p=.000). The findings further revealed that there existed a significant and strong positive correlation between the use of point of sale machines (r=.995, p=.000), implying that point of sale machines significantly affected financial performance. The electronic cash registers had (r=.899, p=.000), implying that electronic cash registers significantly affected financial performance. The mobile payment systems recorded (r= .861, p=.000) and financial performance, implying that mobile payment systems significantly affected financial performance. The study concluded that the use of electronic revenue collection positively and significantly influences the financial performance of County Government of Siaya.