| dc.description.abstract | Revenue collection is vital for financing public services and driving sustainable development. Advanced economies like the United States, China, and India have recorded notable gains, with the U.S. tax-to-GDP ratio rising from 25.8% in 2020 to 26.6% in 2021, China from 20.1% to 21.0%, and India posting a 34% revenue increase in 2021/2022.In contrast, Nigeria‘s ratio fell from 6.0% in 2019 to 5.5% in 2020, while Kenya‘s dropped from 15.8% to 15.2% between 2020 and 2021. The Lake Region Economic Bloc (LREB) performed worse, with its ratio stagnating at 4% (2019–2022) before declining to 3% in 2023–2024, resulting in only 65–72% revenue realization and a 30.8% funding gap, forcing reliance on costly borrowing. Existing studies affirm the importance of internal controls and financial systems but reveal gaps: focus on private sector contexts, limited exploration of FIS as a moderator, reliance on cross-sectional or perception-based data, and lack of robust diagnostic testing. This study examined the effect of Financial Information Systems (FIS) on the relationship between control activities, risk assessment and revenue collection in the Lake Region Economic Bloc (LREB) counties in Kenya. Objectives include assessing the effects of control activities and risk assessment, as well as the moderating role of FIS in strengthening these relationships. Grounded in Contingency, Agency, and Task-Technology Fit theories, the study adopted a correlational panel design using secondary data from all 14 LREB counties (2015–2024), applying panel regression to evaluate these relationships. The regression analysis reveals that both internal control activities (ICA) and financial information systems (FIS) are positively and highly significant predictors of revenue collection, with a % increase in ICA corresponding to a 5.8% increase in revenue collection (z = 7.71, p < 0.001) and a % increase in FIS associated with a 6.7% increase in revenue collection (z = 8.60, p < 0.001). Critically, a significant synergistic interaction exists between ICA and FIS (β = 0.016, z = 3.33, p = 0.001), indicating that their combined effect on revenue performance is greater than the sum of their individual impacts. While the Annual Risk Index Score itself showed a negative but marginally non-significant effect in the fixed-effects model (β = –0.013, t = –1.80, p = 0.096), FIS significantly moderates this relationship, with the interaction term (Risk × FIS) being positive and significant (β = 0.009, t = 2.18, p = 0.049), demonstrating that robust financial systems mitigate the adverse effects of risk. The model explains substantial variance in revenue collection, with an overall R² of 64.5% and a within-county R² of 71.7%. The study conclusively establishes that internal control activities (ICA) and financial information systems (FIS) are fundamental drivers of revenue collection efficiency in the Lake Region Economic Bloc counties, with a significant synergistic interaction underscoring the necessity of integrating these systems for superior outcomes. Furthermore, FIS serves a critical risk-mitigation role, counteracting the negative effects of annual risk on revenue performance, while persistent unobserved county-specific factors also substantially influence revenue capacity. Based on these findings, recommendations include prioritizing the concurrent strengthening of ICA and FIS to leverage their synergy, deploying FIS strategically for risk mitigation, adapting policies to county-specific contexts due to significant between-county variation (ρ = 0.620), and investigating specific county-level factors such as governance structures and institutional capacity to inform targeted policy design. Policy should focus on capacity-building for finance staff and extending digital revenue platforms to grass-roots micro-traders (―Mama Mboga‖) to promote equity and compliance. | en_US |
