Effect of Budgeting on Public Sector Wage Bill Management by the Government of Kenya

Mogere Henry Nyakundi; Simiyu Justo Masinde; Mugenda Nebat Galo

doi:doi:10.11648/j.jfa.20160403.11

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Effect of Budgeting on Public Sector Wage Bill Management by the Government of Kenya

Mogere Henry Nyakundi, Simiyu Justo Masinde, Mugenda Nebat Galo

Published in Journal of Finance and Accounting (Volume 4, Issue 3)

Received: 21 March 2016 Accepted: 5 April 2016 Published: 7 May 2016

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Abstract

The main aim of budgeting by the government is to create plans on how to source, allocate and spend public resources prudently to meet allocation, development and stabilization objectives. All government expenditure should be controlled if both development and recurrent objectives are to be met. This is however not the case with the public sector wage bill in Kenya since it has been at a spiraling level in the recent past. The wage bill to GDP ratio was 12.1% in the year 2012/13 as compared to the internationally accepted level of 7%. The wage bill to revenue ratio was 47% in the year 2012/13 as compared to the internationally accepted levels of between 30% and 40%. The wage bill to expenditure ratio was 57% in the year 2012/13 as compared to the conventionally accepted levels of utmost 40%. This implies fiscal unsustainability of public expenditure. Public sector wage bill reforms like retrenchments, salary cuts and introduction of Salaries and Remuneration Commission to bring fiscal guidelines in wage Bill has not worked in managing the public sector wage bill in Kenya. This study aimed at assessing the effect of budgeting on public sector wage bill management in Kenya as another intervention in wage sanity. The study relied on Principal agent theory of budgeting, Top Down theory of budgeting, Bottom up theory of budgeting and incrementalism theory of budgeting which postulate that budgeting is a tool for control of expenditure. The specific objectives of the study were to establish whether the revenue forecast, recurrent expenditure budgetary projections, capital expenditure budgetary projections and expected growth in GDP have effects on public sector wage bill management. Causal research design was used to establish the cause and effect relationship between the independent and dependent variables. Purposive sampling was employed in selecting 13 fiscal year budget data. Step-wise multiple linear regression models were employed in establishing the degree and magnitude of the relationship between the variables. Student’s t-test and F-ratio were respectively applied to test hypotheses and overall significance of the regression models at 5% level of significance. The findings of this study indicates significant effect of revenue forecast, development expenditure projection and GDP on wage bill to revenue ratio and wage bill to GDP ratio and no significant effect on wage bill to recurrent expenditure ratio. It therefore implies a budget can be a control tool for expenditure. This study recommends the need for the government of Kenya to adopt program based budgeting system that factors output factor to control the wage bill.

Published in	Journal of Finance and Accounting (Volume 4, Issue 3)
DOI	10.11648/j.jfa.20160403.11
Page(s)	86-101
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2016. Published by Science Publishing Group

Keywords

Wage Bill to Recurrent Expenditure, Wage Bill to Gdp Ratio, Wage Bill to Revenue Ratio, Revenue Forecast, Budget, Principal Agent Theory of Budgeting

References

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[4]	Aliu, O. A., Salam, M. O., & Abdulkadir, R. I. (2009). An Assessment of Influence Of Budget Process on Budget Perfomance:The expperience of Kwara State. Academy of Taiwan Business Management Review, 85-92.
[5]	Bammeke, S. (2008). Public Sector Accounting and Finance for Decision Making. Lagos: SAB and Associate.
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[7]	Cowen, S., & Dean, B. (1979). The Use of Zero-based Budgeting in Local Government: Some Observations. Interfaces 9(4), 61-66.
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[11]	Holm-Hadulla, F., Kamath, K., Lamo, A., Perez, J., & Schuknecht, L. (2010). Public Wages in the Euro area, Towards Securing Stability and Competitiveness. Occassional Paper Series no 112, European Central Bank.
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[18]	Lienert, I., & Modi, J. (1997). A Decade of Civil Service Reform in Sub-saharan Africa: IMF Working Paper WP/97/197. IMF Fiscal Affairs Department.
[19]	Mitchell, D. J. (2005). The impact of Government spending on economic growth.
[20]	Parliamentary Budget Office of Kenya. (2013). The Public Sector Wage Bill And Its implications on Economic Perfomance in Kenya. Policy Working Paper series NO 1 of 2013. Nairobi: Government Printers.
[21]	Pierrre, C., & Carcillo, S. (2012). Can Public Sector Wage Bill Be Reduced? National Bureau of Economic Research.
[22]	Poverty Reduction and Economic unit, Africa Region. (August 11, 2010). Managing Government Wage Bill for Sustained Recovery. Harare: Zimbabwe Public Expenditure Notes.
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[27]	Salaries and Remuneration Commission. (2013). Wage bill sustainability: what options for Kenya. A report issued by SRC to contain the public sector wage bill in kenya pp 1-20. Nairobi: Government Printers.

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APA Style

Mogere Henry Nyakundi, Simiyu Justo Masinde, Mugenda Nebat Galo. (2016). Effect of Budgeting on Public Sector Wage Bill Management by the Government of Kenya. Journal of Finance and Accounting, 4(3), 86-101. https://doi.org/10.11648/j.jfa.20160403.11

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ACS Style

Mogere Henry Nyakundi; Simiyu Justo Masinde; Mugenda Nebat Galo. Effect of Budgeting on Public Sector Wage Bill Management by the Government of Kenya. J. Finance Account. 2016, 4(3), 86-101. doi: 10.11648/j.jfa.20160403.11

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AMA Style

Mogere Henry Nyakundi, Simiyu Justo Masinde, Mugenda Nebat Galo. Effect of Budgeting on Public Sector Wage Bill Management by the Government of Kenya. J Finance Account. 2016;4(3):86-101. doi: 10.11648/j.jfa.20160403.11

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@article{10.11648/j.jfa.20160403.11,
  author = {Mogere Henry Nyakundi and Simiyu Justo Masinde and Mugenda Nebat Galo},
  title = {Effect of Budgeting on Public Sector Wage Bill Management by the Government of Kenya},
  journal = {Journal of Finance and Accounting},
  volume = {4},
  number = {3},
  pages = {86-101},
  doi = {10.11648/j.jfa.20160403.11},
  url = {https://doi.org/10.11648/j.jfa.20160403.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20160403.11},
  abstract = {The main aim of budgeting by the government is to create plans on how to source, allocate and spend public resources prudently to meet allocation, development and stabilization objectives. All government expenditure should be controlled if both development and recurrent objectives are to be met. This is however not the case with the public sector wage bill in Kenya since it has been at a spiraling level in the recent past. The wage bill to GDP ratio was 12.1% in the year 2012/13 as compared to the internationally accepted level of 7%. The wage bill to revenue ratio was 47% in the year 2012/13 as compared to the internationally accepted levels of between 30% and 40%. The wage bill to expenditure ratio was 57% in the year 2012/13 as compared to the conventionally accepted levels of utmost 40%. This implies fiscal unsustainability of public expenditure. Public sector wage bill reforms like retrenchments, salary cuts and introduction of Salaries and Remuneration Commission to bring fiscal guidelines in wage Bill has not worked in managing the public sector wage bill in Kenya. This study aimed at assessing the effect of budgeting on public sector wage bill management in Kenya as another intervention in wage sanity. The study relied on Principal agent theory of budgeting, Top Down theory of budgeting, Bottom up theory of budgeting and incrementalism theory of budgeting which postulate that budgeting is a tool for control of expenditure. The specific objectives of the study were to establish whether the revenue forecast, recurrent expenditure budgetary projections, capital expenditure budgetary projections and expected growth in GDP have effects on public sector wage bill management. Causal research design was used to establish the cause and effect relationship between the independent and dependent variables. Purposive sampling was employed in selecting 13 fiscal year budget data. Step-wise multiple linear regression models were employed in establishing the degree and magnitude of the relationship between the variables. Student’s t-test and F-ratio were respectively applied to test hypotheses and overall significance of the regression models at 5% level of significance. The findings of this study indicates significant effect of revenue forecast, development expenditure projection and GDP on wage bill to revenue ratio and wage bill to GDP ratio and no significant effect on wage bill to recurrent expenditure ratio. It therefore implies a budget can be a control tool for expenditure. This study recommends the need for the government of Kenya to adopt program based budgeting system that factors output factor to control the wage bill.},
 year = {2016}
}

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TY  - JOUR
T1  - Effect of Budgeting on Public Sector Wage Bill Management by the Government of Kenya
AU  - Mogere Henry Nyakundi
AU  - Simiyu Justo Masinde
AU  - Mugenda Nebat Galo
Y1  - 2016/05/07
PY  - 2016
N1  - https://doi.org/10.11648/j.jfa.20160403.11
DO  - 10.11648/j.jfa.20160403.11
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 86
EP  - 101
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20160403.11
AB  - The main aim of budgeting by the government is to create plans on how to source, allocate and spend public resources prudently to meet allocation, development and stabilization objectives. All government expenditure should be controlled if both development and recurrent objectives are to be met. This is however not the case with the public sector wage bill in Kenya since it has been at a spiraling level in the recent past. The wage bill to GDP ratio was 12.1% in the year 2012/13 as compared to the internationally accepted level of 7%. The wage bill to revenue ratio was 47% in the year 2012/13 as compared to the internationally accepted levels of between 30% and 40%. The wage bill to expenditure ratio was 57% in the year 2012/13 as compared to the conventionally accepted levels of utmost 40%. This implies fiscal unsustainability of public expenditure. Public sector wage bill reforms like retrenchments, salary cuts and introduction of Salaries and Remuneration Commission to bring fiscal guidelines in wage Bill has not worked in managing the public sector wage bill in Kenya. This study aimed at assessing the effect of budgeting on public sector wage bill management in Kenya as another intervention in wage sanity. The study relied on Principal agent theory of budgeting, Top Down theory of budgeting, Bottom up theory of budgeting and incrementalism theory of budgeting which postulate that budgeting is a tool for control of expenditure. The specific objectives of the study were to establish whether the revenue forecast, recurrent expenditure budgetary projections, capital expenditure budgetary projections and expected growth in GDP have effects on public sector wage bill management. Causal research design was used to establish the cause and effect relationship between the independent and dependent variables. Purposive sampling was employed in selecting 13 fiscal year budget data. Step-wise multiple linear regression models were employed in establishing the degree and magnitude of the relationship between the variables. Student’s t-test and F-ratio were respectively applied to test hypotheses and overall significance of the regression models at 5% level of significance. The findings of this study indicates significant effect of revenue forecast, development expenditure projection and GDP on wage bill to revenue ratio and wage bill to GDP ratio and no significant effect on wage bill to recurrent expenditure ratio. It therefore implies a budget can be a control tool for expenditure. This study recommends the need for the government of Kenya to adopt program based budgeting system that factors output factor to control the wage bill.
VL  - 4
IS  - 3
ER  -

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Author Information

Mogere Henry Nyakundi

Faculty of Business Studies, Chuka University, Chuka, Kenya
Simiyu Justo Masinde

Faculty of Business Studies, Chuka University, Chuka, Kenya
Mugenda Nebat Galo

Faculty of Business Studies, Chuka University, Chuka, Kenya

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APA Style

Mogere Henry Nyakundi, Simiyu Justo Masinde, Mugenda Nebat Galo. (2016). Effect of Budgeting on Public Sector Wage Bill Management by the Government of Kenya. Journal of Finance and Accounting, 4(3), 86-101. https://doi.org/10.11648/j.jfa.20160403.11

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ACS Style

Mogere Henry Nyakundi; Simiyu Justo Masinde; Mugenda Nebat Galo. Effect of Budgeting on Public Sector Wage Bill Management by the Government of Kenya. J. Finance Account. 2016, 4(3), 86-101. doi: 10.11648/j.jfa.20160403.11

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AMA Style

Mogere Henry Nyakundi, Simiyu Justo Masinde, Mugenda Nebat Galo. Effect of Budgeting on Public Sector Wage Bill Management by the Government of Kenya. J Finance Account. 2016;4(3):86-101. doi: 10.11648/j.jfa.20160403.11

Copy | Download

@article{10.11648/j.jfa.20160403.11,
  author = {Mogere Henry Nyakundi and Simiyu Justo Masinde and Mugenda Nebat Galo},
  title = {Effect of Budgeting on Public Sector Wage Bill Management by the Government of Kenya},
  journal = {Journal of Finance and Accounting},
  volume = {4},
  number = {3},
  pages = {86-101},
  doi = {10.11648/j.jfa.20160403.11},
  url = {https://doi.org/10.11648/j.jfa.20160403.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20160403.11},
  abstract = {The main aim of budgeting by the government is to create plans on how to source, allocate and spend public resources prudently to meet allocation, development and stabilization objectives. All government expenditure should be controlled if both development and recurrent objectives are to be met. This is however not the case with the public sector wage bill in Kenya since it has been at a spiraling level in the recent past. The wage bill to GDP ratio was 12.1% in the year 2012/13 as compared to the internationally accepted level of 7%. The wage bill to revenue ratio was 47% in the year 2012/13 as compared to the internationally accepted levels of between 30% and 40%. The wage bill to expenditure ratio was 57% in the year 2012/13 as compared to the conventionally accepted levels of utmost 40%. This implies fiscal unsustainability of public expenditure. Public sector wage bill reforms like retrenchments, salary cuts and introduction of Salaries and Remuneration Commission to bring fiscal guidelines in wage Bill has not worked in managing the public sector wage bill in Kenya. This study aimed at assessing the effect of budgeting on public sector wage bill management in Kenya as another intervention in wage sanity. The study relied on Principal agent theory of budgeting, Top Down theory of budgeting, Bottom up theory of budgeting and incrementalism theory of budgeting which postulate that budgeting is a tool for control of expenditure. The specific objectives of the study were to establish whether the revenue forecast, recurrent expenditure budgetary projections, capital expenditure budgetary projections and expected growth in GDP have effects on public sector wage bill management. Causal research design was used to establish the cause and effect relationship between the independent and dependent variables. Purposive sampling was employed in selecting 13 fiscal year budget data. Step-wise multiple linear regression models were employed in establishing the degree and magnitude of the relationship between the variables. Student’s t-test and F-ratio were respectively applied to test hypotheses and overall significance of the regression models at 5% level of significance. The findings of this study indicates significant effect of revenue forecast, development expenditure projection and GDP on wage bill to revenue ratio and wage bill to GDP ratio and no significant effect on wage bill to recurrent expenditure ratio. It therefore implies a budget can be a control tool for expenditure. This study recommends the need for the government of Kenya to adopt program based budgeting system that factors output factor to control the wage bill.},
 year = {2016}
}

Copy | Download

TY  - JOUR
T1  - Effect of Budgeting on Public Sector Wage Bill Management by the Government of Kenya
AU  - Mogere Henry Nyakundi
AU  - Simiyu Justo Masinde
AU  - Mugenda Nebat Galo
Y1  - 2016/05/07
PY  - 2016
N1  - https://doi.org/10.11648/j.jfa.20160403.11
DO  - 10.11648/j.jfa.20160403.11
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 86
EP  - 101
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20160403.11
AB  - The main aim of budgeting by the government is to create plans on how to source, allocate and spend public resources prudently to meet allocation, development and stabilization objectives. All government expenditure should be controlled if both development and recurrent objectives are to be met. This is however not the case with the public sector wage bill in Kenya since it has been at a spiraling level in the recent past. The wage bill to GDP ratio was 12.1% in the year 2012/13 as compared to the internationally accepted level of 7%. The wage bill to revenue ratio was 47% in the year 2012/13 as compared to the internationally accepted levels of between 30% and 40%. The wage bill to expenditure ratio was 57% in the year 2012/13 as compared to the conventionally accepted levels of utmost 40%. This implies fiscal unsustainability of public expenditure. Public sector wage bill reforms like retrenchments, salary cuts and introduction of Salaries and Remuneration Commission to bring fiscal guidelines in wage Bill has not worked in managing the public sector wage bill in Kenya. This study aimed at assessing the effect of budgeting on public sector wage bill management in Kenya as another intervention in wage sanity. The study relied on Principal agent theory of budgeting, Top Down theory of budgeting, Bottom up theory of budgeting and incrementalism theory of budgeting which postulate that budgeting is a tool for control of expenditure. The specific objectives of the study were to establish whether the revenue forecast, recurrent expenditure budgetary projections, capital expenditure budgetary projections and expected growth in GDP have effects on public sector wage bill management. Causal research design was used to establish the cause and effect relationship between the independent and dependent variables. Purposive sampling was employed in selecting 13 fiscal year budget data. Step-wise multiple linear regression models were employed in establishing the degree and magnitude of the relationship between the variables. Student’s t-test and F-ratio were respectively applied to test hypotheses and overall significance of the regression models at 5% level of significance. The findings of this study indicates significant effect of revenue forecast, development expenditure projection and GDP on wage bill to revenue ratio and wage bill to GDP ratio and no significant effect on wage bill to recurrent expenditure ratio. It therefore implies a budget can be a control tool for expenditure. This study recommends the need for the government of Kenya to adopt program based budgeting system that factors output factor to control the wage bill.
VL  - 4
IS  - 3
ER  -

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