Thesis:

Effect of fiscal decentralization policy on public service Delivery in Embu county government Kenya

Widespread dissatisfaction with centralized systems of service delivery at the local level, combined with developmental inefficiencies, has led to increased global advocacy for fiscal decentralization. This strategy is intended to improve service provision by empowering local governments. Nonetheless, in Kenya, county-level service delivery has continued to face performance challenges despite the implementation of fiscal decentralization frameworks. This study explored the influence of fiscal decentralization on public service delivery within Embu County's local government structures. It specifically investigated the effects of own source revenue generation, decentralized expenditure, intergovernmental fiscal transfers, and county-level borrowing. Additionally, the study assessed how accountability practices mediate the relationship between fiscal decentralization and service delivery. The research was grounded in the theoretical lenses of fiscal decentralization, agency theory, and New Public Management (NPM). An interpretivist philosophical stance was adopted, and a descriptive research design guided the study. The target population included 98 opinion leaders from Embu County, and a census approach was used for data collection. A random sampling technique was employed, and in-depth interviews were conducted with nine key directors from the departments of budget, finance, and planning. Data collection instruments included structured questionnaires and an interview schedule. The questionnaire underwent a thorough validation process through expert panel reviews, pilot testing, and exploratory factor analysis. Internal reliability was tested using Cronbach’s Alpha, with a threshold value above 0.70 , confirming consistency. Data analysis involved both descriptive and inferential statistics, with significance determined at the 0.05 level. Diagnostic tests ensured all assumptions for linear regression were met. A high response rate of 95.9% was achieved. Correlation analysis demonstrated a positive relationship between public service delivery and most fiscal decentralization variables, while county borrowing was negatively associated. Regression results indicated that fiscal decentralization components significantly influenced service delivery, with the model accounting for 67% of the variation (F(5, 88) = 14.413, p < 0.05). The specific findings were: own-source revenue (β = 0.2247, t = 2.75, p < 0.05), expenditure decentralization (β = 0.304, t = 3.55, p < 0.05), intergovernmental transfers (β = 0.326, t = 3.43, p < 0.05), and county borrowing (β = -0.171, t = -2.61, p < 0.05). Based on these results, the study recommends that county governments diversify their revenue sources, ensure active citizen participation in budget processes, secure timely transfers from the national government, and develop robust policies to regulate county-level borrowing. From a policy standpoint, adherence to the Public Finance Management Act throughout the budgeting cycle is crucial. Future research should explore how decentralization affects the operational capacities and institutional effectiveness of county governments.