EXAMINING THE EFFECT OF FINANCIAL MANAGEMENT ON PERFORMANCE OF PUBLIC SECTOR ORGANIZATIONS

Abstract

Most of the public sector institutions in Zambia are faced with a confront of poor financial performance thus posting losses. One of the reasons quoted is lack of robust public financial management practices such as inadequate budgeting processes, poor financial reporting and tracking mechanisms, lack of internal control systems and risk management teams. These challenges culminate into the need of ascertaining the interplay between financial management and financial performance of the institutions. The key objective of the study was to evaluate the impact of financial management on financial performance of public v vi

institutions in Zambia. Particularly, the study sought to ascertain how budgeting, financial reporting, internal control and risk management systems influence the financial performance indicators as profitability, cash flow and revenue collection at the NRFA. The study was underpinned by such theories as organizational control theory, contingency theory, modern portfolio theory and the resource-based theory. The empirical literature review covers the independent and the dependent variables. The conceptual framework gives a representation of the variables and the linkage of these variables. The study employed a descriptive study design and aided by inferential statistics to provide the degree of influence of the explanatory variable on the explained variable. The population of the study comprised of 60 respondents from various units of the agency. Census sampling was adopted where all the respondents formed the study sample. In the collection of data, questionnaires were utilized. The analysis of the collected data was done descriptively and inferentially. The study infers that budgeting, financial reporting, internal control and risk management had an effect on the financial performance though not statistically significant.