Auditing Internal Control and Performance of Semi-Autonomous Government Agencies in Kenya

Abstract

This study examined the effect of auditing internal controls on the performance of semi-autonomous government agencies (SAGAs) in Kenya, with the legal framework as a moderating variable. Despite comprehensive public finance reforms, persistent governance challenges, including procurement irregularities and weak control environments, continue to undermine service delivery in Kenyan SAGAs. Guided by institutional theory and agency theory, the study employed a cross-sectional survey design targeting 516 senior officers across 129 SAGAs. A stratified random sample of 225 respondents was drawn using the Krejcie and Morgan formula, yielding 214 usable questionnaires (95.2% response rate). Data were analysed using hierarchical moderated multiple regression. The findings revealed that internal control auditing (β = 0.55, p < .001) and the legal framework (β = 0.32, p < .001) have significant positive direct effects on SAGA performance. Critically, the legal framework positively moderates the relationship between internal control auditing and performance (β = 0.19, p < .001; ΔR² = .035), indicating that the effectiveness of internal controls is amplified within a robust regulatory environment. Descriptive results show that while auditor competence is a strength (M = 4.27), post-contract management (M = 3.93) and adherence to constitutional procurement principles (M = 3.68) remain inconsistent. Common method bias was not a concern (Harman's single factor = 38.04%). The study contributes to public sector governance literature by demonstrating the synergistic relationship between organizational controls and institutional frameworks. For policymakers, the findings imply that investments in internal audit capacity should be accompanied by efforts to strengthen the clarity and enforceability of the legal framework to maximize performance outcomes.