FACTORS AFFECTING THE EFFECTIVENESS OF PUBLIC FINANCIAL MANAGEMENT SYSTEM IN LOCAL GOVERNMENT. CASE STUDY BOSASO, PUNTLAND, SOMALIA

This study examines the critical factors affecting public financial management (PFM) effectiveness in Bosaso, Puntland, Somalia, analyzing five key dimensions: accounting systems, institutional capacity, management practices, budgeting procedures, and employee capacity. The study adopts a mixed research approach combining descriptive and exploratory study designs, utilizing questionnaires (199 respondents), key informant interviews (5 participants), and document analysis. Data collection instruments included structured questionnaires and interview guides, while analytical methods encompassed both descriptive and inferential statistics, with particular emphasis on multiple linear regression and correlation analyses to determine variable relationships and predictive power. The study reveals that while accounting systems are operational, their PFM impact remains constrained by inadequate data use and staff skills. Institutional capacity serves as an important enabler, while management practices and budgeting procedures prove most influential - particularly budget planning/execution and supervisory oversight. Despite their significance, employee capacity gaps and motivational issues hinder performance. Systemic challenges include transparency deficits, political meddling in budgets, departmental fragmentation, and corruption vulnerabilities. These findings underscore the need for integrated reforms addressing technical systems, governance structures, management processes, and human capital development to strengthen PFM effectiveness. Based on the regression analysis, budgeting procedures and management practices are the most influential predictors of performance, demonstrating strong and statistically significant effects. Employee capacity also contributes meaningfully, while institutional capacity and accounting systems show weaker impacts, likely due to implementation or structural gaps. These findings highlight the importance of strengthening budgeting, leadership, and workforce skills for enhanced organizational success. Correlation analysis reinforced these findings by revealing a very strong positive association between institutional capacity and overall performance, closely followed by management practices and budgeting procedures. Employee capacity and accounting systems also demonstrated strong, positive relationships, though slightly less pronounced. The study recommends integrated reforms including: modernization of accounting technologies with capacity building, strengthening institutional oversight mechanisms, enhancing performance-based management, implementing participatory budgeting reforms, and comprehensive staff development programs.