Budgeting and Financial Management have been at the core of economic reform programs in
most nations around the world. They have also been the principle instruments of
transformation and restructuring of public sector organizations. With the growing challenges
posed by financial mismanagement and budgetary, the need for enhanced budget processes
and innovative financial management techniques are increasingly felt in developing countries
and transition economies. Budgets can be used to allocate funds optimally by funding
projects that promise the highest returns. The objective of this study was therefore to identify
the challenges encountered in the budgeting process at the City Council of Nairobi.
This study used descriptive survey study which was aimed at establishing the challenges of
operational budgeting process at CCN. The study targeted a hundred (100) employees in the
CCN. These were the respective heads of various departments/sections at the City Council.
Primary data was collected using questionnaires which had both closed and open ended
questions. Quantitative data was analyzed using SPSS. Descriptive statistics were used to
summarize the data. This included mean scores, percentages and frequencies. Tables and
other graphical presentations were also used to present the data collected for ease of
understanding and analysis.
From the findings, the study found that there were some challenges faced by CCN in
budgeting. These challenges included: investment processes are highly fragmented,
methodological difficulties in budget implementation, limited financial resources,
institutional and procedural weaknesses, fragmentation of decision-making, need to compare
programs and projects with different timeframes and also failure to use market-related prices,
CCN loses significant resources in "white elephant" projects at the expense of other
beneficial projects, reduction of expenditure because of low revenue inflows, experiences ofexcess expenditure in budget implementation and also failed projects due to under-costing of
the budget. The study therefore recommends that for the budgeting process at the CCN to be
successful, the budget plan should be made more clear and accurate so that all the employees
are able to understand it, many employees as possible in the departments should participate in
budget preparation and all the senior staff in the organization should be involved in budget
preparation and discussions.

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