Financial Management
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Determinantsofsoundbudgetingandfinancialmanagementpracticesatthedecentralisedlevelofpublicadministration.docxDeterminants of sound budgeting and financial management practices at the decentralised level of public administration
Smith, Ben ; Bempah, Owusu.
OECD Journal on Budgeting ; Paris Vol. 16, Iss. 2, (2017): 109-128. DOI:10.1787/budget-16-5jg19mnf3vr1
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This study employs path analyses to explain the determinants of implementation of sound budgeting and financial management practices at the local level of public administration. This paper recommends strengthening strategic planning, characteristics of implementing agencies, contextual factors and the disposition of management teams to achieve sound budgeting and financial management practices. Further recommendations are made for future research.
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This study employs path analyses to explain the determinants of implementation of sound budgeting and financial management practices at the local level of public administration. This paper recommends strengthening strategic planning, characteristics of implementing agencies, contextual factors and the disposition of management teams to achieve sound budgeting and financial management practices. Further recommendations are made for future research.
JEL classification: H6, H51
Keywords: Strategic planning, budgeting and financial management practices
1.Introduction
Valdimer Orlando Key (1949) sought to address the unresolved problem of public budgeting, that is how to deal with limited resource allocation of x dollar to activity A and not B by offering a macroeconomic prescription that improves government allocative efficiency (Khan and Hildreth, 2002; Fozzard, 2001). Insight from contemporary economic development theories informs us that the budget problem goes beyond allocative efficiency. New Public Management (NPM) has reinforced the need to consider the institutional, cultural, behavioural, strategic planning and contextual dynamics that affect public sector budgeting and financial management (Gruening, 2001).
The World Bank (1998) points out that sound budgeting and financial management practice is key to achieving the expected outcome of government policy. Sound budgeting and financial management practice is defined to embody the generally accepted principles guiding budget preparation, execution, monitoring and evaluation. The aim is to enhance spending controls, linkages between resource allocation and priorities and use of funds to achieve targeted objectives (Allen and Tommasi, 2001:3; World Bank, 1998:1; Schick, 1998:2). According to Graham (2011) good budgeting should possess medium term perspective, base decisions on results, provide incentives to budgeters and involve stakeholders in preparation and implementation.
1.1.The context of ghana health sector public expenditure management reform
Ghana has been reforming its public expenditure management system to achieve increased and sustained economic growth. Ghana's Public Expenditure Management (PEM) reviews in 1993, 1994 and 1995 identified several weaknesses of the hitherto orthodox method of line item budgeting and incremental budgeting. These included: Poor budgetary and financial management planning and implementation lack of accountability, transparency and poor public sector performance (Oduro, 2003; Kabo, 2004; Short, 2003). The PEM reviews recommended the strengthening of institutional and regulatory systems to improve upon budgeting and financial management practices. Legal frameworks such as the Public Procurement ACT 2003, (ACT, 663), Financial Administration ACT 2003 (ACT, 654) and Internal Audit Agency ACT 2003 (ACT, 658) were enacted and implemented.
The Ghana health sector PEM review in 2008 acknowledged low budget credibility, inadequate resource and unpredictable flow of funds for implementation (MoH, 2010). According to the Ministry of Health by the end of June 2009 for instance, only 12% of the Government of Ghana's allocation for service implementation had been released to the sector. The rhetoric has been that weak budgeting and financial management practices are contributing to sub-optimal performance in the health sector (MoH, 2010:23). However, there has not been any empirical study to ascertain the determinants of budgeting and financial management practices as well as its effects on performance outcome in the Ghana's health sector. This study, therefore, contributes to offering suggestions for improving budgeting and financial management practices in the sector.
1.2.Theoretical gaps and study objectives
Academics have long lamented over the methodological approaches to budgeting and financial management research (Khan and Hildreth, 2002; Rubin, 1990; Gibran and Sekwat, 2003). They contend that the general lack of theory of budgeting over focuses on use of case studies as well as the concentration of PEM reforms studies at the national and sectoral levels (Short 2003, World Bank, 1998). This leaves out the focus of understanding budgeting and financial management practices at the implementation levels of government. It must be mentioned that policy implementation, budgeting and financial management is eclectic, however, there are limited attempts to develop multi-theoretical frameworks for their empirical investigations (Khan and Hildreth, 2002, Rubin, 1990). There are also scarce attempts by academicians to develop and test theoretical models of budgeting and financial management practices (Schick, 1983; Khan and Hildreth, 2002; LeLoup, 1983).
This study, therefore, draws on the potential interface of policy implementation, modern management, and budgeting and financial management theories to develop a model that broadens the scope of understanding of budgeting and financial management practices at a decentralised level of public administration. The principal objectives of the research are as follows:
1. to assess the relationship between the determinants of budgeting and financial management practices at local level of administration;
2. to perform path analysis to ascertain the direct and indirect effects of the determinants of sound budgeting and financial management practices; and
3. recommend considerations for improving budgeting and financial management practices at the local level of administration.
2.Literature review and conceptual framework
In this study, theoretical insights are borrowed from policy implementation, modern management budgeting and financial management disciplines. This stems from the wider theoretical complexities of developing a holistic model to explain budgeting and financial management practices (see Figure 1).
2.1. Policy implementation models
Policy implementation is concerned with the process of interaction between the setting of goals and actions aimed at their attainment (Pressman and Wildavsky, 1984). Three generational approaches have influenced implementation studies (Goggin, Bowman, Lester, and O'Toole, 1990). The first generation (Early 1970s) employed case studies to explain policy implementation. This generation helped to define variables, which affect the successful outcome (Pressman and Wildavsky, 1973). The second generation (1975-80s) was characterised by top-down and bottom-up discourse and a focus on developing analytical frameworks to explain implementation. Top-down proponents assumed that once a policy is formulated and backed by rules and norms agencies downstream will implement it accordingly. Hence they emphasised on the use of resource allocation criteria, regulations and administrative control to direct policy implementation. These models include: The Intergovernmental Implementation Model (Van and Van Horn, 1975), and the Forward Mapping and Backward Mapping Implementation Model (Elmore, 1979-80). Van Meter and Van Horn (1975), for instance explained variables such as communication and rule enforcement, characteristics of implementing agencies, socio-economic, political considerations and disposition of managers to determine successful policy implementation.
The bottom-uppers maintained that street level bureaucrats play a significant role in the interpretation and implementation of public policies. To the bottom-uppers factors such as managers' disposition, incentives and motivation affect the outcome of policy implementation. Sabatier and Mazmanian (1983) developed the hybrid framework of implementation, which looks at the tractability of the problem (technical theory and technology), the ability of the state to structure implementation (clear and consistent objectives, financial resources), non-statutory variables (socio-economic conditions, commitment and leadership skills of implementers) to impact on implementation outcome.
The third generation of implementation researchers (1980s and beyond) brought to academic consideration the need for the clear design of theoretical frameworks with explicit operational concepts, which are testable, predictive and can be generalised. Najam (1995: 453) for instance reviewed the literature on implementation and came out with the "5C" protocols of implementation studies, which are policy Content, Context, Commitment, Capacity and Client and Coalitions.
2.2. Perspectives from modern management theories
Contingency theory: Contingency theorists posit that organisation, which are able to fit their internal structures to the dictates of their environment, succeed and grow. Key contingent variables studied to affect budgeting and financial management practices include, size, structure, culture, technology and team commitment (Lawrence and Lorsch, 1967; Lüder, 1992; Scott, 2003; Chalos and Poon, 2000).
Resource Dependency: Resource dependency assumes that the survival and growth of any organisation hinge on its ability to mobilise adequate resources for production. This implies that organisations having adequate resources and being able to predict the flow of funds with power and autonomy for implementation sustain their growth (Pfeffer and Salancik, 1978; Leruth and Paul, 2007).
2.3.Institutional theory perspectives
Institutional theorists posit that organisations mimic the rules and myths of their wider environment in order to increase their legitimacy and survival. According to Scott (2008) there are three pillars of an institution: normative, regulative and cultural cognitive.
Normative: Budget norms and behavioural practices of budget officials in ensuring compliance are important factors that should be taken into account in explaining budget and financial management practices (Wildavsky and Caiden, 1997). Classical budget theory is underpinned by the principles of annuality, unity, appropriation and audit, which have formed the framework of for defining the structure of a budget to present days.
Regulative: Encompasses the conformity to stated rules and laws governing budgeting and financial management. The assumption is that agencies adhering to the prevailing norms and regulation achieve successful policy implementation. Review of the literature helped to articulate the key rules and norms that have to be incorporated and adhered to in budget and financial management practices as indicated below (Lacasse, 1996; Hôgye, 2002; Musso, Graddy, and Grizard, 2006; Mikesell, 1991).
Cultural Cognitive Pillar: Cammack (2007) states that a cultural perspective of budgeting and financial management should consider the following: Management commitment to dealing with financial matters, leadership involvement in establishing financial priorities and the capacity of financial management staff Amdrew (2006) notes that in Ghana leadership acceptance of institutionalised political and managerial reform were crucial to the success of financial management reform.
2.4.Approaches to public sector budgeting
Line Budgeting: Focuses on controlling inputs (salaries and wages, goods and services) necessary for the provision of government services. The general assumption is that line item budgeting allows top executives to exercise control over inputs in a bid to maintain budget discipline.
Performance-Based Budgeting: Focuses on the linkage between the funds provided to public sector entities and their outcomes and/or outputs. It highlights the linkage between policy and priorities and allocation of implementation resources to achieve expected outputs.
Incremental Budgeting: Reviews the previous year's budget and adjustments are made to reflect current goals and objectives.
Medium Term Expenditure Framework (MTEF): This approach seeks to ensure attainment of improved fiscal discipline and allocation of resources aligned to government policy objectives and priorities for a three-year rolling perspective (Schick, 1998).
2.5. Public expenditure management models
Classical Model: According to the classical model proponents argue in favour of, input control, rule-based and adherence to fiscal discipline. Bureaucrats, therefore, ensure stability and conformity through the rational implementation of plans, budgets and financial management guidelines (Chan, 2003: 2). The point to note is that following budget and financial management rules is assumed to enhance successful implementation of government policies at all levels.
New Public Management: Underscores the fact that the public sector should not be different from the private in terms of focus on efficiency, performance management, transparency and accountability (Pollitt and Bouckaert, 2004). The central notion is that budget managers must be cost conscious and be innovative in generating revenue
Barnard-Simon Governance Model: This model dwells on the need for establishing governance and leadership structures through, which control, authority, power specialisation and purpose can be brought to bear in budgeting and financial management practices at all levels of government Chan (2003). Financial managers focus their role on engaging with funders and financial performance monitoring.
2.6. Conceptual framework
The proposed conceptual model helps to simplify understanding and explain the factors affecting the implementation of sound budgeting and financial management practices. The factors assessed to affect sound budgeting and financial management are: strategic planning, contextual factors, disposition of management teams and characteristics of health directorates (see Figure 2).
2.7. Strategic planning
Strategic planning entails the process of establishing what an organisation intends to achieve and mobilising and managing resources over time to accomplish it (Barry, 1997: 8). The Medium Term Expenditure Framework entails the process of strategic planning in which public organisations in Ghana plans for a three-year horizon with a resource envelope (Short, 2003). Three main factors affect strategic planning in relation to the achievement of sound budgeting and financial management practices. These include the extent of key stakeholders' participation in the process (Shah, 2007; Shileds and Young, 1993; Lipsky, 1980; World Bank, 1998); the clarity of the policy content (Sabatier and Mazmanian, 1983; Van and Van Horn, 1975) and resource adequacy and predictability for implementation (Grizzle and Pettijohn, 2002; Chanddarasorn, 1997; Pfeffer and Salancik, 1978; Van and Van Horn, 1975).
2.7.1.Stakeholder participation
Participatory budgeting a feature of MTEF and performance-based budgeting has an inherent conception that stakeholders' participation in budget preparation and implementation reduces information asymmetry and addresses budget dysfunction (Chalos and Poon, 2000; World Bank, 1998; Argyris, 1953). According to Fölscher (2007: 186) participatory budgeting initiatives, which foster adherence to the basic tenets of sound budgeting and financial management practices, are effective to achieve intended policy results.
2.7.2. Policy content
According to Van and Van Horn (1975), the prerequisite for successful implementation demands that implementers clearly understand the policy standards and objectives. The policy content component is underpinned by the hybrid theory of implementation, which underscores the need for clear policy content from the top and effective articulation of standards to guide implementation at lower levels (Goggin, Bowman, Lester, and O'Toole, 1990). Institutional theorists also posit that adhering to clear policy standards to improve the legitimacy and survival of organisations in terms of policy implementation (Scott, 2008; Oliver, 1991).
2.7.3. Resource adequacy and predictability
Resource adequacy and predictability in this research is reinforced by the resource dependency theory (RDT) (Scott, 2003; Oliver, 1991; Pfeffer and Salancik, 1978) as well as the MTEF approach to planning and budgeting (Kabo, 2004; Oduro, 2003; Schick, 1998; World Bank, 1998) and also the governance model of financial management (Chan, 2003). According to Chan (2003) the classical model of financial management holds the view that revenue and spending decisions should be projected over a fiscal period so that managers are informed and can predict the flow of resources to implement their plans and budgets successfully.
2.8. Contextual factors
Scott's (2008) three pillars of an institution which are: Normative, regulative and cultural influences are taken to impact on the implementation of sound budgeting and financial management practices. The institutional context illuminates understanding on the need to adhere to budget norms and regulations in order to legitimise the actions of budget officials during implementation. Other important contextual considerations in budgeting and financial management are the socio-economic and political influences.
2.8.1. Normative pillar
The mainstay of the normative influence is that strengthening budget and financial management norms and ensuring adherence to their practices ensure the success of implementation. The classical, new public management and the Barnard-Simon Governance models of public financial management (Chan, 2003) and the MTEF approach to budget preparation all dwell on the effective articulation of norms to achieve successful implementation (Short, 2003; World Bank, 1998).
2.8.2. Regulative pillar
The thrust of the regulative pillar is that managerial articulation and enforcement of regulations leads to sound budgeting and financial management practices (Shah, 2007; World Bank, 1998; Schick, 1998; Lacasse, 1996). From an institutional context, it is assumed that due to the quest for legitimising their actions, financial managers will comprehend and adhere to regulations for sound budgeting and financial management practices.
2.8.3. Cultural pillar
Recognisable roles and structural arrangements of an organisation are important facets of its culture (Scott, 2003). Studies in budgeting and accounting innovation have established a correlation between organisational culture, roles and behaviour of budget officials and its effect on implementation outcome (Goddard, 1997, p. 111; O'Connor, 1997; Lüder, 1992, Cammack, 2007, p. 13). The components for examining the cultural aspect of this study are adapted from Cammack (2007:13) Building Capacity through Financial Management: A Practical Guide. These components are; the focus of management committee on financial matters, leadership example in setting financial priorities, leadership adherence to financial management principles and regulations and the capacity of financial management staff.
2.8.4. Socio-political and economic factors
Bhuyan, Jorgensen, and Sharma (2010) documented factors for assessing the effect of socio-political and economic factors on policy implementation. These factors include; local political influence such as compatibility of local plans and budgets with relevant national local and divergent policies (Khin, 2010; Rubin, 1993; Lüder, 1992; Wildavsky, 1992), social factors such as gender norms (Budlender, Sharp, and Allen, 1998) economic issues such as poverty and global assistance (Grizzle and Pettijohn, 2002; Lüder, 1992; World Bank, 1998; Lüder, 1992).
2.9. Disposition of management teams
Top-down (Van and Van Horn, 1975: 445-488) and bottom-up (Lipsky, 1980; Elmore, 19791980; Lipsky, 1971) implementation scholars have all recognised the effect of the disposition of management teams on implementation success. Among the variables considered in this study that affect managers' disposition are: i) participation of implementers in policy decisions (Chenhall and Brownell, 1988; Gross, Giacquinta, and Bernstein, 1971; Hofstede, 1965); ii) motivation (Robinson and Brumby, 2005:16; Sandalgaard, Bukh, and Poulsen, 2001: 8); iii) trust (Graham, 2011: 29; Cammack, 2007: 4); iv) adequate training (Cammack, 2007: 71; Lüder, 1992: 115); v) commitment (Graham, 2011:31; Bhuyan, Jorgensen, and Sharma, 2010: 6; O'Connor, 1997); and vi) acceptance and training (Lüder, 1992:10,115).
2.10. Characteristics of implementing agencies (Health Directorates)
Contingency studies have identified the following variables to affect performance outcome: i) staff capacity (Graham, 2011; Cammack, 2007; Lüder, 1992); ii) team work (Merchant, 1984); iii) information communication and technology (Woodward, 1965); iv) size and structure (Blau, 1970) and v) management teams' support (Chalos and Poon, 2000). For the purpose of this study only financial management Information system (FMIS), staff capacity and functioning of management teams are considered due to their potential impact on sound budgeting and financial management practices at the local level.
2.11. Sound budgeting and financial management practices
The World Bank (1998: 129) provides a checklist consisting of 14 items for assessing budget practices out of which 11 were modified for the study and 9 items for assessing financial management practices, which were all, adapted. The 11 items of sound budgeting practices are:
1. evidenced-based planning and budgeting
2. annual budget based on multi-year resource envelope
3. plans and budgets which consider the national macroeconomic policy environment
4. equitable resource allocation criteria
5. transparent plans and budgets
6. use of authorisation procedures in the implementation
7. effective spending control,
8. the incentive for efficient resource use
9. use of performance measures to monitor the implementation
10. managerial discretion and flexibility over resource use
11. support of accounting software for planning, budgeting and financial management. The 9 items of sound financial management practices adapted for the study are:
1. financial decisions based on accounting standards
2. efficient cash management
3. timely disbursement of budgeted funds
4. accountability for expenditure
5. effective internal control systems
6. audit of expenditure (professional, timely reporting)
7. a financial management information system that links planning, budgeting, accounting
8. consistency between budget and accounting system
9. transparent and competitive procurement system
Based on further review of the literature on budget and financial management system, an additional three items were added:
1. consistency of strategic planning with the dictates of the accounting and financial management principles,
2. properly maintained and safeguarded books of accounts and accounting records and
3. use of financial management performance indicators to monitor plans and budgets implementation (Graham, 2011; Cammack, 2007; Allen and Tommasi, 2001).
3.Methodology
3.1. Data collection
The unit of analysis was 107 District Health Directorates (DHDs) in Ghana out of 170, which existed in 2008. All the Directorates were from Budget Management Centres at the metropolitan, municipal and district levels in all ten regions of Ghana. Respondents were purposely, accountants and financial managers because they are principally involved in strategic planning, budgeting and financial management processes. Trained field staff from the Ghana Health Services administered the questionnaires.
3.2. Measurement and instrumentation
The survey instrument consisted of five main parts. The first part is strategic planning measured by stakeholder participation, policy content and resource adequacy and predictability. The second part is contextual factors, which consist of normative influence, regulative influence, cultural influence and socio-political and economic influence. The third part is the disposition of management teams. The fourth part is characteristics of implementing agency (health directorate) which include: financial management information systems, staff capacity and functioning of management teams. The fifth part measures sound budgeting and financial management practices. All the factors were measured using a ten-point rating scale from 1 being very low to 10 being very high. IBM SPSS version 20 was used for data screening, exploratory factor analysis, reliability testing and bi-variate correlations. IBM SPSS AMOS version 20 was used to perform Structural Equation Modeling (SEM) for path analysis to determine the direct and indirect effects of the determinants of sound budgeting and financial management practices. In view of the complexities associated with designing a theoretical model for implementation of sound budgeting and financial management practices, SEM was used to effectively ascertain the relationships between both manifest (i.e. observed) and latent variables and also for confirming the factor structure (i.e. underlying theoretical construct).
In terms of Exploratory Factor Analysis, all the variables exceeded the minimum KMO threshold of 0.6. Socio-political and economic recorded the least, 0.68 and the highest being sound budgeting practices 0.93 (see Table 2). The eigenvalues recorded for all the constructs exceeded the minimum requirement of 1. For variance explained, the least was culture (42%) and the highest being functioning of management teams (64%). Moreover, the study constructs achieved a Cronbach alpha above the acceptable threshold of 0.7 as recommended for social science research. Confirmatory factor analysis was performed to validate the fit of the measurement model for explaining each of the constructs for explaining budgeting and financial management practices. This enhanced a better understanding of the relationships between latent and observed variables.
Table 2, further shows that the data provided a good fit within the acceptable thresholds with Chi-square/df (cmin/df) ranging between 1.974 for resource adequacy and predictability and 0.371 for regulative influence and all within the standards of Chi-square (cmin/df), < 3 good; < 5 sometimes permissible. For Comparative Fit Index (CFI) criteria of > 0.95 great; > 0.90 traditional; > 0.80 sometimes permissible, the data achieved a range of 1 for six of the constructs and 0.977 for two constructs. Regarding Goodness of Fit Index) with acceptable range (GFI) > 0.95, with the exception of sound budgeting practices recording 0.94, all the rest performed above the standard. Additionally, the Root Mean Square Error of Approximation (RMSEA) evaluating criteria of < 0.05 good; 0.05-0.10 moderate; > 0.10 bad was also achieved with the highest 0.096 for resource adequacy and predictability.
4.Results
4.1. Study respondents
The majority of the respondents were males (86%). The age distribution of the respondents showed that about 23% were below 35 years old, 22% between 36 to 40 years and 20% between 41 to 44 years, the mean age was 41. In terms of their educational levels, 43% had below a bachelor's degree, 31% held a bachelor's degree and 26% have attained a master's degree or beyond. The data collected showed that about 40% of the respondents had been in their current position from 1 to 4 years, whereas about 32% had over 7 years experience at their post.
4.2. Statistical analysis
With the exception of characteristics of health directorates and contextual factors which recorded a correlation of 0.74, the remaining inter-item correlations were below 0 .70 (See Table 3). Tolerance values ranged from 0.35 to 0.65 and the Variance Inflation Factor (VIF) showed values ranging from 1.60 to 2.83. In view of these diagnoses, all variables were retained for further analysis. The correlation results also indicate a positive relation between all variables as expected (See, Table 3).
The conceptual model (Figure 3) developed for the study depicts the hypothesis that strategic planning, contextual factors, disposition of managers and characteristics of health directorates will have a positive relationship with sound budgeting and financial management practices. The results affirm this relationship with characteristics of health directorates (beta = 0.274, p < 0.001) having the highest statistically significant and positive effect on sound budgeting and financial management practices, followed by contextual factors (beta = 0.259, p < 0.05), strategic planning (beta=0.241, p < 0.05) and disposition of management teams (beta = 0.197, p < 0.01). The adjusted r-square value of 0.59 indicates that the model explains 59% percent of the variations in sound budgeting and financial management practices.
The examination of the total effects of the determinants of sound budgeting and financial management practices shows that strategic planning contributed the highest (39.30%) of the total effect 1.55. This was followed by the disposition of management teams (26.35%), characteristics of health directorates (17.66%) and contextual factors (16.70%). The implication is that strategic planning should be given the highest priority in an effort to improve sound budgeting and financial management practices. Strengthening strategic planning means prioritising to improve stakeholder participation, defining a clear policy content and providing adequate and predictable resource for planning and implementation. It is interesting to note the contribution of the disposition of management team, which placed second in an effort to strengthen budgeting and financial management practices. Strengthening management team disposition implies, team motivation and sustaining awareness of the importance of sound budget and financial management practices as well as commitment and acceptance to work within existing policies and standards.
The characteristics of implementing agencies (DHDs) accounted for the highest (28.22%) of the total direct effect of the determinant of sound budgeting and financial management practices (0.97). This underscores the fact that strengthening staff capacity, enhancing the functioning of the management teams and improving the use of financial management information systems will go a long way to ensuring effective implementation of sound budgeting and financial management practices. Contextual factors accounted for 26.67% of the direct effect of the determinants of sound budgeting and financial management practices. Therefore any effort to improve sound budgeting and financial management practices should take into account, the norm, regulations, cultural and socioeconomic as well as political issues that impact on successful implementation. Strategic planning, which had the highest total effect, continued to exert its importance to the direct effect, contributing 24.82%. Whilst disposition of management team placed second in the overall total effect. It accounts for the third position in considering the total direct effect, which stresses its importance as a mediating variable in the model to explain sound budgeting and financial management practices.
Examining the indirect effect of the determinants of sound budgeting and financial management practices reveals that out of the total of 0.58, strategic planning makes a major contribution of 63.51%. Although, strategic planning makes an important contribution on its own to sound budgeting and financial management practices, there is the need for other variables to play their key roles for it to account for its expected impact. Disposition of management accounted for 36.50% of the indirect effect, which supported its major role as a mediating variable in the model employed to explain the implementation of sound budgeting and financial management practices.
5.Discussion and conclusion
5.1.Discussion of findings
The study borrowed insights from modern management theories, approaches to budgeting, financial management and policy implementation models, to illuminate understanding of determinants of sound budgeting and financial management practices at the local level of public administration. Reflecting on the theoretical perspectives, the conceptual model mirrored and supported the variables articulated in literature on policy implementation (Grizzle and Pettijohn, 2002; Chanddarasorn, 1997; Elmore, 1979-80; Lüder, 1992; Van and Van Horn, 1975). Results from this study present varying interpretations depending upon the angle of elaboration of the results. For instance, the characteristics of health directorates (beta = 0.274 ***p < 0.001) stands out as the key priority of intervention if one considers the relationships among the variables and sound budgeting and financial management practices. This is further supported by the literature on implementation (Van and Van Horn, 1975) and contingency perspectives of financial management (Lüder, 1992; Grizzle and Pettijohn, 2002; Merchant, 1984 and Woodward, 1965). On this account, financial management information systems, requisite staff capacity and functioning of various oversight committees are important components of agency characteristics that need to be strengthened in an effort to improve sound budgeting and financial management practices.
From the account of the path analysis, strategic planning with 39% of the total effect of 1.55 surfaced as the key priority of intervention in a sequential approach in prioritising to improve sound budgeting and financial management practices. The positive and significant effect of strategic planning on sound budgeting and financial management practices implies that the more stakeholders participate (Shah, 2007; Wong-On-Wing, Guo, and Lui, 2010; Chalos and Poon, 2000) and the clearer the policy content (Nakamura and Smallwood, 1980; Shileds and Young, 1993) with adequate and predictable resources (Chan, 2003; Chanddarasorn, 1997; Lüder, 1992; Pfeffer and Salancik, 1978), the better will be the implementation of sound budgeting and financial management practices.
In considering the direct effect, characteristics of health directorates, in other words implementing agency, with 29.22% of the 0.97 resurfaces as the key priority to focus on in an attempt to improve upon the implementation of sound budgeting and financial management practices. Strategic planning with 63.51% of 0.58 of the indirect effects shows its importance as key exogenous variable worthy of consideration in strengthening sound budgeting and financial management practices. This further buttresses the fact that the other endogenous variables are of paramount interest for strategic planning to play its major role in improving sound budgeting and financial management practices. The positive and significant effect of the disposition of management teams on sound budgeting and financial management practice supports other related literature (Jensen, 2003; Grizzle and Pettijohn, 2002; Sandalgaard, Bukh, and Poulsen, 2001). The implication is that managerial disposition consisting of motivation, awareness, participation, commitment, acceptance and training mediates efforts to strengthen the implementation of sound budgeting and financial management practices.
This brief discussion concludes that any effort to improve the implementation of sound budgeting and financial management practices at the decentralised level of public administration should take into account all the determinants studied because of their varying important contributions.
5.2.Conclusion
Schick's (1983) work An Inquiry into the Possibility of a Budgetary Theory imbued academicians to revisit the development of a budget theory. As part of Schick's conclusion, he stated that it may be more illuminating to examine budgeting from the perspectives of other disciplines than as a field of its own authority (Goggin, Bowman, Lester, and O'Toole, 1990) also pressed on the third-generation implementation scholars to develop clear operational instruments, and provide adequate empirical observations to test their hypotheses, however, only a few studies have so far followed this path (O'Toole, 2000: 268; deLeon, 1999: 318). The current research contributes to these recommendations and therefore developed and tested a model of implementation of sound budgeting and financial management practices. This was achieved through a review of theoretical insights on policy implementation models, organisation theory and approaches to budgeting and public financial management practices.
This study has provided critical determinants, which must be taken into account in an effort to strengthen sound budgeting and financial management practices at the implementation level of public administration. The result from the path analysis informs managers, policy implementers and all stakeholders as to which area and path of implementation to focus on in implementing budgeting and financial management practices. The conceptual model developed can also be applied to other public sector reform implementation and at various levels of governance. It must, however, be stated that the model is not prescriptive to solve the persistent lack of a theory of a budget, what it does is to bring out the explicit insight of looking at budgeting and financial management from a multi-theoretical and multi-disciplinary perspectives.
In conclusion, strategic planning is critical to achieving sound budgeting and financial management practices in the public sector. Moreover, a holistic approach encompassing the articulation of contextual issues, disposition of management teams and characteristics of implementing agencies are essential to the implementation of sound budgeting and financial management practices.
The study respondents were mainly members of the district health management team, it will equally be important to consider the views of managers at national and regional levels with regards to budgeting and financial practices in the service. This will expand the scope of understanding as to whether practices at the national and regional levels exert considerable influence at the district level in implementing budgeting and financial management practices.
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AuthorAffiliation
by
Ben Smith and Owusu Bempah*
* Ben Bempah is a Principal Planning and Budgeting Officer at Ghana Health Service and alumni of the National Institute of Development Administration-Graduate School of Public Administration Bangkok, Thailand.
Word count: 7003
Source: OECD Journal on Budgeting, © OECD 2017, doi: http://dx.doi.org/10.1787/16812336
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Top of Form
· Subject
Planning
Teams
Implementation
Public administration
Public finance
Theory
Sound
Expenditures
Government spending
Politics
Objectives
Case studies
Financial management
Management theory
Budgets
Strategic planning
Budgeting
Public sector
· Location
Ghana
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