Budget repair or budget spectacle? The passage of Wisconsin’s Act 10

Strategic planning processes use budgets to implement control and accountability. However, budgets can also be used to generate support for strategic decisions, for example by creating a political spectacle. A political spectacle is a problem engineered to have a specific political impact. This paper investigates politicians’ use of a state budget as a political manoeuvre to defend strategic decisions regarding public employee unions in Wisconsin. The analysis shows how the 2011 state budget in Wisconsin was used to create a political spectacle to generate support for eliminating collective bargaining for public workers, especially public (state) school teachers.     

Does Proximity to School Still Matter Once Access to Your Preferred School Zone Has Already Been Secured?

The Journal of Real Estate Finance and Economics - This paper examines the relationship between proximity to secondary schools and property values within three school enrollment zones in Auckland,...     

Public–private partnership meets corporate social responsibility—the case of H-JUMP school

This paper examines tripartite public–private partnerships (PPPs), a new form of partnership between the government, business, and nonprofit sectors. Partly funded by for-profit firms’ corporate social responsibility (CSR) budgets, this approach reduces a government’s costs for providing a public service. Based on a case study of the H-JUMP school, a recently-formed tripartite PPP in South Korea, the authors explore the motives of each partner organization, the key factors in making the partnership sustainable, and the partnership’s social value implications.     

A study of the linkages between rolling budget forms,uncertainty and strategy

Addressing the dearth of studies on rolling budgets, we investigate how the importance of rolling budgets for various planning, control and evaluation reasons relate to a business unit's strategy and uncertainty, and report on the variation in these responses when partitioned into quarterly and monthly rolling budget types. We use a survey instrument with responses from 182 rolling budget firms in our investigation. Our findings reveal consistencies as well as deviations between our sub-samples (quarterly and monthly rolling budgets), and the total rolling budget sample. We report that the way rolling budgets relate to uncertainty and strategy in organisations are substantively different for monthly and quarterly rolling budget types, and vary across planning, control and evaluation budget reasons. Our findings show a greater sensitivity between monthly rolling budgets and uncertainty/strategy, and virtually nil relations between quarterly rolling budgets and uncertainty/strategy. We posit that monthly rolling budgets are used in a manner more traditionally associated to rolling budgets in prior studies, while quarterly rolling budgets might be used relatively more symbolically or in response to external pressures such as earnings forecast requirements, and are less sensitive to established organisational antecedents such as uncertainty/strategy.     

Product innovation, budgetary control, and the financial performance of firms

Organizations are increasingly calling for greater budgetary oversight of the product innovation process. A major focus of their concern is the costs associated with product innovation together with their need to enhance their financial performance through these endeavours. However, the literature has raised a number of issues arising from such budgetary proposals, suggesting that the creativity of those involved in product innovation should not be constrained by cost concerns, that the use of management control systems is incompatible with product innovation, and that budgets may stifle innovation. It is argued in this paper that the extent to which product innovation has a positive impact on the financial performance of firms is dependent on the manner in which budgets are used in organizations. If budgets are used predominantly as a planning mechanism, then such budget planning facilitates product innovation resulting in enhanced performance. In contrast, if budgets are used primarily as a control mechanism, then it is unlikely that product innovation will contribute to financial performance. The results of the study are consistent with these expectations. This paper makes a contribution to the literature by providing empirical evidence of the impact of budgets in the context of product innovation.     

The Response of Fundholding Family Doctors to Price Signals

The introduction of budgets for family doctors to purchase health services for their patients was a major part of the internal market reforms in the UK health service. The paper examines the response to price signals of 35 fundholding GP practices during the first four years of fundholding. Admissions increased and the private sector was used for a small level of provision, but great diversity was apparent between individual GP practices. Despite huge potential savings from changing referral patterns, only very minor changes were observed. GPs used the power of fundholding to instigate change in the services provided by existing suppliers rather than to respond to more attractive prices from alternative suppliers.     

MULTILEVEL FRAMING: AN ALTERNATIVE UNDERSTANDING OF BUDGET CONTROL IN PUBLIC ENTERPRISES

This paper addresses the question as to why there tends to be recurring budget deviations in public sector service organizations. In the public sector, budgets and actuals are loosely coupled, and budgets may serve other institutional functions than control purposes. However, little research has addressed how the framing of budget information may explain the different functions of the budgets as control devices. The paper argues that the valence of budget deviations varies between organizations, and that organizations that have a positively oriented valence towards budget surpluses have a propensity to underspend the budgets. Consequently, organizations that have a positively oriented valence towards budget deficits tend to overspend the budgets. The empirical part analyses the budget situations in the Central Bank of Norway and in a large university hospital in Norway. In the case of the Bank, it was found that underspending of budgets was framed as performance measures indicating high organizational efficiency. The Hospital, on the other hand, showed a different picture as budget deficits were the situation during all years studied. One main finding was the key actors’ roles as translators of the society's expectations as to the fulfilling of the organizations’ missions. These translators function as mediators between the institutional context and pressures, the organizations’ goals and the internal budget processes. The conventional wisdom that the budget also acts as a means of communication and as symbols and ritual acts that reflect the institutional contingencies of the organizations, is further developed by describing how organizations’ goals valence the role of budgets.     

On the empirical relationship between market value and residual income in the U.K.

This paper examines the empirical cross-sectional relationship between residual income and market value for U.K. firms. It does so because of recent claims that RI is a better measure for use by firms in internal planning and control activities than, say earnings. If such is the case then, presumably, we would expect that RI has a stronger association with market value than, for example, earnings. We conclude that the relationship between RI and market value is by no means perfect. Nonetheless, RI has a stronger association with market value, in conjunction with RD expenditures and opening and closing book value, than does earnings in conjunction with RD expenditures and closing book value. As a consequence, the capital charge element of RI does appear to add explanatory power to equations involving merely earnings, RD expenditures and closing book value. Our view, therefore, would be that the evidence presented in the paper provides some support for advocates of the use of RI for planning and control.     

The influence of funding source and legislative requirements on government cost accounting practices

This paper provides preliminary evidence on the determinants of cost accounting practices in government agencies. Drawing on institutional and contingency theories of management accounting choice, we examine two potential influences on the design and use of government cost systems: legal requirements to be self-funding and mandated requirements for cost accounting data. We test these hypotheses using survey data from the U.S. General Accounting Office. The empirical evidence indicates that organizations using cost system output to satisfy external requirements tend to implement more “elaborate” cost accounting systems than units without external requirements, but are no more likely to use cost system data for internal purposes. In contrast, government organizations that are required to “pay their own way” by fully recovering costs through revenues or fees not only implement more elaborate systems than units funded by appropriated budgets or reimbursement of expenses by other government units, but also tend to make more extensive use of cost system output for a wide variety of internal purposes ranging from pricing to management control.     

Linkages between organizational goals,strategies, and the budget process

This case is ideally suited to integrate organizational goals and strategies with budgeting, feedback, and variance analysis. It demonstrates the interplay between the budget process and organizational goals and strategies. The case is also useful in integrating accounting concepts with concepts which students have studied in management or organizational behavior courses. It suggests that the way that managers respond to variances is affected by the environment in which the firm operates and the product(s) manufactured by the firm. This case is based upon an actual situation in which a firm experienced rapid growth through acquisition. Integration of the budget process with organizational goals and strategies enhances the students' interest and their understanding of the role of budgets in the planning and control process. The case demonstrates that budgets are part of a “big picture,” and can be traced and related to managerial goals and strategies. Further, the case allows students to develop an understanding and appreciation of variance analysis. The case has been used successfully with undergraduate cost accounting students and with participants in a 2-week executive-education program. The students find the case interesting and are eager to participate in the discussion.     

The Effect of Personnel Characteristics in the Internal Accounting Control System on Discretionary Tax Accruals: Evidence from Korea

This study examines whether the characteristics of personnel in a firm's internal accounting control system (IACS) and auditor characteristics control managers’ discretionary behaviour for tax planning. The study uses a sample of 4210 firm‐year observations from 2006 to 2014. The results show that managers’ discretionary tax planning cannot be controlled when the personnel in charge of internal accounting control are at an optimum level or higher. On the other hand, when a CPA is included among the personnel, the manager's discretionary behaviour is somewhat controlled. Moreover, the results show that firms audited by a large accounting firm also control the manager's discretionary tax planning to some extent. Unlike previous studies that examine the effects of IACS on discretionary accruals mostly in terms of book income, this study's contribution is an examination of the effects of the characteristics of personnel in IACS on the relationship between discretionary book‐tax conformity accruals and discretionary book‐only accruals that can be used when the manager establishes a tax plan. Additionally, this study also provides indirect evidence that the characteristics of auditors and personnel in charge of internal accounting perform a monitoring role that controls the manager's opportunistic behaviour.     

School output control and student performance in Norwegian primary schools—an exploratory study

This paper explores how national school performance measures are used as a management control system in Norwegian schools and the relationship between the use of these measures and student performance. Survey data from Norway and archival family background data are examined with the results of national tests (NTs) taken by grade 5 students (10 year olds). The study finds interesting relationships between how schools use NT results and student performance. The findings provide insight into how take up of national tests can be improved within Norwegian schools. These insights might also be transferable to schools outside Norway.     

Moderating Role of Cost Accounting Information Quality on the Relationship Between the COVID-19 Pandemic and Budgeting in Public Hospitals

Based on new public management, information processing theory and contingency theory, this study investigates the impact of the COVID-19 pandemic on budgeting in public hospitals, focusing on budget use. The research hypotheses were tested using a survey of 82 responses from hospital CFOs. The results show that the organisations that were most affected by the pandemic increased their use of budgets for planning, resource allocation and control, compared to those that were less affected. This study also highlights the moderating role of cost accounting information quality in the relationship between crises and budget use. We find that public hospitals that have been most affected by the pandemic and have simultaneously better cost accounting information have increased their use of budgets for planning, resource allocation and cost control more than those whose costing system does not provide superior cost data.     

Not So Seamless? Performance Related Pay and Financial Control in English Schools

The introduction of performance related pay (PRP) in English schools, following a 1998 Green Paper, was presented as a seamless policy. Incentives for teachers to contribute to performance targets would mean that performance management would be closely linked with the allocation of school budgets. This article traces the problems of implementing this policy stemming from its expenditure implications. The initial criterion-referenced stance adopted by the Government has been progressively abandoned in the light of concerns over the cost of the scheme. As a consequence, the Government has increasingly moved to a policy of imposing limits on access to PRP which threaten to reopen political conflicts over the extent to which PRP is an equitable form of pay determination in schools.     

How do politicians shape and use budgets to govern public sector organizations? A position-practice approach

This paper examines politicians’ influence on budgets in governing public sector organizations. Theoretical reasoning is based on the position-practice concept applied in structuration theory. Research took place in a hospital district in Finland from 2009 to 2015. The findings show that politicians set coercive budgetary policies, but there was no direct relationship between budgets and actual medical practices. As a result, the budget was simply a ‘ceremonial’ tool of political governance, as medical professionals concentrate on delivering healthcare services.     

Toward an integrative framework of organizational control

This paper develops an integrative organizational control model which synthesizes selected contributions of the administrative management school, organizational sociologists and organizational psychologists. The model consists of a core control system embedded in the context of organizational structure, organizational culture and the external environment. Control is defined as attempts by the organization to increase the probability that individuals will behave in ways that will lead to the attainment of organizational objectives. Control of work behavior is accomplished by the four core control mechanisms of planning, measurement, feedback and evaluation-reward. The paper presents propositions for each core control mechanism, relating its impact to work behaviors and outcomes. It also examines the manner in which the contextual factors (culture, etc.) function as control mechanisms on work behavior. Finally, the paper suggests directions for future research on the proposed model. Taken together, the model and the propositions comprise the basis for an integrative framework of organizational control.     

Virtual schools

Virtual schools have already made their appearance. This paper examines the factors which promote or slow the spread of virtual schools. Technological change, economic rationalism, and the suitability of conventional schools for the information age are identified as reasons for the continued growth of virtual schools. Conversely, the identification of an appropriate pedagogy, the lack of required teaching skills, concerns for the reshaping of human values, socialisation, and the continued need for student supervision are seen as reasons why virtual schools will not rapidly overtake conventional ones. It is concluded that virtual schools will continue to increase in the 21st century, and that appropriate planning must be made for their impact.     

Budget Development and Use in Small‐ and Medium‐Sized Enterprises: A Field Investigation

We examine the process by which operating budgets are developed and how they are used for control, evaluation, and reward purposes in small‐ and medium‐sized enterprises (SMEs). SMEs (i.e., fewer than 500 employees) represent the dominant organizational form in North America but surprisingly little research has examined how these companies develop and use management controls. Our study focuses on a key element of the management control system, operating budgets, because prior research on SMEs indicates this as an important and commonly used control tool in such companies. Prior research on budgeting practices, while extensive, has almost exclusively examined larger companies. We conduct in‐depth field interviews at 12 participating SMEs to address four theory‐based research questions intended to provide insights regarding the development and use of budgets by SMEs. Our first question examines how budgets are developed, top‐down versus collaborative. Our second, third, and fourth research questions examine, respectively, whether budgets are used tightly or loosely for results control, performance evaluation, and reward purposes. As a first step in providing a deeper understanding of budget development and use in SMEs, our results have implications for practice, theory development, and management accounting education.     

Budgeting for information technology

This paper examines patterns in the budgeting of information technology (IT). Using an econometric time-series model of budgeted versus actual spending, the paper explores, in the context of healthcare settings, the relationship between past, present, and future budgets with past, present and future spending for IT and non-IT variables. The results show a distinct difference in the patterns of budgeted and actual spending across IT and non-IT variables. Notably, actual IT capital spending does not correlate significantly with past or budgeted IT spending. These results signal a need for more research in the design of IT budgets.     

Discourse and institutional change: ‘Giving accounts’ and accountability

This paper examines the impact of the implementation of Local Management of Schools (LMS) in the UK on the discursive practices that help construct institutions of ‘accountability’ in a particular organizational field. The paper examines the institutionalization of accountability processes by analyzing discourses on accountability in the education field. It explores the extent to which the focus on financial discourses of accountability introduced by state legislation, and underpinned by the promotion of the market ethos, mediates the enactment of non-financial understandings and beliefs about the institutionalized accountability of schools and their staff. We focus upon two discourses of accountability: those introduced by organizations requirements under recent legislation to legitimate themselves within their field (regulatory institutions of accountability) and how organizational actors legitimate themselves with each other in the enactment of their everyday activities (‘folk’, or old, institutions of accountability). The paper argues that, in their strategic response to regulatory institutions of accountability, school staff struggled to disentangle the ‘rational’ or ‘legitimate’ notions of their accountability from the folk, tacit or private institutional norms to which they have held themselves accountable in the past. Although different informants have tended to emphasize different dimensions of accountability, discourses of financial accountability were the key rationale for the explanations of conduct, even when informants were discussing seemingly non-financial or ‘folk-based’ institutions of accountability.