VALUE FOR MONEY AUDITING IN LOCAL GOVERNMENT: A CASE STUDY OF PERCEIVED
EFFICIENCY OF MUNICIPAL VFM AUDITING IN FINLAND, NORWAY AND SCOTLAND
Department of Accounting and
Business Method, University of Edinburgh
E-mail: aage.johnsen@ed.ac.uk
Department of Administrative
Sciences, University of Tampere
E-mail: lasse.oulasvirta@uta.fi
Scandinavian Consortium for
Organizational Research (SCANCOR), Stanford University/
Department of Administrative Sciences, University of Tampere
E-mail: vakkuri@leland.stanford.edu
Address for correspondence:
Aage Johnsen
Department of Accounting and
Business Method
The University of Edinburgh
William Robertson Building
50 George Square
Edinburgh EH8 9JY, UK
Tel: (+44) (0)131-650-8334
Fax: (+44) (0)131-650-8337
E-mail: aage.johnsen@ed.ac.uk
Abstract
Value for money (VFM) auditing has been a long
standing component of accountability in public administration. During the 1980s
and 1990s VFM auditing has allegedly been even more adopted in the new public
management. While there has been much research on public management and VFM
auditing in central government, local government has been less studied in the
literature. While municipalities and counties in local government have an
important role in public sector service production most European countries, and
especially in the Nordic countries, it is surprising that VFM auditing in this
context has not received much scholarly attention. This study is aimed aid
filling that gap. The purpose of this descriptive study is therefore to
document how VFM auditing systems, auditing practices, including performance
measurement practices, are used to assess and verify value for money in local
government and to enhance the accountability of municipalities and counties. This
comparative study analyses how key informants perceive the efficiency of
conducting VFM audits in Finish, Norwegian and Scottish municipalities. Furthermore,
the information from the survey data are also to be linked with other types of
efficiency information.
Keywords: accountability, local government,
value for money (VFM) auditing
INTRODUCTION
There has been an explosion of audits in many
different fields of society. However, the efficacy of audits is seldom documented and is debated. Power
(1997) argued that audit, despite its role in assessing and verifying other
organizations performance, has put itself beyond empirical knowledge about its own effects in favour of a constant
programmatic affirmation of its potential. Many audit practices have grown out
from changes in public sector management with ideals as quality, governance and
accountability. Paradoxically, value for money (VFM) auditing, which presumably
is more ambiguous than financial auditing, is probably more important in public
sector organizations than in firms even though performance in the public sector
is more difficult to verify than in firms.
Value for money (VFM) auditing has been a long
standing component of accountability in public administration (Simon,
1947/1997). During the 1980s and 1990s VFM auditing allegedly has been even
more adopted in the new public management (Hood, 1991, 1995). While there has
been much research on public management and VFM auditing in central government,
local government has been less studied and reported in the literature. While
municipalities and counties in local government have an important role in
public sector service production, especially in some European countries and in
the Nordic countries, it is surprising that VFM auditing in this context has
not received much scholarly attention. With our study we are trying to fill
that gap. The purpose of this study is therefore to describe how VFM auditing
functions in local government. This comparative study documents how key
informants perceive the efficiency of conducting VFM audits in Finish,
Norwegian and Scottish municipalities. These data are then combined with other
data on municipal contingencies and and audit efficiency.
The rest of this paper is outlined as follows:
In the second section a review of the literature shows that VFM auditing has a
long tradition in public administration. However, VFM auditing in local
government has been relatively little studied in the literature. Section three
justifies the hypotheses which are studied in this paper. Section four
documents the research design where research questions have been posed to key
informants in cases from the three countries. The following section five
reports the results from the comparative study. The sixth and last concluding
section rounds off the paper with summary of the findings, assessments of some
limitations, potential implications for theory and practice, and suggestions
for future research.
LITERATURE REVIEW
[See preliminary literature in References.]
HYPOTHESES
The emphasis is, first of all, on highlighting characteristics of auditing systems. In what respects are auditing systems similar in different countries? How do they differ? Second, the study examines efficiency in conducting VFM audits. What is the role and function of VFM auditing in improving the performance of local government services? How much can it contribute to performance improvements in local government?
RESEARCH DESIGN
The study is comparative. It describes the nature of VFM auditing systems in three countries: Finland, Norway and Scotland. The focus of this analysis is on VFM auditing systems, auditing practices, including performance measurement practices, that are used to assess and verify value for money in local government and to enhance the accountability of municipalities and counties. The study examines the efficiency of VFM auditing in these countries by asking key informants how they perceive the efficiency of conducting VFM audits. Furthermore, the study also attempts to combine information collected from the key informants with other types of information on efficiency of VFM audits. The reason for this is that we may not be able to examine the efficiency of VFM auditing by asking stakeholders how they perceive it only. That is relevant, but we probably need other information too, for instance to study efficiency. Probably the best way would be to combine different sources of data, i.e. link survey information with other forms of measurement information.
For Norway interviews are currently conducted by two students and will be finished by May. These data will be coordinated with data collection in Finland and Scotland.
RESULTS
Table 1
The Finnish case
The Norwegian case
The Scottish case
CONCLUSIONS
Summary of findings
Assessment of limitations with the study
Implications of findings for theory, research and policy
Future research