Public Management and Administration - Owen E.hughes

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could impose similar rigidity as the traditional model. It does, however, offer an improved accounting system to go along with other parts of public management. Another aspect of accounting is the more intense use of auditing than was previously the case. Public sector auditing once concentrated on financial probity by managers rather than whether or not a programme or agency was serving any useful function. Performance auditing can address this. It is part way between financial management and performance management. It covers the auditing functions carried out by auditors, usually independent from the areas being reviewed, but its role includes deciding whether programmes themselves were effective as well as looking for financial probity. Devolution of budgets Related to the previous point, governments have increasingly devolved budget authority to line managers. Instead of the allocation of photocopiers, for example, being decided centrally, it becomes the decision of a line manager to decide if that section wishes to buy a photocopier or a computer or use it for some completely unrelated purpose. In principle, a one-line budget could be given to a particular manager to then manage the resources as he or she chose. The idea is to relate budget authority with management authority. As Thompson argues (1997, p. 6): In the private sector, operating budgets are primarily a means of motivating managers to serve the policies and purposes of the organization to which they belong. Budgets convert an organization’s commitments into terms that correspond to the sphere of responsibility of administrative units and their managers and provide a basis for monitoring operations, evaluating performance, and rewarding managers. The same principle can be applied to government. A manager needs to produce results and the budget is the main resource allowing this to be done. This has generally worked quite well. As an OECD paper argues (1997, p. 23): Entrusting managers with responsibility for their operating resources has not compromised spending control. It has proven easier to maintain cash limits when managers are given a fixed budget within which to operate, than when spending details are controlled by outsiders. Managers have demonstrated that they can maintain timely and accurate financial records and that they can compile financial statements that comply with accounting standards. In principle, devolution of real budget authority to managers is inarguable: in practice it has not been so easy for central agencies to devolve budget authority as completely as might be desirable. Contracting out Financial Management 175 The contracting out of the provision of government services can, in some senses, be considered a financial reform. It is assumed that cost savings will be
176 Public Management and Administration made, usually seen as of the order of 20 per cent (OECD, 1998). It is perhaps more important that contracting is an extension of programme budgeting and specifying what is required in performance terms. In drawing up a contract it is necessary to spell out exactly what is to be achieved and the mechanisms of monitoring. The detailed delivery is then in the hands of outsiders, but in principle there is little difference in what could occur within government, by specifying exactly what an agency or a section is to achieve and funding it accordingly. If the mechanisms are precise enough, there should be no great difference in internal or external provision, other than not having public servants carrying out the delivery. In general, the financial reforms aim to make the public sector more like the private sector in terms of how it deals with money. As Kamarck argues (2000, pp. 246–7): Performance-based budgeting, the use of new accounting systems, and the general interest in accountability exhibited by some of these reform movements are part and parcel of an effort to bring the public sector’s financial management more in line with commonly accepted practices in the private sector. Like civil service reform, many of the experiments in financial management reform seek to close the gap between the public and the private sector. It could be argued that the private sector is hardly a model, given the lack of agreement over accounting standards and the like. However, it is still more rigorous than the public sector was under the traditional model of financial management. Financial management is concerned most of all with providing information to enable decisions to be made. The newer forms of management do this better than did the previous one. Criticisms of financial reforms Despite a fairly general view that the financial reforms have been successful there have been criticisms of specific elements. Budget reform criticisms Instead of budgeting through inputs, the newer management looks at using outputs or performance, particularly programme budgeting. This has attracted criticisms since the 1960s and the PPB system in the United States. The most prominent critic of programme budgeting was Wildavsky. For him, programme budgeting has failed ‘everywhere and at all times’ (1979, p. 198). His general argument is that programme budgeting is an attempt to impose rationality on what is basically an irrational (or highly political) process. Yet his criticisms may not be as universal as he suggests. They greatly overstate what programme budgeting can actually do, because, as pointed out earlier,
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Public Management and Administratio
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Also by Owen E. Hughes AUSTRALIAN P
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© Owen E. Hughes 1994, 1998, 2003
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Preface Over the past 20 years the
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viii Preface the Colorado link such
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3 Public Management Introduction Th
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5 Public Enterprise Introduction Pu
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13 Accountability Introduction The
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14 Conclusion: A New Paradigm for P
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284 References Borins, Sandford (19
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286 References Glor, Eleanor D. (20
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288 References Jordan, Grant (1997)
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290 References Monroe, Kristen Renw
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292 References Putt, Allen C. and S
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294 References Wilson, Graham K. (1
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296 Index bureaucracy 1-5, 9, 15-43
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298 Index information and communica
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300 Index ‘one best way’ thinki
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302 Index Ritter, G. 85, 86 role of
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