International Journal of Arts & Sciences,

CD-ROM. ISSN: 1944-6934 :: 08(07):303317 (2015)

FACTORS AFFECTING BUDGETING AND FINANCIAL MANAGEMENT

PRACTICES OF DISTRICT HEALTH DIRECTORATES IN GHANA

Ben Smith Owusu Bempah

Graduate School of Public Administration (GSPA-NIDA), Thailand

This study is an effort to fill the gap in knowledge and methodological limitations of current research
interest on factors affecting budgeting and financial management practices at local level of public
administration. The focus of most research on budgeting and financial management practices within
government sector has been at the national and sectoral levels. The general notion has been that
modalities, regulations and policies for budgeting and financial management can be developed at the
national level and then sent down to implementers for their compliance to effect the needed change.
This has led to over-focus on the national level. A conceptual model is proposed that establishes a
sequential network of factors affecting sound budgeting and financial management practices at the local
level. The main argument is that contextual factors, the disposition of management teams,
characteristics of district health directorates and strategic planning at the local level all affect the
achievement of sound budgeting and financial management practices. Hypotheses were developed to
articulate the direct and indirect effect of sound budgeting and financial management practices by
employing the path analytic framework. The analysis shows that district health directorate
characteristics have a strong direct effect, whereas strategic planning and budgeting exert a strong
indirect effect. Hence, strengthening of budget and financial management practices should take into
consideration all the variables studied with strategic planning as its foundation block.

Keywords: Strategic planning, Budgeting and financial management practices.

Introduction

The health sector of Ghana has been strengthening its public financial management systems. The aim is to
address challenges of budget comprehensiveness, credibility, predictability, transparency and
accountability. It is reported that budgeting and financial management challenges such as inadequate
funding, unpredictable disbursement, incomplete and untimely reporting of financial data have the
potential to negatively impact on service performance outcome (MoH, 2010, p. 23). This study takes an
empirical investigation into factora affcting the implmentation of sound budget and financial
managment practices at the district level.
Sound budgeting and financial management practices is defined in this study to embrace widely
accepted principles guiding budget preparation, execution, monitoring and evaluation (Allen & Tommasi,
2001; World Bank, 1998). The aim is to enhance spending controls, linkages between resource allocation
and priorities and use of funds to achieve targeted objectives. According to (Graham, 2011, p. 11) good
budgeting system should possess medium-term perspective, based decisions on results, provide incentives
to budgeters and involve stakeholders in preparation and implementation.

303
304 Factors Affecting Budgeting and Financial Management ...

Public expenditure management reforms are aimed at improving budgeting and financial
management practices. Therefore, there are several studies into public expenditure management reform
implementation at the country-wide, national and sectoral levels (Short, 2003; World Bank, 1998; Schick,
1998). A review of literature on public expenditure management shows that most of the studies employed
case study methodology (Pretorius & Pretorius, 2008; World Bank, 1998). The theoretical approaches to
budgeting and financial management have also been biased towards policy implementation informed by
political system and economic theories (Gibran & Sekwat, 2003; Meyers, 1996; Rubin, 1990).
Whereas the eclectic nature of budgeting and financial management has been recognized, there are
limited attempts in developing theoretical models for its empirical investigations (Gibran & Sekwat,
2003; Khan & Hildreth., 2002; Meyers, 1996; Rubin, 1990). In fact no systematic attempt has been made
in the academic domain to develop and test a generic theoretical model of budgeting and financial
management practices in the public sector. There are still gaps and limited knowledge on factors that
impact on budgeting and financial management reform implementation. The study therefore, seeks to
bring together insights from policy implementation, organisation, budgeting and financial management
theories and approaches to broadening the theoretical and practical understanding of implementing
budgeting and financial management practices at the local level of public administration.

Research Objectives

Based on background of the study and the gaps in theoretical knowledge the research has three-fold
objectives to:
1. develop and empirically test a theoretical model of implementation of sound budgeting and
financial management practices
2. examine the direct and indirect effects of the factors affecting implementation of sound budgeting
and financial management practices
3. offer theoretical and policy recommendations for improving implementation of sound budgeting
and financial management practices at the local level of administration

Theoretical and Conceptual Framework

The factors assessed to affect sound budgeting and financial management are; strategic planning,
contextual factors, and disposition of management teams and characteristics of health directorates.

Strategic Planning

Strategic planning entails the process of establishing what an organization intends to achieve and
mobilizing and managing resources overtime to accomplish it (Barry, 1997, p. 8). (Chandler (1989)
elucidates on strategic planning as the process leading to the formulation of the long-term goals of an
organization and the adoption of the policies and priorities matched by resource allocation to achieve the
goals. In the public sector strategic planning has been embedded in the overall process of Medium-Term
Expenditure Framework (MTEF) planning, which covers a three year horizon (Short, 2003). In Ghana
public sector, strategic planning has been embedded in the overall process of MTEF which covers a three-
year planning horizon supported by rolling plans and budgets (Oduro, 2003; Short, 2003). A synthesis of
the factors affecting strategic planning in relation to the achievement of sound budgeting and financial
management practices resulted in three main dimensions, which are the extent of key stakeholders
participation in the process (Shah, 2007; Shileds & Young, 1993; Lipsky, 1980; World Bank, 1998),
the clarity of the policy content (Sabatier & Mazmanian, 1983; Van & Van Horn, 1975) and resource
adequacy and predictability for implementation (Grizzle & Pettijohn, 2002; Chanddarasorn, 1997;
Pfeffer & Salancik, 1978; Van & Van Horn, 1975).
 Ben Smith Owusu Bempah 305

Stakeholder Participation
The stakeholder participation is supported by various policy implementation theories. These theories
include the top-down theory (Sabatier & Mazmanian, 1983; Van & Van Horn, 1975; Pressman &
Wildavsky, 1973) and bottom-up theory (Lipsky, 1980; Elmore, 1979-1980) of implementation. The top-
down proponents assumed that government policies are clear and when it is backed by adequate resources
and effective control of rules and norms expected outcome will be achieved. The bottom-up proponents
hold the view that bureaucrats disposition, their technical expertise and how they articulate a policy have
effect on implementation success. Additionally, the participatory budgeting approach which is a feature of
performance-based budgeting and the MTEF approach emphasize that key stakeholders participation in
budget preparation and implementation, reduces information asymmetry and addresses budget
dysfunction (Chalos & Poon, 2000; World Bank, 1998; Chenhall & Brownell, 1988; Argyris, 1953).
Flscher (2007, p. 186) notes that participatory budgeting initiatives that adhere to the basic principles of
good budgeting are effective to achieve intended results. Participatory budgeting enhances stakeholders
participation in influencing positively the allocation of public resources.

Policy Content
Pressman & Wildavsky (1973), noted that pivotal to the setting of goals and means of its achievement is
the content of policy. According to Van & Van Horn (1975) the prerequisite of successful implementation
demands that there is clear understanding of the policy standards and objectives by policy implementers.
The policy content component is underpinned by the top-down, bottom-up and hybrid theory proponents
of implementation. The theorists contend that the clarity of policy content is critical to implementation
success. The hybrid theory is a combination of both the top-down and bottom-up perspectives and seeks
to address their limitations (Goggin, Bowman, Lester, & O'Toole, 1990). On the grounds of institutional
theory it is noted that adhering to clear policy standards improve the legitimacy and survival of
organizations with regards to policy implementation (Scott, 2008; Oliver, 1991).

Resource Adequacy and Predictability

Resource adequacy reflects the extent to which funding for the implementation of plans and budgets is
sufficient. On the other hand resource predictability is concerned with the extent to which the health
directorates are able to forecast and receive on timely basis funds approved for implementation. Resource
adequacy and predictability in this research is reinforced by the resource dependency theory (RDT),
(Scott, 2003; Oliver, 1991; Pfeffer & Salancik, 1978) as well as the Medium Term Expenditure
Framework (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). RDT argues
that in resource dependency organizations are other-directed and involved in a constant struggle for
autonomy and discretion confronted with constraint and external control by resource holders (Pfeffer &
Salancik, 1978, p. 257). 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. The literature on
public financial management documents constraints such as budget predictability, inadequate funding and
low attraction of funding by government agencies at the decentralized level of public sector ministries to
affect policy implementation (Leruth & Paul, 2007; Bramley & Stewart, 1981; World Bank, 1998).

Contextual Factors

Scott (2008) identifies three pillars of institution that is normative, regulative and cultural influences
which are taken to impact on sound budgeting and financial management practices in this study (Marko,
2009; Scott, 2008). The premise of institutional theory is that organizations become isomorphic with their
306 Factors Affecting Budgeting and Financial Management ...

institutionalized environment in a process of gaining legitimacy and survival (Marko, 2009; Scott, 2008;
Oliver, 1991). In the public sector budget and financial management laws and rules are established
centrally, local level managers have to comply with them to legitimize their actions. In addition to the
institutional pillars, the study considered the socio-political and economic issues.

Normative Pillar
The normative pillar brings out actions that are deemed to be legitimate and further prescribe necessary
evaluative and prescriptive rules of conduct (Scott, 2008, pp. 54-56). The central notion of normative
influence is that strengthening budget and financial management norms and instilling adherence to its
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 dwells on articulation of norms to achieve successful implementation (Short, 2003;
World Bank, 1998). Among widely, accepted budgeting and financial management norms in the literature
are; budget comprehensiveness, budget annuality, multi-year perspective, monitoring and evaluation, and
auditing (Allen & Tommasi, 2001; Schick, 1998; World Bank, 1998; Lacasse, 1996; Mikesell, 1991).

Regulative Pillar
The regulative pillar assumes that there is need for effective control and direction based on laws, rules and
standard operating procedures to achieve desired implementation outcome. The general assertion 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 theory perspective, it can be assumed that due to the quest for legitimizing their actions
financial managers will comprehend and adhere to the regulations for sound budgeting and financial
management practices. In Ghana the prescribed laws and regulations of conducting budgeting and
financial management planning and implementation are enshrined in the Republic of Ghana Financial
Administration Act 2003, Act 654, Republic of Ghana. Public Procurement Act, 2003, Act 663 and
Republic of Ghana, Audit Service Act 2000, Act 584.

Cultural Pillar
The cultural cognitive pillar in this study holds that legitimacy in budgeting and financial management
can be achieved by conforming to recognizable role or structural arrangements of an organization in order
to achieve implementation success (Scott, 2003). From the perspectives of budgeting and accounting
innovation, studies have established a correlation between organizational culture, budget and financial
control systems to affect implementation outcome (Goddard, 1997, p. 111; OConnor, 1995; Lder,
1992). The components for examining the cultural aspect of this study are adapted from Cammack (2007,
p. 13) Building Capacity through Financial Management: A Practical Guide. These components are;
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.

Socio-political and economic factors

Bhuyan, Jorgensen, & 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; Lder, 1992; Wildavsky, 1992), social factors such as gender norms (Budlender, Sharp, &
Allen, 1998) economic issues such as poverty and global assistance (Grizzle & Pettijohn, 2002; World
Bank, 1998; Lder, 1992).
 Ben Smith Owusu Bempah 307

Disposition of Management Team

Contingency theory developed by Fielder accounts that the psychological disposition of work teams is the
most important variable that affects their relationships on a job and invariably impact on performance
outcome (Vroom & Arthur, 2007; Fiedler, 1967). The effect of disposition on policy implementation has
been recognized by both the top-down (Van & Van Horn, 1975, pp. 445-488) and bottom-up
implementation theorists (Lipsky, 1980; Elmore, 1979-1980; Lipsky, 1971). Among the variables
considered in this study that affect disposition and noted in literature are; participation of implementers in
policy decisions (Chenhall, 2003; Gross, Giacquinta, & Bernstein, 1971; Hofstede, 1965) motivation
(Robinson & Brumby, 2005, p. 16; Sandalgaard, Bukh, & Poulsen, 2001, p. 8; Chanddarasorn, 1997;
Berman & McLaughlin, 1976) trust (Graham, 2011, p. 29; Cammack, 2007, p. 4; Feng-Yu, Chin-Chun,
Shao-Hsi, & Kuo-Chih, 2005 ; World Bank, 1998, p. 96) adequate training (Cammack, 2007, p. 71;
Lder, 1992, p. 115) commitment (Graham, 2011, p. 31; Bhuyan, Jorgensen, & Sharma, 2010, p. 6;
O'Connor, 1997) acceptance and training (Lder, 1992, pp. 10,115).

Characteristics of Health Directorates

The general proposition by contingency theorist with regard to implementation is that organizations
whose internal features best match the demands of the policy environment will achieve the best
adaptation and hence outcome (Scott, 2003; Lawrence & Lorsch., 1967). Contingency studies have
identified the following variables to affect performance outcome; staff capacity (Graham, 2011;
Cammack, 2007; Lder, 1992) teams work (Merchant, 1984) information communication and technology
(Woodward, 1965), size and structure (Blau, 1970; Woodward, 1965) and nature of environment (Burns
& Stalker, 1961) and management teams support (Chalos & Poon, 2000). For the purpose of this study
only financial management Information system (FMIS), staff capacity and functioning of management
teams were considered due to their potential impact on sound budgeting and financial management
practices at the local level.

Dependent Variable: Sound Budgeting and Financial Management Practices

The traditional use of accounting performance measures in assessing budget and financial management
performance has been criticized. In the domain of policy implementation, Lester & Goggin (1998) argued
for third generation researchers to organise their studies around the dependent variable of implementers
behaviour and practices. Argyris (1953), cautioned against the use of budgets as performance measures in
view of their associated dysfunctional and behavioural effects. According to Hopewood (1976) the use of
budget as performance measure leads to subordinate stress and also manipulation of accounting
information. In support of these assertions this study focuses on sound budgeting and financial
management practices instead, which in turn have an effect on the accounting performance measures.
Sound budgeting and financial management practices refer to the widely accepted principles that guide
budget preparation, implementation, control and auditing. The World Bank (1998, p. 129), provides a
checklist for assessing the strengths and weaknesses of budgeting and financial management practices of
countries. The checklist consists of fourteen items for assessing budget practices out of which eleven were
modified for the study and nine items for assessing financial management practices which were all
adapted.
The eleven items of sound budgeting practices are;
I. evidenced-based planning and budgeting
II. annual budget based on multi-year resource envelope
III. plans and budgets which consider the national macroeconomic policy environment
IV. equitable resource allocation criteria
V. transparent plans and budgets
308 Factors Affecting Budgeting and Financial Management ...

VI. use of authorization procedures in the implementation

VII. effective spending control,
VIII. the incentive for efficient resource use
IX. use of performance measures to monitor implementation
X. managerial discretion and flexibility over resource use
XI. Support of accounting software for planning, budgeting and financial management.
The nine items of sound financial management practices adapted for the study are;
I. financial decisions based on accounting standards
II. efficient cash management
III. timely disbursement of budgeted funds
IV. accountability for expenditure
V. effective internal control systems
VI. audit of expenditure (professional, timely reporting)
VII. a financial management information system links planning, budgeting, accounting
VIII. consistency between budget and accounting system
IX. transparent and competitive procurement system
Based on further review of the literature on budget and financial management system, an additional
three items were added these are;
I. consistency of strategic planning with the dictates of the accounting and financial management
principles,
II. properly maintained and safeguarded books of accounts and accounting records and
III. use of financial management performance indicators to monitor plans and budgets
implementation (Graham, 2011; Cammack, 2007; Allen & Tommasi, 2001)

Conceptual Framework

Based on the theoretical overview the conceptual model (figure 1) has been developed. The model
demonstrates the linkages between the dependent variable sound budgeting and financial management
practices and its antecedent variables of implementation as reviewed from the literature.

(+)

Strategic Planning (+) Contextual Factors Characteristics of Health

(S) (C) Directorates (DC)

(+) (+) (+)

Disposition of Management Teams

(D) (+)
(+) (+)
(+)

Sound Budgeting and Financial Management Practices

(BFP)

Figure 1. Path Analysis model showing hypothesized relationships

 Ben Smith Owusu Bempah 309

Methodology

Data Collection

The unit of analysis was 107 health directorates out of 170 that existed in 2008 with all being Budget
Management Centres at the metropolitan, municipal and district levels in all ten regions of Ghana.
Respondents were accountants and financial managers because they are principally involved in strategic
planning, budgeting and financial management processes of their health directorates. The questionnaires
were administered by trained field staff from Finance Division and Policy Planning, Monitoring and
Evaluation Division of Ghana Health Services.

Measurement and Instrumentation

The survey instrument was developed by the researcher based on in-depth review of the literature to either
1
modify or formulate new constructs . The 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 issues. The third part is the disposition of
management teams. The fourth part is characteristics of health directorates which embrace; financial
management information system, 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. The SPSS version 16 was used for all
statistical analysis.
To determine the dimensionality, reliability, sample adequacy among others, the appropriate data
examinations were carried out and results are presented in table 1:

Table 1. Summary Results of Factor Analysis and Reliability Testing

Factor Components Kaiser-Meyer-Olkin Reliability:

Variance No. of
Measure of Eigenvalue Cronbach
Explained Items
Sampling Adequacy Alpha
Strategic Stakeholder
Planning Participation 0.82 3.23 53.86 0.82 6

Policy content 0.81 2.79 55.75 0.79 5

Resource
Adequacy and 0.70 2.17 54.26 0.71 4
Predictability
Contextual Normative 0.79 2.61 43.59 0.74 6
Regulative 0.84 2.98 59.69 0.83 5
Culture 0.82 2.94 42.04 0.78 7
Socio-Political-
Economic 0.68 2.36 47.20 0.70 5

Disposition Disposition 0.79 2.82 46.99 0.77 6

Characteristics of FMIIS 0.84 2.97 59.47 0.83 5
Health Staff Capacity 0.75 2.41 60.20 0.78 4

1
The detailed instrument is available upon request from researchers
310 Factors Affecting Budgeting and Financial Management ...

Directorates Functioning of
Mgt Team 0.85 3.20 64.05 0.86 5

Sound Budgeting Sound Budget

0.93 6.13 55.73 0.92 10
and Financial Practices
Management Sound
Practices Financial
0.92 6.92 57.71 0.93 12
Management
Practices

All the variables passed the KMO minimum test of 0.6 for factorability with socio-political and
economic being least, 0.68 and the highest being sound budgeting practices 0.93.
Regarding eigenvalue all the constructs exceeded the minimum requirement of 1. In terms of the
variance explained, the least was the cultural influence, 42percent and the highest being functioning of
management teams, 64percent. None of the study constructs recorded a Cronbach alpha below the
acceptable threshold of 0.7 as recommended for social science research.

Regression Analysis

Various regression modules were used as part of the procedure in path analysis to check for the direct and
indirect effects of strategic planning, contextual factors, disposition of management teams and
characteristics of health directorates on sound budgeting and financial management practices. The
following models were estimated.
Model 1
BFP= a+b1S+b2C+b3D+DC+e
Model 2
C= a+b1S+b2D+e
Model 3
D= a+b1S+e
Model 4
DC = a+b1S+b2D+e
Where:
BFP = Sound budgeting and financial management practices
S = Strategic planning,
C = Contextual factors
D = Disposition
DC = Characteristics of health directorate

Results

Study Respondents

The majority of the respondents were males, 86percent. The age distribution of the respondents showed
that about 23percent were below 35 years old, 22percent between 36 -40 years and 20percent between 41-
44 years, the mean age was 41. In terms of their educational level, 43percent had below bachelor degree,
31percent bachelor and 26percent have attained masters degree or beyond. The data collected showed that
 Ben Smith Owusu Bempah 311

about 40% of the respondents have been in their current position from 1 -4 years, whereas about
32percent had over 7years experience at post.

Study Variables
The responses from survey respondents are used in the following description and statistical
analysis. Among these responses, strategic planning has the highest mean score of 5.5 and the
lowest, 4.5 was characteristics of health directorates (See, table 2).

Table 2. Summary Statistics for Variables included in the Sound Budgeting and
Financial Management Practices Regression

Variable Mean SD Min Max

Sound budgeting and Financial Management Practices 5.18 0.97 3.48 6.64
Strategic Planning 5.50 0.96 3.66 7.49
Contextual 5.04 0.78 3.59 6.72
Disposition 5.09 0.86 3.50 7.33
Characteristics of DHD 4.51 1.01 2.22 6.95

Correlation Results

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).

Table 3. Correlation Results for Determinant Factors and Sound Budgeting and
Sound Financial Management Practices

N= 107, Variable 1 2 3 4 5
1. Sound budgeting and
Financial Management Practices 1
2. Strategic planning 0.597** 1
3. Contextual 0.702** 0.566** 1
4. Disposition 0.577** 0.408** 0.604** 1
5. Characteristics of DHD 0.675** 0.517** 0.740** 0.503** 1
*** = P < 0.001, ** = P < 0.05, * = P < 0.01

Regression Result

The results from model 1 depict that strategic planning, contextual factors, disposition of management
teams and characteristics of health directorates were all statistically significant with each having a
positive effect on sound budgeting and financial management practices, F4,106=40.109, p<.001, R2=.611
(See, Table 4). The adjusted r-square indicates that 61percent of the variation in sound budgeting and
financial management practices are explained by the model. The characteristics of health directorates
have the highest significant effect on sound budgeting and financial management practices.
312 Factors Affecting Budgeting and Financial Management ...

Table 4. Summary Results of the Four Regression Models

Dependent Variables
1 Budgeting and 2 3 4
Financial Mg. Contextual Disposition Characteristics of
Model No. Practice DHD
Independent Variables
Strategic planning 0.236** 0.383*** 0.408*** 0.374***
Contextual 0.254*
Disposition 0.173* 0.447*** 0.351***
Characteristics of DHD 0.263**
Summary Statistics df 102 104 105 104
R2 0.611 0.487 0.167 0.370
2
Adj. R 0.596 0.477 0.159 0.358
F 40.109 49.384 21.02 30.493
P< 0.001 0.001 0.001 0.001
Note: The coefficients in the cells are standardized beta values
*** = P < 0.001, ** = P < 0.05, * = P < 0.01

The results from model 2 show that strategic planning and disposition of management teams were all
statistically significant with each having a positive effect on contextual factors, F2,104=49.384, P<.001,
R2=.487. In model 3 strategic planning had a significant and positive effect on the disposition of
management teams, F1, 105=21.02, P<.001, R2=.167. Results from model 4 shows that both strategic
planning and disposition of management team have a positive statistically significant effect on
characteristics of health directorates, F2, 104=30.493, P<.001, R2=.370.

Direct and Indirect Effects on Sound Budgeting and Financial MANAGEMENT practices

Table 5. Path Analysis of Indirect and Direct Causal Effects

Indirect Path Direct Path

% Direct Total % Causal
Variable Indirect Path Direct
Path Computed Effect Effect Effect
Effect Computed Effect

(S*C)+(S*D)+(S*D
Strategic C)+(S*D*C)+ 0.35 S 0.24 25% 0.59 46%
Planning
(S*D*D)

Contextual
0.00 C 0.25 27% 0.25 20%
Factors
Disposition of
Management 0.00 D 0.17 18% 0.17 13%
Team
CHD
0.00 DC 0.27 29% 0.27 21%
Characteristics
Overall
0.35 0.93 100% 1.28 100%
Effect(s)
 Ben Smith Owusu Bempah 313

Table 5 depicts that four variables S, C, D and DC has a direct effect on BFP, the total direct effects
computed was 0.93 which constituted about 72percent of the total effect of 1.28. The direct effect
contributions from the variables, however vary with DC having the highest direct effect of 0.27 followed
by C, 0.25; S, 0.24 and D, accounting for the lowest 0.17. This implies that when the direct effects are
considered, the first prioritized attention should be given to improving the elements that make up the
characteristics of health directorates. This is to be achieved by improving staff capacity, financial
management information system and function of management teams in order to achieve improve sound
budgeting and financial management practices. The second priority should be on strengthening the
articulation and application of the contextual factors surrounding budgeting and financial management
practices by the health directorates. The third level priority should focus on strengthening the strategic
planning in terms of stakeholder participation, policy content and resource adequacy and predictability. It
must be stated that even though the total direct effect of 0.93 outweighs the indirect effect of 0.35, a
holistic approach in focusing on all the antecedents of sound budgeting and financial management
practices is important.
The indirect effect moves from S to BFP, through C, D and DC as intervening variables. The path
analysis shows that the indirect effects on BFP, were high from S, through C, accounting for 0.10 of the
total indirect effects of 0.35 (see table 5). This means that sound budgeting and financial management
practices can be improved by strengthening the managerial understanding, adherence and adaptation to
the contextual factors. The indirect effect from strategic planning through the characteristics of health
directorates were also strong accounting for 0.10 of the total indirect effects.
In considering the overall total causal effect, strategic planning recorded the highest of 0.59, which is
about 46percent of 1.28. The least was the disposition of management team which had 0.17 representing
13percent of the total causal effect. On the basis of these analyses, it is worth noting that variables C, D
and DC also play a significant role in the implementation of sound budgeting and financial management
practices.

Discussion and Conclusion

The study set up the objective to develop a conceptual model to examine the direct and indirect effects of
factors affecting sound budgeting and financial management practices based on multi-disciplinary
theoretical insights. This was based on policy implementation models, organisation theory and theoretical
approaches to budgeting and public financial management.
The conceptual model as a whole had a strong total causal effect on sound budgeting and financial
management practices. Expectations regarding the major role of strategic planning received support on its
own having strong total causal effect on sound budgeting and financial management practices as well as
its relative dominance of indirect effects through the mediation of contextual factors, disposition of
management teams and characteristics of health directorates. The findings from the conceptual model
employed support other models in the literature on policy implementation (Grizzle & Pettijohn, 2002;
Chanddarasorn, 1997; Elmore, 1979-1980; Lder, 1992; Van & Van Horn, 1975).
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,
& Lui, 2010; Chalos & Poon, 2000) and the clearer the policy content (Nakamura & Smallwood, 1980;
Shileds & Young, 1993) and the adequacy and predictability of resources (Chan, 2003; Chanddarasorn,
1997; Lder, 1992; Pfeffer & Salancik, 1978), the better will be the implementation of sound budgeting
and financial management practices.
The positive and significant effect of disposition of management teams on sound budgeting and
financial management practice is consistent with other related literature (Jensen, 2003; Grizzle &
Pettijohn, 2002; Sandalgaard, Bukh, & Poulsen, 2001). The inference from the study is that if managerial
disposition with the elements of motivation, awareness, participation, commitment, acceptance and
314 Factors Affecting Budgeting and Financial Management ...

training are improved, it will strengthen the implementation of sound budgeting and financial
management practices.
The characteristics of budget management centres measured in terms of enhanced financial
management information system, requisite staff capacity and functioning of various over sight
committees was assessed to have a positive effect on sound budgeting and financial management
practices. This supported the theoretical literature on policy implementation and contingency perspectives
on financial management (Grizzle & Pettijohn, 2002; Lder, 1992; Merchant, 1984; Van & Van Horn,
1975; Woodward, 1965).
This study makes a modest contribution to the literature on policy implementation in so far as public
financial management is concerned. The general focus of public expenditure management studies have
been at the national and sectoral levels of government administration but this study has demonstrated that
a focus on improving implementation of sound budgeting and financial management practices at the
district level is important.
Though Goggin, Bowman, Lester, & O'Toole (1990) proposed that the third-generation
implementation scholars should lay much emphasis on specifying clear hypotheses, finding proper
operationalizations and producing adequate empirical observations to test these hypotheses, only a few
studies have so far followed this path (O'Toole, 2000, p. 268; deLeon, 1999, p. 318). This study takes the
cue from the third generation implementation research and therefore, developed and tested a conceptual
model of implementation. The result from the path analysis informs managers, policy implementers and
all stakeholders as to which area and path of implementation to focus in achieving a successful policy
outcome. The conceptual model developed can also be applied to other public sector reform
implementation and at various levels of governance.
In conclusion, the intrinsic analyses of the conceptual model developed showed that strategic
planning is paramount to achieving sound budgeting and financial management practices in the public
sector. This notwithstanding, a holistic approach encompassing the strengthening of all the factors
affecting the implementation of sounds budgeting and financial management practices is recommended.
The respondents were mainly members of the district management team and because the study falls
within their work responsibilities, they were likely to have provided favourable responses in their
operational areas which are likely to bias the study results. Moreover, the district health directorates do
not operate in isolation since they are monitored and resourced from the regional health directorates.
Therefore, it would have been worthwhile to consider the views of the managers at the regional level with
regards to budgeting and financial practices in the service. This would have broadened the scope of
understanding as to whether practices at the regional level exert a considerable effect at the district levels.

References

1. Allen, R., & Tommasi, D. (2001). Managing Public Expenditure, A Reference Book for Transition Countries,
Governance. (R. Allen, & D. Tommasi, Eds.) Paris, France: Organization for Economic Co-operation and
Development (OECD) Publication Service.
2. Argyris, C. (1953). Human Problems with Budgets. Harvard Business Review , 1 (31), 97-110.
3. Barry, B. W. (1997). Strategic Planning Workbook for Nonprofit Organizations. . St. Paul, MN: Amherst H.
Wilder Foundation. .
4. Berman, P., & McLaughlin, M. W. (1976). Implementation of Educational Innovation. Educational Forum , 3
(40), 344-70.
5. Bhuyan, A., Jorgensen, A., & Sharma, S. (2010). Taking the Pulse of Policy: The Policy Implementation
Assessment Tool. Washington, DC: Futures Group, Health Policy Initiative, Task Order 1.
6. Blau, P. M. (1970). 'A formal theory of differentiation in organizations',. American Sociological Review , 35
(2), 201-18.
7. Bramley, G., & Stewart, M. (1981). Implementing Public Expenditure Cuts. In S. Barrett, & C. Fudge, Policy
and Action:Essays on the Implementation of Public Policy. London: Methan and Co. Ltd.
 Ben Smith Owusu Bempah 315

8. Budlender, D., Sharp, R., & Allen, K. (1998). How to Do a Gender-Sensitive Budget Analysis.
Canberra/London: Australian Agency for International Development/Commonwealth Secretariat.
9. Burns, T., & Stalker, G. M. (1961). The Management of Innovation. London: Tavistock Publication.
10. Cammack, J. (2007). Building Capacity through Financial Management:A Practical Guide. Oxford: Oxfam
GB.
11. Chalos, P., & Poon, M. C. (2000). Participation and performance in capital budgeting teams. 12, 199-229.
12. Chan, J. L. (2003). Changing Roles of Public Financial Management. In T. Bouvard, & E. Loeffler, Public
Management and Governance (pp. 101-111). London: Routledge.
13. Chanddarasorn, V. (1997). Public Sector Reform: A Hypothetical Model of Successful Reform Adoption and
Implementation. Asian Review of Public Administration, , No. 1 (January-June 1997) , VIX (1), 233-247.
14. Chandler, D. (1989). Strategies et Structure de lentreprise (Editions dOrganisation, ed.).
15. Chenhall, R. H. (2003). Management control systems design within its organizational context: findings from
contingency-based research and directions for the future. Accounting, Organizations and Society (28),
127168.
16. Chenhall, R. H., & Brownell, P. (1988). The effect of participative budgeting on job satisfaction and
performance: Role ambiguity as an intervening variable. Accounting, Organizations and Society , 3 (13),
225-33.
17. deLeon, P. (1999). The Missing Link Revisited. Contemporary Implementation Research. Policy Studies
Review (16), 311338.
18. Elmore, R. F. (1979-1980). Backward Mapping. Implementation Research and Policy Decisions. Political
Science Quarterly , 94 (4), 601-616.
19. Feng-Yu, N., Chin-Chun, S., Shao-Hsi, C., & Kuo-Chih, C. (2005 ). The Role of Trust in Supervisor in
Budgeting System. The 17th Asia-Pacific Conference on International Accounting Issues. Wellington, New
Zealand .
20. Fiedler, F. (1967). A theory of leadership effectiveness. . New York:: McGraw-Hill.
21. Flscher, A. (2007). Participatory Budgeting in Asia. In A. Shah (Ed.), Participatory Budgeting, Public Sector
Governance and Accountability Series (pp. 157-189). Washing-D.C: The World Bank.
22. ibran, J. M., & Sekwat, A. (2003). Continuing Search for a Theory of Budgeting. Journal of Public Budgeting
Accounting and Financial Management , 4 (21), 617-644.
23. Goddard, A. (1997). Organizational culture and budget related behavior: a comparative contingency study of
three local government organizations. The International Journal of Accounting , 1 (32), 79-97.
24. Goggin, M. L., Bowman, A., Lester, J., & O'Toole, L. (1990). Implementation Theory and Practice: Toward a
Third Generation. New York: Harper Collins.
25. Graham, A. (2011). Financial Management for Managers. Canada: Canadian Governance Support Office,
CANADEM.
26. Grizzle, G. A., & Pettijohn, ,. C. (2002). Implementing performance-based program budgeting: A system-
dynamics perspective. Public Administration Review , 62 (1), 51-62.
27. Gross, ,. N., Giacquinta, J. B., & Bernstein, M. (1971). Implementing Organizational Innovations. New York:
Basic Books.
28. Hofstede, G. H. (1965). The Game of Trust in Budget Control. Van Gorcum.
29. Hopewood, A. G. (1976). Accounting and Human Behaviour. Englewood Cliffs: Prentice-Hall.
30. Jensen, M. C. (2003). Paying People to Lie: the Truth about the Budgeting Process. European Financial
Management , 9 (3), 379-406.
31. Kabo, S. K. (2004). Manual on the Budget Process in Ghana and the Linkage with Ghanas Macro Economic
Framework. Accra: Prepare for Centre for Budget Advocacy, Integrated Social Development Centre (ISODEC)
ISODEC.
32. Khan, A., & Hildreth., B. W. (2002). Budget theory in the public sector. Westport: Quorum Books, .
33. Khin, E. W. (2010). Comparative Study of Budgeting Process Reforms within two International Accounting
Organizations : Malaysia and Australia Perspectives. Australian Journal of Basic and Applied Sciences , 6 (5),
4142-4150.
316 Factors Affecting Budgeting and Financial Management ...

34. Lacasse, F. (1996). Budget and Policy Making: Issues, Tensions and Solutions. In O. f.-o. Development,
Budgeting and Policy Making (Vol. 8, pp. 23-52). Paris:: Sigma Papers.
35. Lawrence, ,. P., & Lorsch., J. W. (1967). Organization and Environment: Managing Differentiation and
Integration. Administrative Scoence Quarterly , 12 (1), 1-47.
36. Leruth, L., & Paul, E. (2007). A Principal-Agent Theory Approach to Public Expenditure Management
Systems in Developing Countries. OECD Journal on Budgeting , 7 (3).
37. Lester, J., & Goggin, M. (1998). Back to the Future:The Rediscovery of Implementation Studies. Policy
Currents , 8 (3), 1-7.
38. Lipsky, M. (1971). Street Level Bureaucracy and the Analysis of Urban Reform. Urban Affairs Quarterly , 6,
391409.
39. Lipsky, M. (1980). Street-Level Bureaucracy: Dilemmas of the Individual in Public Service.
40. Lder, K. G. (1992). A Contingency Model of Government Accounting Innovation in the Political
Administration Environment. Research in Governmental and Nonprofit Accounting , 7, 99-127.
41. Marko, J. (2009). The institutional pillars of management accounting function. Journal of Accounting &
Organizational Change , 5 (4), 444 - 471.
42. Merchant, K. A. (1984). Influence of Departmental Budget: An Empirical Examination of Contingency Model.
Accounting Organization and Society , 9 (34), 291-307.
43. Meyers, R. T. (1996). Is there a key to the normative budgeting lock? Policy Sciences , 29, 171-188.
44. Mikesell, J. L. (1991). Fiscal AdministrationAnalysis and Applications for the Public Sector. Pacific Grove,
California: Brooks/Cole Publishing Company.
45. MoH. (2010). Independent Review Health Sector Programme of Work 2009. (Draft Final Report), Ministry of
Health,, Acrra-Ghana.
46. Nakamura, R. T., & Smallwood, F. (1980). The Politics of Policy Implementation. New York:: St.Martins
Press.
47. OConnor, N. G. (1995). The Influence of Organizational Culture on the Usefulness of Budget Participation by
Singaporean-Chinese Managers. Accounting Organization & Society , 20 (5), 383-403.
48. O'Connor, N. G. (1997). Patterns of Cuhral and Budgetury Controls in International Joint Ventures in South
Korea. Asian Review of Accounting , 5 (2), 1-20.
49. Oduro, K. N. (2003). Results-Oriented Public Expenditure Management:Case Study of Ghana. Working Paper
208, Overseas Development Institute, London.
50. Oliver, C. (1991). Strategic Responses to institutional Processes. Academy of Management Review , 16 (1),
145-179.
51. O'Toole, L. J. (2000). Research on Policy Implementation. Assessment and Prospects. Journal of Public
Administration Research and Theory , 10, 263288.
52. Pfeffer, J., & Salancik, G. (1978). The External Control of Organizations: A Resource Dependency
Perspective. New York: Harper and Row.
53. Pressman, J. L., & Wildavsky, A. (1973). Implementation: How Great Expectations in in Washington Are
Dashed in Oakland; Or, Why It's Amazing that Federal Programs Workat All, This Being a Saga ... on a
Foundation. Berkeley: University of California Press.
54. Pretorius, C., & Pretorius, N. (2008). Review of Public Financial Management Reform. Evaluation Working
Paper/Evaluation Report EV698, DFID, London.
55. Republic of Ghana Financial Administration Act 2003, Act 654. (n.d.). Accra, Ghana.
56. Republic of Ghana, Audit Service Act 2000, Act 584. (n.d.). Accra, Ghana.
57. Republic of Ghana. Public Procurement Act, 2003, Act 663. (n.d.). Accra, Ghana.
58. Robinson, M., & Brumby, J. (2005). Does Performance Budgeting Work? An Analytical Review of the
Empirical Literature. IMF Working Paper,WP/05/210, International Monetary Fund, Fiscal Affairs
Department.
59. Rubin, I. S. (1990). Budget Theory and Budget Practice: How Good the Fit? Public Administration Review , 50
(2), 179-189.
60. Rubin, I. S. (1993). he Politics of Publie Budgeting, 2nd ed. Chatham, N.J: N.J.: Chatham House.
 Ben Smith Owusu Bempah 317

61. Sabatier, P., & Mazmanian, D. A. (1983). mplementation and public policy. Chicago: Scotts Foresman.
62. Sandalgaard, ,. N., Bukh, P. N., & Poulsen, S. C. (2001). The interaction between Motivational Disposition and
Participative Budgeting Evidence from a Bank. Journal of Human Resource Costing & Accounting , 15 (1),
7-23.
63. Schick, A. (1998). A Contemporary Approach to Public Expenditure Management. World Bank Institute,
Governance, Regulation, and Finance Division.
64. Scott, R. W. (2008). Institutions and Organizations Ideas and Interests Third Edition. Thousand Oaks: SAGE
Publications, Inc .
65. Scott, R. W. (2003). Organizations: Rational, Natural and Open Systems 5th ed. Upper Saddle River NJ:
Prentice-Hall,.
66. Shah, A. (Ed.). (2007). Participatory Budgeting. Washington, D.C.: International Bank for Reconstruction and
Development/World Bank.
67. Shileds, M. D., & Young, M. S. (1993). Antecedents and Consequences of Participative Budgeting Evidence
on the Effects of Asymetrical Information. Journal of Management Acounting Rsearch , 5, 265-280.
68. Short, J. (2003). Country Case Study 4: Assessment of the MTEF in Ghana. Overseas Development Institute,
Africa Policy Department of the Department for International Development (DFID) U.K. in collaboration with
the European Commission DG Dev. London: ODI Centre for Aid and Public Expenditure.
69. Van, M. D., & Van Horn, H. C. (1975). The Policy Implementation Process. A Conceptual Framework,.
Administration and Society , 6, 445488.
70. Vroom, V. H., & Arthur, J. G. (2007). The Role of the Situation in Leadership. American Psychologist , 62 (1),
17-24.
71. Wildavsky, A. (1992). Political Implications of Budget Reform: A Retrospective. Public Administration
Review , 6 (56), 594-599.
72. Wong-On-Wing, B., Guo, L., & Lui, G. (2010). Intrinsic and Extrinsic Motivation and Participation in
Budgeting: Antecedents and Consequences. Behavioral Research in Accounting , 22 (2), 133-153.
73. Woodward, J. (1965). Industrial Organization: Theory and Practice. London: Oxford: niversity Press.
74. World Bank. (1998). Public expenditure management handbook. Washington, D.C.: The International Bank for
Reconstruction and Development, World Bank.
Reproduced with permission of the copyright owner. Further reproduction prohibited without
permission.