Determinants of the use of accounting information in the public sector budgetary decision-making processes : the case of Tanzanian Local Government Authorities (LGAs)

Since the 1980s, public sector entities have been exposed to accounting reforms under an umbrella of New Public Management (NPM). The main purpose of adoption of accounting reforms is to increase efficiency in decision-making by producing useful accounting information. However, it is argued that the adoption of accounting reforms by public sector entities in developing countries is attributed to the seeking of financial legitimacy, rather than increasing organisational efficiency (Mzenzi, 2013; Mkasiwa, 2011; Adhikari and Mellemvik, 2011; Tambulasi, 2007; Sarker, 2006). Therefore, it is the interest of this study to research the use of accounting information by public sector entities in developing countries. This study is based on an interpretative approach and employs an exploratory case study strategy with two cases (LGAs) in order to accomplish four specific objectives. The roles and responsibilities of LGAs and their multiple actors in delivering public services to the citizens, and their roles in budgetary decision-making attributed by the adopted accounting practices, represent the major motivation of this study. Institutional theory and its three branches, which are Old Institutional Economics (OIE), New Institutional Sociology (NIS) and New Institutional Economics (NIE), were used in the process of developing the initial model, and the overall interpretation of findings. The findings of this study revealed three dimensions of instrumental-conceptual use, which included conceptual use, decision relevant, and recommendations use of accounting information in decisions related to estimations and collections of own source revenue. Furthermore, the study’s findings showed that legitimating use was the main dimension of the symbolic use of accounting information in the budget approval, as well as in the decision about estimating and collecting revenue from external sources. It further identified 22 factors influencing the use of accounting information in the budget decision-making processes. The study findings also revealed that instrumental-conceptual use of accounting information increases both an organisation’s budget efficiency as well as its external financial legitimacy. On the other hand, the symbolic use of accounting information decreases the organisation’s budget efficiency and the actual external financial legitimacy but increases the promised external financial legitimacy. This is attributed, mainly, by external institutional pressures that result in decoupling behavior in the use of accounting information in budgetary decision-making processes. In addition, the findings revealed that budget efficiency and acquired financial legitimacy are interdependent. This means that the high financial legitimacy acquired can indicate high budget efficiency in the situation the instrumental-conceptual use exists than the symbolic legitimating use of accounting information. The study proposes a model of the determinants of the use of accounting information in budget decision-making processes for budget efficiency and external financial legitimacy. It informs reformers, practitioners, policy-makers and researchers about the necessary measures to undertake to make sure that NPM reforms, especially accounting reforms, enhance both efficiency and financial legitimacy in the public sector organisations through the use of accounting information