The impact of organizational culture on outcomes oriented financial management and control systems in local government

In 2001 the Institute of Chartered Accountants of Australia undertook a survey of Victorian local government budgets and concluded that budgeting practices were variable but generally very poor. It subsequently issued a model budget for local governments, giving detailed guidance for Victorian local governments to follow. Given that Victoria has restructured and reformed its local government system more than other states, and has been shown to have more modern management practices than its interstate counterparts, the ICAA’s assessment suggests that the reforms have been misguided, or poorly implemented, or a combination of these and other factors. Previous research points to a lack of technical accounting and finance expertise in Australian local government. However, lack of technical expertise can be overcome. The fact that a lack of accounting and finance expertise continues points to a deeper problem. We contend that the problem is related to organisational culture. Cultural specificity affects the way management control systems are interpreted and applied. Kloot and Martin (2000) concluded that the issue of corporate culture is crucial in local government performance management. Martin and Simons (2002) recently examined the relationship between the organisational culture values of local government CEOs and their mayor. Their research points the way to appreciating the impact of values on organisational management and processes. Goddard (1999) identified the historical, political and organisational factors that determine the nature of a local government’s FMCS. He made an important connection between key events, organisational culture and FMCS. Similarly Cuervo (2000) argued that the gap between projected performance and actual performance could be explained by culture and strategy. This research examines the relationship between a local government’s organisational culture, its FMCS and its performance management orientation. It looks at the way structural changes (through legislation, amalgamations and regulation) and the organisational culture in local government impacts on their FMCS, and their ability to deliver value for money works and services for effective local and regional economic development. A questionnaire was sent to five local governments in Victoria. The survey had sections based on the dimensions of culture, ‘dramatic’ events, FMCS and performance management. It was developed from Cameron and Quinn’s 1999 work on organisational culture and Van der Stede’s 2003 work on MCS and also included questions on critical events in a council’s recent history