New Public Management and Budgeting Practices in Tanzanian Central Government:
‘Struggling for Conformance’
Abstract
This paper investigates the budgeting practices in the Tanzanian central governmentfollowing its adoption of systems of performance budgeting, cash budgeting, and a Medium Term Expenditure Framework. These systems were introduced following exhortations from the bodies such as the UN, the World Bank and the IMF and reflect the New Public Management practices being exhorted worldwide. A grounded theory methodology was used. This methodology is inductive, allowing phenomena to emerge from the participants rather than from prior theory. This ensures both relevance and depth of understanding. The principal research findings from the data concern the central phenomenon of ‘Struggling for Conformance’. Tanzanian central government adopted innovations in order to ensure donor funding by demonstrating its ability to implement imposed budgetary changes. Organisational actors were committed to these reforms through necessity and struggled to implement them, rather than more overtly resisting them. The resulting ‘Struggling for Conformance’ led to the establishment of rhetorical rules and regulations; manipulation of the measurement of performance and the playing of budgeting games. The grounded theory also provided evidence of the coexistence of ceremonial and instrumental use of accounting in organizations and of a strategic deterioration role in the organization.
Keywords: Tanzanian Central Government,New Public Management,Performance Budgeting, Grounded Theory.
New Public Management and Budgeting Practices in Tanzanian Central Government:
‘Struggling for Conformance’
INTRODUCTION
Financial management is a vital tool for poverty reduction in any country. More specifically, budgetinghas attracted great attention from various stakeholders throughout the world since in order to achieve “a performing state”, governments need “a performing budget” (OECD 2003; Caiden 2010). Budgetary reforms in developing countries have been urged by various international bodies such as the World Bank, UN and IMF, under the auspices of New Public Management (NPM).However, understanding local contexts of central government for the purpose of improving financial management is imperative (Wynne 2005; Sarker 2006; ODI 2007).
NPM reforms and UN-, World Bank- and IMF-exhorted systems ostensibly seek to reduce deficits and improve efficiency, accountability and service delivery.NPM reforms are inherently complex and empirical findings in both developed and developing countries have revealed mixed results (Evans and Ngalwea 2001; McGill 2001; Kong 2005; Lu 2007). Indeed, the positive impacts of NPM reforms have been argued to be outweighed by their negative impacts (Tomkins 1987; Guthrie, Olson et al. 1999; Olson, Humphrey et al. 2001; Schiavo-Campo 2009). A cautious approach to such reforms has been advocated and as early as 1987, Tomkins argued that major change cannot be achieved without setting the right climate for change (Tomkins 1987). Others have emphasised the need for an understanding of the local contexts of the country and evaluation of the reforms themselves to ensure their relevance and successful implementation (example Abdul-Rahaman, Gallhofer et al. 1997; Guthrie, Olson et al. 1999; Lapsley 1999; Olson, Humphrey et al. 2001).
Most of the papers researching NPM are from Western countries and there has been relatively little exploration of NPM reforms in developing countries(Sarker, 2006). Tanzania is a particularly appropriate site to study the implementation of NPM initiatives as it has undergone a series of reforms at the behest of donors such as the World Bank. These reforms have been strongly influenced by the global initiatives in NPM. Reforms in the public sector in Tanzania started in the 1990s. In 1991 the Civil service reform programme was launched with the objective of cost containment and government restructuring. This programme extended to 1999, and was followed by Public Service Reform Programme (PRSP) I in 2000, which had the objective of instituting performance management systems. It was designed to create efficient public services that would be capable of delivering services to the people and enhancing the performance and accountability of Ministries, Departments and Agencies (MDA)s. In 2007, PRSP II was launched, focusing on results and accountability and the third phase of PRSP was started in 2012, with the objective of a quality improvement cycle. Alongside these, a series of Public Sector Financial Management Reforms (PFMRF) reformswere also implemented.
PFMRF phase I was implemented between 1998 and 2004, with the objective of improving fiscal discipline. It focused on minimizing resource leakage, strengthening financial controls, enhancing accountability and introducing a computerizeIntegrated Financial Management System (IFMS). The second phase of PFMRP lasted from 2004 to 2008, with the objective of improving allocation efficiency. It focused on improving revenue forecasting, debt management, the expenditure framework, external resources management, Treasury management and accounting, procurement, the use of information technology, investment management, administration support services, external audit, leadership, coordination and monitoring, and evaluation of the programme. PFMRP III has the same objective as previous reforms of public financial management, which has remained to ensure efficiency, effectiveness, transparency and accountability in the use of public financial resources. Phase III started in 2008 and is ongoing; it focuses on enhancing predictability of resources promoting effective service delivery and strengthening production of accurate and timely accounts and results.
Reforms of the budgeting practices started early in 1994, when Tanzania adopted a cash budgeting (CB) systemThis focused on bringing spending into line with resources. In 1998/1999, Tanzania adopted a Medium Term Expenditure Framework (MTEF). MTEF was initially adopted by only a few (MDAs) during this period but, by 2000/2001, all MDAswere implementing MTEF. The current budgeting system in Tanzania is an MTEF system and incorporates performance-based budgeting (PB). The budgeting process of Tanzania involves four main stages: budget formulation, scrutiny of budget proposals and dialogue, budget execution, and budget monitoring, evaluation and control.
In order to understand the cultural, political, social, and economic context in which these budgetary practices are interwoven in Tanzania, this study used agrounded theory (GT) approach (Parker and Roffey 1997).This approach also allows the issues which are important to the participants to emerge, rather than impose a priorirestrictions on the aspects of budgeting to be studied and commences with very general research questions.
The purpose of this research was to understand budgeting practices in everyday life and in the social, cultural and political contexts of the Tanzanian central government, with a specific focus on the adoption and implementation of PB, MTEF and CB systems. The following general research questions were formulated:
- How do organizational actors within the Tanzanian Central Government accept, resist, influence or become influenced by PB, MTEF and CB?
- What theoretical explanations can be developed to understand and explain the budgeting practices in the context of their current reforms?
A grounded theory was developed from multiple sources including interviews, observations, and documents analysis, resulting in the identification of ‘Struggling for Conformance’ as the core phenomena. ‘Struggling for Conformance’ explains the process through which TCG’s actors were determined to conform to budgetary reforms despite encountering significant difficulties.
The principle finding, that participants struggled to conform to the reform requirements rather than resisting them, was somewhat contrary to previous research (Broadbent and Laughlin 1998, Jones 2006, Andersson and Tengblad 2009, Sharma et al 2012). The grounded theory provides a more thorough understanding of this core finding by showing how it was managed by participants (establishment of rhetoric rules and regulations; attempting to measure performance and linking budgeting with performance; and practicing of budgeting norms and playing of budgeting games), the context from which it emerged (the uncertain environment, ambiguous and or complex budgeting systems, donors’ influence, and cultural and administrative practices) and its consequences (budgets-related and practices-related impacts). The research unveils the complex nature of the adoption and implementation of budgetary reforms in Tanzanian central government. Finally the research contributes to the theoretical findings of prior NIS research. It found evidence of the coexistence of ceremonial and instrumental use of accounting in organizations and of the existence of a strategic deterioration role of accounting in organizations. It also found evidence of the integration of efficiency and legitimacy through proactive mimicking of organizational actors.
The remainder of the paper is structured as follows. In the next section, prior research on NPM and its associated accounting practices is presented. This informs the context of the research rather than to imposinga theoretical framework for empirical analysis. This is followed by the section on the study setting, outlining the principle budgeting practices studied in Tanzania. Next, the methodology used in the study is presented. The grounded theory is presented, which explains the findings of the research which emerged from the data collected. The emergent theory was further analysed through the lens of New Institutional Sociology (NIS) in order to further understand and generalise the findings. Lastly, the final section provides concluding comments of the paper.
LITERATURE REVIEW
NPM first assumed a dominant role in reforms in the public sector in the 1980s and 1990s (Lapsley, 1999). Hood (1991) claimed that NPM’s origins could be explained from two different ideological movements, namely the new institutional economics and the business-type 'managerialism’. The former sought to produce change in the administration based on the principles of “contestability, user choice, and transparency and close concentration on incentive structures” (Hood, p. 5). Meanwhile, the latter referred to “a set of administrative reform doctrines based on the ideas of 'professional management'expertise… [that required] high discretionary powerto achieve results…through the development of appropriate cultures…and the active measurement and adjustment of organizational outputs” (ibid. p. 6). Diefenbach (2009) suggests that NPM has proliferated into different versions especially when it is applied to different settings.
Groot and Budding (2008) summarise the purpose of NPM as ensuring public organizations are more efficient, provide value for money, and are customer- oriented, flexible and effective in their operations. This new orientation has challenged the traditional model of public administration. It required a major cultural change from old bureaucratic beliefs to a model that “attempts to combine modern management practices with the logic of economics, while retaining the core public values” (Samaratunge, Alam, and Teicher (2008, p. 26). Some of the claimed benefits of NPM include reducing the public financial burden; improving public sector efficiency and effectiveness; improving public service responsiveness and accountability; producing an “entrepreneurial” public sectorand increased customer satisfaction (Hood, 1995; Jones and Kettl, 2003 and Sarker, 2006).
Although NPM started in industrialized Western nations particularly in the US, UK, Western Europe, Australia and New Zealand, it has nowbecome a worldwide phenomenon (Jones and Kettl, 2003). Nonetheless, Samaratunge, Alam and Teicher (2008) argued that the impact of NPM, particularly in OECD nations, is rather unclear, even in the early adopters such as Australia and New Zealand. Jones and Kettl (2003) noted that although the Australia government has been benefited from the NPM’s reform, the social and political impacts have proven fatal to the political party that reigned during those reforms period. Meanwhile, in New Zealand, Laking (2001) asserted that although there is an overall gain in efficiency, the impact on the effectiveness of the movement is rather uncertain. Hodgson, Farrell and Connolly (2007) stated that a similar inconclusive trend is found in the UK.Countries such as Norway and Portugal considered themselves reluctant NPM reformersdue to issues such as the barrier of the traditional bureaucracy, the lack of external pressure for reform and resistance to change(Araujo, 2001 and Christensen and Laegreid, 2008). Several authors (Hood, 1995; Bovaird and Russell, 2007; Hodgson Farrell and Connolly, 2007) have recognized the implementation of NPM reform is heavily institutionally dependent. This is because different nations, and even different levels and types of public organizations, tend to function with different norms, traditions, capacities and structures, and hence require different approaches (John and Kettl, 2003, Groot and Budding, 2008). Yang and Kassekert (2009, p. 432) warned, “equating all NPM type reforms oversimplifies the unique dynamics of each of these reforms”. Essentially, each of the NPM reforms “needs independent evaluation and theorizing and should not be discounted because of ‘guilt of association’” (ibid, p. 432). Therefore, more research on the specific components of NPM is suggested, which would give a greater understanding and assessment of the impact made (John and Kettl, 2003).
From a sociological institutional viewpoint, by adopting NPM, organizations may be seeking to achieve ‘external legitimation’ by conforming to new rules and expectations(ter Bogt 2008, p.33). This is consistent with the findings in the Russian public sector when NPM changeswere better comprehended in terms of legitimacy rather than instrumentality(Timoshenko & Adhikari, 2009). External legitimacy was also identified in the role of the internal system of budgetary control and school development planning (Edwards, Ezzamel, Mclean, & Robson, 2000).
Accounting reform is a central aspect of NPM. Hood(1995) identified several possible accounting implications of NPM implementation includingdisaggregation of public organizations resulting in more cost centre units, greater use of practices drawn from the corporate sector, resulting in private-sector accounting norms,more use of financial data for management accountability,more explicit and measurable standards of performance, resulting in performance indicators and audits and more preset output measures, resulting in moving from activity costing to cost centre accounting.Guthrie et al (1999) further identifyfive categories of NPM accounting: financial reporting systems, management systems and structures, performance measurement, devolvement or delegation of budgets, and internal and external public sector (ibid).
Since its inception, NPM accounting has attracted the interest of many authors in the field of accounting (Broadbent and Laughlin 1998, Goddard, 2005; Groot and Budding, 2008; Hoque et al., 2004; Jackson and Lapsley, 2003; Kurunmaki 2008, Jansen, 2008; Lapsley, 2008; Newberry and Pallot, 2005; Olson et al., 2001; ter Bogt, 2008, Watkins and Arrington 2007 amongst others). Many of these studieshave concluded that the positive impacts of NPM reforms have been outweighed by their negative impacts (see for example, Guthrie, Olson et al. 1999, Olson, Humphrey et al. 2001, Schiavo-Campo 2009). In perhaps the most comprehensive review of NPM in developed countries, Pollitt and Bouckaert (2011) note that ‘during half a century many countries have experienced considerable and persistent difficulties in trying to establish close link between the performance of programmes and their performance allocations’ and that ‘there is no particular reason to believe that the latest generation of budget reforms will enjoy any more than marginally greater success than previous efforts’. For instance, empirical research in Dutch government organizations showed that initiatives to introduce performance budgeting and to increase efficiency were only moderately successful. A wide gap was found to exist between the intended accounting change and its ultimate development and between the newly-developed accounting instruments and their actual application. (ter Bogt & van Helden 2000). Other researchers noted the resistance to change following implementation of budgeting reforms (Broadbent and Laughlin 1998, Jones 2006, Andersson and Tengblad 2009, Sharma et al 2012).
Nonetheless, in recent years, “following the paths blazed by developed countries and the pressures imposed by the international donor agencies, many developingcountries have been trying to reshape their administrative systems along the logic of NPM” (Sarker, 2006, p. 181).Samaratunge, Alam & Teicher (2008) noted that a dynamic and efficient public sector is a crucial element in order to attract foreign direct investments and bring more economic benefits to the nation. Thus, many International Development Agencies put NPM reforms as a prerequisite for any nations seeking foreign assistances. However, researches on the implementation phase in developing countries are still limited and lacks of detail, compared to those in the developed nations.It is also relatively pessimistic. Sarker (2006) argued that most developing nations are unable to attain the prerequisites to successful implementation. These are a reasonable level of economic development and experience of the operations of markets. Therkildsen(2000) investigated public sector reform in Tanzania, and argues that there was fragile domestic political support for these reforms and few service delivery improvements. Substantial external influences, fragmented domestic policy-making, weak links between policy-making and its implementation, and questionable assumptions about NPM-inspired reform measures, were identified as the causes of these shortcomings.Uddin & Hopper (2003)researched World Bank claims that NPM initiatives such as privatization, could improve management controls, commercial performance, and development. In fact, privatization appeared to be a relative failure in gaining theses intended benefits. Quah (2002) noted that fighting corruption is one of targeted improvementsof NPM in developing countries. However, only three Asian countries – Singapore, Hong Kong and Malaysia – have succeeded in minimizing it. Manning (2001)suggests that the marginal nature of the impact of NPM may be due to limited public expectations and hurried implementation.
Relatively few researchers have investigated NPM accounting practices in developing countries. Batley and Larbi (2004) examined reforms in Africa, South and Southeast Asia, and Latin America.They conclude that reform approaches need to be sensitive to the institutional conditions of particular countries. Awio et al.(2007) examined the Ugandan community-led approach of anHIV/AIDS initiative. They concluded that developing countries need to import relevant and workable aspects of NPM reforms, while at the same time exploring other options for services and programme areas that apply to unique circumstances. Tambulasi(2007) investigated the extent to which NPM-based management accounting practices have increased managerial autonomy and reduced political control in Malawi’s local governance. He found that the NPM-based management accounting has led to loss of local political control, which makes politicians resort to unproductive behaviours including interference, sabotage and corruption in order to regain their lost political control. On the other hand, administrators maintain their managerial autonomy through NPM-based managerial prerogative, seeking central government intervention and colluding with councillors in corrupt activities. He suggests that reformers should consider the social, political and cultural environment of the implementing countries, so as to prevent counter-productive consequences that may present massive negative implications for public policy outcomes. Rahaman and Lawrence(2001) examined and reviewed the concept of deficiency in Ghana, through a case-study of the Volta River Authority (VRA). They observed that the concerns about the lack of formal accounting control and budgetary procedures, did not apply in the context of the VRA. However, the historical circumstances of the Authority presented serious constraints and challenges to the effectiveness of its financial resource management, thus rendering the accounting and financial management procedures a facade, which masked the underlying socio-political reality in the organization and which could therefore fit the description “deficient”. In their study of a Fiji Telecommunications company, Sharma and Lawrence (2012) found that the cultural conflicts and political influences led to the new public management process being resisted and modified to reduce the tension between economic and social relations.