University of Groningen
Faculty of Economics and Business
MSc Business Administration
Organizational & Management Control
Performance information for councillors in
municipalities in the Netherlands
Grietzen Broersma
S2798271
Supervisor: prof. dr. H.J. ter Bogt
Co-assessor: drs. D.P. Tavenier
23 January 2017
Number of words: 16.023
ABSTRACT
This study considers how councillors in two Dutch municipalities make use of the available performance and other accounting information to control the municipal organization, what information should be provided to meet councillors’ needs and identifies the role of various parties in the municipal organization in providing this information. Field research was conducted by means of a multiple qualitative case study in the municipalities of Leeuwarden and Littenseradiel. The research shows that there is no ‘one best way’ to produce and make use of the available information. Councillors have different ideas on and ways of fulfilling their tasks, make use of different sources of information and have different information needs. However, it is clear that councillors have a desire to have more measurable performance indicators about outputs and outcomes available. The research in the two municipalities shows that in practice it is hard or impossible to steer and control a municipal organization on the bases of the now available output and outcome-oriented performance information.
KEYWORDS
2
INTRODUCTION
Since the 1980s the public sector has been paying more attention to management techniques and instruments derived from the private sector. This development can be characterized as New Public Management (NPM). The two most important differences in comparison with previous public sector accounting were reducing or removing dissimilarities between the public and the private sector and the shift to more accountability in terms of results instead of input and process accountability (Hood, 1995: p. 94). The international trend of NPM also covered Dutch municipalities. Regarding the control of Dutch municipalities the emphasis has shifted from budgets (input and processes) towards products (outputs) since the mid-1980s (Ter Bogt, 2001: pp. 623-624). The Dutch Ministry of Home Affairs encouraged this shift and took the initiative to introduce NPM elements such as output budgeting, responsibility accounting and cost allocation (Van Helden, 1998: p. 85). This project is known as Policy and Management Instruments for municipalities (PMI), in Dutch municipalities as ‘Beleids- en Beheers Instrumentarium (BBI) (Ter Bogt, 2004: p. 221).
An aim of the recent public sector accounting reforms in the Netherlands has been to improve the budgetary information available to elected politicians (i.e. councillors) and enable them to execute their budget allocation, budgetary control, and accountability tasks more effectively (Ter Bogt et al., 2015: p. 288). The most important aspects of the reforms during the last two decades were the output budgets, introduced via PMI, and subsequently since 2004 the requirement of outcome oriented program budgets. The output budgets refer to the introduction of the previously mentioned improvements of budgetary information, whilst outcome oriented program budgets focus on the intended outcomes; i.e. the final results of the municipal policy initiatives (Ter Bogt et al., 2015: p. 290). The program budget is together with an annual report a compulsory part of the planning and control cycle in Dutch municipalities, which often also consists of a ‘perspective note’ and one or more Executive interim reports (Vereniging Nederlandse Gemeenten (VNG), 2014: pp. 1-3). The performance- and other accounting information available in these documents could help municipal councillors to execute their steering and controlling role in the municipal organization.
3 information, but in several cases to the issues of the introduction and use of accrual accounting based information. This is not really an issue in Dutch municipalities, since accrual accounting is mandated there since decades.
Ter Bogt et al. (2015: p. 309) conducted research where they discuss the initiative aimed at enhancing the extent to which politicians in a Dutch province value and use the performance information in budgets for controlling purposes. The empirical findings showed that councillors are rather positive about the redesigned budgetary- and performance information. However, it turned out simultaneously that the actual and visible use of performance information is very limited. Subsequently, Ter Bogt et al. (2015: pp. 309-310) could only speculate about the reasons why councillors did not make use of the performance information, despite of the fact that they were rather positive about it. Elaborating on this case study of Ter Bogt et al. (2015), this raises the question to what extent councillors in Dutch municipalities are willing to make use of such information and, for example, if they are skilled enough to handle the matter. It is not inconceivable that councillors need additional information, or more suitable information of good quality, and that only such information will really make them use it more frequently in their decision-making about and control of municipal policy initiatives. Therefore, the role of different parties in the municipal organization (i.e. civil servants, Executives, the clerk of the council (Dutch: griffier) who are involved in providing and customizing this information, could be important to better meet the information needs of councillors in a Dutch municipality. They are the specialists, who probably can make the relevant performance information available. It seems that the role of these different parties has not been subject of any research in literature yet.
Accordingly, the main purpose of this research is to investigate how municipal councillors
make use of the available performance and other accounting information in the planning and control documents to control the municipal organization, what information should be provided to meet the needs of councillors, and to identify the role of various parties in the municipal organization in providing this information. In view of the relatively new field of research within this topic, a qualitative case study will be conducted. Two Dutch municipalities and various involved parties (i.e. councillors, clerk of the council and civil servants) will be researched.
4 The remainder of this paper has the following structure. The next section will summarise and review the literature regarding the performance- and other accounting information in the (Dutch) public sector. Subsequently, the methodology of the research including the method of data collection and the method of data analysis is presented. Thereafter, a discussion of the results will be described. The last section of the research consists of a discussion of the findings, a conclusion and ideas for future research regarding this topic.
LITERATURE REVIEW
This section provides a review of the literature about the main concepts which are used in this research. The concepts NPM & PMI and the planning & control cycle in Dutch municipalities are described to explain the context of the research more in-depth. After that, the literature on accounting information, performance information and control in a local governmental context are explicated. Subsequently these concepts will be related to each other which leads to the research questions and sub questions.
NPM & PMI
The NPM approach has changed the modes of public management more towards ‘accountingization’ (Hood, 1995: p.1). This means, for example, “the introduction of ever-more explicit cost categorization into areas where costs were previously aggregated, pooled or undefined” (Power & Laughlin, 1992: p. 133). In the 1980s a number of OECD (Organization for Economic Co-operation and Development) countries, including the Netherlands, adopted the NPM-approach and started using more management techniques and instruments derived from the private sector for their public management (Hood, 1995: p.1). Changes in Dutch local government in the last three decades were mostly in line with the NPM approach (Ter Bogt et al., 2015: p.290). Although the precise contents of NPM vary between countries, an important characteristic of the reforms in managing governments is the use of numbers and other performance indicators, that describe throughputs, outputs and outcomes (Hood, 2007: p.2).
5 strengthen the position of the municipal council by providing high quality information to control more effectively, improving the planning and control processes by introducing output budgeting and more cost-effective behavior, and to increase the customer orientation of municipalities by delivering more concrete services and increasing responsiveness to changing needs (Van Helden, 1998: p. 86).
To make the municipalities familiar with this more pragmatic way of governance and management the PMI-project introduced some tools with the aim to make municipalities more
effective and efficient.The most important tool with respect to new planning and control techniques
was the output budget (Dutch: ‘productbegroting’). In the past municipalities were controlled more by means of procedures and budgets, but the PMI project shifted the focus of control more to products, quantitative performance indicators and a comparison of planned and realized production (Van Helden, 1998; p. 87; Van Helden & ter Bogt, 2001: p. 66; Ter Bogt, 2001: p. 623). However, more generally, ‘ideological reasons’, such as a political desire to reduce the role of government also played a role in NPM (Hood, 1995: pp. 5-6), and probably also in the Netherlands. The requirement to account for their performance was an attempt to cope with the need for clarity and accountability in local government (Ter Bogt, 2001: p.623). Financial information in budgets also continued to be important, but the attention for activities and outputs as a new element in output budgets meant a control shift in Dutch municipalities (Ter Bogt, 2001: p. 623)
Another important change in planning and control of municipalities came in 2002 with the introduction of the dual system for local governments. In this system the responsibilities of the municipal council were separated from those of the Executive (Ter Bogt et al., 2015: p.290). Since 2004, councilors are expected to outline their policies in a so called ‘outcome-oriented’ program budget (Dutch: ‘programmabegroting’) to give a clear description of the council’s policy programs (Ministerie van Binnenlandse Zaken en Koninkrijksrelaties (MBZK), 2003: pp. 7-13). The focus in such a program budget should be on outcomes, i.e. the effects and results of the work initiated by the municipality. This shift should create more insight into whether outputs or products led to the desired effect or outcome and should increase the attention for the assessment of the effectiveness of a municipal organization. However, within the budget period of only one year it is often hard to measure the generated effects of some council’s policy programs. Nevertheless, Dutch central government strived for visible and controllable outcomes in that specific budget year using the program budget (Ter Bogt et al., 2015: p. 311). The output budget and program budget are planning and control documents which are part of the planning and control cycle in Dutch municipalities.
Dutch municipalities & the Planning and Control cycle
6 Burgemeester & Wethouders, B & W). The various documents in the planning and control cycle could guide councilors in fulfilling these roles to meet their responsibilities. Central government provides budgeting and reporting rules to local government by their ‘Besluit Begroting en Verantwoording’ (BBV) and since 2002, the determination and approval of some documents by the municipal council is mandatory and officially formalized in the Municipal Law (Dutch: ‘Gemeentewet’) (Tweede Kamer der Staten-Generaal, 2000-2001, 27 751-nr. 3: pp. 1-86).
According to the BBV, the planning and control cycle should at least consist of the earlier
mentioned program budget and an annual report (Dutch: ‘jaarrekening’).1
The municipal council states in the program budget on main lines how the available money must be allocated in that budget year and based on this allocation the intended outcomes and performance indicators are supposed to be indicated. A part of the annual expenditures of a municipality are determined by regulations of central government or annual depreciation of past investments. The execution of the designed policy is done by the Executive Committee, which is supported by the civil servants who are directly involved in the policy execution in practice. The municipal council is then responsible for the control of the effective execution of the municipal policy initiatives and whether the expected outcomes are achieved. Apart from deciding about the budget, the main tasks will be done by means of the control of the annual report and other helpful information in the documents in the planning and control cycle and by making use of policy notes.
The program budget and annual report have to meet a substantive number of rules which are stated in the BBV, such as the requirement to divide the program budget in several programmes (VNG, 2014: p. 2). A Dutch municipality can develop its own programs, there is no limit in terms of the amount of programs, and in this context the municipal council has to answer per program three so called ‘W-questions’: ‘what do we want to achieve?’, ‘what are we going to do to achieve this?’ and ‘what will be the costs of it?’ (MBZK, 2003: p. 34). The annual report should subsequently provide an answer to these questions and give insight into the realization of the intended policy and performance indicators as stated in the program budget. The precise requirements and frames of these documents are frequently subject of change. In 2015 was announced via BBV that Dutch municipalities are legally required to record five financial indicators in their annual report and program budget from respectively 2015 and 2016 on (MBZK, 2015: p.1). Moreover, in 2016 it was announced that Dutch municipalities are required to record a basic set of policy indicators in their program budget of 2017 which seeks to make the program budgets more transparent for councilors who are not responsible for financial matters and also has the aim to improve the comparability of the municipal program budgets (MBZK, 2016: p. 27).
7 next budget on main lines. The Dutch name of this ‘perspective note’ differs between municipalities; it is usually called the ‘Kadernota’, ‘Voorjaarsnota’ or ‘Perspectiefnota’ (VNG, 2014: p.1). Although this document is formally a document drawn up (or at least decided) by the Council, in practice it is usually compiled by civil servants and Aldermen, without much interference of councillors. However, the municipal council could have impact on the possible adjustments of the program budget and the allocation of money during discussions of the perspective note (VNG, 2014: p.3). Furthermore, Dutch municipalities may choose to create one or more Executive interim reports (Dutch: ‘bestuursrapportage’ or ‘tussentijdse rapportage’) to explain developments on financial budgets or municipal performance that could possibly lead to changes in or additions to the program budget (Ter Bogt, 2004: p. 244). Mostly councillors only receive an abridged version of the interim reports from the Executive.
It turns out that Dutch municipalities could have a different content and amount of programs in the mandatory planning and control documents. Moreover, the contents of the information that support the mandatory documents (i.e. the perspective note and interim reports), which may be included in the cycle, can differ between municipalities. In practice, the Executives and in particular the civil servants involved, are to a large extent involved in providing information to the councillors. This means also that the information available to councillors to fulfil their steering and controlling role differs between municipalities. Furthermore, they are also depending on providers (i.e. Executives, civil servants) of the ‘right’ information which can be useful to execute their main tasks in a proper way. This raises the question to what extent these providers of information are aware of the needs of councillors and take those needs explicitly into account. Further, it could be questionable whether councillors utilize the available performance- and other accounting information in an optimal way. In this context it could be taken into account that councillors – who are elected by citizens, and thus are supposed to represent their interests in certain respects – can also draw information from other external sources, such as citizens or special interest groups.
Accounting information & performance information
The shifted emphasis in public sector over the years, more specifically in Dutch municipalities, from inputs and processes towards outputs and outcomes led also to a change in the type of accounting information that is available to councillors. The introduction of performance measurement in governmental organizations can be regarded as “a major accounting change” (Ter Bogt, 2004: p. 22).
8 focuses more on outputs and outcomes, is in principle commonplace in public management for accountability about tasks and to support control and decision making. Pollitt (2006: p. 39) defined performance information, a bit more narrow, as “systematic information describing the outputs and outcomes of public programmes and organizations – whether intended or otherwise – generated by systems and processes intended to produce such information”. So he excludes information on activities and throughputs. Performance information may be included in budgets, annual reports and interim reports which are all part of the planning and control cycle in Dutch municipalities (Ter Bogt, 2004: p. 246).
Performance and other accounting information can also be categorized as ‘formal information’. Within formal information there is a distinction between ‘formal numeric information’, i.e. information in budgets with a quantitative nature, and ‘formal written information’; i.e. information in documents and reports with a qualitative nature (Ter Bogt, 2004: p. 228). Although it is argued that the focus of control increasingly shifted more towards outputs and thus formal information, it can’t be excluded that politicians also use informal information. This information is mostly verbal and appears from, for example, face-to-face meetings. Daft and Lengel (1990, pp. 248-250) typified this as ‘rich information’; it is more personal, generates immediate feedback and takes impressions of the interlocutor into account.
With the introduction of performance measurement in the public sector a growing range of literature developed about this topic over the last 30 years. Jackson (2011: pp. 13-23) reviewed in his article this increased attention for public sector performance in academic literature and asks the question what has been learned and whether this has led to an improved performance, i.e. measurable increases in effectiveness and outcomes. According to Jackson (2011, p. 15) many studies in this field lack conceptualization and is it not clear where the measures come from. Furthermore Jackson (2011: p. 23) states in his article that very little information or understanding exists about the effectiveness or outcomes of public services and which management practices will improve performance. Subsequently the author questions if performance information is worth the high costs of producing it and if the information supports effective decision-making and improved outcomes (Jackson, 2011: pp. 23-24).
9 “creative destruction” of the present or future “political or managerial status quo” (Johnsen, 2005: p. 15). So, Johnsen draws the attention to a ‘political’ use of performance information, i.e. using it when it could bring a political gain (see also the roles of accounting as defined by Burchell et al., 1980: p. 14)
Politicians’ use of performance information and the issues regarding this use in politics, have also been subject of empirical research in the past. It appears from those studies that the introduction of more output oriented accounting information in the governmental sector, due to NPM, is not always a success. There is some literature available where influencing factors, complexities and possible reasons are mentioned that could possibly clarify the less intensive use and lack of valuation of information in budgets and reports. Although these studies have been conducted in different governmental settings with different types of politicians and often refer to accrual accounting based information, it can create insights about the use of information which could be useful to meet the information needs of councillors in local government.
In another context, a Norwegian local government, Askim (2009, pp. 24-47) conducted a survey research about performance information’s usefulness for councillors. Askim distinguishes three factors that mainly influence the search for performance information of councillors: within-polity rank, education and political experience (Askim, 2009: pp. 39-40). Regarding to the first mentioned influencing factor Askim suggests that frontbenchers, i.e. mayors and executives, are more likely to search for performance information than backbenchers, i.e. councillors. The research shows that under certain circumstances politicians’ use and attitude towards performance information changes to a more intensive use. Taylor (2009: p. 866) concludes that politicians use performance information primarily as a tool for accountability rather than for steering and controlling purposes. This in line with the research of Ter Bogt et al. (2015: p. 309) who did not observe a rational use of performance information for controlling purposes despite the fact that this was the intention of the program budget in a Dutch province. Furthermore, Taylor (2009: p. 866) shows in her research at Australian public agencies and public accountability authorities, that mainly technical problems hinder the use of performance information for internal improvements.
10 issues surrounding the language of accounting” where the situation of this research in Northern-Ireland is typified as a context that requires increasingly more detailed knowledge.
Pollitt (2006) argues that, with respect to the use of performance information by politicians they collect the information mainly by verbal information from other politicians and not by reading reports (Pollitt, 2006: p. 50). Further, Pollitt states that when there need to be written reports, they have to be short in order to prevent that their content will be ignored (Pollitt, 2006: p. 50). Ter Bogt (2004: p. 241) concludes in his survey research among aldermen in Dutch municipalities that they prefer rich, qualitative and informal information above to written, numeric and formal information in the planning and control documents. In addition, a comparison is made with the research of Daft and Macintosh (1978, pp. 33-34) who conducted a research among managers in a private organization. They argue that there exists a strong relationship between the amount and type of information managers require and the degree of uncertainty that managers are confronted with. Aldermen work in a relatively complex and uncertain political environment whereby this provides a possible explanation for the preference of rich, informal and verbal information above formal written reports in the planning and control cycle.
A research of Ter Bogt (2001) a few years earlier showed some similarities with the above results. In his empirical research in Dutch municipalities to determine the value that aldermen attach to quantitative output information, it appears that these politicians do not make much use of the information in planning and control documents (Ter Bogt, 2001: p. 638). The quality of the quantitative output data in these documents is questioned and they did not shift fully their attention to outputs and results (Ter Bogt, 2001: pp. 638-639). The latest research of Ter Bogt et al. (2015: p. 309) at a Dutch province showed that councillors value the selectivity of a redesigned performance budget and are pleased with the concrete performance information, but at the same time the actual and visible use of these information during the Council meetings remains limited.
11
Control
The previous sections made clear that the use of several instruments and techniques for steering and controlling purposes in public management changed a lot over the last decades. As mentioned, a main task of the municipal council is to control the effective execution of the municipal policy initiatives and to assess whether the expected outcomes are achieved, for example by using the information in the annual report and performance information from other sources.
Control is a very broad term, so many definitions in the literature can be found. A frequently
used definition is described by Ouchi (1979, p: 833) who defines control as “the mechanism through which an organization can be managed to move towards its objectives”. So, the author assumes, implicitly, that the objectives to be realized are clear. Further, the author distinguishes in the same paper different types of control. The first, output controls, includes measuring and rewarding outputs, i.e. products or other ‘results’. The second type, behavioral controls, relies on monitoring behaviors and actions of individuals towards common objectives, i.e. control by rules, processes and procedures. The third type of control, clan controls, relies on a complete socialization process to influence each other’s behaviors. Clan control is characterized by ‘ceremonies and rituals’, i.e. focusing on such aspects as education backgrounds, norms and values, or shared culture. Where output controls and behavioral controls are more formal by nature, since they are ‘written’ explicitly, the third type, clan controls, is denoted as informal (Ouchi, 1979: p. 833). Which type of control or a combination of controls can be used properly in a specific situation depends on two factors: the ability to measure outputs and the knowledge of the transformation process (Ouchi, 1979: p. 843). With the increasing focus on outputs and results in public management, NPM suggests that in particular the use of output controls is the most appropriate form of control. Behavior controls relates more to the ‘traditional’ control of the public sector via rules and procedures, indicating what actions have to be taken or are forbidden. Under conditions of “ambiguity and uncertainty” there is little knowledge of the transformation process, and reliable output measurement is not possible; in that case clan control is most suitable according to Ouchi (1979: p. 845).
12 not perform) certain actions known to be beneficial (harmful) to the organization” (Merchant & van der Stede, 2007: p. 76). This type is feasible and effective if is known what actions are acceptable, desirable and will occur. At the same time it aims to prevent harmful actions that are not desirable (Merchant & van der Stede, 2007: p. 76). Merchant and Van der Stede split Ouchi’s clan control in two types of control, i.e. personnel control and cultural control. Basically, these two types of control together are similar to clan control, but Merchant and Van der Stede developed their two types of control somewhat more explicitly. Their personnel controls, for example, are focusing more outspoken on well pursuing of a job by an individual employee through training, selection and placement, and job design (Merchant & van der Stede, 2007: pp 83-84). Cultural controls include the other ‘part’ of the clan controls, i.e. the norms, values and culture. So these controls are aimed at shaping organizational norms and values and encouraging employees to social monitoring of colleagues (Merchant & Van der Stede, 2007: p. 85).
Hofstede (1981: p. 193) relates the use of different types of control to public and not-for profit activities. Four criteria are mentioned which have an effect on the control type: 1) are objectives unambiguous? 2) are outputs measurable? 3) are the effects of interventions known? 4) is the activity repetitive? (Hofstede, 1981: pp. 193-195). The applicable type of control - the author mentioned six different types - depends on the review of these criteria. These six types can be divided into two different categories: cybernetic and non-cybernetic models (Hofstede, 1981: p. 193). Cybernetic models are most similar with the NPM-approach and its emphasis on outputs and results, which became in principle commonplace in municipalities during the last decades. It is typified as rational and operational, especially in case of the first type ‘routine control’. The use of output budgets and program budgets asks for the use of the most cybernetic type of control, i.e. ‘routine control’: it represents mainly measurable outputs and repetitive activities (Hofstede, 1981: p. 203). The most specific non-cybernetic type is called ‘political control’; when there exists ambiguity in objectives it is this form which will be used, Hofstede suggests. This control type is dependent of e.g. power structures and negotiation processes (Hofstede, 1981: p. 198). This can probably be related to the situation in local government, because there is a mix of different interests and stakeholders. For that reason compromises can be necessary, meaning that objectives might consciously not be made very clear and explicit.
13 An implicit assumption of the NPM-approach is ‘rational management’ (Gruening, 2001: p. 1-25). In case of Dutch municipalities this covers the rational use of performance information in program budgets for policy-making and controlling purposes as encouraged by Dutch central government with the introduction of the dual system (Ter Bogt et al., 2015: pp. 287-315). In relation to this, the type ‘routine control’ of Hofstede (1981) has the most in common with this idea of NPM. It can also be inferred from the frameworks of Ouchi (1979) and Merchant & van der Stede (2007) that according to NPM, with the increasing focus on outputs and results, respectively output controls or result controls, are most appropriate for public management. As mentioned above, these type of controls and use of budgetary information can be typified as ‘formal’. All in all, as indicated before, the type of control NPM focuses on could be denoted as ‘routine output control’.
However, the various authors introduced before suggest that in various cases output controls are not the proper type of control. This may have consequences for the use of mainly performance information and other accounting information by councilors that can be expected in practice. Malmi and Brown (2008: p. 288) state in their research that there is still limited understanding of the impact of the more informal types of control and whether/how they complement or substitute each other. Therefore it is unclear, for example, how councilors deal with a relatively uncertain situation where they can’t rely on performance information in budgets and need broader (informal) information to enable decision-making and control. In relation to this, Askim (2009, p. 40) indicates that notwithstanding the NPM-reforms and its focus on outcomes and results of policy initiatives, councilors still collect information from citizens, interest groups, and civil servants of the municipality. Askim suggests that councilors’ use of different information types appears not to be a
14
Research questions
NPM suggests that control of public sector organizations should be based on outputs and outcomes. The Dutch BBV also promises this. However, various authors in the field of management control have indicated that output control can’t be used in all situations. This raises the question whether in practice it is always possible to steer and control public sector organizations, such as municipalities, largely on the bases of output oriented performance and other accounting information. Previous research on the use of such information by politicians in other contexts shows mixed results. For that reason, the following research question and sub questions have been formulated for councillors in Dutch municipalities.
Main question
“How do councilors make use of the available performance- and other accounting information in the planning and control cycle to control the municipal organization and what could the municipal
organization do in providing information which meets councilors’ needs?”
Sub questions
1.What performance- and other accounting information do councillors need to fulfil their steering and controlling role and to ensure effective decision-making?
2.Which factors can have influence on the use of performance- and other accounting information by councillors?
3.How is the available performance- and other accounting information valued by councillors? 4.How can performance- and other accounting information be provided in such a way that it better meets the needs of councillors (to make the councillors’ use of accounting information more intensive and effective)?
5.What is the role of different parties in the municipal organization (i.e. clerk of the council & civil servants) in adapting this information to the needs of councilors?
15
METHODOLOGY
The following section first states the approach that is used to conduct the empirical research. After that a short case description is given to provide an overview of the research context. Next, the method of data collection and the method of data analysis are described. Finally the controllability, reliability and validity of this research is justified and explained.
Research approach
The literature review regarding the use of performance and other accounting information by politicians in the governmental sector showed that not much is known about the information use by councillors in (Dutch) municipalities. Therefore, the main purpose is to find out how municipal councillors make use of the available information to control the municipal organization, how to meet the information needs of councillors and to identify the role of different parties in the municipal organization in providing this information. In order to meet the objectives of the research and to create insight into this relatively new research area, a qualitative research approach will be conducted in the form of a multiple case study.
The research can be typified as descriptive and explorative. This type of research is useful to get thorough knowledge of councillors’ use and needs of information and the influence of various involved parties. It is an inductive process to build theory from the explanations and mechanisms out
of the cases (Eisenhardt, 1989: pp. 532-550). Rowley (2002, p. 17) and Yin (1994, p. 9) argue that a
case study gives understanding of meanings and suits well to research that answers ‘how’ and ‘why’ questions of processes of a particular case. Eisenhardt (1989, pp. 548-549) adds to this that case studies are appropriate to “new research areas or research areas for which existing theory seems inadequate”. The choice for a multiple case study is based on the “replication logic” which can lead to refining or extension of the theory by disconfirming relationships in at least two cases (Eisenhardt, p. 542).
Case description
Two Dutch municipalities were researched: Leeuwarden and Littenseradiel. Below some background information is given about each of the cases.
16 The municipality of Littenseradiel, situated in the province of Friesland, consists only of villages; the biggest is called Wommels, and has in total approximately 10.800 inhabitants. The
municipal council has 15 seats distributed over from high to low: SAM2, CDA, FNP and VVD.
The size of a municipality could possibly be an influencing factor in the search for information (Ter Bogt, 2001: p. 627; Vakkuri & Meklin, 2006: p. 239). It is stated that a councilor in a large municipality has a wider access to control instruments than one in a small municipality (Askim, 2009: p. 35). Therefore the choice was made to select two municipalities of different sizes. Municipality size is also probably influencing the use of information with a more informal character. It could be assumed that in a municipality with a small size the lines of communication are shorter to the municipal organization. Furthermore it is probably more easier to access external sources of information, e.g. citizens or special interest groups.
Method of data collection
To obtain the necessary data different types of sources were used. On a primary level by conducting semi-structured interviews and, on a secondary level, by analysing and collecting internal policy documents and documents from the planning and control cycle. Gathering data from different sources, which is called ‘triangulation’, was based on the consideration that the focus on more data types in a case study provides evidence to “corroborate the same fact or finding” (Rowley, 2002: p. 23; Eisenhardt, 1989: p. 538).
Primary data were collected by conducting semi-structured interviews in both municipalities. In total there were 9 people interviewed: two councilors of the municipality Littenseradiel, three councilors of the municipality Leeuwarden and from each case the clerk of the council and a civil servant with financial responsibilities. The councilors of both cases represented different political groups and also had different tenures. Besides that, at least one of the councilors had a financial background or sound financial knowledge. The choice for these persons was made to create insight into the experiences and needs of the demanders of the performance- and further accounting information (i.e. councilors), and also to expose the role of various providers of information in the municipal organization (i.e. the clerk of the council, civil servant). Ultimately, this could provide empirical knowledge about the interplay between these parties in the composition and use of the available performance- and accounting information.
17 Some questions which were asked in the conducted interviews are: In which kind of situations do you make use of planning and control documents? What is your opinion about the quality of the performance information? Do you also make use of more informal information in or outside the municipal organization? What changes are needed to better fulfil your information needs as a councillor? The themes and questions used for the interviews with councillors and employees of the municipal organization are available in the appendix. The findings from the empirical research can offer insights which can be useful for a follow-up study concerning the use of performance and other accounting information by councillors. Apart from that, they can be helpful in a practical sense, i.e. to improve the information made available to councillors.
Secondary data were collected from policy documents and from the documents in the planning and control cycle from the two municipalities. As noted earlier, the content and size of these documents can differ between municipalities. These policy documents and planning and control documents were also used as input for interview questions and also as additional material to interpret the answers and outcome of the interviews. A file with parts of the used documents is available at the author.
Method of analysis
After the data collection via the interviews the data was analysed by means of the use of “within-case analysis” and “cross-case analysis” (Eisenhardt, 1989: pp. 539-541). In an exploratory case study the process of data collection and data analysis are closely linked; evidence is gathered within relevant themes from the literature and analysed within these categories (Rowley, 2002: p. 24). The interviews were recorded and transcribed. After this the interviewees had the possibility to react and approve the transcription. On request the interviews will be, anonymously, supplied by the author. Subsequently recurring themes, patterns and categories become evident to ultimately draw conclusions and also to find themes which can be relevant to build theory. Analysing the various documents is used to further interpret the answers of the interviewees. The municipality of Leeuwarden is used as ‘base case’ to report and analyse the findings of the primary and secondary data. Therefore the case of Leeuwarden contains more comprehensive descriptions of results, where after Littenseradiel contains a more concise description and a description of the deviations in comparison to the base case. In this way the results of the two cases are intertwined with each other and at the same time analysed.
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Controllability, reliability and validity
Measuring for controllability, reliability and validity improves the “inter-subjectivity agreement on the research results” (Yin, 1994: p. 41; Van Aken, Berends & van der Bij, 2012: p. 202). That means in this case consensus between involved parties who deal with the research problem.
A detailed description of the way the research was executed is added in this methodology section to improve the controllability. In this way other researchers can replicate the research and use it for the evaluation of other quality criteria (Van Aken et al., 2012: p. 203).
The reliability of the research is improved by assembling semi-structured interviews, recording the interviews and creating an complete investigation database to prevent a potential researcher bias. Besides that, the supervisor has collaborated in the process of selecting themes and interview questions. Furthermore, the research made use of multiple research instruments (i.e. interviews and documentation) to control instruments biases. The approach of triangulation can “remedy the specific shortcomings and biases of these instruments by complementing and correcting each other in combination” (Van Aken et al., 2012: p. 207).
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RESULTS
This chapter presents and analyses the findings from the empirical research. The various sections will first present the findings for Leeuwarden and then those for Littenseradiel. For Littenseradiel, in particular those aspects will be discussed which differ from the findings for Leeuwarden.
1.What performance and other accounting information do councillors need?
Case: Leeuwarden
As noted earlier, a program budget and an annual report are mandatory part of the planning and control cycle in a Dutch municipality. Generally, although it is not required, municipalities make the choice to publish yearly also a perspective note and one or more interim reports. Leeuwarden deviates from this regular design and uses an alternative cycle. Instead of yearly assessing the direction of the defined policy and corresponding financial resources in a perspective note, it occurs in Leeuwarden
only twice during the council term,i.e. a four year period.The reason for this choice is the observation
of the municipal organization that the policy and processes are too fixed to justify a policy debate yearly. The annual update of the financial position does not affect the policy choices. The interviewed councillors, and the council clerk too, believe that this choice leads to a ‘gap’. Arguments mentioned for a yearly perspective note are the fact that the municipal council formally keeps the budget and the belief that rapidly changing situations could be better treated immediate to prevent tensions and to give timely direction to the subsequent program budget.
Furthermore, councillors indicate that the influence of the municipal council in the composition and content of the program budget is very limited. They can have some input in policy initiatives, but approximately 90 percent of the budget allocation is fixed as a result of regulations and regular duties that require little direction. The program budget 2016 of the municipality of Leeuwarden also states that 95 percent of the budget implementation consists of regular tasks. These “going concern tasks” require less steering as long as there are no essential deviations from the existing policy (Gemeente Leeuwarden, 2015: p. 3). Moreover, councillors of political parties in the opposition, i.e. those parties
which are not represented in the coalition which forms the Executive Committee, indicate and
20 Nevertheless, the program budget is considered as the most important document of the planning and control cycle to check whether the allocation of money is in accordance with the Coalition policy agreement. The way in which the interviewed councillors make use of the available information in the program budget has some similarities, but also shows some differences. A substantial difference between councillors in their use of information follows from their different views on the role of a municipal councillor. Where one councillor considers the program budget as an essential document to control the Executives, two others do insist on their role as a representative of
the citizens, which in their eyes makes financial figures less important. Information from and
experiences in the local society and their party members and other voters, i.e. informal information, are more valuable for them to fulfil their role than documents from the planning and control cycle. A councillor emphasizes this as follows:
“I am a ‘fieldworker’. I talk a lot to citizens, companies and institutions, because that is where the truth is. They know what is going on and they identify problems”.
The underlying reason for adapting this way of working is the risk that there could occur a kind of ´blindness´; if you assess municipal policy purely from your own perspective. The idea to listen mainly to people in society is further enhanced by the opinion that civil servants of the municipal organization are bound by a ‘straitjacket’. Another councillor mentions that he can’t rely only on the documents, because doing politics is also dependent of signals from society. So there seems to be a strong need for informal information as well. This information is obtained from party members, voters and a network of other people who have direct contact with relevant groups in society. However, one councillor warns that you have to listen to society, but you should not be totally guided by specific voices in society, because a councillor needs to take his/her own responsibility. Another important source of information which is suggested in the interviews is the information that could be taken from social media and the internet. How and to what extent this is used is relatively unknown, but this may increasingly come into play.
21 deployed policy are not always measurable; the interviewees understand that measurement of results can be quite problematic. However, in such cases there is a need for more qualitative information about e.g. the effects of a budget cut in a particular policy program. One councillor explains the complexity concerning the use of performance information as follows:
“It is questionable whether it is possible to directly link the municipal financial effort to the ultimate outcome or effect of a policy initiative. This relationship between effort and result is hard to measure. It is sometimes a feeling where you hope it has effect. There are so many external factors which play a
role that this makes sure that there is no direct relation anymore between municipal effort and outcome. We have to accept that practice sometimes differs from the theory”.
At the same time is observed that there is not always precise control by councillors whether targets are met or not. In the debate of the annual report this is rarely noted, probably because of a lack of time to treat more detailed information in such a setting.
A striking result is that both employees of the municipal organization and councillors state that there is a need for possibilities and figures to compare the municipality in relation to other municipalities. The interviewed civil servants, who play an important role in the drawing up of the program budget, believe that councillors are triggered by the required new financial indicators. In the program budget for 2016 is also referred to this new section in the document and a link of a website is included where Leeuwarden can be compared with other municipalities (Gemeente Leeuwarden, 2015: p. 7; in this context see also: www.waarstaatjegemeente.nl). In their eyes, this fills a need and the indicators do have many benefits; it is “to the point and SMART”, it provides objective and factual information, it gives possibilities to compare and it is a starting point for discussion. The civil servants consider these ‘comparison figures’ and, the since 2017 required basic set of policy indicators as well, as the most important performance information for the municipal council. Councillors endorse this development and see opportunities to use it in performing their role. They use it to ‘benchmark’ Leeuwarden with comparable municipalities, in order to better assess the costs of a policy and therefore it provides them with some guidelines. Although one councillor uses the comparison figures frequently, he also warns for misuse of these indicators:
“Do not ‘shop’ with the indicators; you have to look to the story behind the indicators and explain why the municipality scored in this way”.
Case: Littenseradiel
22 municipality does not invest very much anymore in, for example, changing the planning and control. Littenseradiel works without a perspective note, it discusses interim reports orally and budget amendments are submitted to the council each month; opinions about this structure are variable. Furthermore the councillors interviewed, who both are a member of opposition parties, indicate that the program budget over the years only has had minimal changes and that the ‘real’ influence of program the budget on municipal policy is limited.
However, the councillors qualify the program budget as being basically very important in fulfilling their role as a councillor and to get an insight into the implementation of the policies. In the use of this document, there is mainly a need for qualitative information about outputs and outcomes. Quantitative performance information on outputs and outcomes is not included in the documents. Both councillors believe that the control of the agreements which the parties represented in the coalition and the Executive have made and the municipal policy activities, could be much stricter than it is in the current situation. Both councillors would like to receive performance information which shows whether targets are met or not, instead of “bald statements” expressed in words only. The councillors do not contact civil servants very often to ask them a further explanation or for factual information and if they do so, this is mostly in the beginning of the council term.
Like in Leeuwarden, among councillors there lives a need for ‘benchmarking figures’, so that comparisons with other municipalities can be made. They see the possible benefits of such figures, but also due to the reclassification they play only a marginal role in Littenseradiel. In contrast to the interviewed councillors in Leeuwarden, these councillors do not insist explicitly on informal information, or refer to their role as a ‘representative of the citizens’. Meanwhile, the council clerk has the impression that some councillors mostly steer on some main lines and want to focus on keeping the satisfaction of citizens in the municipal activities high. The issue of keeping citizens involved in and satisfied with municipal activities is important for the municipality of Littenseradiel, the clerk indicates, as can also be seen from their use of a conference model in which every citizen is asked to join the conversation.
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2.Which factors influence the use of information?
Case: Leeuwarden
In the interviews, several factors emerge which possibly underlie the use, or limited use, of information in planning and control documents. One of these factors which could influence the use of information relates to ‘skills’ or ‘knowledge’ of councillors. In general, it could be stated that the documents in the planning and control cycle, especially the program budget, are considered as difficult matter by the interviewees. To overcome a potential knowledge problem, political parties in the council often appoint specialists within their party which then focus on a specific policy theme. The council clerk does not want to give a judgment about the skills and knowledge of councillors, because they are elected representatives and not professionals. However, two councillors believe that the level of councillors sometimes is inadequate to offer powerful resistance against skilled, high level civil servants and the Executive committee. One of them argues that a councillor must be able to translate what is going on in local society to the Executive Committee, in order to create an effect or to convince them. In addition, it is indicated that the councillors’ knowledge about the structure and objectives of the program budget sinks over time. One councillor defends the opinion that skills and knowledge about the documents is less important, because of the fact that the documents ultimately always lead to a political discussion and he doesn’t wants to “take the role of an accountant”.
Besides skills and knowledge, ‘experience’ as a municipal councillor also seems to play a role in the use of information. All councillors have extensive experience in local politics and that makes sure that they know where to look in a program budget in order to read it effectively. One councillor has the impression that relatively inexperienced councillors study everything. Another factor that is related to this observation is ‘time’. To read all the available documents completely takes too much time, certainly in the case of relatively small political parties with only one or a few representatives in the council, is the general view. The council clerk confirms that councillors are in the opinion that they need too much time to read the documents, partly due to the fact that most of them also have a fulltime job.
24 Another often recurring item in the interviews, both with councillors and employees of the municipal organization mention this factor, is ‘trust’. The council clerk indicates that a councillor must be able to rely on the expertise of a civil servant to help them in their tasks. So, having trust in the civil servants is regarded important. The interviewed civil servants agree with this and add that civil servants should be able to indicate things openly. A councillor expressed it as follows:
“Ultimately it is about trust in what the Executive Committee does. If you don’t have that trust, accurate written information may not avail”.
The doubts about this topic of trust are reflected in the interviews with all the councillors and mainly relate to what is seen as the disadvantages of the dual system used in local politics. The “first loyalty” of a civil servant is to the aldermen and therefore this creates some caution by councillors in the search for information. Sometimes the feeling is that, aldermen receive perhaps more detailed information, or the municipal council is not fully informed in certain situations. Councillors, especially those in the opposition, indicate to be cautious in using information written or provided by civil servants, because this information is possibly ‘coloured’ in favour of the Executive Committee. Thus, it is for political parties, which are not in the coalition, difficult to assess what information is reliable, because political interest can play a role in this area. For that reason, councillors are also tempted to search for and use information outside the municipal organization, e.g. to see how the information ‘in society’ relates to received information from the municipal organization. The civil servants confirm that they have to be careful in providing proper information, because otherwise the system is democratic threatened.
The last factor which can be derived from the interviews refers to the ‘political use’ of information. The council clerk indicates that every fraction or individual councillor uses what he or she needs. She describes this with the following words:
“Very important is the attitude; whether you are looking for information to support the opinion you already had or whether you are looking for information which can tell you something new and
different”.
25 Case: Littenseradiel
In Littenseradiel, the factors that possibly influence the use of information by councillors are very similar to those in Leeuwarden. The interviewed councillors, who both are the financial spokesman of their party, believe that a limited group of councillors really know how to deal with the (financial) matters and therefore others may not be able to fulfil their intended role as a councillor. The factor ‘experience’ is also identified; the civil servant observes that at the start of the council term much instruction is needed to explain how to use the program budget. The councillors acknowledge that the size of the municipality also plays a role, but in a different way. They indicate that in such a small municipality ‘everything’ is politics and therefore the council steers on ‘side issues’ and details, instead of the main lines or financial figures.
The word ‘trust’ is not expressed so often in Littenseradiel as it was in Leeuwarden, but the disadvantages of the dual system used in local politics are a recurring theme. According to the councillors, the dual system also influences their information use. The facts that the Executive Committee has more information than councillors have, that coalition parties might have easier access to information and that the first loyalty of a civil servant is with the aldermen, are the themes mentioned here. The dual system is said to have created a system which in practice puts the council, although in principle the highest authority, more to the background and in this is in particular the case for opposition parties. One councillor questions the unusual situation, for example, in which the financial civil servant is present at council meetings to answer financial questions on behalf of the aldermen. The civil servant also confirms that aldermen are involved in drawing up the program budget, where after councillors are informed about it. In contrast to Leeuwarden, the council clerk believes that there is a limited ‘political’ use of information; in such a small municipality parties do actually not differ that much and there are a few “political clashes”.
It can be concluded that factors which possibly influence the use or limited use of information by councillors are largely corresponding in both municipalities.
3.How is the available information valued by councillors?
Case: Leeuwarden
The interviews made clear that people have different criteria according to which they value the information available in the planning and control documents and policy notes. Above was clarified that the councillors each have their own needs and preferences in using the available information and that several factors could have influence on their use, or limited use, of information. This finding on the extent to which information is used is probably related to the thoughts and appreciation of the available information.
26 ´information package’. However, at the same time they confirm that they have limited contact with councillors about this. Furthermore, they indicate themselves that the information provided to councillors could be regarded as “much”. There is demand for more “compact” information among councillors, according to the impressions of the civil servants. Although they have the intention to shorten the information, they also hold the opinion that a certain size is required to make information useful or clear. The council clerk considers the program budget also as “quite thick”, with often diffuse and perhaps too detailed texts. However, in her opinion much information as such is not a problem and she considers the program budget still as “accessible and readable”.
Councillors do also qualify the information as “extensive” and “much”, but they realize at the same time that it is perhaps inevitable, e.g. because of set rules and regulations. They believe that the information is still manageable if as a political group/party you focus on those parts of the budget which are characterized as relevant. Sifting through the whole program budget is referred to as “frenzy” and “maddening”. One councillor gives the opinion that there are too many financial numbers and too much a focus on those, relative to more output-and outcome-related and qualitative information:
“The municipal council should not be tempted to play the role of ‘shadow accountant’ of the controller or the Executive Committee. The council is there to set targets and to control effects. Let’s
not lose ourselves in the recalculation of numbers”.
This statement shows also one of the biggest criticisms about the information in the program budget which came to the fore in the interviews, i.e. the lack of measurable performance indicators in relation to the formulated targets. The belief is that in order to be able as a councillor to monitor the effectiveness of policy initiatives, more performance information and indicators are needed. They should in particular relate to outputs and outcomes, so that the policy results can become more clear. Although there is satisfaction about the intentions and design of the program budget, this area gives still room for improvement. The use of the annual report to control effectiveness on the long-term also has a limited value in the eyes of a councillor. This report, too, has a financial focus.
The last topic that can be derived from the interviews is the question whether the information is sufficiently adapted to the specific users, i.e. the councillors. One councillor thinks that the program budget is too complex for the “average councillor”. In addition, the issue is raised whether civil servants use too much difficult jargon, making the contents of the document too ‘technical’ for a councillor.
Case: Littenseradiel
27 program budget provides sufficient insight into finances and is in that sense accessible and clear. But in their view “you can get more out of the program budget” with respect to performance information.
The councillors believe that targets and performance indicators are described too general. This can also be observed, for example, in the program budget for 2016 with regard to the program ‘education and childcare’ (Gemeente Littenseradiel, 2015: p. 17). To exercise their controlling role and to check whether targets are really met, the councillors interviewed say they need more ‘common frames’ and concrete information in the planning and control documents and in policy notes as well. The civil servant, who draws up the program budget, confirms that there is very limited performance information included in this document. So there is room for improvement in the area of ‘what do we want to achieve’ and concrete performance indicators could possibly help in measuring outputs and outcomes. Furthermore, there are some contradicting views about whether the information is sufficiently adapted to the users between on the one hand councillors (who say ‘insufficiently fitting our needs’), and on the other hand the civil servant.
The call for more measurable performances, more quantitative output and outcome information and also more outcome-related qualitative information in the program budget, is a recurring item in the answers of the interviewees in both municipalities. Therefore it seems that in this area further improvement in the available information is desired and should receive attention, according to the various interviewees.
4.How can information better meet the councillors’ needs?
Case: Leeuwarden
The previous sections indicated many experiences of those who are affected by the use of information in the planning and control cycle and those who provide the information. Councillors and interviewees from the municipal organization also mentioned things that are going well in the process. Besides they identified areas of improvement which could be interesting for the councillors. The interviews offer various suggestions on how the information provided could better meet councillors’ needs.
28 it is difficult for the council to take a guiding role with only the now available performance indicators. Both agreed that in council meetings and the discussions there, these kind of issues do not come up for discussion, or are too detailed to handle in that setting. Councillors also like to see the consequences and effects of policy initiatives and they want to have a view on alternatives or predicted results, e.g. about the question “what happens when” making a certain policy choice or a budget cut in a specific policy program.
The idea of making all the available information more manageable and more adapted to the specific needs of councillors, creates different views. The interviewed civil servants observe that councillors could probably indicate what they consider as urgent or relevant, in order to limit the amount of information (and avoid that unnecessary information is provided). In contrast to the civil servants, the council clerk has the opinion that councillors can be better advised by the municipal organization (and the Executives) in case of a lot of information, so that they know better where to focus on. In her view, the program budget needs to have a focus on points which deserve to be debated and clarify what needs attention. The belief is that this gives guidance to the councillors and will help them to form an opinion on relevant issues. Regarding the process, the council clerk sees an important role for the civil servants to better meet councillors’ needs:
“Sometimes I say to civil servants: ‘You won’t get more of the council, then what you bring in’. As a civil servant, you can provide the council with several solutions about complex issues. As a member of
the municipal organizationyou have to prepare the discussion properly. At the moment, too often the councillors need to figure it out by themselves”.
Furthermore, to cope with the ‘trust problem’ which some councillors noticed, she thinks that civil servants could better send two different advises, i.e. alternatives, to the council. In this way, the council is forced to make an argued choice on the basis of the available information.
A last point which was commonly mentioned in the interviews, is the digital availability of information. Providing more information digitally is seen as making it more accessible; it gives councillors the opportunity to filter information to their own wishes and moreover the information is continuously available. The feeling that you have to read a complete ‘book’, i.e. the whole program budget or annual report, will probably come to an end in the near future, according to the financial civil servants. This in line with the need for and development of ‘online analysing instruments’, which make financial and policy indicators available that can be used for comparison of the own municipality with other municipalities.
Case: Littenseradiel
