2022. January 12. 16:22

Focus on performance and its measurement in the public sector - The Latest 2021/2 Special Issue of the Public Finance Quarterly has been published

The focus of the performance and its measurement in the public sector. We can get to know the economic paths of Hungarian counties via comparative analysis, as well as the measurement methods of financial performance of state-owned companies in Hungary. Those interested can read more about the relative efficiency analysis of general inpatient hospitals in Hungary, as well as the effect of local government internal control systems on local government administration performance in Indonesia. Accrual accounting is also covered in this special issue.

The studies published in this issue can be viewed and downloaded here.

FOCUS – Performance and its Measurement in the Public Sector

György Kocziszky and Dóra Szendi in their study present the economic development paths of Hungarian counties via comparative analysis. In the present study, the authors, after a brief theoretical overview of economic development and path dependency, quantify the economic development of 19 Hungarian counties and the capital city using a complex index, and then examine the changes in the index between 1995 and 2019. The final part of the paper analyses the expected similarities and differences in the development paths up to 2024. The counties have followed different development paths over the last 25 years, a trend that is also reflected over the forecast horizon. The development trajectories of the counties are more sensitive to shocks than the paths of specific GDP output, due to global, macro and local shocks that occur from time to time.

Measurement and analysis of the financial performance of state-owned companies is the main topic of Krisztina Kistóth’s study. The experts of the State Audit Office of Hungary analysed financial performance measurement issues of state-owned companies (public companies) with the aim to apply the principle of performance as widely as possible during public money spending. In many respects, the same tools can be used to measure and analyze the performance of these companies as for private sector companies, however misrepresentations arising from public sector specialties must be filtered out. Therefore, an adjusted version of the financial indicators has been prepared, using corrective items specifically focusing public sector specificities. To test the adjusted indicators, the author prepared an analysis for a group of 148 public companies, the main findings of which are presented in our article. The special conditions, operation or risks of state-owned companies may require different tools and priorities in terms of ownership control. In this article, we try to form relatively homogeneous groups, portfolios - based on adjusted financial indicators- which helps the owner to treat groups of companies differently according to financial capabilities and performance. Classification into groups can draw attention to critical management factors, risks, but also strengths as well. In this way, the development of portfolios can provide a good basis for effective ownership management of companies.

Tamás Borbély, Mária Király Szikszainé and Sándor Kakas in their analysis present the accrual accounting as an untapped opportunity to measure the performance of budgetary bodies. Hungary's public accounting system underwent a significant reform in 2014. The reform meant not only a change in accounting, but also a new opportunity to support sustainable financial management and the measurement of organisational performance. In order to gather practical experience, a research was carried out by the State Audit Office of Hungary. Based on the results of the survey, accrual-based accounting was only partially integrated into the accounting profit and return calculations of individual activities, and, especially in case of smaller organizations, it did not exceed the mandatory, administrative role stipulated by law. Accrual-based accounting typically did not support the measurement of organisational performance. Further development can be carried out in terms of increasing the role of governing bodies in order to achieve target-setting, measurement and reporting along the same principles, as well as raising awareness. Moreover, in order to support organizational performance measurement, it may be necessary to develop a sectoral system of task and performance indicators, for which accrual-based accounting can become an important source of information.

In their study, Daniella Kucsma and Krisztina Varga undertake a relative efficiency analysis of general inpatient hospitals with a 600-1200 bed capacity, which play a prominent role in the Hungarian health care system. In the 2015-2019 period, particular attention will be paid to the identification of available and meaningful indicators in the sector under study. The relative effectiveness analysis (DEA) method is a suitable response to this challenge. The DEA (Data Envelopment Analysis) method defines the efficiency values (ratio) and the efficiency frontier as a linear programming task. The analysis compares the efficiency values of the decision-making units and calculates an efficiency frontier (best practice), which is used to determine an efficiency ranking. The deviations identified in the DEA model reveal the problems of inefficient units, the causes of inefficiency and the extent to which critical factors deviate from optimal. Accordingly, the information revealed by this method of analysis can provide useful guidance to organisational management on where and in what direction to make changes to improve efficiency.

Jaka Winarna, Muhtar Muhtar, Sutaryo Sutaryo and Prihatnolo Gandhi Amidjaya investigate the effect of local government internal control systems on local government administration performance. The authors use secondary data from the Ministry of Internal Affairs, Financial and Development Supervisory Agency, Indonesian Statistics Bureau, and respective local government financial statements and websites. They generate a set of panel data from 508 local governments during 2017-2019 with 1524 observations analysed with panel data regression. The analysis provides empirical evidence that control environment, risk assessment, and information and communication positively affect local government administration performance. The results provide inputs for the Financial and Development Supervisory Agency in order to continuously optimise internal control system development programs in Indonesian local governments and the Ministry of Internal Affairs to have higher enforcement of local government administration performance achievement.