New Zealand's public sector reforms have been hailed as a model of theoretical consistency and coherence. The associated financial management reforms, known internationally as new public financial management (NPFM), were world-leading although they are no longer unique. The underlying nature and intent of public sector reforms have been the subject of considerable debate internationally. Early public sector reforms openly sought privatisation, often on ideological grounds. However, in the face of gathering public opposition, public discussion of privatisation softened. NPM and NPFM have been promoted instead mainly on more pragmatic grounds such as improving public sector performance. In New Zealand, the Public Finance Act 1989 is the key legislation underpinning the financial management reforms. The Act delegates regulatory powers to the Treasury and, over time, a considerable body of secondary regulation, including accounting rules, has been developed. However, this secondary regulation, and its contribution to the success or otherwise of the public sector reforms, has not been examined in detail to date. In 1999, New Zealand s Controller and Auditor-General suggested that the financial management system erodes government departments resources and that somehow this resource erosion escapes parliamentary scrutiny. The Treasury, on the other hand, defended the foundations of the financial management system as solid, arguing that retention of the existing framework would allow further and faster progress towards improved performance and value-for-money than would be achieved by a new set of reforms. This debate prompts questions whether and, if so, how and why a financial management system, ostensibly implemented to improve the performance and accountability of the public sector, could be linked to such effects, and whether parliamentary scrutiny is indeed avoided. This thesis examines the secondary regulation and explains the development of the financial management system with the intention of answering those questions. The analysis undertaken in this thesis suggests that New Zealand's public sector financial management system fabricates the conditions under which privatisation initiatives might be accepted for pragmatic reasons. The erosion of departments financial resources is an essential mechanism in that fabrication process. As this system has developed, the time available for parliamentary scrutiny has reduced and the Controller and Auditor-General s controller function has been eroded, while the control and discretion exercised within the Treasury has increased. Arguably, these developments have helped to conceal the system s privatising intent. The thesis identifies features of the financial management system used to rationalise the financial resource-eroding processes. It also notes that if New Zealand's financial management system is no longer unique, then other NPFM systems may contain a similar combination of features.

Philosophiae Doctor - PhD / The prime aim of this thesis is to examine the link between fiscal decentralization and local financial governance in fiscally empowered woreda administrations (districts) of the Amhara region in Ethiopia. Local financial governance has been one of the reasons and arguably the crucial one that drives many countries to subscribe to fiscal decentralization. The presumption is that public finance mobilization and spending can be implemented in a more efficient, responsive, transparent and accountable manner at the local government level than at the centre. Nonetheless, empirical studies show that the linkage between fiscal decentralization and these local financial governance benefits is not automatic. Several developing countries that have tried to implement fiscal decentralization have failed to realise the promised financial governance gains largely due to design and implementation flaws. A review of the various theoretical perspectives suggest that local financial governance is not a factor of just devolution of fiscal power but also other intervening forces such as financial management system, citizen voicing mechanisms and the social and political context. It is within the framework of this theoretical argument that this study sought to investigate how the mixed and incomplete efforts of the district level fiscal decentralization program in the Amhara region has impacted on financial governance of woreda administrations. The study assesses the efficacy and role of various initiatives of the district level decentralization program of the Amhara region, such as the fiscal empowerment of woredas; financial management system reforms; citizen voicing mechanisms and political party structures and system in influencing woreda financial governance. To this end, the investigation process largely took the form of an interpretative approach employing a combination of various methods of gathering the required qualitative and quantitative data from respondents and documents in the selected four case woredas or districts. Findings on the assessment of the intergovernmental relations to measure the adequacy of devolution of fiscal power indicate that, despite the constitutional provision that affords the woredas the power to mobilize and spend public finance for the provision of various local public services, several design and implementation shortcomings have constrained woreda administrations from exercising such power effectively. As a result, the district level fiscal decentralization framework of the Amhara region appears to have features of decentralization by de-concentration rather than by devolution. Despite the extensive financial management reforms that have been undertaken, the research findings indicate that the financial management system in woreda administrations faces a range of challenges triggered largely by important design and implementation shortcomings. It is observed that the ‘getting the basics right first’ reforms in various financial management processes of woreda administrations are not only incomplete but also found to be inconsistent with each other and therefore could not serve their purpose. Furthermore, there has not been any other change in the last two decades since the initial implementation of these reforms despite such serious shortcomings. Most importantly, woreda administrations could not properly implement the techniques, methods, procedures and rules that constituted the reform process due to serious implementation problems such as the lack of manpower competency and problems associated with the lack of administrative accountability. The results of the study’s assessment regarding the practice of social accountability show that currently there is no arrangement for citizens to participate in public financial decisions and controls. In general, people have little interest in participating in the meetings organised by woreda government. Formal and informal community based organizations suffer from important capcity constraints, and the lack of strong civil society organizations to support these community based organizations makes such problems more difficult to resolve. However, local communities did indicate that they would be interested in participating in financial and budgeting processes if a number of conditions were satisfied. These included the availability of adequate and relevant information; the introduction of genuine forms of participation in which citizens were empowered; and evidence that popular participation was making a visible impact on financial decisions related to service delivery in their surroundings. The assessment of the ruling party structure and system suggests that the centralized system of the regional ruling party has created a dominant relationship between party organs at various levels so much sothat it has undermined the fiscal discretionary power of woreda administrations; blurred relationship between party and woreda financial management systems; and undermined direct voicing. Consequently, the genuine devolution of fiscal power, the effective implementation of the decentralised financial management systems, and direct participation of citizens are unlikely to be realised within the current ruling party system and structure. Moreover, the study shows that the intergovernmental relations, the implementation of financial management reforms and direct involvement of people influence each other. The evidence suggests that the effective implementation of the financial management reforms is not possible without genuine devolution of fiscal power and arrangements for the activeinvolvement of citizens. Despite these limitations and shortcomings, the research nevertheless reveals that the decentralization process has achieved some positive results, such as the expansion of access to basic services; the economic use of resources for such expansion; the mobilization of resources from local communities; and the streamlining of a number of bureaucratic processes. However, the prevalence of various financial governance challenges such as excessive budget transfers; low budget execution; uneconomical procurement; illicit spending; budget pressure; inadequate revenue collection; poor financial transparency; and compromised accountability in fiscally decentralized woreda administrations means the promised local financial governance benefits of fiscal decentralization are remain largely unrealized. The evidences in the study strongly suggest that the shortcomings in the design and implementation of intergovernmental relations, financial management system reforms, and direct voicing mechanisms areresponsible in combination with each other for these local financial governance challenges. Thus, the study concludes that local financial governance is a result of a complex network of interactions of intergovernmental relations, public financial management arrangements and social accountability mechanisms. The success of initiatives to improve local financial governance is dependent on contextual factors such as the capacity of civil society organizations and the ruling party system and structure. Therefore, while recommending further efforts of genuine devolution of power, in particular through the continuation of the financial management reform processes towards full-fledged reforms, the study contends that opening enough space for the proliferation of civil society organizations and alternative political parties will be the main priority.