Measuring the Performance of Local Government Entities and Analysis of their Managers' and Personnel's Information Needs in the Context of "New Public Management"

Zarzycka, Ewelina; Michalak, Marcin Article Measuring the Performance of Local Government Entities and Analysis of their Managers' and Personnel's Information Needs in the Context of "New Public Management" Comparative Economic Research. Central and Eastern Europe Provided in Cooperation with: Institute of Economics, University of Łódź Suggested Citation: Zarzycka, Ewelina; Michalak, Marcin (2013) : Measuring the Performance of Local Government Entities and Analysis of their Managers' and Personnel's Information Needs in the Context of "New Public Management", Comparative Economic Research. Central and Eastern Europe, ISSN 2082-6737, Łodz University Press, Łodz, Vol. 16, Iss. 2, pp. 123-147, https://doi.org/10.2478/cer-2013-0015 This Version is available at: https://hdl.handle.net/10419/259150 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-nc-nd/4.0 10.2478/cer-2013-0015 EWELINA ZARZYCKA*, MARCIN MICHALAK** Measuring the Performance of Local Government Entities and Analysis of their Managers’ and Personnel’s Information Needs in the Context of New Public Management Abstract Ways to make the public sector more effective and efficient have been vigorously discussed for more than thirty years by practitioners and researchers all over the world. Public sector reforms drawing on the paradigm of an entrepreneurial and market style of management are called New Public Management (NPM). However if the concept of managing public sector entities according to the best management practices in the private sector is to be implemented and used effectively, the necessary management-aid tools must be introduced. This particularly applies to the public sector’s accounting system oriented to external reporting, to which needs to be added a management accounting subsystem with cost accounting and budgeting based on responsibility accounting and a measurement, evaluation, and performance reporting subsystem. The main research objectives of this article are the following: •to identify the management accounting methods and tools currently used by the managers of sampled local government entities (LGEs); •to identify the information needs of the LGEs’ managers and personnel related to the implementation and application of a management accounting system, and to find out what accounting methods and tools they would like to have at their disposal to improve management processes; *Ph.D., University of Łódź, , Faculty of Management, Chair of Accounting ** University of Łódź, , Faculty of Management, Chair of Accounting 124 Ewelina Zarzycka, Marcin Michalak • to evaluate the usefulness, adequacy and effectiveness of performance measurement systems used in LGEs. This article fits into the scope of world research on the implementations of the NPM concept and uses New Institutional Economy to better understand the implementation of management accounting in the public sector. 1. Introduction Ways to make the public sector more effective and efficient have been vigorously discussed, for more than thirty years, by practitioners and researchers all over the world. The continually expanding public sectors and the growing crisis affecting their guiding values have caused some countries, such as the UK (1970s), the USA (1980s), New Zealand or Australia, to introduce major reforms in this area. In planning them, the operational and management rules and practices of private sector organizations were used as a benchmark. All public sector reforms drawing on the paradigm of entrepreneurial and market style management are called New Public Management (NPM) (Pollitt 1990; Hoggett 1991; Hood 1991; Osborne, Gaebler 1992). This approach also became popular in Canada, Sweden, the Netherlands and other western European countries, although some of them failed to follow it through (e.g. Germany, Sweden). In Europe, an important advocate of the NPM concept is the European Union, which develops laws, recommendations, and exerts other forms of institutional influence on the Member States to make their public sectors more effective and efficient. The outset of the 21 st century, when the world economy is going through recurrent crises, has been particularly rich in reports and studies on management methods and management-aid tools useful for public sector entities. The special characteristics of this sector, particularly political influences, specific allocation of resources, the use of public utility rather than economic profitability as a criterion, the mandatory obligation to provide certain services, the wide range of goals pursued by both public sector entities and their stakeholders, and the diversity of tasks and functions etc., makes public management an extremely complex issue. If the concept of managing public sector entities according to the private sector’s good management practices is to be implemented and used effectively, the necessary management-aid tools must be introduced. This particularly applies to the public sector’s accounting system oriented to external reporting, to which needs to be added a management accounting subsystem with cost accounting and budgeting based on responsibility accounting and Measuring the Performance of Local Government… 125 a measurement, evaluation, and performance reporting subsystem. The last element is particularly important for ensuring that the tasks of the public sector entities as a whole and of their subdivisions are carried out with the necessary effectiveness and efficiency. The main research objectives of this article are the following: • to identify management accounting methods and tools currently used by the managers of the sampled local government entities (LGEs); • to identify the information needs of the LGEs’ managers and personnel related to the implementation and application of a management control system, and to find out what accounting methods and tools they would like to have at their disposal to improve management processes; • to evaluate the usefulness, adequacy and effectiveness of performance measurement systems used in LGEs in Poland, as well as the degree of the systems’ compliance with the applicable laws in the context of the assumptions concerning management control systems. This article is one of the first articles in Poland dealing with this subject. It also fits into the scope of world research on the implementations of the NPM concept. T.Randma-Liiv (2008) argues that in Western Europe management systems of public sectors have evolved from the traditional Weberian bureaucratic model to NPM, owing to improvements made to the systems’ rules and modes of operation, which drew on the management model used in the private sector. In the meantime, the Central and Eastern European countries (CEECs) were busy modifying their economic systems by replacing the centralcommand model with a market model. This process resulted in the complete reorganization of the rules governing and determining the functioning of their public sectors, as well as laying the foundations for development of the private sector, which western countries had relied on as a benchmark in their reformations of various public sectors. The institutional differences between the functioning and reforms of public sectors in Western Europe and CEECs brought about a situation whereby the NPM systems implemented in the public sectors of the respective regions were not fully comparable until late 1990s. The main factors explaining why the CEECs followed a different course of reforms are the following: 1) the existence of newly established, and therefore constantly evolving, private sectors; 2) the post-communist model of the public sector having to be developed from scratch; 3) the creation of principles for a democratic state and citizen’s freedoms, including property rights (RandmaLiiv 2008). As the development of public sector rules in the 1990s was somewhat experimental and spontaneous (Agh 2003; Verheijen 2003), the main aim of the subsequent reforms was to remove obvious inefficiencies, with the improvement of the sector’s effectiveness and efficiency having to wait its turn. 126 Ewelina Zarzycka, Marcin Michalak Quite naturally, the fledgling private sector in the CEECs could not serve as a benchmarkfor public sector reforms, particularly because citizens themselves were only starting to learn about their privileges in a democracy. For these reasons, the authors of this article focused on the NPM concept rather than the public governance concept prevailing today (Kernaghan, Marson, Borins 2000; Rudolf 2010). 2. The characteristics of New Public Management The concept of New Public Management replaces the traditional (Weberian) bureaucratic model of managing the public administration and the public sector as a whole with an entrepreneurial model, and promotes a possibly extensive use in the public sector of management rules and models successfully employed in private businesses. It is postulated that in order to create value for citizens, public sector entities must be effective (to act so as to achieve their statutory objectives and fulfil stakeholders’ expectations) and efficient (to deliver what is expected of them while consuming as few resources as possible, or to generate the highest value for their beneficiaries at a given level of resources). Studies on New Public Management are of an interdisciplinary character. They focus on areas such as public administration, accounting, economics, and management. Applied studies and practical activities within New Public Management are mainly undertaken to transfer private sector concepts, solutions and tools (budgeting, performance measurement, risk analysis, etc.) to the public sector. The authors of this article have developed the following classification of NPM characteristics, based on those which are most frequently mentioned in the literature (Hood 1991, pp. 4,5; Polidano 1999; OECD 1995; Zawicki 2011, p. 34): 1. related to NPM culture: a. emphasis on goals and the mission instead of simple compliance with the rules; b. market mechanisms overriding bureaucratic mechanisms; c. encouragement to public sector entities to compete; d. focus on customers and on providing them with value added; 2. concerning consistency between a management system and New Public Management: a. decentralization of powers down to particular entities in the public sector; b. entrepreneurial style of management; c. a greater role given to performance control; Measuring the Performance of Local Government… 127 d. measurement of performance and concentration on outputs rather than inputs; e. transparency of standards and indicators of performance; f. more discipline and more economic use of resources. According to Pollitt and Bouckaert, the transition to NPM involves changes in both structures and process (2004, p. 8). In New Public Management, an entrepreneurial style of management and resourcefulness replaces bureaucracy in order to improve functional efficiency and effectiveness. O. E. Hughes (1994) indicates that the difference between a process of administration (bureaucracy) and an entrepreneurial approach (management) is that “administration is about following instructions, whereas management means achievement”. However, the transition of public sector entities from administration to management requires major adjustments in their performance measurement and reporting systems, as well as a shift in the control mechanisms from “passive compliance with procedures” to “active control.” An important aspect of the decentralisation of powers and of granting greater flexibility of action to public sector managers is personal accountability for effectiveness. E. Ferlie, L. Ashburnen, L. Fitzgerald, A. Pettigrew (1996) have described public sector reforms towards NPM in terms of four models: focus on value, organizational downsizing and decentralisation of management, pursuit of excellence, and orientation to public services. The authors of this article have established that Polish reforms have the characteristics of the first model, typical of Western European reforms of the 1980s, and some of the second model. 3. Management control and management accounting in the Polish public sector The major source of laws on management control systems in the Polish public sector is the Public Finance Act (2009). In addition to supporting management processes in public sector entities, its instruments intend to make the entities more effective and efficient, to ensure that they are focused on their goals (including the long-term goals), and to make their managers more accountable. The main instruments are management control, performance budgeting, and internal audit. For the instruments to function properly, consistently and in an integrated manner, the information needs of managers and personnel in public sector entities must be recognised and appropriate performance measurement and reporting systems implemented. This means that management accounting subsystems must be added to the existing financial accounting systems. 128 Ewelina Zarzycka, Marcin Michalak The management control system which was introduced into the Polish public sector in 2009 replaced the financial control system (with less stringent accountability standards) which had been in use since 1998. The new system defines management control as all measures allowing objectives and tasks to be fulfilled in a lawful, effective, economic, and timely manner (Public Finance Act, 2009, par. 68). The main purpose of management control is to ensure that actions comply with the relevant laws and internal procedures, to boost the effectiveness and efficiency of public sector entities, to protect resources, to streamline information and increase the reliability of reporting, and to manage risks. In 2009,the Minister of Finance issued management control implementation and application standards for the public finance sector (The Finance Ministry Statement no. 23, 2009). These standards aim to ensure that the management control model is homogenous and coherent across the sector, consistent with international standards, and used to create, evaluate and improve management control systems. The standards are grouped into five categories, each corresponding to a particular component of management control: internal environment, objectives and risk management, control mechanisms, information and communication, and monitoring and evaluation. The standards have been developed based on the COSO concept (The Committee of Sponsoring Organizations of the Treadway Commission). Information and communication have been given a very special role as an element of a management control, because the respective standards require that both managers and personnel in public sector entities are provided with access to the information they need to do their work, and that the communication system in place not only distributes information, but also ensures its comprehensibility to the recipients. It is equally important that the entities have efficient information and communication systems allowing them to manage their processes. The standards address three areas related to information: current information, internal communication, and external communication. Both managers and personnel in the public sector need to have timely access to appropriately formatted, vital, and reliable data to fulfil their goals and tasks. A public sector entity provided with information on a current basis may not only remove inefficiencies as soon as they are spotted, but also strengthen decision-making skills and the system of motivation. The structure of the information and internal communication system in a public sector entity should correspond to its setup. With regard to external communication, its system should be configured so that the entity can efficiently exchange informationwith those external Measuring the Performance of Local Government… 129 institutions that may have an effect on the fulfilment of its goals and tasks. Above all, external communication must ensure that information flows between subordinate and superior organizations. It is also important for the public sector entities to be able to communicate with various external bodies, regardless of their organizational form and legal status. The management control system must be monitored and evaluated on an on-going basis. Effective monitoring ensures a flow of information regarding the performance of the control mechanisms. Information must be available early enough to enable the identified problems to be solved as they arise and countermeasures to be applied. The management control system enacted for the public finance sector has two levels. The basic level is public sector entities (level I). The responsibility for management control is vested in their managers. At the level of the central administration bodies and local governments, management control must be exercised by the branches of government administration and local government entities (level II). Because management control is mandatory the manager in charge of the entity must implement effective organizational solutions and procedures and make sure that they are adhered to. At the same time, though, the manager is free to choose any solutions he or she finds suitable, including the types of indicators showing performance and achievement. For the implementation and operation of a management control system to be successful and effective, the scope of traditional financial accounting must be extended to include some elements of management accounting, particularly those concerning budgeting, costing, and measurement and evaluation of performance. It is not possible that the managers of public sector entities can make decisions and manage them efficiently without access to the same information that businesses obtain from their management accounting systems. 4. An overview of empirical studies on management accounting in the public sector Management accounting tools and methods used in the public sector have been studied on many occasions all over the world, because management accounting supports public entity management, provides their managers with decision-making information, and allows public funds to be spent effectively and economically. 130 Ewelina Zarzycka, Marcin Michalak Studies usually concentrate on performance measurement and management issues, as well as on the use of information generated by management accounting systems for management purposes. Among the research subjects attracting the interest of international authors and researchers, the highest ranking are the choice of financial and non-financial measures of performance, including the use of Balanced Scorecard in the public sector (see, e.g. Lee 2008; Guthrie 1994, Spiegelman 2001),and the usefulness and quality of performance reporting systems in the public sector organizations(e.g. Carlin, Guthrie 2001, Walker 1995, Pettersen 2001). Relatively high attention is also given to changes in the performance measurement concept under the influence of NPM (Jansen 2008, Hyndman, McGeough 2006) and to the public sector’s use of methods of relative performance measurement, such as rankings or benchmarking (Ball 2001, Johansson, Siverbo 2009). The studies on public sector’s management accounting methods and tools give a special role to institutional theory, because no other theory is better at explaining the influence of institutional, social, and political factors in this area (Modell 2009, p. 267). Of particular interest are those studies analysing changes in entities’ management accounting (e.g.Bogt 2008) and in its practices related to performance measurement caused by the implementation of NPM and other improvements, which treat new regulations as the driver of change (Sharifi, Bovaird, 1995, Cavalluzzo, Ittner, 2004).S. Brignall and S. Modell (2000) have used institutional theory to identify the factors which determine successful implementation of a comprehensive performance measurement and management system in the public sector in the NPM environment. 5. The theoretical basis of NPM studies: the New Institutional Economy (NIE) An important theoretical underpinning of New Public Management is the New Institutional Economy (NIE) 1 , which makes use of public choice theory, agency theory, property rights theory, and transaction cost theory. NIE has emerged as a response to the “institutional conglomerate” present in the neoclassical economics, particularly to its treatment of formal and informal institutions as a sort of “black hole”. The advocates of NIE argue that 1 Institutional economy appeared over 100 years ago in the USA. It was created by Thorstein Veblen, Wesley C. Mitchell and John R. Commons, who were the first to analyse the influence of institutions and institutional changes on the working of the economy. Although its importance started to fade after some years, in the early 1960s it reappeared as the New Institutional Economy (Landreth, Colander, 1998). Measuring the Performance of Local Government… 137 This limited interest in the non-financial indicators may be partly due to their poor selection or their ineffective use in the surveyed LGEs This conclusion is based on the results provided in Table 8. Considering the purpose of this study, its part devoted to performance measurement systems and indicators used in the surveyed LGE was important. In the first stage, the entities were investigated to determine whether such solutions were present. The results showed that 29.54% of them were found to use financial or non-financial indicators of performance (see Table 3). Table 3. The use of performance measures in the investigated LGEs Does your LGE use financial or non-financial indicators of performance? % Yes, the indicators are used, but they measure the overall performance of the entity and not of its internal subdivisions. 18.18 Yes, the indicators are used and they show the overall performance of the entity as well as of its subdivisions. 11.36 Indicators are not used. 34.09 I don’t know if any indicators of performance are used. 36.36 Total 100.00 Source: results of the authors’ research. As can be seen, 18.18% of the entities applied the indicators with the exclusive purpose of measuring the performance of the entire organization, without cascading them down to lower levels. This limited application of performance measurement systems, together with the aforementioned prevalence of traditional budgeting systems (without feedback) as LGEs’ main accounting tool, seems to prove that coercive isomorphism (legislation) strongly determines management processes in the entities, including the range and type of information they use for management and task performance purposes and their ways of accounting for effective use of public resources. It may also be an attempt at reducing the negative impacts of the first dimension of agency theory mentioned by the authors. Only 11.36% of respondents stated that their performance measurement indicators were applied to both the entire organization and its subdivisions, thus contributing to greater decentralisation, wider use of the entrepreneurial style of management, and motivating people to work with greater effectiveness and efficiency. It is noteworthy that in the opinion of more than 34% of respondents their LGEs did not use performance indicators and that another 36% did not know if performance measurement systems were used or not. It is probable that some respondents in the second group represented LGEs where performance indicators were either not used or served the purpose of overall performance evaluation, i.e. without being cascaded down to the lower organizational levels 138 Ewelina Zarzycka, Marcin Michalak and without ensuring that the non-managerial personnel has access to this information too. The data in Table 4 shows that around 80% of respondents were of the opinion that their entities did not use performance indicator systems, or did so to a very limited extent, separately from the motivation systems. The authors consider this another proof of strong institutional effects on LGEs’ management systems. It is, therefore, justified to conclude that the entities surveyed continue to foster a culture of administration instead of implementing the entrepreneurial style of management inherent in the concept of New Public Management. This conclusion coincides with that reached by Hyndman and McGeough (2006), according to whom this type of situation prevents those in charge from being held accountable for their actions and hampers management in the organization, owing to the lack of necessary information and reliable performance data. The infrequent use of performance indicators in managing an LGE was exposed by the analysis of relationships between performance measurement systems and motivation systems conducted among respondents from organizations measuring performance (Table 4). Table 4. Indicators of performance and the motivation system In your entity (subdivision), performance measures: % are part of the motivation system, and their degree of fulfillment determines employee promotion or the amount of compensation 10.53 are formally part of the motivation system, but the degree of their fulfillment does not affect the amount of compensation (e.g. bonuses) or promotion, 10.53 have only formal status and remain outside the motivation system. 78.95 Total 100.00 Source: results of the authors’ research. Only 10.53% of these respondents (ca. 4% of the total sample) stated that performance measurement systems were coupled to the motivation system in their entities and thereby influenced employee compensation or a career path. This suggests that these are the only cases when a real management control system allowing an LGE to be managed effectively and efficiently was actually functioning. Another 10.53% indicated that their entities’ performance measurement systems were only formally related to the motivation systems, having no measurable influence on the evaluation of employees’ effectiveness and efficiency. Almost 79% of respondents in entities using performance indicators pointed to their purely formal character and complete separation from the motivation system. This means that a total of around 90% of performance Measuring the Performance of Local Government… 139 indicator systems are superficial and that they were created only to meet institutional requirements. They also represent an attempt to mitigate the adverse impacts of the first dimension of agency theory. As far as NPM analysis is concerned, these systems neither make the public sector more effective and efficient, nor do they enable better use of the available resources. These conclusions confirm those reached by Carlin and Guthriee (2001) who point to discrepancies between organizations’ performance management practices, the expectations of its supervisory authorities, and the laws in force. The degree to which a performance measurement system is accepted and its capacity for motivating employees are greatly dependent on the approach used to construct its indicators (top-bottom/participatory, SMART, etc.). Table 5. Approaches to constructing performance indicators The performance indicators in your entity were: % imposed by the law in force or superior authorities/institutions without any involvement of its personnel / managers 50.00 developed by the senior management without any involvement of the personnel 44.44 developed by the senior management in cooperation with the personnel 5.56 developed by an external firm 0.00 Total 100.00 Source: results of the authors’ research. In the opinion of 50% of respondents from LGEs operating performance measurement systems, the performance indicators were imposed by the law or superior authorities, without any contribution from those to be evaluated by them. Another 44.4% stated that the indicators had been developed by the senior management. Only 5.6% indicated that the process used to develop indicators had been participatory, i.e. involving those directly interested. None of the sampled organizations requested an external firm to provide it with a performance measurement system. The fact that the personnel in 94% of LGEs did not participate in developing their entities’ performance management systems (Table 5) and that the system was run independently of the motivation system (Table 2) suggests that public sector entities are basically devoid of real performance measurement systems. The above data can be supplemented with the results of the investigation aimed at identifying the ways of establishing the target values of indicators. Almost 46% of respondents in entities operating with performance measurement systems answered that the targets had been imposed by the law or superior authorities. According to 33.3% of them, the targets were determined by the 140 Ewelina Zarzycka, Marcin Michalak LGE management. In only slightly above 4% of LGEs were the targets established in cooperation with the employees assigned the task of achieving them. Table 6. Methods of setting the target values of performance indicators The target values of performance indicators in your LGE were: % imposed by the law in force or external authorities 45.83 imposed by the senior management 33.33 negotiated between the senior management and the entities’ subdivisions (employees) to be evaluated by them 4.17 I don’t know who set them 16.67 Total 100.00 Source: results of the authors’ research. A factor determining the perception of the quality of an LGE’s performance measurement system is the target values of the implemented indicators. Table 7. Evaluation of the target values of performance indicators Opinions on the target values of indicators were: % very demanding and impossible to fulfil 5.26 very demanding but achievable 10.53 moderately demanding 26.32 relatively easy to fulfil, with a very weak efficiency-boosting effect 10.53 no opinion 47.37 Total 100.00 Source: results of the authors’ research. According to the survey, over 47% of respondents considered their performance indicators to be realistic (i.e. achievable). Only 5.2% answered that they were impossible to fulfil. Another 27% described them as only moderately demanding. Therefore, one may presume the indicators have a small effect on making LGEs’ management systems more effective and efficient. Additionally, a meaningful share of the respondents (47%) could not tell how difficult their indicators were. This means that the indicators have no bearing on the motivation systems, and consequently fail to meet the requirements of a management control system as defined by the public finance law. The autocratic approach to defining the types as well as the targets of indicators that was revealed in the survey has an effect on how staff perceives the quality of their performance measurement systems (Table 8). Measuring the Performance of Local Government… 141 Table 8. Assessment of LGEs’ performance indicators What is your opinion on the performance indicators in your entity? % The indicators are very well defined, because their values really show changes in my entity’s performance 0.00 The indicators are defined quite well, because their values approximate changes in my entity’s performance 20.00 The indicators are not chosen well, because in many cases their fulfillment does not depend on the performance of my entity, but on the achievements of other subdivisions 13.33 The indicators are inappropriate, because they do not show the performance of my entity at all 66.67 Total 100.00 Source: results of the authors’ research. According to almost 67% of respondents, their entities’ performance indicators were incorrect because they completely failed to show the results of their activity. For another 13% their systems were dysfunctional, because indicator fulfilment depended on factors outside the evaluated person’s control. This situation defies SMART’s basic rules for creating indicators, which should quantify only those outputs that the person being evaluated can control. None of the respondents was of the opinion that their entities’ performance indicator systems could capture changes in their performance, thereby revealing the low usefulness and quality of the systems that LGE use to report on their performance (e.g. Carlin, Guthrie 2001, Walker 1995). The quality of improvements made to management accounting and performance management systems was also evaluated by the respondents based on the benefits they expected (Table 9). Table 9. Analysis of benefits expected from the implementation of accounting management tools and methods Benefits expected from the implementation of accounting management methods and tools % Better control and lower costs 50.00 Better quality of services 40.91 Better-motivated personnel 25.00 More efficient personnel 20.45 Higher credibility of the institution 20.45 Others 0.00 *Not that the respondents could check more than one answer. Source: results of the authors’ research. 142 Ewelina Zarzycka, Marcin Michalak The expected benefits that the respondents mentioned the most frequently were better control and lower costs (50%) and higher quality of services (41%). The first type of benefits solidifies the financial approach to measuring LGE performance. While confirming the outcomes of Lee’s study (2008), the relatively large share of respondents expecting the quality of services to be higher is inconsistent with their weak interest in financial indicators. From the perspective of a performance measurement system, the important benefits are the stronger motivation (25%) and increased efficiency (20.45%) of employees. The survey data shows, though, that both the existing and expected solutions within management accounting and performance measurement weakly improve operational effectiveness and efficiency in LGEs. The period necessary for management control to yield the intended results is strongly determined by the barriers to its implementation. According to the respondents, the major barriers to introducing new solutions into their LGEs’ performance measurement and information systems were lack of time (55%) and lack of necessary knowledge (30%). These and other obstacles are rated in Table 10. Table 10. Barriers impeding the implementation of management accounting tools and methods Barriers impeding the implementation of management accounting tools and methods % Lack of time 54.55 Lack of knowledge 29.55 Lack of funds 22.73 Impracticality 11.36 Others 0.00 *Note that respondents could check more than one answer. Source: results of the authors’ research. 7. Conclusions The results of the survey of Polish LGEs’ performance measurement systems allowed its authors to make a preliminary assessment of their compliance with the management control standards (Table 11). It was found that performance measurement systems in the LGEs surveyed were determined by strong institutional influences affecting their management systems. They were not useful, neither for managers nor for lowerranking employees, and in addition fail to meet the requirements of the New Measuring the Performance of Local Government… 143 Public Management concept. Polish LGEs have not switched their control mechanisms from “passive compliance with procedures” to “active control.” The above survey is the first step towards identifying the information needs of public sector employees and the degree of NMP implementation. It will be followed by another questionnaire survey with a sample extended to other public sector entities in Poland, and a by comparative study on CEECs, the outcomes of which will be juxtaposed with those obtained by Western European authors. Table 11. Management control standards, purposes, and levels of fulfillment Standard Purpose Level of fulfilment Internal environment Regulates entities’ management systems and their setup. Its elements are integrity and ethical norms, and professional competencies of managers and personnel (the required level of knowledge, skills and experience), the scope of duties, authority and responsibility assigned to particular subdivisions. Low. The method of setting up a performance measurement system, the strength of the systems’ relationship with the motivation system and the actual access to feedback on LGE achievements show that the entities’ performance measurement systems are poorly developed. Objectives and risk management Describes tasks to be fulfilled and their monitoring, identification of risks, risk analysis, risk handling and countermeasures. Low. The research has found a very weak connection between LGEs’ objectives and their performance measurement systems, which significantly reduces LGE capability of monitoring and managing performance and risks. Control mechanisms Requires LGEs to limit particular risks by documenting their control systems, to supervise tasks so that they are performed economically and effectively, to ensure the continuity of operation, and to protect resources. Low. There are significant gaps between the actual performance measurement practices in LGEs, the expectations of their stakeholders, particularly of their supervisory authorities, and the laws introduced several years earlier. Information and communication Requires that LGE personnel have access to the necessary information and that an effective system of internal and external communication is functional, ensuring the smooth flow of information and its correct understanding by the recipients. Low. Information and internal communication systems are insufficiently developed. There is little or no feedback on the actual achievements of LGEs, and low opinions of LGEs’ performance indicators (Table 6). 144 Ewelina Zarzycka, Marcin Michalak Monitoring and evaluation Defines how effective a control system and its components should be to solve the problems which appear Low. 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