Financial Supervision of Local Governments: An Organizational Challenge

There is a general consensus on the effects of bureaucratic structures on task implementation and performance. Nonetheless, there has been very little research in the field of local public finance regulation. This article analyses the question of organisational structure in the field of local public finance regulation by surveying 18 European countries. We present five organisational dimensions, which potentially relate to regulatory outputs, and analyse their relation to four fiscal indicators. Those organisational dimensions are (1) the department owning the task of fiscal oversight, (2) centralised or decentralised implementation, (3) implementation in the form of one concentrated or several deconcentrated (regionalised) administrative units, (4) involvement of audit court(s) and (5) task execution by higher local government tiers. This analysis carefully demonstrates whether fiscal performance is somewhat more difficult for some organisational structures than for others. The number of countries per dimension shows that in the field of local public finance regulation, some options are more likely than other ones. Moreover, our results indicate that those organisational categories, such as “task ownership” and the involvement of “audit courts” link to higher financial performance. These results can help practitioners at the respective government levels to reconsider given bureaucratic structures.