Determinants of Budgetary Slack Creation: A Study in Malaysian Local Authorities

Tuan Zainun Tuan Mat*, Nur Shahirah Adilah Mohd Sairazi, Fadzlina Mohd Fahmi, Sharifah Nazatul Faiza Syed Mustapha Nazri and Sharina Tajul Urus
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Tuan Zainun Tuan Mat*: Faculty of Accountancy, Universiti Teknologi MARA UiTM Selangor, Puncak Alam Campus, Malaysia
Nur Shahirah Adilah Mohd Sairazi: Faculty of Accountancy, Universiti Teknologi MARA UiTM Selangor, Puncak Alam Campus, Malaysia
Fadzlina Mohd Fahmi: Faculty of Accountancy, Universiti Teknologi MARA UiTM Selangor, Puncak Alam Campus, Malaysia
Sharifah Nazatul Faiza Syed Mustapha Nazri: Faculty of Accountancy, Universiti Teknologi MARA UiTM Selangor, Puncak Alam Campus, Malaysia
Sharina Tajul Urus: Faculty of Accountancy, Universiti Teknologi MARA UiTM Selangor, Puncak Alam Campus, Malaysia

The Journal of Social Sciences Research, 2018, 1040-1050 Special Issue: 5

Abstract: Local authorities are responsible in allocating the resources provided by Federal Government through budget allocation process. The effectiveness and efficiency of local authorities in utilising the resources is determined by the way they manage the public funds. It is important for the local authorities to have a high degree of accountability in order to gain public trust. Managerial behavioural issues such as budgetary slack could affect the effectiveness of the budgeting process. This study aims to examine the influence of budgetary practices, specifically budget participation, budget emphasis and budget control, on the budgetary slack creation in Malaysian Local Authorities. 200 questionnaires survey were randomly distributed in January 2017 to employees that involved in budget preparation from 99 local authorities located in Peninsular Malaysia, and 109 were responded (54.5%). Hypotheses for this study were analysed using simple linear regression. Results show that budget participation, budget emphasis and budget control influence budgetary slack creation among the Malaysian local authorities. This indicates that the propensity of the subordinates to create budgetary slack increases when subordinates have influenced and involved in the budget setting as well as the use of budget in evaluating performance. High involvement and control in budgeting process, provides opportunity to manipulate the budget. The findings in this study contribute to the public sector management accounting literature in the area of budget in Malaysian local authorities. This study could assist the local authorities to enhance their budgeting system and practices.

Keywords: Accountability; Budgetary practice; Budget participation, Budget emphasis; Budget control; Budgetary slack; Local authorities (search for similar items in EconPapers)
Date: 2018
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