e-Government process andincentives for online public

financial informationCarmen Caba Perez

Department of Business Management,Faculty of Economics and Business Studies, University of Almeria,

Almeria, Spain, and

Manuel Pedro Rodrıguez Bolıvar and Antonio M. Lopez HernandezDepartment of Accounting and Finance,

Faculty of Economics and Business Studies, University of Granada,Granada, Spain

Abstract

Purpose – The aim of this paper is to examine the extent of financial information made available bypublic administrations on their web sites and to discover whether this communications policy isinfluenced by the context in which the public entity operates.

Design/methodology/approach – The study took as its reference the prior literature anddistinguished three dimensions – information content, qualitative characteristics of information andaccessibility – which were converted into a disclosure index that was used to assess government websites. A multivariable linear regression analysis was performed in search of a relationship betweenseven external factors and the provision of public financial information online.

Findings – The empirical research revealed that the sample municipalities were not fully aware ofthe potential importance of the internet in enabling the achievement of e-democracy initiatives as a toolof new public management. The factors previously found to be important in paper-based reportingseem to have no influence on the public disclosure of financial information on the internet. Only thecost of debt and access to the internet in households seem to be relevant factors in the degree offinancial information transparency achieved via the internet.

Practical implications – The good practices by greater online public financial transparency couldimprove the image of governments and the confidence of citizens.

Originality/value – This paper tries to encourage a benchmarking process disseminating bestpractices in online government financial information and identifying the key variables that promotethis process.

Keywords Democracy, Government, Incentives (psychology), Best practice, Online operations, Spain

Paper type Research paper

IntroductionCitizens are increasingly aware of the need to endow public sector bodies with effective,efficient management systems in order to rationalize the use of financial resources andimprove the performance of public services. Thus, more information transparency is

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1468-4527.htm

This study has been carried out with the financial support of the Spanish National R&D Planthrough research project SEJ2007-67441.

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Refereed article received26 July 2007

Approved for publication6 February 2008

Online Information ReviewVol. 32 No. 3, 2008

pp. 379-400q Emerald Group Publishing Limited

1468-4527DOI 10.1108/14684520810889682

required in governmental financial affairs so that government accountability can befacilitated and citizens apprised of decision-making processes.

Over the last few years, numerous countries have implemented changes in their publicadministration management called new public management (NPM). NPM emphasisesmanagement responsibility and continuous improvement in public administration, and isbased on three fundamental pillars (Pollit, 1990) – the accomplishment of a stable financialbalance, the search for quality in service provision and higher transparency ofmanagement and information.

Under NPM it is increasingly recognised that good governance in publicadministration requires transparent and publicly accountable institutions. This needhas led public administrations to search for tools which could be adopted from thebusiness sphere to enable them to provide greater transparency (Bonson et al., 2006).

The business sector has employed new information and communication technologies(ICT) to make financial information more transparent. Public administrations couldadopt these new technologies to meet the objectives of NPM, thus meeting socialdemands efficiently and effectively (Welch and Hinnant, 2002). These technologies notonly enable more efficient and effective public management, but also management thatis more transparent, democratic, participative and responsive to social needs. ICT isbecoming an increasingly important means of improving access to government servicesand information, thus improving accountability. This process is called e-government.

Many public administrations are using ICT to offer both the digitalisation of publicservices and greater economic transparency, allowing users free, easy and appropriateaccess to fiscal and economic information on the management of public finances.

In light of the multiple possibilities of new technologies this paper focuses on theinternet, one of the tools most widely used by the public, and on online access togovernment financial information (Borins, 2002). Use of the internet is expected toresult in government services being made directly and easily accessible to the public,meaning information will be more widely disseminated and of greater public use.

As a traditional way of meeting citizens’ demand for accountability, the disclosureof public sector financial information has helped inform society about public sectoractivities and their contribution to social and economic development. The availabilityof such government financial information means the public can continually assessgovernment agencies. The financial accountability of government and its response tothe public demand for information and services are thus a contribution to governmentopenness.

This research focuses on e-democracy and the role that new technologies canplay in its fulfilment, specifically, on the transparency of government information.In particular, this paper analyses governmental financial disclosure on the web as ameans of assessing government financial accountability and determines some keyvariables that could play a role in government financial disclosure on the internet.

Our contribution to the literature on governmental financial disclosure is threefold.First, this paper provides an overview of the e-government process, with particularemphasis on e-democracy, in relation to accountability and the role that newtechnologies can play in the disclosure of government financial information. Second,we propose a scoring system for the analysis of government financial disclosure on theinternet. This could encourage a benchmarking process among public administrations,as well as identifying and disseminating best practices. Finally, we analyse whether

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key variables in the paper-based reporting of government financial information mayalso play a key role in government financial disclosure on the internet.

e-Government, e-democracy and information disclosuree-Government has attracted increasing attention from both the academic communityand the public sector. Broadly speaking, e-government has five main aspects:interaction among government agencies, web-based service delivery, e-commerce,digital democracy for more transparent accountability of government, and e-finance(Moon, 2002; Wang and Rubin, 2004). One of the main concerns of e-government is thelegitimacy of the state and its relationship with citizens and the rule of law, togetherwith the spheres of e-democracy and e-governance (Brown, 2005).

Traditionally, the relationship between government and citizens has beenconsidered under principal-agent theory, which has been employed extensively inpublic administration to examine the problems associated with management andadministration in a decentralised environment (Thompson, 1998). The problems that arisein the principal-agent relationship are inherently information related, but they are notnecessarily intransigent (Alvarez and Hall, 2006). Thus, under principal-agent theoryefforts have been made to identify the incentives for disclosure in the public sector (Fisheret al., 2005). Some studies have examined only factors pertaining to the financial sector(Gang, 1988), while others have also considered factors relating to the social, political andadministrative spheres (Luder, 1992). Although the variables examined in these studieshave differed widely, Luder (1992) grouped them into four broad categories: politicalincentives, social incentives, institutional or administrative incentives, and economic orfinancial incentives.

Under these four categories various incentives have been examined in prior studies thatseek to explain the paper-based reporting of better public financial information. Thus,under political incentives, political competition (Hartung, 1992; Baber, 1983; Baber andSen, 1984) and political culture (Luder, 1992) have been examined. Under social incentives,the socio-economic level (Ingram, 1984; Chan and Rubin, 1987), voters’ education level(Ingram, 1984), population size (Robbins and Austin, 1986; Evans and Patton, 1987), theinfluence of regional culture on the dissemination of public financial information (Godfreyet al., 2000), the predominant doctrine (Pallot, 1996), and the press and public media(Zimmerman, 1977) have been identified as the main factors influencing the agencyrelationship between voters and politicians. Under institutional or administrativeincentives, the complexity or form of local government and monitoring incentives (Ingramand de Jong, 1987), the size of government (Baber and Sen, 1984) and internal agency staffcharacteristics (Eschendelfer, 2004) have attracted a great deal of attention amongresearchers. Finally, under economic or financial incentives, the debt or cost of debt (Goreet al., 2004), the state/regional transfer of funds to municipal administrations (Ingram,1984) and state/municipal wealth or fiscal pressure (Luder, 1992) have been highlighted.

The idea underpinning these studies is that by reporting to the public-at-large onagency activities, government agencies contribute to achieving an informed citizenry,which is an essential foundation of any democracy. Indeed, the level of democracy andcultural legacies have been shown to be key determinants of the openness ofe-governments (Katchanovski and La Porte, 2005).

National legislatures have addressed information technology and e-governmentperformance requirements to promote the use of new technologies as the preferred media

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for their relationship with citizens. Thus, various US laws, including the PaperworkReduction Act, the Computer Security Act, the Clinger-Cohen Act, the GovernmentInformation Security Reform Act and the e-Government Act, provide a powerfulframework for developing and fully integrating information such as agencies’ missionsand strategic priorities, the results-oriented performance goals that flow from thosepriorities and performance data showing the level of goal achievement (Mullen, 2005).

In the case of Spain, recent legislation has promoted the modernisation of Spanishlocal governments by the implementation of new technologies. Law No. 34/2002, onservices for the information society and electronic commerce, enables citizens to gainaccess to government information, and Law No. 57/2003, on the modernisation of localgovernment, promotes the use of new technologies in order to:

. enhance participation and communication with citizens;

. perform administrative acts;

. upload the basic legislation; and

. enhance interaction with the government.

e-Democracy is one of the main objectives underlying the information policiesintroduced in the above legislation, together with the introduction of new technologiesinto the field of government. Numerous studies (King, 2006; La Porte et al., 2002) havehighlighted the importance of the use of new technologies to enhance e-democracy.This reform involves a new form of governance of society, entailing a new kind ofinteraction between governments, citizens, the private sector and communityorganisations (Snellen, 2002). It also involves a new sharing of powers among thevarious internal and external players (Charih and Robert, 2004). e-Democracy hasarisen in the context of growing public concern about openness and accountability ofgovernment and politicians (King, 2006).

A central e-democracy initiative is to enhance financial accountability, which, broadlyspeaking, concerns keeping citizens informed about a government’s financial position,financial performance, service effort and accomplishment (Torres et al., 2006). Indeed,accountability information has become a norm and is often focused on financialaccountability (Wang, 2002), leaving policies and evaluation of their societal impact aside(United Nations, 2003). New technologies could improve government responsiveness andempower individual citizens (Ward, 1996) by communicating government information toimprove democratic governance (King, 2006), because citizens can only make effectivedecisions if they can evaluate the information about government (Jho, 2005). In fact,although the three main reasons for citizens’ visits to government web sites are e-commerce,e-democracy and e-research (Clift, 2002), the leading reason in the USA and Canada for suchweb site visits is to obtain information regarding income tax (Borins, 2002).

Although there has been little systematic empirical analysis of the extent to whichgovernmental use of technology provides information and interactive capabilities thatmight meaningfully improve governance (Musso et al., 2000), citizens are generallysatisfied with the electronic provision of information (transparency) (Welch et al., 2005).Nonetheless, most government web sites lack the “interactive quality crucial to othercitizen-initiated contacts” (Thomas and Streib, 2003, p. 83).

The governmental response to public demands for information and services is thusa contribution to government openness and a measure of government accountability

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(La Porte et al., 2002), and the response often involves public policy (Thomas andStreib, 2005). Nonetheless, numerous studies have concluded that politics on theinternet is simply politics as usual because easier access to information does not appearto lead to greater participation (Davis, 1999). e-Government also brings with it risks tocivilian society through creating a digital divide that increases the disadvantage ofalready disadvantaged citizens (Dugdale et al., 2005).

In view of the preceding comments this paper investigates the transparency of theinformation process within e-democracy and as a part of the NPM approach that hasbeen implemented on a municipal level, together with some key variables that couldplay a role in government financial disclosure on the internet. To this end, we carriedout an empirical study of municipal governments in Spain.

MethodologyAlthough the financial information being produced by public entities is improvingsteadily (Bac, 1996), the difficulty encountered by users (i.e. citizens) in accessing thisinformation has been made apparent on many occasions (Tayib et al., 1999). In recentyears, international organisations such as the OECD (2001) have expressed the wishthat all the public financial information that is recommended to be produced should beavailable to the general public, so that the desired transparency may be attained,stating that “This includes the availability of all reports free of charge on the internet.”Thus, the disclosure of financial information on the internet could improve thedissemination of this type of information to different users.

However, the disclosure of financial information could be influenced by the contextin which this takes place (Debreceny et al., 2002; Fisher et al., 2005), so it wouldbe useful to identify the possible influence of certain environmental factors on thequantity and type of financial disclosure made on the internet.

This gives rise to the following two questions:

(1) Is the online transparency of the financial-information process, as a part of theNPM approach, is being taken into account at the municipal level?

(2) Might the online transparency of the financial-information process, as a part ofthe NPM approach, at the municipal level be affected by given factors withinthe socio-economic and administrative context in which this process takesplace?

Methodology to analyse the disclosure of public financial informationon the internetTo analyse the transparency of municipal financial information on the internet, wepropose the use of a disclosure index (DI). For public entities, particularly in the field ofpublic financial information disclosure, professional guidelines have not yet beendeveloped on the content they provide through the internet. In selecting thecomponents of the DI, we took into account prior research aimed at creating aharmonised framework for the structure of financial information in the private sector(IASC, 1999; FASB, 2000) and research papers that have sought to measure the level ofinformation disclosed by companies (Ashbaugh et al., 1999; Hedlin, 1999) In addition,we considered the items used for analysing the quality of the public financialinformation that is made available (Ingram, 1984; Hartung, 1992).

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This DI was composed of various items grouped into three sections. Theabove-mentioned studies considered not only practices related to the financialinformation that web sites should include (classified as rapt) but also the characteristicsof the contents included (rapc), and the design of the web site (rapn) in order to makefinancial information more accessible for users (Table I).

To score these items, we opted to assign an identical weighting of six points to eachsection (Hartung, 1992; Ingram, 1984), even if the sub-sections contained differentnumbers of items (Table I).

The municipal online financial information DI is obtained by adding the itemsincluded in each of the three sections:

DI ¼Xl

i¼1

rapt þXm

j¼1

rapc þXp

k¼1

rapn

where rapt, rapc, rapn, is the value assigned to each item included for the informationcontent, characteristics and accessibility, respectively, to be scored if the localadministration includes the rapi recommended element, practice or characteristic on itsweb site. If this item does not appear, it is assigned the value 0.

Methodology to analyse the incentives for disclosureTo examine the incentives for municipalities to disclose public financial information onthe web, we reviewed the literature describing the factors leading to more and betterdisclosure of public sector information. These studies are mainly based on the agencyand incentive theory. Indeed, the agency relationships in the public sector provideincentives to public sector managers to voluntarily disclose information that allowsmonitoring of their actions. This way, elected politicians supply information to showthat they are honouring pre-election promises and their incentives to do so increase aspolitical competition increases (Baber, 1983). In addition, prior research shows anassociation between some attributes of the local government, such as the form(Zimmerman, 1977; Evans and Patton, 1987), the size (Ingram and de Jong, 1987;Christiaens, 1999) or the debt (Zimmerman, 1977), and the disclosure of information. Onthe whole, prior research has analysed the context within a country and its impact onthe government accounting reform process (Zimmerman, 1977; Baber and Sen, 1984;Evans and Patton, 1987; Godfrey et al., 2000). These factors help explain why certainreforms take place in some countries and not in others.

On the basis of these precedents, in this paper we opted to analyse someindependent variables that have been widely used in previous research. Thus, withinthe category of political incentives indicated by Luder (1992), we analysed politicalcompetition, while in that of financial factors, we studied debt, state/regional funds andmunicipal wealth/fiscal pressure, and of the social factors studied in prior research, wefocused on the education level of voters and population size.

In addition, we considered a new independent variable that could be included in thegroup of social variables – the average number of households with computers and internetaccess in the region. All together we analysed a total of seven independent variables.

As in the studies by Hartung (1992) and Fisher et al. (2005), multivariable linearregression was used to test the association between dependent and independentvariables, i.e. to analyse the association between:

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Score

1. Content of information supplied (CONTENT-INFO) rapt 61.A. Budgetary information and cash-flow 21.A.1. Information on the fiscal year budget 0.331.A.2. Expenditure implementation 0.331.A.3. Revenue implementation 0.331.A.4. Budgetary result 0.331.A.5. Budgetary modifications 0.331.A.6. Cash-flow statement 0.331.B. Financial position 21.B.1. Information on non-financial fixed assets 0.41.B.2. Information on asset variation 0.41.B.3. Total borrowing 0.41.B.4. Variation in public borrowing 0.41.B.5. Operating statement 0.41.C. Non-financial information 2Indicators related to public service management1.C.1. Indicators of efficiency 0.661.C.2. Indicators of economy 0.661.C.3. Indicators of effectiveness 0.662. Characteristics of information (CHARACT-INFO) rapc 62.A. Completeness 1The web page should be as informative as possible2.A.1. The general accounts can be consulted on the web page 12.B. Timeliness 1Provide information more frequently than on an annual basis (e.g. quarterly, monthly)2.B.1.Convenience of the information supplied 12.C. Comparability 1Provide financial information for three or more fiscal years, to enable comparative reports2.C.1. The possibility of comparing information exists 0.52.C.2. Comparative summaries of the accounting information compiled by the entity itself are madeavailable

0.5

2.D. Understandability 1The presence of ratios or graphs, with explanatory comments2.D.1. Ratios and graphs or back-up figures are included to present the accounting information 0.52.D.2. Comments on accounting information are included 0.52.E. Relevance 1Provision of technical reports on management performance, both overall and by sector2.E.1. Technical reports elaborated by the entity itself are available 0.52.E.2. Sorted and ranked information offered on the internet 0.52.F. Reliability 1Information is verified by auditors2.F.1. Official financial information is audited 0.52.F.2. Audited and non-audited information are clearly differentiated 0.53. Navigability, design and access (NAV-DES-ACC) rapn 63.A. Ease of access to the information 1Existence of a web site map and a specific section on financial information3.A.1. The web page has a specific section that includes information on public financial information 0.53.A.2. A web site map showing the contents is available 0.53.B. Categorisation of users’ accessibility 1Establish diverse profiles for access to information3.B.1. Establish access areas bounded according to the user profile 13.C. Ease of movement through areas of financial information 1Introduce a system of hyperlinks within the sections concerning accounting data

(continued)

Table I.Items taken into

consideration in thevoluntary reporting of

public financialinformation on the

internet

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Q1. Online municipal financial information and political competition.

Q2. Online municipal financial information and the amount of municipal debt.

Q3. Online municipal financial information and the transfer of state/regionalfunds to municipal administrations.

Q4. Online municipal financial information and fiscal pressure.

Q5. Online municipal financial information and the overall education level of voters.

Q6. Online municipal financial information and the size of population.

Q7. Online municipal financial information and levels of internet access inhouseholds.

For the dependent variable, the municipal financial information reported on theweb site, based on the methodology proposed for the analysis of the transparencyof online municipal financial information, we considered not just the score obtained bythe municipality in the DI but also the score obtained for each of the three sections thatmade up the DI. Thus, we obtained four dependent variables:

(1) content of information provided (CONTENT-INFO);

(2) characteristics of the information disclosed (CHARACT-INFO);

(3) navigability, design and accessibility of public financial information on the website (NAV-DES-ACC); and

(4) overall quality of the web site in terms of financial information, namely, a DIreflecting all the information obtained (DI).

Then, by performing a regression analysis, we determined the extent to which each ofthe dependent variables with a positive sign depends on the above-mentionedindependent variables. Thus:

Score

3.C.1. A system of hyperlinks for the information is provided 13.D. Ease of data management 1Information is provided in various downloadable formats, such that users can edit, combine orsummarise the data to suit their needs3.D.1. Format: html 0.253.D.2. Format: pdf or doc 0.253.D.3. Format: xls 0.53.E. Ease of use in an international context 1It is highly positive for information to be made available in various languages3.E.1. Information content is available in different languages 13.F. Interactivity with the user 1Means are available for interactivity between the administration and users3.F.1. An email address other than the webmaster’s is provided for information or explanations to berequested

0.5

3.F.2. A mailing list is provided 0.5Table I.

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Model 1 : CONTENT 2 INFO ¼ aþX7

i¼1

bjX ij þ mi

Model 2 : CHARACT 2 INFO ¼ aþX7

i¼1

bjX ij þ mi

Model 3 : NAV 2 DES 2 ACC ¼ aþX7

i¼1

bjX ij þ mi

Model 4 : DI ¼ aþX7

i¼1

bjX ij þ mi

where: Dependent variable ¼ a þ b1 political competition þb2 population þb3 fiscalpressure þb4 cost of debt þb5 state/regional funds þb6 level of education þb7

internet access in households þmi and where a is the constant term, Xij represents thevariables that influence financial information disclosure on the net, bj is a coefficientvector to be calculated and mi is the random error term, presumably with identical andindependent distribution, with an average of 0.

Empirical studyThe methodology was applied to Spanish municipalities. Given the extent of theSpanish public sector and the size variety of the entities of which it is comprised,sample municipalities were selected by their homogeneity and budget resources.Thus, the sample municipalities included were large cities (defined in Law 57/2003 of16 December as those with a population of over 250,000 inhabitants), provincialcapitals with a population of over 175,000 inhabitants, autonomous region capitals andmunicipalities with central offices of the autonomous regions’ institutions (under Law6/85, these are conferred the same powers and duties as the former category).

Furthermore, the legislation concerning the disclosure of information in the contextwe considered had a very considerable influence on the analysis. Municipal financialinformation in Spain has undergone a dramatic revolution in recent years to providebudgetary and financial information as well as indicators related to public servicemanagement, and to publicise local public accounting information (Order No. EHA4041/2004, Ministry of Economy and Treasury, 2004).

On the basis of the above considerations, in the present study we analysed 65 citycouncils, all of which had their own web sites. The data collection of the dependentvariables was carried out during January 2007.

Spanish municipal financial information on the internetTable II shows the results of the web site content analysis for the selected sample ofSpanish municipalities. Let us begin by noting that, of the local councils studied, only47.69 per cent disclosed financial information on their web sites (Table III).

From Table II we see that the mean value for rapt (content of information providedon the web site) was 0.4105, which is a very low score considering that the maximumpossible was 6. Note, too, that the maximum score obtained by any municipality was3.9800. This is due to the fact that the publication of management indicators is not yetobligatory.

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CO

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0.44

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0.82

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9482

Table II.Descriptive statistics

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From analysis of the individual results obtained for content of information, we see thatthose corresponding to the traditional information provided (i.e. the budget) scoredhigher than those corresponding to the revised format for information (i.e. financialinformation) at 0.2843 versus 0.1262. Analysis of the sub-items comprising this sectionrevealed that a large proportion of municipalities were willing to provide informationon the fiscal year budget, i.e. on the financial policy to be implemented (Figure 1), whilevery few were willing to make information available on the implementation of budgetitems or on the financial position of the municipality.

Concerning the qualitative characteristics of the financial information, the meanvalue scored for rapc among the sample of Spanish municipalities was 0.8 out of a totalof 6, while the municipalities scoring highest in this achieved 4.25.

For the first part of the section on the characteristics of the financial information, wesee that almost 41.5 per cent of all the analysed municipalities provided completeinformation on the budget approved, but that this value fell dramatically (to 4.6 per cent)with respect to the availability of complete financial information. Moreover, the resultswere very poor for timeliness, with only one local council providing timely information(Figure 2).

Regarding comparability, we see that data for more than two financial years wasprovided on only 21.5 per cent of the web sites analysed. Moreover, very few (15.4 per cent)attempted to assist the user by providing comparative summaries giving a historicaloverview of financial trends.

Concerning comprehensibility, financial information seemed to be being presentedin a more accessible form to users, with the provision of graphs and ratios on

Frequency Per cent/total Per cent/sample

Municipal web site with financial and budgetaryinformation 31 47.69 47.69Municipal web site without financial and budgetaryinformation 34 52.31 52.31Total 65 100.00 100.00

Table III.Public financial

information on Spanishmunicipal web sites

Figure 1.Content of financial

information disclosedonline by Spanish

municipalities

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24.6 per cent of the web sites. This was much more common than the provision ofcomments on the values reported (3 per cent of web sites).

Regarding relevance, it is noteworthy that city councils seem to be becoming moreaware of the importance of providing aggregate information on the overall financialsituation of the municipality. This was done on 30.8 per cent of web sites.

Finally, on the question of reliability we found that only 1.5 per cent of the financialinformation that was reported annually was accompanied by correspondingcertification by independent auditors.

To conclude let us examine the aspects concerning the navigability, design andaccessibility of the web sites analysed. The mean value for rapn in the sample was0.9654 out of a total of 6.

With respect to ease of access to information, in a high proportion of cases(72.3 per cent) a map of the web site was provided, but very few web sites (27.6 per cent)had a specific section dedicated to reporting financial information (Figure 3).

Only one municipality differentiated various user profiles to simplifynavigation through the web site. Regarding the formats used in publishing theinformation, pdf was most commonly used format on web pages containing financial

Figure 2.Qualitative characteristicsof financial informationdisclosed online bySpanish municipalities

Figure 3.Web site design,navigability andaccessibility of municipalfinancial informationin Spain

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information (40 per cent). Finally, it was surprising that the use of Excel spreadsheetswas so uncommon (1.5 per cent) as this format not only allows users to downloaddata to their own computers, but also makes it possible for them to create their ownreports.

Finally, turning to interactivity, a significant number of web sites (46.15 per cent)provided an e-mail address other than that of the webmaster. On average, the web sitesin the sample obtained high scores in navigability, design and accessibility.

Incentives for the disclosure of municipal financial information on theinternetThe methodology mentioned above for determining the incentives for the disclosure onthe internet was applied to the sample Spanish municipalities. The data for theindependent variables were obtained from the sources detailed in Table IV.

The Spearman correlation test was used to analyse the associations between the studyvariables. This test is an analytical tool that is widely used in this type of study (Fisheret al., 2005; Hartung, 1992). Thus, Table V presents the Spearman correlation coefficientsfor all the independent variables included in the models. The highest correlations werebetween education level and internet access in households (0.64), fiscal pressure andpolitical competence (0.33) and fiscal pressure and cost of debt (0.31). When each of thesevariables was omitted from the analysis the results tended to be fairly similar. Thus, theconclusions offered below on the effects of these variables are subject to this qualification.

Political competition Councillors elected at the last elections for the party in power/total number ofcouncillors (interior ministry – election results): www.mir.es

Cost of debt Funding costs of current year budget expenditure/population. Budget figurespublished at: www.map.es

State/regional funds Current and capital transfers of current year budget revenue. Budget figurespublished at: www.map.es

Education level Level of university studies by provinces. Data obtained from: www.ine.esPopulation Population by municipality. Data obtained from: www.ine.esFiscal pressure Tax and non-tax revenue, and sale of goods and services of the public

administrations of current year budget revenue/population. Budget figurespublished at: www.map.es

Internet access inhouseholds

Percentage of households with internet and computer. Data obtained from:www.ine.es

Note: The data obtained refer to 2005

Table IV.Independent variables

and sources

1 2 3 4 5 6 7

1. POPULAT 1.00002. FISC-PRESS 0.0144 1.00003. COST-DEBT 20.0890 0.3129 1.00004. FUNDS 20.0841 0.1365 0.2215 1.00005. EDUC-LEV 0.1465 0.0363 20.2340 0.2641 1.00006. ACCESS-HH 0.1057 0.0701 20.1347 0.2078 0.6467 1.00007. POL-COMP 0.0381 0.3381 0.2274 0.2432 0.1197 0.1527 1.0000

Table V.Spearman correlation

matrix of independentvariables (n ¼ 65)

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After considering the correlation between the independent variables, let us now discussthe influence of the independent variables in this study on the dependent variables.

Association between online municipal financial information and political competition(POL-COMP)It is assumed in political science literature that strong party competition provides anincentive for regional and national authorities to exercise influence over bureaucracy(Dye and Robey, 1980). Earlier studies have looked at the effects of politicalcompetition on public sector accounting choice (Zimmerman, 1977; Ingram, 1984;Baber and Sen, 1984; Evans and Patton, 1987).

Some these studies found a positive and statistically significant association betweenpolitical competition and the disclosure of public financial information, arguing thatpolitical leaders, seeking to obtain more votes, try to meet voters’ needs as much as possible.Therefore, the more competition there is, the more incentive there is for transparency.However, not all the previous studies agreed on this (Evans and Patton, 1987).

In the Spanish case the coefficient for the variable political competition presented apositive sign in all the models (Tables VI and VII). Despite this, the results obtained

(C) Model 3: NAV-DES-ACC (D) Model 4: DI

Expectedsign b t-Statistic

Coef.partialcorrel. b t-Statistic

Coef.partialcorrel.

1. POPULAT þ 0.0009 0.9306 0.1223 0.0008 0.2012 0.02662. FISC-PRESS þ 0.0010 0.9643 0.1267 0.0017 0.3811 0.05043. COST-DEBT þ 0.0035 0.3649 0.0483 0.0507 1.1986 0.15684. FUNDS þ 0.0001 0.1610 0.0213 20.00116 20.4937 20.06535. EDUC-LEV þ 20.0287 21.1353 20.1487 20.0832 20.7364 20.09716. ACCESS-HH þ 7.6595 2.0997 * * 0.2679 52.4935 3.2219 * * * 0.39257. POL-COMP þ 0.1475 0.7075 0.0933 1.0332 1.1099 0.1454

Notes: *p , 0.10; * *p , 0.05; * * *p , 0.01

Table VII.Multivariable linearregression results:Models 3 and 4

(A) Model 1: CONTENT-INFO (B) Model 2: CHARACT-INFO

Expectedsign b t-Statistic

Coef.partialcorrel. b t-Statistic

Coef.partialcorrel.

1. POPULAT þ 20.0004 20.3267 20.0432 0.0008 0.5323 0.07032. FISC-PRESS þ 0.0001 0.0525 0.6436 0.0006 0.3864 0.05113. COST-DEBT þ 0.0171 1.3762 * 0.1793 0.0130 0.8833 0.11624. FUNDS þ 20.0007 20.7506 20.0989 20.0003 20.2535 20.03365. EDUC-LEV þ 20.0077 20.2329 20.0308 20.0390 20.9926 20.13036. ACCESS-HH þ 11.5334 2.4061 * * * 0.3036 21.7672 3.8424 * * * 0.45367. POL-COMP þ 0.2576 0.9403 0.1236 0.3707 1.1451 0.1500

Notes: *p , 0.10; * *p , 0.05; * * *p , 0.01

Table VI.Multivariable linearregression results:Models 1 and 2

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were not statistically significant ( p . 0.30). Thus, political competition in Spain doesnot seem to exert pressure on political entities to disclose financial information.

Association between online municipal financial information and debt (COST-DEBT)Municipal managers have incentives to lower municipal debt costs because this leadsto lower property taxes, which are reflected as more votes for municipal officials (Goreet al., 2004). Thus, municipal officials seek to minimise borrowing costs.

Luder (1992) and Fisher et al. (2005), among others, have found a positiveassociation between public debt and the voluntary disclosure of public financialinformation. When debt starts to become unsustainable and financial difficultiesappear, it becomes more important to publish reports reflecting the financial situationof public bodies. For this reason, the existence of outstanding debt could favour thedisclosure of public financial information (Wilson and Howard, 1985).

The association between the cost of debt variable and the content of the Spanishmunicipal financial information provided online (Model 1) does seem to be statisticallysignificant (p , 0.10) and the sign is positive as expected. Similar results were obtainedby Robbins and Austin (1986) and Evans and Patton (1987), who found debt to be apositive, significant variable explaining municipal disclosure. However, we must note thatin many studies this variable has not been shown to have a significant association withpublic financial information disclosure (Baber, 1983; Ingram, 1984; Christiaens, 1999).Overall, this result suggests that more debt does provide an incentive for municipalofficials to improve the quantity of financial information online.

However, there was no association found between cost of debt and the qualitativecharacteristics of the financial information; the navigability, design and accessibility ofthe web sites; or the DI (Models 2, 3 and 4).

Association between online municipal financial information and population(POPULAT)Some studies on technology diffusion and adoption have found that largerorganisations tend to adopt new technology and innovations more frequently thansmaller ones. Thus, Moon and Norris (2005) reported that the governments of largecities are more likely to adopt e-government than those of small ones because largercities are under greater pressure to find ways to provide public services and to offerinformation. They also have more resources (a larger budget and often a formal,well-established IT department) to pursue alternatives.

Evans and Patton (1987) found that population is a significant variable in publicfinancial disclosure – the larger the population, the greater the pressure exerted onthose in the municipal agency responsible for making information publicly available.However, other authors, such as Robbins and Austin (1986), found no significantrelationship between the population factor and financial reporting.

Regarding the population variable in the Spanish municipalities, it might be thoughtthat the cities with larger populations would produce better reporting (Models 1, 2, 3and 4) because more resources available. However, in keeping with studies by Ingram(1984) and Ingram and de Jong (1987), no such statistical association was obtained( p . 0.7). Indeed, in the Spanish case, this variable had an unexpected negative sign, aswas also found in the study by Evans and Patton (1987), although we must rememberthis result was statistically insignificant. Thus, it was not always the case that the

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governments of the larger Spanish cities, even though they had larger budgets and oftena formal, well-established IT department, included public financial information on theirweb sites.

Association between online municipal financial information and the transfer ofstate/regional funds to municipal administrations (FUNDS)Ingram (1984) and Luder (1992) noted that the more necessary it is for a municipality toreceive funds from other bodies, the more it needs to report high-quality publicfinancial information, taking into account that such bodies are investing resources tofinance the development of these municipalities. In this case, it seems logical for thesebodies to set certain conditions that would affect the field of financial administration,and thus also that the financial information would be made available to the public.

In the Spanish case, a contrary result was obtained for the state/regional fundsindependent variable. The association was statistically insignificant ( p . 0.7) in all themodels and the sign was negative in Model 1. Some researchers, such as Robbins andAustin (1986) and Ingram and de Jong (1987), have concluded that when a substantialproportion of local funding is met by the national government, this may increase theinfluence of the latter and favour greater monitoring of the municipal disclosure offinancial information. However, other studies (Ingram, 1984) have obtained resultssimilar to ours – that intergovernmental revenues do not comprise a significantvariable in this respect.

Association between online municipal financial information and education level(EDUC-LEV)Many studies have examined the effects of social variables such as citizens’ educationlevel on financial reporting. Chan and Rubin (1987) studied whether the higher educationlevel of voters might lead to voters requiring a greater amount of information fromgovernment bodies. Evans and Yen (2005) observed that an appropriate level ofeducation is necessary for computer skills to be acquired and that this would influencethe progress of e-government – countries with substantially lower levels of educationwithin the population would have users who are unfamiliar with basic screen forms andwho would not press for information to be provided by such means.

Some previous studies have observed a significant positive effect of education levelon information disclosure (Chaudhuri et al., 2005), although others have found nosignificant association. In the present study, we propose that education level ispositively related to the municipal disclosure of financial information via the internet.

In our study, the overall level of education had an unexpected negative sign but didnot seem to have a significant influence ( p . 0.3) in all models. Thus, although acertain level of education is necessary to acquire computer skills, the results seem tosuggest that this factor does not impel municipal officials to provide a greater amountof financial information on the internet, or improve the quality, navigability, design oraccessibility of such information.

Association between online municipal financial information and fiscal pressure(FISC-PRESS)Citizens seek to obtain the maximum amount of services while paying the lowestpossible amount of taxes (GASB, 1987). In this context, they have a clear incentive to

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assess local financial conditions in comparison with those of other local governmentsas a means of evaluating both current levels of taxes and services and the likelihood ofreductions in taxes or services (Lin and Raman, 1998). Ingram (1984) found that thegreater the fiscal pressure, the more important is the disclosure of public sectorfinancial information.

However, the results obtained in the present study ( p . 0.9) do not agree with thoseof Ingram (1984), but rather with those of Christiaens (1999), who concluded that netrevenue as a percentage of total revenue was not significantly related to publicfinancial disclosure.

Association between online municipal financial information and internet accessin households (ACCESS-HH)Finally, let us comment on the results obtained for the internet access in householdsindependent variable. As for effect of the extent of internet penetration on the onlinedissemination of public financial information, we note that this social variable has beenalmost entirely ignored in the studies that have been carried out concerning the publicsector. However, Debreceny et al. (2002) noted that internet take-up is an environmentalvariable that from a user’s perspective creates demand for financial information andfrom the supplier’s perspective, creates a conduit for the more efficient dissemination ofinformation. In fact, in those municipalities where there is heavy internet usage, theavailability of public financial information is likely to be greater. For this reason, weexpected that a high degree of internet penetration in households would influence localgovernments’ to disclose more financial information on the net, as there would be morepotential users.

In the Spanish case, for the independent variable internet access in households, wefound the highest positive relation of all the independent variables ( p ¼ 0.0001). Incities with a high rate of internet usage, many councils had introduced online financialinformation. In other words, the councils in regions with internet promotion policiestended to provide more financial-budgetary information. Indeed, internet penetrationappeared to be a determining factor in all the models.

Discussion and conclusionsIn the move towards e-government, the disclosure of public sector financialinformation is a highly significant factor in improving transparency. By disclosingfinancial information online, the requirement of public accountability can be met moreefficiently and effectively.

Spanish municipalities are currently improving their procedures for the disclosureof financial information. The recently passed legislative Order No. EHA/4041/2004aims to enhance information transparency, and undoubtedly the internet is a tool thatcan facilitate this. However, empirical research has revealed that Spanishmunicipalities are still not fully aware of the potential importance of the internet inenabling the achievement of e-democracy initiatives as a tool of NPM. The resultsindicate that new technologies such as the internet are still not an important means bywhich Spanish municipalities disclose their financial information to the public.

In our opinion, the need to meet people’s expectations concerning publicaccountability means that administrations must be made more aware of theimportance of including financial information on their web sites. This requires city

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councils in Spain to consider what financial information should be made available,what parameters should be addressed and what should be done so that the informationon the web site can be readily accessible and straightforward to navigate. For thispurpose, we must encourage a benchmarking process among local administrations inorder to intensify the sharing of knowledge regarding best practice in this field.

Moreover, on examining potential determinants of the disclosure of public financialinformation online by large city councils, we discovered that factors previously foundto be important in paper-based reporting, such as political competition, state/regionalfunds, education level, population size and fiscal pressure, seem to have no influence onthe disclosure of public financial information on the internet. Only the cost of debtseems to be a relevant factor in the degree of financial information transparencyachieved via the internet. This could be due to the perceived importance ofdisseminating information on public debt as a means of evaluating the responsibilityand effectiveness of government bodies. Such a policy of transparency by publicentities could be thought to favour greater involvement by the general public in themanagement of public resources, this being one of the main features of e-democracy.

Another aspect of interest is that of access to the internet in households, whichaccording to our empirical results seems to exert a great deal of influence. Our studysuggests that the social variable of internet access in households is associated with thequality and quantity of the public financial information made available online bySpanish municipalities. Moreover, increased access to the internet in households wouldincrease the possibility of interactivity between people and the public administrationand satisfy information requirements in a more efficient way. This would helpdemocratise the provision of information by improving the transparency of publicaccounting. This is an important finding because this variable has not been examinedin prior studies of the voluntary disclosure of public financial information.

Future research could consider the inclusion of other financial and non-financialvariables, such as the importance of the media, the selection process andprofessionalisation. This could assist the development of improved predictive modelsof the voluntary disclosure of public financial information on the internet. As themethodology of this study has been applied to Spanish municipalities, research in othercountries and international comparisons of the practices and the determinants of publicfinancial information disclosure on the internet would be useful to intensify the sharingof knowledge concerning best practice in this field and to develop a comprehensivepredictive model for public sector financial information disclosure on the internet.

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Further reading

AICPA (1994), Improving Business Reporting – A Customer Focus: Meeting Information Needs ofInvestors and Creditors. Comprehensive Report of the Special Committee on FinancialReporting, American Institute of Certified Public Accountants, New York, NY, available at:www.aicpa.org/members/div/acctstd/ibr/index.htm

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ICAEW (1998), The 21st Century Annual Report, Institute of Chartered Accountants in Englandand Wales, London.

Spaul, B. (1997), Corporate Dialogue in the Digital Age, The Institute of Chartered Accountantsin England and Wales (ICAEW), London.

Corresponding authorManuel Pedro Rodrıguez Bolıvar can be contacted at: manuelp@ugr.es

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