Factors contributing to innovations in local government budgeting and financial management

Recent research has reported on patterns of usage and perceptions of effectiveness of such innovations over the past decade and has identified expansion of the use of existing techniques such as program budgeting, management by objectives (MBO), performance monitoring, and program evaluation; and recent creative innovations, such as financial trend monitoring, multi-year forecasting, strategic planning, and productivity improvement techniques (e.g., quality circles). This study focuses (a) on factors which contribute to the rapid diffusion of new tools and promote innovation in budgeting and financial management and (b) on what causes new management systems to be developed and adapted with enthusiasm by local government managers in the 1980s. A framework is proposed for understanding the innovation process in local government budgeting and financial management based upon the underlying empirical research on usage of financial management processes, practices, and tools over the last decade and the analytical concepts derived from consideration of local government financial management capacity building and management of innovation and change.