Modelling budget management for public service in South African Municipalities: a structural equation modelling approach

Abstract

Background: For more than two decades, many municipalities have failed to render services effectively because of lack of competency and budget management skills to manage budgets. This has resulted in either over or under expenditure, which ultimately leads to poor service delivery. Aim: This study aimed to develop a budget management model to improve public service in South African municipalities. Setting: Three municipalities in the Western Cape, Eastern Cape and Free State are the areas where data were collected by researchers. Methods: A quantitative research approach was employed and an online questionnaire was used for data collection from 261 participants in three municipalities. A structural equation modelling approach was used to develop the budget management model. Results: The results revealed that risk management (RM), cash flow management (CFM) from employee perceptions have a positive impact on budget management; whereas CFM from general compliance with legislative consideration (LC) have a negative impact, budget planning (BP) and revenue and expenditure management (REM) have low impact on budget management for public service. Conclusion: The study highlights the key factors (i.e. RM, BP, CFM, LC and REM) as a result of which managers at various levels fail to manage budgets effectively. The proposed model adds new insights to respond to budget management challenges. It is recommended that municipalities must improve their budget management skills for an effective public service. Findings from this study contribute to the existing body of knowledge by proposing a budget management model for public service in South Africa.