Public value of online financial transparency. Financial sustainability and corruption of public officials in the US state governments

• Pages: 467-488
• DOI: https://doi.org/10.1108/IJPSM-03-2018-0073
• Published date: 08 July 2019
• Date: 08 July 2019
• Author: Gabriel Puron-Cid,Christopher G. Reddick,Sukumar Ganapati
• Subject Matter: Public policy & environmental management

Public value of online

financial transparency

Financial sustainability and corruption of

public officials in the US state governments

Gabriel Puron-Cid

Department of Public Administration,

Centro de Investigación y Docencia Económicas, Aguascalientes, Mexico

Christopher G. Reddick

College of Public Policy,

University of Texas at San Antonio, San Antonio, Texas, USA, and

Sukumar Ganapati

Department of Public Policy and Administration,

Florida International University, Miami, Florida, USA

Abstract

Purpose –The purpose of thispaper is to apply Moore’s public value modelinto the context of e-government

research by examining online financialtransparency as both an organizational goal and asa driving force for

financial sustainability and publicofficials’corruption. Theempirical context comprises thestate governments

in the USA.

Design/methodology/approach –Structuralequation modelingis used to examine the relationshipbetween

specificcontextual factors of the authorizingenvironment, financialsustainability,public official corruptionand

online budget transparency.

Findings –The results show that contextual factors like population explain online financial transparency,

while financial sustainability and corruption had moderating and negative effects.

Practical implications –Governments that struggle with issues of financial sustainability and corruption

will rely more on online financial transparency. Transparency increases detection of public corruption.

Originality/value –The effects of financial transparency and financial sustainability on corruption have been

studied separately. This study fills the gap of understanding the effects of both on corruption as one phenomenon.

Keywords Corruption, Structural equation modelling, Financial sustainability, US state governments,

Online budget transparency

Paper type Research paper

Online digital applications and tools have improved transparency of different aspects of

public finance by providing new means of disclosing financial information of government

agencies (Muñoz et al., 2017; Caba et al., 2008; Cárcaba and García, 2008; Dimitriu, 2008).

Government agencies increasingly provide information about their budgets, expenditures

and taxes over the internet through web portals. Indeed, the volume of financial information

disclosed through online means has surpassed hard copy formats (Muñoz et al., 2017;

Rodríguez Bolívar et al., 2013). The internet has become a staple platform for curating and

disseminating both financial and non-financial information in the public sector. Researchers

have highlighted how the online access improves government performance, competitiveness

and evaluation of government agencies (Caba et al., 2008; Cárcaba and García, 2008; Gandía

and Archidona, 2008). The transparency could result in efficiency gains as unnecessary and

wasteful spending can be avoided (Bastida et al., 2015; Lavielle et al., 2003). Greater

transparency reduces the scope of governments to manipulate budget information and use

fiscal gimmickry (Caba et al., 2008; Ingram and DeJong, 1987).

International Journal of Public

Sector Management

Vol. 32 No. 5, 2019

pp. 467-488

© Emerald PublishingLimited

0951-3558

DOI 10.1108/IJPSM-03-2018-0073

Received 13 March 2018

Revised 14 September 2018

17 December 2018

Accepted 24 January 2019

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0951-3558.htm

467

Public value of

online financial

transparency

Citizens are stakeholders in the government decision-making process. Information

about budgets and expenditures is critical information that needs to be availableto enrich

this decision-making process. Federal, state and local government agencies are online

repositories of large amounts of economic, fiscal, budgetary and financial data, which are

made freely available to the public. Federal sites like usaspending.gov allow the public to

track federal spending. Citizens’scope for engagement with government has also

increased with this online transparency.

Although not the focus of this paper, financial transparency online has been used in

other ways. Social media tools like Facebook and Twitter have become means of instant

campaigns, inviting engagement from various stakeholders to use this type of information

in the discussion of public finance. Politicians as well as government agencies use the Web

2.0 tools to make economic, fiscal, budgetary and financial information transparent to

directly engage, network and even mobilize their constituencies around specific topics

(Gainous and Wagner, 2014; Mergel, 2013; Schweitzer, 2014; Stier, et al., 2018). The online

tools have transformed the way different stakeholders interact with governments with the

hope to change citizens from a passive role to a more proactive one in governance processes

(Castells, 2012; Dunleavy et al., 2006; Taylor et al., 2007). Some scholars and visionary

practitioners celebrate the prospects of the new digital era for transparency and

collaborative governance (Bertot et al., 2010; Noveck, 2010, 2015; Klievink et al., 2016).

Empirical research, however, shows that there are several challenges of digital governance

and that there are more modest benefits than predicted by visionaries (Brainard, 2016;

Bryer, 2011; Hand and Ching, 2011; Zavattaro and Sementelli, 2014).

With respect to the benefits of financial transparency, there are debates surrounding its

role in improving financial sustainability and preventing public officials’corruption.

Financial transparency could arguably reduce corruption because the government finances

are then subject to public scrutiny. Open decision-making processes expose corrupt

practices of public officials. Critics argue that financial transparency does not directly curb

public officials’corruption. It is moderated by the political, social and economic context.

Transparency needs to be accompanied with accountable institutions to sanction corrupt

actions of public employees (Lindstedt and Naurin, 2010; Vadlamannati and Cooray, 2017).

In this paper, the debate on financial transparency is further examined in the empirical

context of the state governments in the USA. The principal research question is:

RQ1. How does online financial transparency impact financial sustainability and public

officials’corruption?

We use the US Public Interest Research Group’s annual “Following the money”reports for

the data on online financial transparency. Structural equation modeling (SEM) is used to

analyze the relationship between financial transparency, financial sustainability and

corruption of public officials.

We extend Moore’s (1995) classical public value framework as the theoretical lens for

analysis. Although there are several dimensions of public values, broadly they are “enduring

beliefs in the organization of and activities in a society that are regarded as crucial or desirable”

(Rutgers, 2015, p. 40). The public value framework is ideally suited since it combines the public

value goals with the organizational context of the operational capability and the external context

of authorizing environment. In the context of this research, financial transparency is both a

public value goal and a means to other public value of financial sustainability and corruption

reduction. The operational capability is in terms of organizational factors that impact financial

transparency practices. The authorizing environment is the external political and economic

context, which provides the legitimacy and support for implementing the transparency practices.

The next section reviews the relationship between online financial transparency, fiscal

sustainability and corruption of public officials manifest in the current literature. Then, the

468

IJPSM

32,5