The article examines changes in the financial management of Danish municipalities in a period with increasing fiscal stress based on case studies in five municipalities. The analytical focus is on the interplay between the finance unit’s advice service and the actual actions taken by the professionally oriented managers. First, the article finds that the economic crisis has increased the municipalities’ focus on spending controls. The mechanism seems to be a strengthening of the organization’s spending guardians vis-à-vis the spending advocates, in particular a strengthening of the municipal finance unit. Second, the article finds that the municipalities’ objective to increase cost considerations in the professionally oriented managers’ daily actions has not been achieved. As a reason for this the article points to challenges in the working relationship between the strengthened finance unit and the professionally oriented managers.

In this article it is investigated how the conditions of crisis and austerity have contributed to organizational change in Danish municipalities. Based on a comparative case study of five municipalities, it is argued that tighter fiscal control by the central government created a political window for change in municipalities with weak expenditure control, and that it led to economic pressure necessitating cutbacks on administrative expenses in the municipalities. Both mechanisms reinforced the tendency for change towards an organizational model that represents a “whole-of-government” perspective. According to the study, the new organizational model also affects the organization of individual policy areas. In the area of public schools, the top administrative officer is made responsible for a broader task area and is integrated in the top management. It also means that schools are integrated more into the administrative hierarchy by way of more administrative layers, more follow-up procedures, and new management fora.  

Within the boundaries of national legislation, the assemblies in Danish municipalities define the scope and form of autonomy given to political committees, public agencies, and service-producing units in each policy area. Actors placed at identical levels in the hierarchy, but in different policy areas or different municipalities, might, therefore, experience a varied degree of professional and economic autonomy to prioritize, design, and plan the supply of public services. The comprehensive literature on Danish municipalities’ economic affairs overlooks the essential issue of decentralization of economic competencies within local governments. To fill this gap, this article uses a principal-agent perspective and analyzes data on politically decided budgets and appropriation summaries for Danish municipalities in 2009 and 2015 and shows that there is great variation across municipalities and policy areas in the degree of decentralization of economic competencies.  

According to the budget literature, budget institutions and administrative organization are of great importance for public organizations’ financial results. But can a particular kind of administrative organization contribute to improving a municipality’s efficiency? Empirically, the analysis shows that both the local fiscal environment and the administrative organization of municipalities affect efficiency. The efficiency is lower, the less hard-pressed the municipality is financially, the smaller the size of the municipality and/or if the municipality is organized according to an executive model without separate administrative responsibility. According to previous studies, executive models can strengthen financial steering in the form of budget balance and expenditure control. The present analysis indicates that, conversely, the executive model’s – intended – separation from the professional environments and employees seems to reduce municipal efficiency. Thus, the choice of administrative organization seems to involve a trade-off between strong expenditure control and high efficiency. 

---

Ophavsretten tilhører Politica. Materialet må ikke bruges eller distribueres i kommercielt øjemed.