Budgeting Process, Expenditure Management, Institutional Quality and Financial Accountability among Selected Local Governments in Southwest Nigeria

Abstract

Financial accountability in the public sector is vital for economic growth, financial stability, service delivery and the gaining of public trust. It is, however, often hampered by poor financial management practices and weak institutions. In Nigerian local governments, fears that inefficiencies in the budgeting process, expenditure management practices and weak institutions may mar the achievement of financial accountability and ultimately stifle grassroots development is widespread. It is on this basis that the study investigates how budgeting process and expenditure management practices affect financial accountability in Southwest Nigeria local governments and also explores the intervening role of institutional quality. Mixed method research was adopted. A sample size of 320 respondents was derived from a population of 1, 896, made up of directors in the local governments and officers on grade level 10 and above in the Office of the Auditor General for Local Governments using stratified sampling technique. Descriptive analysis of data (mean scores and standard deviations) were displayed in tables while further analysis was done with the Partial Least Squire Structural Equation Modeling (PLS-SEM). Qualitative data were analyzed thematically. Findings revealed a statistically significant positive relationship between budgeting process and financial accountability: (β = 0.261, t = 6.21, p < 0.001) as well as expenditure management and financial accountability (β = 0.274, t = 6.68, p < 0.001). In addition, institutional quality significantly intervenes in the relationship between these elements of financial management practices and financial accountability. Qualitative findings confirmed a flawed, top-down, and politically influenced budgeting process, and expenditure management that prioritized recurrent spending over capital projects with weak performance links. The study concludes that the positive relationship between budgeting process, expenditure management and financial accountability in these local governments is severely curtailed by poor budgeting and expenditure management practices, worsened by political interference. It recommends a holistic institutional and governance reforms, digitalizing financial processes, embedding accountability mechanisms, and enforcing legal frameworks to improve financial accountability.