How budget authority and obedience pressure influence budgetary slack in the public sector?

Fraud in public organizations is often driven by obedience pressure from superiors, prompting subordinates to justify unethical actions such as creating budgetary slack. This study examines how obedience pressure and budget authority influence responsibility shifting and budgetary slack in public sector budgeting. A 2x2 between-subject laboratory experiment was conducted involving 88 final-year accounting students, simulating roles as financial officers in a government unit. The study manipulated obedience pressure (with/without) and budget authority (superior/subordinate). Data were analyzed using ANOVA. Results show that obedience pressure significantly increases budgetary slack, while superior authority also leads to more slack creation. However, neither variable significantly reduces perceived responsibility. The lowest slack was observed when subordinates had full authority without superior pressure, indicating that autonomy under low pressure fosters ethical budgeting. Interestingly, responsibility shifting patterns did not fully support previous findings, possibly due to the personal nature of task consequences in the experimental design. This study contributes to the understanding of how hierarchical dynamics and authority structures shape ethical decision-making in budgeting. It highlights the need for procedural justice and decentralization to reduce slack behavior in public sector organizations.