Accountability through budget performance: a study on budget adequacy and participation of Malaysian local government

Budget mirrors local authorities' effective and efficient resource allocation practices. In many cases, however, a tendency toward budget slack raises genuine concern among stakeholders who participate in and are affected by the budget. The budget slack potentially exerts bias in the budgeting process which is detrimental to the accountability of local authorities. On this premise, this study aims to examine the influence of budget participation and budget adequacy on the budget performance of local governments in Malaysia and how accountability could be promoted through high budget performance. A survey-based instrument was used to collect the data for this study from various local authorities in Klang Valley. A total of 110 responses were obtained representing a 73% response rate. Partial least square (PLS) structural equation modelling results showed that the effect of budgetary participation on budget performance is direct and also mediated by budget adequacy. This implies, among others, that while participation in the budgeting process can enhance budget performance, the effect is also contingent on the adequacy of resources the participants are presented with.