Relation between internet financial information disclosure and internal control in Spanish local governments

Abstract

Purpose The application of new public governance by many countries has led to the creation of new management systems in public administration and the development of an effective accounting structure with efficient internal control to guarantee a proper provision of services that meet citizens’ requirements. The purpose of this paper is to focus on Spanish local government with the intention of determining the impact of the internal control structure on the disclosure of financial information on the internet. Design/methodology/approach The empirical analysis used combines a descriptive aspect with an explanatory one and seeks to answer the question of whether the internal control system (ICS) influences the disclosure of financial information on the websites of Spanish LGs. The authors use a multivariate model that allows us to verify the predictive capability of the previously defined explanatory variable, internal control, in 1,806 local governments. To test the hypotheses, the authors use two different models. Findings The authors consider the existence and quality of the financial information disclosure in relation to ICSs, and a series of financial and non-financial variables. The authors conclude that the structure of the ICS influences financial information disclosure and its quality. Also, the socio-political variable gives a better explanation of financial information disclosure than the financial variable. Originality/value This research is novel to determine whether the development of ICSs in Spanish municipalities has favored and increased the disclosure of financial information financial through the municipalities’ website transparency portal. These findings will contribute to increase the importance of internal control in the management of public entities.

Disclosure of Non-Current Tangible Assets Information in Local Government Financial Statements: The Case of Lithuania

“…Adi et al (2016) have analysed the disclosure of management performance in the Government of Indonesia and showed that the published information disclosed only 35.46% of the required information. Moreno-Enguix et al (2019) have observed that 43.5% of Spanish municipalities do not disclose the financial information required by law. The conclusion is explained by the recent establishment of new accounting standards in the public sector.…”

“…Martani and Lestiani (2012) argue that the increasing size of the local government will make the voters concerned about its performance. Researchers (Garcia and Garcia-Garcia 2010;Ali and Saidin 2016;Moreno-Enguix et al 2019) agree that the size of the organisation in the public sector is considered as one of the determining variables of accounting practices and characteristics of financial disclosure, which is based on different theories. For instance, following the positive accounting theory, Falkman and Tagesson (2008) have claimed that size should influence the political pressure that municipalities experience to comply with accounting standards.…”

“…The researchers select different measures to evaluate the size of the municipality. Total population, i.e., a number of inhabitants, is a measure to size by many researchers (Giroux and McLelland 2003;Falkman and Tagesson 2008;Garcia and Garcia-Garcia 2010;Moreno-Enguix et al 2019). Ingram (1984) and Martani and Lestiani (2012) have used a number of inhabitants as a measure of the complexity of governance that was encouraging municipalities to improve disclosure in financial reports.…”

“…Some authors (Garcia and Garcia-Garcia 2010;Moreno-Enguix et al 2019) measure the leverage by liabilities per capita, i.e., indebtedness per capita. Furthermore, Garcia and Garcia-Garcia (2010) claim that "increasing leverage promotes voluntary reporting to signal the capacity of the entity to fulfil its obligations".…”

“…Total liabilities per capita (TLperCap) is used by Garcia and Garcia-Garcia (2010) and Moreno-Enguix et al (2019) to assess municipality indebtedness. In this research, the above-mentioned measure is also used.…”