The Impact of Performance Analysis on the Financial Management and Control at Public Universities in Bosnia and Herzegovina Federation

By Čergić, Fuad; Kozarević, Emira | Management : Journal of Contemporary Management Issues, December 2019 | Go to article overview

The Impact of Performance Analysis on the Financial Management and Control at Public Universities in Bosnia and Herzegovina Federation


Čergić, Fuad, Kozarević, Emira, Management : Journal of Contemporary Management Issues


1.INTRODUCTION

The Balanced Scorecard is one of the most advanced and comprehensive business models currently used. It measures the efficiency of the most important factors affecting business success. Positive performance from the perspective of learning and growth should lead to the positive effect on internal business processes which should lead to the positive results from the customer perspective, which finally leads to the increase in financial resources (Yancy, 2014).

The significance of the Balanced Scorecard in a non-profit segment of the public sector is particularly evident. Profit organizations, indeed, have an almost perfect system of performance measurement. International accounting standards and international standards of financial reporting are completely dedicated to registering and presenting financial results, assets, and liabilities. As some parts of the public sector do not have profit in the forefront, the question arises how to measure success of such organizations when it comes to spending public funds.

The main difference between the previously implemented systems of performance measurement and the Balanced Scorecard model is in the fact that the previous models used the indicators for the measurement of previous activities while the Balanced Scorecard model introduces the measures that serve for the assessment of future activities.

The aim of this paper is to show what is the use of the Balanced Scorecard at the public (non-profit) universities of Bosnia and Herzegovina Federation (FBiH) and what are the expectations from its introduction from the aspect of financial management and control.

2.LITERATURE REVIEW

Anand, Sahay and Saha (2005) conducted a study in India related to the importance of key performance indicators divided into four perspectives of the Balanced Scorecard (Financial, Customer, Internal Business Process, and Learning and Growth). When it comes to the financial perspective, their results showed that the importance of measurement of return on investment is at 62.5%, cash flow at 50%, the same as for economic value added. This means that the Balanced Scorecard is a tool used for recognizing the areas for future improvement that were not recognized by other systems. Most of the informants in their study stated that the utilization of the Balanced Scorecard led them to recognize the possibilities for cost reduction in organizations, which resulted in the improvement of the low-level organizational units. Following the analysis of the theoretical aspects of the four perspectives, these authors designed the model for the utilization of the Balanced Scorecard in a public hospital in Romania. They identified the sources of data for financial and non-financial indicators required by the Balanced Scorecard as well as the specific goals for every single perspective. Finally, they established indicators, measurement procedures, goals and persons in charge of these goals. Their analysis showed that the public hospital management is rather specific as it requires the administration of complex activities with large consumption of resources in order to produce high quality healthcare services. These activities start with medical care provided for patients (clinical activities) and are followed by hotel services (accommodation and food) and efficient stock management (medications, medical equipment, laboratory reagents, etc.) combined with extremely limited financial resources.

Northcott and Taulapapa (2012) conducted research into how much the Balanced Scorecard is used in the public sector of New Zealand. The general awareness of the use of the Balanced Scorecard among managers is very high at 91.67%, with a little more awareness among municipal councils of 94.60% compared to city councils of 81.81%. Wilson, Hagarty, and Guthier (2004) conducted research into the results of using the Balanced Scorecard in the public sector. They find that organizations that offer more services and knowledge with less tangible desired outcomes make the implementation of the Balanced Scorecard more challenging. …

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