Finance Officers Who Help Build the Budget Run Tighter Internal Controls

Every city, county, and school district builds a budget. Who takes part in that process turns out to matter for something else: the quality of the government’s internal controls. A study in the Journal of Governmental & Nonprofit Accounting finds a link. Finance officers who are more involved in budgeting are associated with fewer control problems.

The study was co-authored by Binod Guragai, Associate Professor in the Department of Accounting at McCoy College of Business. His co-authors are Casey A. Camors and Bradley Lang of Mississippi State University and Paul D. Hutchison of the University of North Texas.

The study

Internal controls are the procedures that keep public money accounted for and spending within the rules. Auditors grade them. A material weakness is a flaw serious enough that a misstatement could go undetected. A significant deficiency is a lesser but still notable gap. Auditors also report compliance failures and whether the audit was completed on time.

The researchers surveyed local government finance officers about how much they take part in the budget process. The survey also captured characteristics of each government and of the officers themselves. The team then hand-collected audit outcomes for each responding government and matched them to the survey answers.

That pairing is the study’s core design. It links what officers say about their role to what auditors independently found.

What the researchers found

Finance officers with greater budget participation are associated with better internal control quality. The result holds across all four measures: fewer material weaknesses, fewer significant deficiencies, better compliance with regulations, and timelier audits.

Two groups show a stronger link. Female finance officers, and officers who are not certified public accountants, show higher control quality when more involved in the budget. One interpretation is that budget participation supplies detailed knowledge of operations and funding. For officers without a CPA credential, that knowledge may substitute for formal training.

The study also finds a limit. Where a budget committee exists, the finance officer’s participation has less bearing on control quality. The committee appears to absorb some of the budget-related information that would otherwise flow through the finance officer.

What it means for local governments

The practical message for city managers, county administrators, and elected boards is direct. Do not treat the finance officer as a bookkeeper who receives the budget after it is set. Involve that person early and throughout.

Budget participation appears to be a low-cost way to strengthen controls. It requires no new software or staff. It does require a decision about who is in the room when spending priorities are set.

Governments that rely on budget committees should look at how the finance officer connects to that committee. If the committee handles budget deliberations on its own, the control benefit of the officer’s knowledge may be lost.

What it means for auditors and oversight bodies

State auditors, bond rating agencies, and oversight boards often assess local governments on control outcomes. This study suggests a leading indicator: the finance officer’s role in budgeting. A government where the finance officer is sidelined may be a government where control problems are more likely to surface.

Professional bodies that train government finance officers may also take note. The findings point to budget involvement as a source of practical competence, particularly for officers who come to the role without a CPA.

This summary is based on the paper’s abstract. The full article reports the data, methods, and detailed results.

What it means for managers

• Bring the finance officer into the budget room. Officers with more involvement in budgeting are linked to better internal control outcomes on four separate measures.
• Participation helps some officers most. The link is stronger for female finance officers and for those who are not CPAs, suggesting budget involvement supplies knowledge that credentials might otherwise provide.
• Budget committees dampen the effect. When a committee handles the budget, the finance officer's involvement matters less for control quality, so governments should be deliberate about who sits at the table.

Camors, C. A., Guragai, B., Hutchison, P. D., & Lang, B. (2025). The relationship between budget participation and internal control: Evidence from government finance officers. Journal of Governmental & Nonprofit Accounting, 14(1), 53-78. 10.2308/jogna-2023-013