Managing and Controlling Second-Level Organisations: The Responsibilities of the First-Level Organisation

What are called second-level bodies exist in probably all public sectors. They can perform very useful roles, although they can be used to avoid the controls that apply to fist-level organisations. However, they do need to be managed by their equivalent first-level or controlling body. Unfortunately in many developing and transition economy countries they are not managed and, in effect, have a life of their own. What is often a cause of this situation is an asymmetry of information; the second-level body knows far more about its business than the controlling body. This may be inevitable but the operations of a second-level body should be always within a context and to a standard and level of performance set by the first-level body. Also second-level body performance should be subject to periodic review. This chapter addresses the problems arising with the management of second-level bodies within the context of a PFM/IC managerial framework and provides advice about reform arrangements. A feature of many public sector organisations is the existence of ‘second-level’ organisations. In considering the introduction of PFM/IC regard should be had to how these organisations are managed by the controlling or first-level body.