Yoshie Saito Lord
Temple University
Christopher S. McIntosh
University of Idaho at Idaho Falls
Abstract: This study applies agency theory to analyze elected officials' incentives where a centralized monitoring mechanism exists for public school operations. The estimation of the current value of auditing as a centralized monitoring mechanism shows that auditing, in fact, reduces the nonproductive use of taxes. However, the results also show that complexity in fund requirements and auditing procedures create resource allocation problems for auditors. Given these two combined effects, for a sample of public school districts in Georgia, we find that auditors' current effort-allocation is inadequate and results in potential undesired wealth transfers from taxpayers to public officials.
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