Abstract
This paper recommends improvements to the management of Japanese local governments by analyzing the challenges faced in adopting a Management Control System to administer the operating budget. Based on the outcome of interviews with executive officials in local governments, this research recommends solutions for better management. The interviews have been analyzed by focusing on the point that the operating budget in local governments in other countries is divided into the legislative budget and the management budget and that the performance budget is a part of the management budget. The results of this research suggest that from an internal accounting report point-of-view, the performance budget should not be split into a legislative budget and a management budget, but that the legislative budget should be changed and utilized as the management budget.
