STRUCTURAL REFORMS AND PUBLIC CHOICES The Failure of External Control on Public Utilities Alessandro Lombrano • Mario Ianniello Received: 13 August 2009 / Accepted: 4 January 2010 / Published online: 4 April 2010 Ó Springer-Verlag 2010 Abstract Although on average the cost of local public services is quite high, the same cannot always be said about their quality. Why is this so? This paper suggests that the answer lies in the failure of external control systems. Specifically, four types of risk have been identified: (1) standardisation that is either lacking or incongruent; (2) inappropriate relationships between controllers and the controlled; (3) cases of erosion and resistance to control; (4) incoherence between control aims and methods, and the skill of controllers. The research method was based partly on an analysis of literature and partly on empirical observation. Initially, a thorough examination of articles on the subject published in the main international journals was carried out. Then empirical research (limited to the Italian situation) was added to support the research hypotheses, and which led to the paper’s conclusions. The results may be significant from two points of view. Firstly, although in recent years financial scandals have been very much in the news (the cases of Enron, Argentine bonds, football club scandals) literature has not yet systematically dealt with control failure. Secondly, the conclusions may be of support to public administration pol- icy-makers or to controllers who need to improve their professionalism and diligence. Keywords Local public services Á Accountability Á External control Á Conflict of interest Á Resistance to control JEL Classification M42 - Auditing Á M48 - Government Policy and Regulation A. Lombrano (&) Department of Company Finance and Financial Markets, University of Udine, Udine, Italy e-mail: alessandro.lombrano@uniud.it M. Ianniello Department of Economy, University of Parma, Parma, Italy e-mail: mario.ianniello@nemo.unipr.it 123 Transit Stud Rev (2010) 17:229–245 DOI 10.1007/s11300-010-0134-6