Internal Auditing in Urban Development: A Case Study of the Egyptian Public Sector

Abstract

This study examines the role of internal auditing in urban development within the Egyptian public sector, emphasising its contribution to governance and accountability in state-led projects. The research introduces a state-centric participatory audit approach tailored for urban development governance, diverging from traditional corporate-focused models by integrating institutional alignment and public sector accountability mechanisms. Unlike existing participatory audit frameworks, this model emphasises cross-agency coordination and sustainability governance within the Egyptian public sector, addressing gaps in oversight and collaborative planning. Findings reveal that internal auditing serves as a critical mechanism for aligning institutional objectives, enhancing transparency, and fostering participatory governance in urban development initiatives. Furthermore, the study advances institutional alignment through enterprise resource planning (ERP)-enabled participatory auditing, offering a governance-oriented framework for sustainability oversight in the public sector. Practically, the findings provide actionable guidance for public sector managers on embedding sustainability key performance indicators (KPIs) into audit processes and leveraging ERP systems for real-time monitoring and assurance reporting. From a policy perspective, the study informs regulatory reforms and governance strategies aimed at institutionalising accountability and participatory oversight in large-scale urban development projects. These insights offer practical implications for policymakers and practitioners seeking to strengthen accountability and sustainability in public sector development programs.

1. Introduction

Urban development in emerging economies presents unique governance challenges, particularly in the public sector. In Egypt, rapid urbanisation and ambitious national projects have exposed vulnerabilities in financial management and accountability [1]. These pressures necessitate robust internal auditing systems that align with sustainability goals. Recent evidence suggests that sustainability initiatives often entail cost implications that organisations strategically absorb rather than transferring to consumers, reflecting global trends in green business models [2]. Internal auditing plays a critical role in enhancing transparency, accountability, and governance within the public sector, particularly in the context of urban development. It enables systematic evaluations of state-owned enterprises (SOEs), focusing on operational efficiency, financial management, and regulatory compliance. By providing objective assessments of how public resources are managed to achieve sustainability goals [3], internal auditing strengthens institutional integrity and fosters public trust.

This study adopts a state-centric perspective, focusing on public sector governance rather than corporate sustainability frameworks, to examine how internal auditing contributes to institutional alignment and participatory sustainability in urban development initiatives. By analysing the Egyptian public sector as a case study, the research explores the mechanisms through which internal auditing supports strategic objectives, mitigates risks, and enhances stakeholder confidence in large-scale development programs.

While sustainability auditing in the public sector and SOEs has received growing scholarly attention, limited research has examined how national urban development pressures influence the evolution of internal auditing systems, particularly within centralised governance contexts. Parker et al. [4] highlight the challenges of aligning institutional logics in public sector sustainability audits, while Mattei et al. [5] call for deeper inquiry into the integration of sustainability practices between central governments and their enterprises. Grossi et al. [6] emphasise both the opportunities and complexities of digitalising sustainability auditing, advocating for more empirical case studies in this emerging field. The role of ERP technologies in enabling participatory auditing also remains underexplored. For example, Pande [7] investigates community-based monitoring in India, Aziliya and Sampurna [8] examine citizen engagement in Indonesia, and the World Bank [9] documents participatory audit initiatives in the Philippines and South Korea, all underscoring the potential of civic involvement in enhancing public accountability. These gaps point to a clear need for theoretically grounded, empirical research that explores how internal auditing systems can be effectively designed and implemented in response to national urban development pressures.

This study investigates how Egypt’s public sector has responded to national urban development pressures by implementing a participatory sustainability-oriented internal auditing system. It focuses on the mechanisms through which such systems are adopted and operationalised, particularly in the context of digital transformation. The central research question guiding this inquiry is: How is an internal auditing system implemented in response to national urban development pressures? To address this, the study explores two interrelated subquestions: First, how do national urban development projects generate pressures that influence the adoption of participatory sustainability auditing systems? Second, how are these systems operationalised through advanced ERP technologies and participatory audit committees? As explained below, Egypt offers a compelling case due to its centralised governance structure, recent regulatory reforms mandating sustainability KPIs, and the integration of ERP systems across public sector entities [1]. These developments provide a unique opportunity to explore how institutional logics, economic and social, are reconciled through digital infrastructure and collaborative audit mechanisms. ERP systems have emerged as transformative tools in public sector governance, enhancing transparency, accountability, and operational efficiency through centralised data management and automated workflows. Recent studies [10,11] show that ERP implementations can reduce manual processing time by up to 37% and improve data accessibility by 42%, directly contributing to improved auditability and sustainability reporting.

Grounded in principles of social accountability and participatory governance, this study introduces a novel internal auditing model tailored to the context of urban development. Unlike traditional top-down approaches, this model promotes active involvement of SOEs in decision-making, aligning audit functions with sustainable development goals. While conceptually related to participatory models such as social audits, citizen audits, and community-based monitoring [7,8,9], the approach developed here differs in its institutional focus and operational design. Existing models typically emphasise citizen engagement to promote transparency and equitable service delivery, examples include the Citizen Participatory Audit in the Philippines, South Korea’s participatory audit system, and Indonesia’s adaptations, often supported by organisations like the World Bank and ACIJ. In contrast, this study’s model centres on inter-organisational collaboration within the public sector, particularly between central government entities and SOEs. It is shaped by national urban development imperatives and institutional dynamics, and is operationalised through ERP technologies and participatory audit committees composed of experienced internal auditors. These committees foster collaborative governance, enable data-driven decision-making, and help overcome resistance to change. By embedding sustainability objectives into the audit process, this model advances a transformative approach, moving beyond citizen oversight toward institutional co-creation and strategic alignment.

This study extends Besharov and Smith’s [12] institutional theory framework to the domain of internal auditing in urban development, addressing a notable gap in the literature. While institutional theory has been widely applied in public sector auditing, particularly in relation to legitimacy, conformity, and organisational change, its use in examining the pressures arising from national urban development remains limited. Egypt’s urban development initiatives present a compelling empirical context, introducing competing demands that divide public sector institutional logic into two interrelated rationalities: a social logic, driven by the government’s commitment to citizen welfare, and an economic logic, increasingly adopted by SOEs in response to fiscal constraints and the shift toward partial self-financing. Besharov and Smith’s [12] framework is particularly relevant here, as it focuses on institutional alignment—the coexistence and interaction of multiple logics within a single organisational field. Unlike models such as Meyer and Rowan’s [13] institutional isomorphism or DiMaggio and Powell’s [14] theory of institutional change, which emphasise conformity and homogenisation, Besharov and Smith [12] offer a dynamic lens for understanding how organisations manage tensions between divergent logics. The economic rationality observed in sustainability practices, where firms balance cost absorption with efficiency gains [2], aligns with institutional logics theory’s emphasis on competing priorities within organisational fields. This study applies their framework to explore how participatory sustainability auditing systems, enabled by ERP technologies and collaborative audit committees, can align the social logic of public sector governance with the economic logic of SOEs. In doing so, it contributes to a deeper understanding of how internal auditing practices evolve to support both sustainability and governance objectives in urban development.

Grounded in institutional theory, specifically Besharov and Smith’s [12] framework on competing logics, this study employs an extended case study approach to examine how economic and social logics are reconciled through digital infrastructure and collaborative audit mechanisms. Unlike conventional case studies that offer static, single-organisation snapshots, Burawoy’s [15] extended case method enables a dynamic, longitudinal analysis across interconnected entities. This approach is particularly suited to capturing the evolving institutional dynamics within Egypt’s public sector, where governance reforms and urban development pressures intersect. The empirical focus is on the relationship between Egypt’s central government, represented by the public sector ministry, and an SOE (anonymised as EYD for confidentiality), within the context of a participatory sustainability auditing system. Data were collected through semi-structured interviews, focus groups, direct observations, and extensive document analysis involving both entities. This multi-source, multi-actor methodology allowed for a nuanced exploration of how ERP technologies and audit committees have facilitated a shift toward participatory governance and institutional alignment over time.

This study contributes to the growing literature on internal auditing in the public sector by offering both theoretical and empirical insights within the underexplored context of Egypt’s national urban development. Drawing on institutional theory, specifically Besharov and Smith’s framework [12], the findings reveal how a participatory sustainability auditing system has transformed internal audit practices. Unlike traditional models centered on central government oversight, this emerging system integrates SOEs into a collaborative framework, expanding the scope of auditing to include sustainability performance, disclosure, and assurance. The Egyptian case presents a distinctive institutional configuration. While the public sector ministry emphasises social sustainability goals, such as equity, justice, and service delivery, SOEs like EYD increasingly adopt an economic logic, driven by fiscal constraints and partial self-financing policies for urban development projects. Although such divergence could lead to institutional conflict, the study identifies a novel form of operational alignment, facilitated by two key mechanisms: the deployment of ERP technologies and the establishment of participatory audit committees. ERP systems have played a central role in institutionalising the new auditing model, enabling real-time data sharing, remote collaboration, and integrated monitoring of sustainability KPIs across entities. In this context, ERP functions not only as a technological tool but as a governance enabler. Equally important are participatory audit committees, composed of senior auditors from both the ministry and SOEs, which have been instrumental in implementing the system and managing resistance during its early stages. Their collaborative efforts mark a shift from hierarchical oversight to inter-organisational partnership. Theoretically, the study extends Besharov and Smith’s concept of institutional alignment [12] by introducing two novel dimensions: the enabling role of ERP technologies in sustaining cross-boundary alignment, and the strategic function of participatory audit committees in navigating institutional tensions. These insights offer a dynamic, practice-oriented understanding of how multiple institutional logics can coexist and be aligned in complex public sector environments. In contrast to prior studies that focus on single logics or conventional audit mechanisms [8,16,17,18,19], this research demonstrates how participatory, ERP-enabled auditing systems can integrate diverse logics to enhance governance and sustainability in urban development. Ultimately, the study offers a replicable model for other countries facing similar governance challenges, highlighting the potential of collaborative, digitally enabled auditing systems to drive institutional alignment and sustainable outcomes.

This paper is structured into seven sections. Following the introduction, Section 2 critically reviews the literature on public sector internal auditing and presents the rationale for adopting Besharov and Smith’s [12] framework on competing institutional logics. Section 3 contextualises the study within Egypt’s national urban development landscape. Section 4 outlines the research methodology, detailing the extended case study design and data collection methods. Section 5 presents the empirical findings, organised around the two subquestions derived from the central research question and interpreted through the lens of institutional alignment. Section 6 discusses these findings in relation to the theoretical framework and existing literature. Finally, Section 7 concludes by summarising key insights, identifying implications for policy and practice, and suggesting directions for future research.

2. Literature Review

2.1. Internal Auditing in the Public Sector

The evolution of public sector internal auditing has been shaped by successive waves of reform, transitioning from traditional public administration to New Public Management (NPM), and more recently, New Public Governance (NPG). Each paradigm introduced distinct institutional logics, ranging from compliance and performance to transparency and stakeholder engagement, that have significantly influenced audit design and practice. For instance, Guthrie and Parker [20] show how performance auditing in Australia has shifted from rigid compliance models to more consultative, stakeholder-oriented approaches, reflecting NPG’s influence. Auditors increasingly engage with parliamentarians, the media, and auditees, using collaborative strategies to navigate conflicting logics and enhance audit effectiveness. Similarly, Mattei et al. [5] trace the evolution of public sector auditing over four decades, highlighting a clear progression from bureaucratic control under traditional administration, to performance-driven auditing under NPM, and finally to participatory, value-oriented models under NPG. Their review underscores how changing public administration paradigms have reshaped both the purpose and practice of auditing. dos Santos and Gonçalves [21] further illustrate this transformation at the European Court of Auditors, where audit methodologies have shifted from financial and compliance audits—aligned with bureaucratic logic—to performance and non-financial audits reflecting managerial and public value logics. These studies collectively demonstrate how evolving paradigms have introduced new institutional logics that continue to shape internal auditing systems, moving them beyond compliance toward more integrated, participatory, and sustainability-focused practices.

Institutional theory has long served as a key framework for interpreting the evolution of public sector auditing, particularly in understanding how audit practices are embedded within broader governance structures. It offers insight into how external pressures, such as regulatory mandates, professional norms, and societal expectations, shape internal audit functions. Studies have emphasised the role of institutional mechanisms, including audit committees, internal control systems, and performance frameworks, in promoting transparency and accountability. For example, Hay and Cordery [3] argue that institutional arrangements such as audit committees and reporting structures are vital for democratic accountability, stressing the need to align audit practices with public expectations and institutional norms to enhance legitimacy and trust. Cordery and Hay [22] further show that while audit institutions often adopt similar structures, their effectiveness is contingent on contextual factors such as political support, legal frameworks, and cultural norms, highlighting the importance of context-sensitive approaches beyond technical compliance. Despite its widespread use, institutional theory remains underdeveloped in parts of the literature. Nerantzidis et al. [17], in a systematic review of 78 peer-reviewed articles, found that many studies lacked robust theoretical grounding and overlooked contextual influences such as institutional diversity, socio-political dynamics, and organisational culture. They call for more theoretically informed research that integrates institutional theory with empirical insights to better understand the evolution and operation of internal auditing systems. Collectively, these studies underscore both the strengths and limitations of current scholarship. While institutional theory provides a valuable foundation, there is a pressing need for more nuanced, contextually rich frameworks to explain the complex interplay of institutional logics, organisational structures, and governance outcomes, particularly in relation to sustainability and urban development.

Empirical research on public sector internal auditing has predominantly focused on performance audits shaped by NPM principles, with limited attention to how these systems address broader sustainability goals, particularly in urban development. Karim et al. [2] demonstrate that firms engaging in green revenue generation typically absorb sustainability costs through operational efficiencies rather than passing them to consumers, reinforcing the economic logic shaping sustainability strategies. Performance audits, centred on efficiency, effectiveness, and economy, have become the dominant model under NPM, yet they often neglect the multidimensional nature of sustainability, which demands integrated frameworks encompassing environmental, social, and economic impacts, alongside participatory governance. Dittenhofer [23] was among the first to advocate for expanding internal auditing beyond financial and compliance functions, proposing a strategic role for auditors in evaluating organisational performance. However, sustainability concerns remained peripheral in this approach. Similarly, Rana et al. [24] examined the evolution of performance auditing and highlighted the influence of institutional pressures, such as regulatory mandates and professional norms, on audit practices. While acknowledging the rise of non-financial indicators, their study continued to frame auditing primarily in terms of operational efficiency, reinforcing critiques that current models are ill-equipped to address sustainability complexities. Moreover, existing literature often treats public sector entities and SOEs as isolated units, overlooking the inter-organisational coordination essential for large-scale urban development. These initiatives typically involve collaboration across ministries, municipalities, and SOEs, each governed by distinct institutional logics and accountability structures. Yet, few studies explore how internal auditing systems can facilitate alignment across these entities, an omission that is particularly problematic in contexts where SOEs must balance public value delivery with financial viability. In sum, while performance auditing has advanced operational oversight, it falls short in addressing systemic sustainability challenges. There is a clear need for more holistic, participatory, and inter-organisational auditing approaches that support sustainable urban development objectives.

Recent scholarship has increasingly explored participatory auditing as a means to enhance stakeholder engagement and promote transparency in public sector governance. Mattei et al. [5], for example, examine mechanisms such as community scorecards and citizen oversight panels, showing how they empower local communities to hold institutions accountable, particularly in service delivery. Similarly, Aziliya and Sampurna [8] highlight the role of digital platforms in enabling real-time citizen feedback, demonstrating how ICT tools can improve audit responsiveness and inclusivity. These approaches, ranging from citizen audits and public hearings to technology-driven feedback systems, align closely with NPG principles, which emphasise collaboration, transparency, and stakeholder involvement. The World Bank [9] supports this view, documenting cases where citizen participation in audit processes has strengthened public trust and oversight, especially at the local government level. However, while promising, these models are largely citizen-centric and decentralised, often rooted in Western democratic or local governance frameworks. As such, they tend to overlook the institutional coordination required in more complex governance arrangements—particularly those involving central governments and SOEs in national urban development initiatives. These contexts demand a more integrated approach to participatory auditing, one that supports cross-sectoral collaboration and aligns with strategic national objectives, rather than relying solely on grassroots mechanisms.

While citizen-centric models have demonstrated success in decentralised governance systems, particularly in enhancing local accountability and civic participation, they may be less feasible in contexts like Egypt, where centralised authority, limited civil society engagement, and strong state oversight shape institutional dynamics. The country’s political structure prioritises strategic coordination and hierarchical control, making bottom-up audit mechanisms difficult to implement at scale [22,25]. Moreover, the absence of robust civic platforms and the limited institutional autonomy of local governments constrain the effectiveness of citizen-led audits [9,26]. In this environment, the state-centric, inter-organisational collaborative model observed in Egypt should not be viewed merely as an alternative, but as a contextually necessary and adaptive institutional innovation. It responds to structural constraints by leveraging existing state capacity and digital infrastructure to embed participatory principles within formal governance systems [27]. This reframing highlights the model’s strategic relevance and underscores its contribution to the broader debate on participatory auditing in complex governance settings.

A growing body of literature has begun to examine the institutional tensions inherent in participatory audit environments, particularly between auditors and stakeholders operating under competing logics. Parker et al. [4] critically analyse how traditional audit institutions prioritise compliance and control, rooted in bureaucratic and regulatory frameworks, while stakeholders, especially citizens and civil society actors, advocate for participation, dialogue, and responsiveness. This divergence often generates friction, as auditors may resist participatory mechanisms that challenge their professional autonomy or introduce ambiguity into standardised procedures. Similarly, Kim [26] explores these tensions in the context of public sector reforms, arguing that the logic of participation, centred on inclusivity and deliberation, frequently clashes with the compliance logic, which values efficiency, risk aversion, and hierarchical accountability. Kim’s [26] findings highlight how these conflicting rationalities are rarely reconciled in practice, resulting in fragmented governance and limited effectiveness of participatory audit models. Despite their potential, existing frameworks often lack institutional mechanisms to align these divergent logics within complex governance structures involving multiple layers of government, SOEs, and private sector actors. This gap undermines the strategic value of participatory auditing in national development contexts. Moreover, the literature tends to overlook the transformative potential of digital technologies in bridging these divides. ERP systems and other integrated platforms can support data-driven decision-making, enhance transparency, and facilitate institutional integration across departments and agencies. These technologies offer a means to harmonise compliance and participation by enabling shared data environments, real-time monitoring, and collaborative interfaces that uphold audit rigour while fostering stakeholder engagement.

ERP systems are increasingly recognised as transformative in public sector governance, offering integrated platforms for financial management, performance monitoring, and compliance reporting [11]. Their ability to centralise data, automate workflows, and enhance transparency has made them pivotal in modernising internal audit functions. However, their role in enabling participatory sustainability auditing remains underexplored. Recent studies have begun linking ERP implementation to broader governance reforms, including civic engagement and collaborative oversight [10,11], suggesting that ERP systems can facilitate participatory governance through real-time data access, cross-organisational collaboration, and citizen-facing reporting tools. Building on this foundation, the present study examines how ERP infrastructure contributes to institutional alignment between central government entities and SOEs in Egypt. Specifically, it explores how ERP systems operationalise participatory sustainability auditing by mediating tensions between economic and social logics and supporting the integration of sustainability KPIs across organisational boundaries. This analysis responds to calls in the literature for more integrated and digitally enabled audit frameworks [5,6], and addresses critiques that traditional audit models remain narrowly focused on compliance and performance [17,24]. By embedding governance principles into daily operations, ERP systems in Egypt function not merely as technical tools but as institutional mechanisms that enable reflexive, inclusive, and data-driven auditing. This digital governance dimension offers a novel contribution to sustainability auditing literature, demonstrating how ERP technologies can support institutional change in complex public sector environments.

While prior studies have explored sustainability auditing within public sector organisations and SOEs, limited attention has been paid to how national urban development pressures shape the design and evolution of internal audit systems, particularly in centralised governance contexts. Much of the above literature focuses on general reform or isolated audit mechanisms, often overlooking the institutional complexity introduced by large-scale development agendas and fiscal constraints. This study addresses that gap by examining Egypt’s public sector response to urban development imperatives, offering a novel perspective on institutional alignment through ERP-enabled participatory auditing. By analysing how digital infrastructure and collaborative audit mechanisms reconcile competing institutional logics—economic and social—this research contributes new empirical insights and extends the theoretical application of institutional theory. In doing so, it builds on existing scholarship while offering a distinct contribution through its focus on a dynamic, multi-actor public sector setting shaped by national development priorities.

2.2. Theoretical Framework

To address the limitations identified in existing literature, particularly the absence of mechanisms for reconciling divergent institutional logics and the underestimation of structural complexity, this study adopts a conceptual framework grounded in institutional theory, focusing on the typology developed by Besharov and Smith [12]. Institutional theory provides a robust lens for examining how organisations respond to external pressures, normative expectations, and regulatory demands. It is especially relevant for analysing environments shaped by multiple institutional logics, defined by Thornton et al. [28] as socially constructed sets of practices, values, and beliefs that guide organisational behaviour. In public sector auditing and governance, these logics often coexist, such as compliance and participation, originating from diverse stakeholders, regulatory bodies, or professional norms. Their interaction can generate tension, ambiguity, or, in some cases, foster innovation depending on how they are managed.

Besharov and Smith’s [12] framework offers a structured approach to analysing this complexity by categorising organisations along two dimensions: centrality (the extent to which multiple logics are integral to core functions) and compatibility (the degree to which these logics can coexist without conflict). Based on these dimensions, organisations fall into four types:

• Contested: High centrality but low compatibility, where deeply embedded logics clash, creating persistent conflict and resistance to change.
• Estranged: Low centrality and low compatibility, where multiple logics are acknowledged but remain peripheral, resulting in superficial engagement and unresolved tensions.
• Dominant: Low centrality and high compatibility, where a single logic prevails and others pose minimal disruption, ensuring stability but limiting adaptability.
• Aligned: High centrality and high compatibility, where multiple logics are central and harmoniously integrated, enabling organisations to balance diverse expectations and navigate complex governance environments with minimal resistance.

Figure 1 illustrates Besharov and Smith’s [12] framework, depicting the dimensions of centrality and compatibility and positioning the Egyptian case within the Aligned quadrant to highlight its relevance to this study.

As shown in Figure 1, Egypt’s public sector ministry and SOE configuration lies within the Aligned quadrant, reflecting high centrality and compatibility of institutional logics. This positioning demonstrates how social and economic priorities are harmonised through ERP-enabled participatory auditing and collaborative committees. These mechanisms embed governance principles into digital infrastructure, enabling real-time KPIs monitoring, cross-organisational coordination, and reflexive decision-making. As detailed in Section 5, empirical evidence confirms that these innovations sustain alignment and mitigate tensions between competing logics. This contrasts with contested configurations reported in prior studies [4,17], underscoring this study’s contribution in showing how ERP technologies and participatory structures institutionalise compatibility in complex, centralised governance contexts.

By applying Besharov and Smith’s [12] framework, this study examines how public sector organisations, particularly those involved in national urban development and sustainability auditing, manage institutional complexity and foster collaborative governance. The framework offers a dynamic, context-sensitive lens for analysing multiple institutional logics, which is critical in environments where diverse actors, such as central governments, SOEs, civil society, and regulators, interact under competing expectations. Unlike earlier models, Besharov and Smith [12] provide a more nuanced and operationalisable approach. For example, Meyer and Rowan’s [13] emphasis on structural conformity explains legitimacy pressures but overlooks internal conflict and integration between logics. Similarly, Selznick’s [29] focus on organisational responsiveness and value infusion offers insight into institutional evolution but lacks a systematic method for analysing the coexistence of multiple logics. These traditional models often assume stable or singular institutional environments, limiting their applicability in complex governance contexts characterised by plurality and contestation.

Besharov and Smith’s [12] framework explicitly incorporates the dimensions of centrality and compatibility, enabling a typological classification of organisations based on how deeply multiple logics are embedded and how well they coexist. This approach aligns with the study’s research question, which examines how participatory sustainability auditing systems can reconcile competing logics, such as compliance, transparency, stakeholder engagement, and performance accountability, within public sector governance structures. The four organisational types (contested, estranged, dominant, and aligned) provide a practical tool for diagnosing institutional tensions and identifying pathways to integration. In participatory auditing, where collaboration among diverse actors is critical, alignment becomes particularly significant. It allows the study to explore how digital technologies (e.g., ERP systems) and participatory mechanisms (e.g., citizen audits, public hearings) can harmonise logics, reduce resistance, and strengthen institutional legitimacy.

Public sector auditing, particularly in sustainability and urban development, requires navigating multiple, often conflicting institutional logics. These include compliance and control (e.g., financial regulations, performance standards), transparency and accountability (e.g., public reporting, citizen engagement), participatory governance (e.g., stakeholder involvement, co-production), and strategic development (e.g., long-term planning, innovation). Traditional institutional theory models, such as Meyer and Rowan [13] and DiMaggio and Powell [14], emphasise legitimacy through conformity or institutional isomorphism, explaining why organisations adopt similar structures. However, they fail to address how organisations actively manage tensions between competing logics when these are central to operations. In contrast, Besharov and Smith’s [12] framework is particularly suited to public sector auditing because it:

• Recognises the coexistence of multiple logics, enabling nuanced analysis of interactions among mandates, citizen expectations, and global sustainability pressures.
• Provides a typology—contested, estranged, dominant, aligned—for diagnosing organisational dynamics and identifying integration pathways, especially for SOEs balancing commercial and public service logics.
• Supports evaluation of participatory auditing systems, where alignment among diverse actors is critical for sustainability.
• Facilitates strategic audit design by linking centrality and compatibility to institutional coherence, allowing technologies like ERP systems to be assessed for their role in mediating logics.
• Aligns directly with this study’s research question, offering a conceptual tool to understand and manage institutional complexity in designing sustainability auditing systems.

Although institutional logics theory is increasingly applied in public sector research, the explicit use of Besharov and Smith’s [12] framework in internal auditing, particularly within SOEs or participatory audit systems, remains rare, making this study a novel contribution. For instance, Grossi et al. [6] examined the evolution of audit practices in the European Court of Auditors, identifying a shift from compliance-based logic to performance and public value logics. While not employing Besharov and Smith’s [12] typology, their work underscores the relevance of multiple logics in public sector auditing and highlights institutional complexity as a key concern. Similarly, Parker et al. [4] explored tensions between auditors and auditees operating under different logics, conceptually aligning with Besharov and Smith’s [12] focus on compatibility and centrality, reinforcing the need for frameworks that address internal conflict and alignment. Maran and Lowe [30] directly applied the centrality-compatibility typology to a hybrid public organisation delivering ICT services, demonstrating how alignment or contestation of logics shapes organisational outcomes. Although not focused on auditing, this provides methodological precedent for applying the framework in public sector governance contexts.

Based on the reviewed literature, there is limited evidence of the explicit application of Besharov and Smith’s [12] framework within internal auditing in the public sector or SOEs. Existing applications predominantly focus on broader organisational contexts, such as hybrid organisations navigating competing logics (e.g., ICT service provision, social enterprises), institutional complexity in sectors like healthcare, education, and cultural industries, and corporate sustainability in developing economies. However, these studies rarely address internal auditing or public sector audit systems directly. One exception is a study that employed the framework to examine institutional pressures on performance management in a privatised Egyptian SOE [31], suggesting some relevance to public sector reform and audit governance. Nonetheless, this remains an emerging area, with scant research applying the framework specifically to participatory sustainability auditing in public sector organisations.

This study represents one of the first applications of Besharov and Smith’s [12] framework within the specific context of internal auditing in the public sector. Its use is both innovative and timely, offering a novel lens to examine how multiple institutional logics, such as compliance, participation, and strategic development, can be reconciled in complex governance settings. Unlike traditional institutional theory models that emphasise stability or conformity, Besharov and Smith’s [12] framework provides a dynamic, context-sensitive approach well-suited to the multifaceted realities of sustainability-focused public sector auditing involving diverse stakeholders. As such, the framework offers a strategically appropriate and theoretically robust foundation for analysing how sustainability auditing systems can be designed to foster accountability, inclusivity, and long-term urban development.

3. The Egyptian Context

Egypt’s public sector has experienced substantial transformation over recent decades, driven by shifting governance paradigms and evolving national priorities. Historically, the country operated under a traditional public administration (TPA) model, marked by centralised control, rigid bureaucratic structures, and a strong emphasis on procedural compliance. Internal auditing during this period focused primarily on financial oversight and legal conformity, with institutions such as the Central Auditing Organization (CAO) playing a dominant role in monitoring public expenditure and enforcing regulatory adherence [32]. Auditing practices were largely reactive and hierarchical, with limited stakeholder engagement and minimal consideration of broader developmental outcomes. Despite modernisation efforts, Egypt’s internal audit systems have long suffered from constrained independence and a narrow compliance orientation, lacking integration with performance-based or participatory approaches [33]. These limitations have prompted calls for a fundamental shift in administrative methodology to support more effective and accountable governance.

The transition to NPM in the late 1990s and early 2000s marked a shift toward efficiency, performance, and managerial accountability. Driven by economic liberalisation, SOE privatisation, and pressure from international financial institutions, Egypt’s public sector began modernising its operations. Internal auditing practices evolved to include performance metrics, risk assessments, and strategic evaluations, particularly within SOEs engaged in infrastructure and service delivery. Auditors were increasingly expected to assess not only compliance but also programme effectiveness and value-for-money. However, despite introducing tools to enhance operational efficiency, NPM reforms often remained technocratic and top-down, with limited emphasis on public engagement or sustainability [27,34]. The Organisation for Economic Co-operation and Development’s (OECD) governance reviews have acknowledged Egypt’s efforts to align with international standards, while also highlighting persistent challenges in coordination, transparency, and citizen-centred policy outcomes.

Over the past decade, Egypt’s governance landscape has evolved under the influence of NPG, which emphasises collaboration, transparency, and stakeholder participation. This shift has been driven by large-scale urban development initiatives, including the New Administrative Capital (NAC), the Urban Development Plan 2052, and the Western North Coast project. These efforts aim to address rapid urbanisation, economic growth, and spatial inequality, but also introduce complex governance arrangements involving central government agencies, private developers, and military institutions. In response, internal auditing practices have increasingly engaged with corporate sustainability frameworks, incorporating environmental, social, and governance (ESG) indicators into audit processes [35]. Examples include metrics on energy efficiency, emissions reduction, social equity in service delivery, and governance transparency. To align with global standards, the Egyptian Financial Regulatory Authority (FRA) has mandated ESG reporting for SOEs and listed companies, requiring disclosure of sustainability metrics and climate-related financial data [36]. These developments reflect a growing institutional commitment to embedding sustainability within governance and audit systems.

A key development in Egypt’s governance reform is the gradual implementation of participatory sustainability auditing systems, particularly within SOEs engaged in urban development. These systems respond to growing national and international demands for transparency, accountability, and inclusive governance. Participatory auditing introduces mechanisms such as citizen feedback platforms, public hearings, and community-based monitoring, enabling stakeholders to engage with audit processes and influence decision-making. In Egypt, such approaches are increasingly relevant in projects where public resources, environmental impacts, and social outcomes intersect, such as housing, transportation, and land reclamation. The OECD has underscored the importance of participatory governance in achieving Egypt’s Vision 2030 goals [25], recommending enhanced public consultation and results-based budgeting frameworks [27]. Additionally, Egypt’s sustainable development goals (SDGs) implementation strategy highlights integrated governance and stakeholder engagement as critical to advancing sustainable development and public sector accountability [27].

Egypt’s public sector auditing presents a distinct institutional configuration, markedly different from both developed and other developing countries, making it a compelling case for investigation. Unlike decentralised systems in many Western democracies, where local governments appoint auditors and foster community-level oversight, Egypt’s model is centralised, with strong involvement from state institutions and the military in urban development governance. This centralisation shapes the design and implementation of internal auditing, particularly within SOEs, where the intersection of public service and commercial logics creates complex accountability challenges. In contrast, countries such as Australia, Germany, and Switzerland operate decentralised audit systems that promote diverse interpretations of financial accountability [37]. Similarly, Brazil and China exhibit varying degrees of independence and standardisation in local audit institutions, reflecting different political and administrative traditions. In other developing contexts, decentralisation has enabled more inclusive audit practices. For example, Ghana’s supreme audit institutions face political pressures that lead to strategic compromises in sustainability audits [18], while Kenya’s citizen accountability framework formalises civil society engagement with the auditor-general [38]. Brazil’s regional audit bodies, though nationally mandated, lack standardised practices, resulting in fragmented oversight [37]. These comparative insights highlight how Egypt’s centralised and politically embedded audit structures, combined with its expansive urban development agenda, create a unique environment in which participatory sustainability auditing must navigate tensions between compliance, performance, and stakeholder engagement. This divergence from global norms underscores the need for context-specific frameworks, such as the one adopted in this study, to understand how institutional logics interact and to identify pathways for more inclusive and effective governance.

4. Research Methodology

This study employs Burawoy’s [15] extended case study approach to examine ERP-enabled processes within a participatory internal auditing committee formed between a public sector ministry and its affiliated SOE (EYD). Over a three-year period, the research involved 20 semi-structured interviews and 22 focus groups with committee members from both entities, selected for their direct involvement in the newly implemented auditing system. Operating under the supervision of the minister and deputy minister, the committee maintains independence in line with the Institute of Internal Auditors’ [39] definition, which emphasises the absence of conditions compromising objectivity. Monthly meetings with ministerial leadership and dual-reporting structures, comprising ERP-generated sustainability performance reports, reinforce transparency, accountability, and institutional integrity. The committee’s diverse composition fosters collaborative governance and participatory decision-making, enabling members to jointly define audit protocols and manage daily ERP operations.

The ERP system plays a central role in promoting transparency and accountability, thereby reducing opportunities for corruption. As a centralised platform, it records and monitors all auditing activities and sustainability KPIs, ensuring traceability and minimising data manipulation risks. Operated jointly by the ministry and EYD, the participatory internal auditing system fosters collaboration and inclusivity, enabling the identification and resolution of discrepancies and reducing biased reporting. Monthly sustainability performance reports are submitted to the ministry and published online, enhancing public scrutiny and serving as a deterrent to unethical practices. The involvement of external stakeholders, including military institutions, further strengthens the legitimacy and oversight of the audit process. Collectively, the ERP infrastructure, collaborative audit structure, regular reporting, and public disclosure form an integrated framework that reinforces institutional integrity and supports transparent, accountable auditing practices.

Interviews and focus groups were conducted across three distinct phases: June-August 2020, September-October 2021, and August-September 2022. This multi-phase design was both strategic and responsive to constraints imposed by the COVID-19 pandemic. Drawing on Burawoy’s [15] extended case study methodology, the timing of data collection was structured to capture the evolution of the participatory internal auditing system—particularly during its formative stages and periods of disruption. In 2020, the system was in its initial implementation via an advanced ERP platform; by 2021 and 2022, it had become fully embedded in the daily operations of the joint auditing committee between the ministry and EYD. The interviews and focus groups explored the collaborative development of this system within the broader context of sustainability KPIs assurance in Egypt’s public sector. This longitudinal approach aligns with Alawattage and Alsaid’s [40] application of Burawoy’s [15] ontological and epistemological principles to document historical accounting reforms and structural transformation, specifically within Egypt’s electricity sector. While the original research plan included multiple data collection phases to track staged implementation, adjustments were made to accommodate pandemic-related disruptions to auditing and sustainability reporting.

To enhance transparency and traceability of the longitudinal research design,

Table 1. Research phase summary.

Time Period	Key Contextual Events	Data Collection Methods Used	Key Findings/Emergent Themes
2020	Initial ERP system deployment across ministry and SOE; COVID-19 lockdowns disrupt audit routines; early resistance to digitalisation; negotiation of audit committee roles begins	16 semi-structured individual interviews with committee members (8 ministry, 8 SOE); 2 structured observations of ERP onboarding and audit meetings; documentary analysis of ERP protocols and early sustainability KPIs	Resistance to digitalisation; unfamiliarity with ERP workflows; institutional logic conflicts between ministry and SOE; concerns over audit independence; early negotiation tensions; lack of trust and role clarity
2021	Enforcement of 2018 regulatory reform mandating sustainability KPIs; ERP system stabilisation; expansion of participatory audit committee; dual-role tensions emerge; military and political leadership intervene to resolve institutional misalignment	10 focus groups (4 ministry, 6 SOE); 3 structured observations of committee meetings and ERP use; follow-up document analysis of KPIs integration and committee protocols	Strategic alignment initiated; dual-role tensions among auditors and managers; integration of sustainability KPIs; ERP-enabled collaboration; emergence of trust-building; political and military mediation to resolve institutional misalignment
2022	Full embedding of ERP-enabled auditing system; launch of public sustainability reporting; expansion of stakeholder engagement; integration of AI analytics; reflexive governance practices institutionalised	12 focus groups (5 ministry, 7 SOE); 3 structured observations of ERP-enabled reporting and stakeholder engagement sessions; analysis of public assurance reports and AI-enhanced dashboards	Institutionalisation of collaborative governance; reflexive reporting practices; shared ownership of audit outcomes; enhanced stakeholder engagement; ERP as governance infrastructure; reduced resistance; integration of AI analytics and real-time decision-making

Source: Authors.

presents a stage-based summary of the participatory sustainability auditing system’s implementation. It outlines the time periods, key contextual events, data collection methods, and emergent themes across each phase. This table aligns with Burawoy’s [15] extended case study methodology and supports the study’s reflexive and process-oriented approach. By linking empirical insights with institutional theory, particularly Besharov and Smith’s [12] alignment typology, Table 1 enables readers to trace how institutional logics evolved and were reconciled through ERP-enabled participatory auditing.

To ensure methodological rigour, the study employed a purposive sampling strategy. It selected 16 committee members, eight from the ministry and eight from EYD, based on their direct involvement in the participatory auditing system and their roles in sustainability governance. The total of 20 interviews and 22 focus groups reflects a longitudinal design across three implementation phases, allowing for follow-up with key informants and iterative exploration of emerging themes. Triangulation was achieved through the integration of interviews, focus groups, participant observations, and documentary analysis, enabling cross-validation and enhancing the credibility of findings. Data coding was conducted manually in three iterative stages: open coding to identify institutional logics and governance mechanisms; axial coding to refine thematic categories; and selective coding to align empirical insights with the theoretical framework. This process was guided by Burawoy’s [15] extended case method and supported by field notes, transcripts, and document reviews, ensuring a robust and context-sensitive analytical approach.

As detailed in

Table 2. (a) Central government participants. (b) State-owned enterprise participants.

Participatory Sustainability Auditing Committee in the Public Sector	Codes	Categories	Age (Years)	Qualifications	Experience (Years)	First Round (2020)	Second Round (2021)	Third Round (2022)	Duration	Documentation Method
						No. of Interviews	No. of Focus Groups
(a)
Deputy minister	M1	politician	58	DBA	25	1	4 of 4 completed	5 of 5 completed	1 h	audio recorded
Military delegate	M2	military	56	CIMA	22	1	4 of 4	5 of 5	1 h	audio recorded
Internal auditing manager	M3	politician	55	CPA	20	1	4 of 4	5 of 5	1.30 h	audio recorded
Senior auditor	M4	public manager	52	PhD	18	2	4 of 4	5 of 5	1 h	mixed (recorded and notes)
Senior auditor and sustainability reporting manager	M5	military	50	PhD	20	1	4 of 4	5 of 5	30 min	audio recorded
Senior auditor	M6	public manager	48	FCCA	17	1	4 of 4	5 of 5	45 min	notes taken
Senior auditor and sustainability risk manager	M7	politician	44	MBA	16	2	-	5 of 5	2 h	mixed (recorded and notes)
Senior auditor	M8	public manager	42	ACCA	13	1	-	5 of 5	45 min	notes taken
(b)
Board director	E1	military	57	PhD	22	1	6 of 6 completed	-	2 h	audio recorded
Financial manager	E2	public manager	55	PhD	14	1	6 of 6	7 of 7 completed	1.30 h	notes taken
ERP manager	E3	politician	54	PhD	13	1	6 of 6	7 of 7	1.30 h	audio recorded
Internal auditing manager	E4	politician	51	MPhil	20	1	6 of 6	7 of 7	1 h	audio recorded
Senior auditor	E5	public manager	51	Diploma	12	2	6 of 6	7 of 7	1 h	mixed (recorded and notes)
Senior auditor and regulatory compliance manager	E6	politician	52	ACCA	16	1	6 of 6	7 of 7	2 h	audio recorded
Senior auditor	E7	military	49	ACMA	11	1	-	7 of 7	1.30 h	notes taken
Senior auditor and sustainable corporate governance manager	E8	public manager	45	MSc	15	2	-	7 of 7	1 h	mixed (recorded and notes)

Source: Authors.

a,b, the study focused on a participatory internal auditing committee comprising 16 members, eight from the ministry and eight from EYD, selected in consultation with the deputy minister and EYD’s board director. Selection criteria included professional experience, roles in sustainability auditing, involvement in urban development decision-making, and prior leadership positions. This ensured that participants possessed the expertise necessary to address the study’s objectives. During the initial data collection phase, all 16 members were interviewed. Ministry participants were coded M1-M8, including a deputy minister (M1), a military delegate (M2), an internal audit manager (M3), and five senior auditors (M4-M8). EYD participants were coded E1–E8, including a board director (E1), financial manager (E2), ERP manager (E3), internal audit manager (E4), and four senior auditors (E5–E8). Each participant was interviewed once, with two senior auditors from each organisation interviewed twice to capture additional insights. Interviews were recorded when permitted; otherwise, detailed notes were taken. While transcripts provide verbatim accounts, note-taking, endorsed by Burawoy [15] and Alvesson [41], remains a valid method for capturing key themes, particularly under confidentiality or feasibility constraints.

The committee included four auditors, two from the ministry and two from EYD, who also held senior leadership roles within their respective organisations. In addition to their auditing responsibilities, they served as the ministry’s sustainability reporting and risk managers, and EYD’s regulatory compliance and corporate governance managers. These dual roles raised concerns regarding objectivity and independence, as managerial duties could influence audit decisions. To mitigate these risks, several safeguards were implemented: clear separation of auditing and managerial responsibilities through defined job descriptions; segregation of duties to prevent individual control over entire audit processes; regular training on ethical standards and conflict-of-interest policies; oversight by an independent monitoring body; periodic auditor rotation to reduce familiarity bias; and transparent reporting with public disclosure to enable external scrutiny. Collectively, these measures ensured the integrity and effectiveness of the participatory internal auditing system despite the dual roles held by some committee members.

While the dual roles of auditors as both internal reviewers and senior managers raised valid concerns about independence and objectivity, fieldwork revealed that this overlap also facilitated several operational advantages. Interviewees noted that these individuals were able to bridge communication gaps between departments, accelerate ERP system integration, and align audit priorities with strategic planning. Their managerial authority enabled faster decision-making and improved coordination across entities. However, some participants expressed reservations about the concentration of power and the potential for bias in KPIs validation and reporting. A few auditors voiced discomfort with the perceived lack of separation between oversight and execution, suggesting that this arrangement could compromise audit neutrality in politically sensitive contexts. These mixed perceptions underscore the importance of reflexivity in evaluating governance innovations. While the dual-role structure enhanced collaboration and responsiveness, it also introduced risks that required careful mitigation through transparency, role segregation, and inclusive committee practices.

Individual interviews were conducted with highly qualified committee members, most of whom hold PhDs and have over a decade of experience in public sector internal auditing and sustainability. Participants included politicians, military officials, and senior public managers. Interviews, ranging from 30 min to two hours, were primarily conducted in Arabic, with English-translated transcripts shared for participant verification in accordance with Yin’s [42] accuracy guidelines. Although a unified interview protocol was used (see

Table 3. Linking empirical insights with Besharov and Smith’s [12] alignment typology.

Theoretical Themes	Analytical Constructs	Interview/Focus Group Questions	Corresponding Fieldwork Insights
Key question: How is the internal auditing system implemented in response to national urban development pressures?
Sub-question 1: How do national urban development projects shape pressures that influence the adoption of a participatory sustainability auditing system?
Exogenous institutional drivers	National urban development pressures shaping participatory sustainability auditing	How have financial requirements in national urban development projects influenced your organisation’s auditing practices? What role does financial sustainability play in shaping your audit decisions?	Transparent auditing needed to validate fund allocation and sustainability KPIs due to financial pressures.
		Can you describe any tensions or conflicts between your organisation and other stakeholders during the implementation of the participatory auditing system? How were these tensions resolved?	Initial resistance from conflicting logics; resolved via political and military intervention.
		How does your organisation balance financial viability with social equity in sustainability service delivery? What pricing strategies are used to support underserved regions?	Cross-subsidisation enabled: affluent areas subsidised underserved regions.
		What role do military institutions play in your organisation’s urban development projects? How does their involvement affect audit practices and governance?	Military collaboration enhanced audit legitimacy and operational efficiency.
		How have recent regulatory changes affected your internal auditing responsibilities? What sustainability KPIs are you required to report, and how are they monitored?	Regulatory reforms mandated ERP-based sustainability auditing and KPIs reporting.
Sub-question 2: How is this new auditing system operationalised through advanced ERP technologies and participatory audit committees?
Endogenous organisational responses	Aligning participatory sustainability auditing with national urban development priorities	How does your organisation use ERP systems in sustainability auditing? What are the benefits and challenges of using ERP for real-time monitoring and reporting?	ERP systems enabled real-time monitoring and collaborative auditing.
		How does the audit committee manage collaboration between different organisational logics? What strategies are used to ensure alignment between financial and social priorities?	Audit committees aligned compliance and financial logics across entities.
		Can you describe how project-level KPIs are used in your auditing process? How have these KPIs influenced decision-making or policy changes?	Project-level KPIs supported targeted evaluation and policy reform.
		Has your organisation integrated AI or advanced analytics into the auditing process? What impact has this had on performance evaluation and risk management?	AI tools improved KPIs interpretation and stakeholder feedback integration.
		How are sustainability assurance reports used in decision-making? What role does public disclosure play in shaping governance outcomes?	Assurance reporting shaped decisions and promoted reflexive governance.
		How would you describe the role and influence of the audit committee in implementing the new system? Have there been any concerns or resistance regarding its authority or decision-making?	Audit committee power was enabling yet contested; required balanced leadership.

Source: Authors.

), questions were tailored to each participant’s role and experience, consistent with Burawoy’s [15] extended case study approach. To deepen insights into the effectiveness of the participatory auditing system and inter-organisational collaboration, focus groups were conducted during the second and third data collection phases. The second round included four focus groups with six ministry participants (M1–M6) and six with seven EYD participants (E1–E7); the third round comprised five focus groups with eight ministry participants (M1–M8) and seven with seven EYD participants (E2–E8).

To validate data from interviews and focus groups, the study incorporated participant observations and documentary analysis, following Alvesson’s [41] recommendations for methodological triangulation. Eight structured observations were conducted, offering insights into the daily operations of the participatory sustainability auditing system (see Section 5). With formal consent from the deputy minister, two auditing and assurance meetings and daily ERP practices were observed. The meetings were formal and focused, while ERP sessions were dynamic and collaborative. Committee members from the ministry and EYD demonstrated efficiency, mutual respect, and a shared commitment to data integrity and sustainability goals. The presence of senior auditors and executives reinforced adherence to best practices. Observations revealed a well-coordinated, professional environment that supported continuous learning and improvement. These findings strengthened the reliability of interview and focus group data and underscored the effectiveness of the participatory auditing system in promoting transparency and accountability in urban development projects.

Several challenges emerged during the observation phase. Maintaining confidentiality while ensuring comprehensive data collection was a key concern, as recording was not permitted. Detailed note-taking became essential, though it occasionally limited the capture of nuanced interactions. The technical complexity of the ERP system also posed difficulties, requiring a strong understanding of its integrated functions across departments. Additionally, balancing the dual roles of auditors and senior managers raised concerns about maintaining audit objectivity. Despite these challenges, the committee demonstrated professionalism and collaboration in resolving conflicts. One notable instance involved a disagreement over resource allocation for a public healthcare sustainability project: a ministry auditor advocated prioritising underserved regions, while an EYD manager preferred a balanced distribution. The issue was resolved through open dialogue, data sharing, and collaborative analysis, resulting in a decision to allocate additional resources to underserved areas while maintaining support elsewhere. This outcome was documented and integrated into the ERP system to ensure transparency and accountability. Overall, the observations revealed a culture of respectful communication, shared responsibility, and strong commitment to sustainable urban development.

Documentary analysis was a key component of the research, complementing interviews, focus groups, and observations in line with Burawoy’s [15] extended case study methodology. Reviewed documents included Egypt’s 2030 urban development strategy [25], project-level sustainability KPIs, internal auditing protocols, ERP-enabled audit features, and the 2022/2023 urban development budget. These were sourced from official channels such as the ministry’s website, committee records, EYD’s on-site library, and quarterly sustainability bulletins. Analysis of KPIs assurance reports and inter-organisational decisions demonstrated the transparency and effectiveness of the participatory auditing system. Publicly issued reports covered governance frameworks, sustainability pricing, and cost-risk management, particularly during the COVID-19 crisis. As detailed in Section 5, these documents revealed the system’s influence on policy-making, including the prioritisation of underserved regions in healthcare, the introduction of cross-subsidisation pricing strategies, and the creation of financial reserves, public–private partnerships (PPPs), and smart bonds to mitigate economic risks. These examples underscore the critical role of participatory sustainability audits in shaping equitable and resilient urban development policies.

Data analysis was conducted manually in three iterative phases to ensure a nuanced understanding of insights from interviews, focus groups, observations, and documentary sources. Each phase aligned with the corresponding data collection period and the ongoing analytical writing process. In the first phase, transcripts and audio recordings were reviewed to extract empirical insights, revealing the coexistence of two institutional logics: the ministry’s social logic, focused on public welfare and equitable urban development, and EYD’s economic logic, centred on financial sustainability and operational efficiency. Their collaboration through the participatory auditing committee illustrated how these logics were integrated to support sustainable urban development, evident in joint decisions on resource allocation, real-time KPIs monitoring via ERP, and policy shifts prioritising underserved regions, adjusting service pricing, and implementing financial safeguards during the COVID-19 crisis. In the second phase, data were categorised and coded to develop a coherent analytical framework, focusing on the interaction between social and economic logics and their influence on audit system design and effectiveness. Patterns and themes were identified using Burawoy’s [15] extended case study approach. The third phase involved synthesising empirical findings with the theoretical framework and situating them within broader literature on public sector auditing and sustainability. As detailed in Section 5, the analysis highlighted how the participatory auditing system enhanced transparency, accountability, and collaborative governance, and demonstrated the ERP platform’s role in enabling informed decision-making and integrating diverse institutional priorities. Overall, the analysis provided a holistic view of how participatory sustainability auditing, grounded in both social and economic logics, contributes to equitable and resilient urban development in Egypt.

5. Empirical Findings

Section 5 presents the empirical findings in two stages: first, descriptive results drawn from interviews, focus groups, observations, and documentary analysis; second, analytical interpretation informed by institutional theory. To operationalise the theoretical framework, this section explicitly distinguishes between external institutional pressures, such as regulatory mandates, financial constraints, and political-military directives, and the strategic responses enacted by organisational actors, including ERP system design, audit committee formation, and participatory governance mechanisms. This structure enables a clear mapping of empirical findings to the core concepts of institutional alignment, as defined by Besharov and Smith’s [12] framework. The findings are interpreted through this lens to examine how competing institutional logics (social and economic) are reconciled within Egypt’s public sector auditing system.

5.1. Exogenous Institutional Drivers: National Urban Development Pressures Shaping Participatory Sustainability Auditing

National-level urban development pressures in Egypt have significantly shaped institutional responses, leading to the implementation of participatory sustainability auditing systems. These systems were designed to foster collaboration between public sector ministries and affiliated SOEs, such as EYD, to meet the demands of large-scale development initiatives. A key driver was the financial structure of these projects, with an estimated cost of EGP 294.2 billion, 50% funded by the International Monetary Fund (IMF), 30% by the European Union (EU), and the remaining 20% requiring self-financing by the ministry and SOEs. This financial burden necessitated transparent auditing mechanisms to validate fund allocation and ensure compliance with sustainability KPIs. The ministry, operating under a social logic focused on public service delivery, faced pressure to maintain quality despite limited resources. In contrast, SOEs like EYD adopted an economic logic, prioritising financial returns to meet their funding obligations. As the deputy minister M1 explained,

EYD’s operational philosophy closely resembles that of private sector organisations, with strategic priorities oriented toward financial performance. EYD’s participation in national projects and its adoption of the participatory auditing framework were contingent on the inclusion of financial and economic dimensions within sustainability indicators.

These findings illustrate the coexistence of divergent institutional logics, social and economic, within Egypt’s public sector auditing landscape. From an institutional theory perspective, this tension reflects the challenge of aligning public welfare objectives with market-oriented imperatives. The negotiated inclusion of financial metrics within sustainability KPIs suggests a strategic compromise that enabled institutional alignment. Applying Besharov and Smith’s [12] framework, this case exemplifies an “aligned” configuration, where both logics are central and sufficiently compatible to support collaborative governance. The participatory auditing system, supported by ERP infrastructure, functioned as a mediating mechanism that reconciled these logics, enabling SOEs to fulfil financial mandates while contributing to national sustainability goals. This alignment underscores the transformative potential of participatory audit structures in navigating complex governance environments.

The divergence in institutional logics, socially oriented compliance for the central government ministry and economically driven priorities for SOEs, initially generated resistance during the negotiation phase of implementing a participatory auditing framework. These tensions persisted for nearly a year and were resolved only after high-level interventions from political leadership and the military. A negotiated compromise granted SOEs, such as EYD, the autonomy to commercialise sustainability-related products and services at premium rates in affluent urban markets. This adjustment aligned their operational model with financial viability while preserving their role in national development. As noted by senior auditor M4,

This arrangement enabled a cross-subsidisation model, allowing identical sustainability services to be delivered at reduced costs in underserved regions. The model was strategically designed to promote social equity while maintaining operational efficiency.

These findings illustrate how institutional tensions arising from incompatible logics can be resolved through strategic negotiation and structural adaptation. From an institutional theory perspective, the compromise reflects a shift toward alignment, where divergent logics are made compatible through policy innovation and governance flexibility. Applying Besharov and Smith’s [12] framework, this case demonstrates how high centrality and increasing compatibility between social and economic logics enabled the participatory auditing system to function as a bridging mechanism. The cross-subsidisation model exemplifies how financial imperatives can be reconciled with equity goals, reinforcing the system’s role in fostering inclusive urban development within a centralised governance context. These arrangements delivered tangible social benefits by ensuring affordable access to sustainability services in underserved regions, while PPPs accelerated infrastructure delivery and improved service quality. Public assurance reports generated through participatory auditing strengthened governance transparency and enhanced stakeholder trust.

Financial pressures also catalysed broader institutional collaboration. As noted by senior auditor E7, the need to meet self-financing requirements led to the formation of PPPs involving the ministry, SOEs, the military, and private sector actors. These partnerships marked a significant shift in Egypt’s urban development governance, representing the first formal integration of cooperative frameworks into national infrastructure planning. The participatory sustainability auditing system became central to this transformation, functioning as an inter-organisational mechanism for collecting, monitoring, and assuring project-level sustainability KPIs. Embedded within Egypt’s Urban Development Strategy 2030 [25], the system enhanced transparency, accountability, and stakeholder engagement, while producing publicly accessible assurance reports that supported funding acquisition and project legitimacy. Senior auditor E8 further highlighted:

Participatory auditing facilitated financing partnerships that enabled landmark projects such as the New Cairo Wastewater Treatment Plant, the Suez Canal Container Terminal, and the Benban Solar Park. These initiatives demonstrated the capacity of participatory auditing and PPPs to leverage public and private sector strengths in delivering sustainable urban development outcomes.

These findings illustrate how financial constraints and governance reforms prompted a reconfiguration of institutional relationships. From an institutional theory perspective, the integration of PPPs and participatory auditing mechanisms reflects a strategic response to reconcile divergent logics, public accountability and financial sustainability, within a centralised governance context. Applying Besharov and Smith’s [12] framework, this shift suggests movement toward an “aligned” organisational configuration, where multiple logics are both central and compatible. The participatory auditing system, supported by ERP infrastructure, served as a mediating mechanism that enabled coordination across institutional boundaries. The production of publicly accessible assurance reports further institutionalised transparency and legitimacy, reinforcing the system’s role in sustaining alignment between state-led development goals and market-based financing strategies.

Urban development in Egypt has not evolved through financial pragmatism alone; it has been strategically recalibrated under the assertive influence of political and military institutions, fundamentally reshaping governance structures and institutional practices. The political leadership, described by internal auditing manager M3 as having a “military spirit and mentality that prioritises discipline, centralised control, and strategic execution,” has actively directed collaborations with military bodies in the planning and execution of urban initiatives. These partnerships have extended beyond logistical coordination into governance reform, particularly through the mandated adoption of participatory sustainability auditing systems. Embedded within Egypt’s Urban Development Strategy 2030 [25], these systems function as inter-organisational mechanisms for monitoring and assuring project-level sustainability KPIs. They enhance transparency, accountability, and stakeholder engagement, producing publicly accessible assurance reports that support project legitimacy and financing. During participatory auditing meetings, senior officials such as the deputy minister M1 and the EYD board director E1 acted as intermediaries, translating strategic directives from political-military leadership into operational frameworks. As senior auditor E7 observed:

The military’s involvement is not symbolic—it is operational. They provide equipment, mobilise public support through social campaigns, and engage directly with communities to ensure that urban development projects are not only executed efficiently but also reflect national sustainability priorities.

Military involvement has also enabled SOEs to reconcile economic objectives with social equity goals through strategic pricing and resource allocation. Military support facilitated the marketing of sustainable products and services in affluent areas at premium prices, allowing profits to be reinvested in subsidising services in disadvantaged regions. This model proved particularly effective in large-scale infrastructure projects such as the Benban Solar Park and the Suez Canal Container Terminal, where military-provided security, logistics, and infrastructure enhanced operational efficiency and reduced implementation risks. These partnerships not only improved service delivery but also legitimised the role of SOEs in advancing inclusive urban development. As military delegate M2 explained:

The participatory auditing system, supported by military coordination and political engagement, operates through an advanced ERP platform that enables decision-makers at all levels, local councils, regional authorities, and national ministries, to verify sustainability KPIs in real time. This system ensures that urban development is not only technically sound but also socially responsive and strategically aligned with Egypt’s long-term goals.

These findings underscore how financial constraints, political authority, and military involvement have jointly driven a strategic reconfiguration of institutional relationships in Egypt’s urban development governance. This transformation reflects a deliberate effort to reconcile competing institutional logics, namely, public accountability, financial sustainability, and centralised state control, within a hybrid governance framework. From an institutional theory perspective, the integration of participatory sustainability auditing and military collaboration represents a form of pragmatic hybridisation, wherein SOEs navigate multiple, potentially conflicting demands. The participatory auditing system, supported by ERP infrastructure and military coordination, operates as a boundary-spanning mechanism that facilitates inter-organisational alignment. It enables real-time verification of sustainability KPIs across local, regional, and national levels, thereby institutionalising transparency and responsiveness. Applying Besharov and Smith’s [12] alignment typology, these developments suggest a shift toward an “aligned” configuration, where multiple logics, discipline-driven execution, market-based financing, and inclusive governance, are both central and compatible. The strategic use of military resources to subsidise services in disadvantaged areas through cross-subsidisation models further exemplifies this alignment, allowing SOEs to pursue economic viability while advancing social equity. The production of publicly accessible assurance reports and the active role of intermediaries such as the deputy minister M1 and the EYD board director E1 reinforce the legitimacy of these hybrid arrangements, embedding sustainability and inclusivity within the operational logic of urban development.

Regulatory reform has emerged not simply as a procedural necessity but as a strategic instrument for institutional transformation in Egypt’s public sector. The 2018 amendment to the public sector law, aligned with Egypt’s Urban Development Strategy 2030 [25], introduced a legal mandate for SOEs to adopt participatory internal auditing systems, signalling a departure from traditional compliance models toward a performance-oriented, KPIs-driven approach to sustainability governance. In response, the public sector ministry and affiliated SOEs established a participatory auditing committee supported by integrated ERP systems, enabling real-time monitoring and reporting of sustainability performance. As noted by senior auditor and sustainability reporting manager M5:

The 2018 amendment was a turning point. It gave legal weight to sustainability KPIs and required SOEs to embed them into their operational and reporting structures… enabling informed decision-making and effective compliance monitoring aligned with national sustainability goals.

The regulatory framework codified a comprehensive set of sustainability KPIs, including emissions reduction, energy efficiency, renewable energy adoption, water management, waste diversion, and occupational health and safety, that now shape both operational and strategic priorities. These indicators function not as passive compliance metrics but as active levers of institutional accountability, influencing funding eligibility, project approval, and public legitimacy. As senior auditor and sustainable corporate governance manager E8, explained:

These KPIs have transformed how we operate… The participatory auditing system ensures that our reports are transparent and credible, which is essential for regulatory compliance and for building trust with stakeholders.

The regulatory embedding of participatory sustainability auditing reflects a deliberate effort to recalibrate institutional logics within Egypt’s public sector. Rather than merely enforcing compliance, the 2018 legal amendment redefined the role of regulation as a mechanism for strategic alignment, compelling SOEs to internalise sustainability as a core operational imperative. The integration of ERP-enabled auditing systems facilitated not only data transparency but also cross-sectoral coordination, reinforcing the state’s capacity to monitor and steer urban development outcomes. From an institutional theory perspective, this shift exemplifies how regulatory instruments can be mobilised to mediate tensions between competing logics, legal compliance, financial accountability, and sustainability performance, within a centralised governance structure. Applying Besharov and Smith’s [12] alignment typology, the Egyptian case illustrates a movement toward an “aligned” configuration, where multiple logics are simultaneously central and mutually reinforcing. The participatory auditing committee operates as a boundary-spanning mechanism, enabling SOEs to reconcile strategic execution with normative expectations of transparency and equity. In doing so, it institutionalises sustainability not as an external demand but as an embedded organisational logic, legitimising SOEs’ role in delivering inclusive and accountable urban development.

In summary, national urban development in Egypt has been shaped by intersecting financial, political-military, and regulatory pressures that have collectively redefined the institutional context for participatory sustainability auditing. These forces have compelled the public sector ministry and affiliated SOEs to adopt collaborative auditing systems that not only comply with evolving governance standards but also strategically align with national sustainability objectives. The participatory auditing system has thus emerged as more than a reactive compliance tool—it functions as a mechanism for institutional reform, enhancing transparency, accountability, and strategic coherence. Building on these national-level drivers, the next subsection examines how such pressures are operationalised within organisations, focusing on the internal implementation of participatory sustainability auditing and its alignment with Egypt’s urban development priorities.

5.2. Endogenous Organisational Responses: Aligning Participatory Sustainability Auditing with National Urban Development Priorities

The implementation of participatory sustainability auditing in Egypt’s public sector has emerged as a strategic mechanism for institutional alignment, linking the public sector and SOEs with national urban development priorities. In contrast to prior models—e.g., [4,26,33,37]—this system reveals institutional mechanisms that foster compatibility between the ministry’s logic of regulatory compliance and social accountability, and the SOEs’ logic of economic and financial performance. Key enablers of this alignment include digital ERP technologies, collaborative audit committees, project-level sustainability KPIs, and online assurance reporting platforms. ERP systems, in particular, have evolved beyond data management tools—e.g., [6,43,44]—to become embedded infrastructures that integrate auditing principles into daily operations. They support real-time oversight, collaborative governance, and transparent decision-making. As M5, senior auditor and sustainability reporting manager, explains:

The ERP system provides a centralised platform… transforming the auditing process from a periodic, retrospective exercise into a continuous, proactive one… ensuring that governance is embedded in everyday practice.

These findings highlight how digital infrastructures, particularly ERP systems, function as institutional mechanisms that operationalise participatory auditing and facilitate cross-organisational alignment. By embedding core auditing principles, such as control environments, urban monitoring, and transparent communication, into routine operations, ERP platforms enable a shift from episodic compliance to continuous governance. From an institutional theory perspective, this transformation reflects a strategic reconciliation of divergent logics within a centralised public sector framework. The participatory auditing system mediates between the ministry’s normative emphasis on accountability and the SOEs’ instrumental focus on efficiency and profitability. Applying Besharov and Smith’s [12] alignment typology, this configuration exemplifies a move toward “aligned” institutional logics, where both compliance and performance are central and mutually reinforcing. The digitalisation of auditing processes not only enhances transparency and responsiveness but also institutionalises sustainability as an operational norm, thereby consolidating the legitimacy of SOEs in delivering state-led urban development.

ERP technologies have become instrumental in advancing financial sustainability within Egypt’s public sector, particularly through features such as mini-budgets and activity-based cost management (ABCM). These tools enable precise resource allocation and cost tracking, allowing departments to fund targeted sustainability initiatives, such as solar installations and waste reduction programmes, while assessing the financial viability of each intervention. This granular visibility enhances risk management and ensures efficient use of public funds. As M1, deputy minister, observed:

Real-time dashboards allow auditors to monitor infrastructure projects and intervene promptly. Inventory optimisation reduces waste and overstocking, while ESG data integration supports informed policy decisions and targeted sustainability actions.

The deployment of ERP technologies illustrates how digital infrastructures can serve as institutional mechanisms for aligning financial and sustainability logics within public sector governance. By embedding cost-efficiency tools and ESG metrics into everyday operations, ERP systems facilitate a shift from fragmented financial oversight to integrated, performance-based management. From an institutional theory perspective, this reflects a strategic reconciliation of economic rationality with normative sustainability goals. ERP platforms operationalise participatory auditing by enabling continuous monitoring and cross-departmental coordination, thereby institutionalising transparency and fiscal discipline. Applying Besharov and Smith’s [12] alignment typology, this configuration exemplifies an “aligned” logic, where financial sustainability and public accountability are not only central but mutually reinforcing. The system’s capacity to link resource use with sustainability outcomes consolidates the legitimacy of SOEs in delivering efficient and socially responsive urban development.

ERP-enabled participatory auditing has generated tangible benefits across stakeholder groups in Egypt’s public sector. Ministry-level auditors and managers (M1-M6) gain timely access to operational data, enhancing decision-making and accountability. EYD’s department heads and project managers benefit from streamlined workflows and automated reporting, improving planning and resource allocation. Local communities experience improved service delivery and transparency, while external stakeholders, such as donors and non-governmental organisations (NGOs), receive consistent, credible sustainability reports that strengthen collaboration and funding prospects. As E1, board director, notes:

ERP technologies are not just supportive tools—they are foundational systems that institutionalise participatory sustainability auditing… enabling data-driven, inclusive, and transparent governance.

These findings underscore the integrative capacity of ERP systems to align diverse stakeholder interests within a centralised governance framework. By consolidating financial, operational, and sustainability data into a unified platform, ERP technologies facilitate inclusive oversight and evidence-based decision-making. This digital infrastructure transforms auditing from a siloed, retrospective function into a continuous, participatory process. From an institutional theory perspective, ERP systems act as mediating mechanisms that reconcile the ministry’s logic of public accountability with SOEs’ logic of financial sustainability. Applying Besharov and Smith’s [12] alignment typology, this configuration reflects a shift toward an “aligned” institutional arrangement, where multiple logics are simultaneously central and mutually reinforcing. The system’s capacity to integrate ESG metrics and support stakeholder engagement embeds sustainability into everyday governance, enhancing legitimacy and coherence in the pursuit of Egypt’s urban development goals.

The deployment of ERP-enabled participatory sustainability auditing in Egypt’s public sector marked a significant institutional shift, yet its implementation was not without resistance. As E5, a senior auditor, noted, early challenges centred on reconciling the ministry’s compliance-driven logic with EYD’s focus on financial performance and service delivery. The complexity of the ERP system, characterised by unfamiliar workflows and digital interfaces, exacerbated these tensions, leading to hesitations around data transparency, reluctance to adopt new reporting routines, and concerns over real-time monitoring. Political sensitivities, particularly regarding the pricing of sustainability services, further complicated the interpretation of cost and performance metrics. As M4, a senior ministry auditor, explained,

The audit committee responded with a phased, inclusive strategy: role-specific training, sandbox environments, and gradual system rollout helped reduce resistance and foster a collaborative culture.

These implementation challenges reveal the friction that can arise when divergent institutional logics are brought into alignment through digital governance reforms. The initial resistance to ERP-enabled participatory auditing underscores the difficulty of integrating compliance-oriented and performance-driven priorities within a single operational framework. However, the committee’s adaptive strategies, emphasising capacity-building and iterative learning, functioned as institutional mechanisms that mediated these tensions and facilitated organisational buy-in. From an institutional theory perspective, this process exemplifies the dynamic nature of alignment work. Applying Besharov and Smith’s [12] typology, the case reflects a transition from “contested” to “aligned” logics, where initial incompatibilities were gradually reconciled through deliberate interventions. The ERP system, while technically complex, became a vehicle for embedding shared governance norms and sustainability priorities across institutional boundaries. Its successful implementation depended not only on technological integration but also on cultivating a participatory ethos that redefined auditing as a collaborative, continuous, and strategic practice.

Egypt’s ERP-enabled participatory sustainability auditing system shares surface-level similarities with public sector ERP initiatives in Washington State [45] and Zimbabwe [43], particularly in encountering early resistance and requiring stakeholder engagement. However, Egypt’s case is distinguished by its scope and ambition: the system was not implemented merely to enhance administrative efficiency or financial reporting, but to institutionalise participatory governance within national urban development. By integrating financial, operational, and sustainability data across ministries and SOEs, the system enables real-time auditing, public accountability, and strategic alignment of resources with sustainability outcomes. Unlike conventional ERP deployments—e.g., [35,40]—which function as back-office upgrades, Egypt’s system operates as a transformative governance platform. As E7, senior auditor, explains,

Its foundational principles, internal control environment, urban monitoring, and information and communication, serve as institutional mechanisms that embed transparency, stakeholder engagement, and ethical oversight into everyday practice.

Egypt’s ERP implementation represents a paradigmatic shift in how digital infrastructures are leveraged to mediate institutional logics. The system’s design reflects a deliberate effort to reconcile the ministry’s normative emphasis on public accountability with SOEs’ instrumental focus on financial and operational performance. Through the integration of real-time monitoring, continuous auditing, and stakeholder communication, the system reconfigures governance from reactive compliance to proactive, participatory oversight. Applying Besharov and Smith’s [12] alignment typology, Egypt’s case exemplifies a transition toward an “aligned” institutional configuration, where multiple logics, compliance, performance, and participatory governance, are simultaneously central and mutually reinforcing. The ERP system does not merely support governance; it constitutes it. By embedding ethical and strategic principles into its architecture, the system institutionalises a new auditing logic that legitimises state-led urban development through transparency, inclusivity, and responsiveness.

The COVID-19 pandemic acted as a catalyst for institutional innovation within Egypt’s ERP-enabled participatory sustainability auditing system. Faced with a sharp decline in international financial aid, approximately 15% from the EU and 25% from the IMF, EYD and the ministry introduced two new principles: sustainability risk management and sustainability cost management. As senior auditor E7 noted, these were not temporary adjustments but strategic additions to the auditing framework, incorporating financial instruments such as reserves, PPPs, and smart bonds as governance tools. These innovations enabled continuity in urban development under crisis conditions. As M8, senior auditor, explained,

The ERP system facilitated timely responses, real-time risk tracking, and strategic decision-making, embedding these principles into the permanent architecture of public sector governance.

The pandemic-induced reforms illustrate how external shocks can accelerate institutional alignment by necessitating the integration of new logics into existing governance systems. The introduction of risk and cost management principles reflects a convergence of compliance-oriented and performance-driven priorities, mediated through digital infrastructure. Unlike the fragmentation observed in other ERP contexts—e.g., [8,17]—Egypt’s system leveraged crisis conditions to deepen alignment and institutional resilience. From an institutional theory perspective, this evolution demonstrates how ERP systems can function as adaptive mechanisms for sustaining alignment amid uncertainty. Applying Besharov and Smith’s [12] typology, Egypt’s case exemplifies a dynamic “aligned” configuration, where multiple logics, regulatory compliance, financial sustainability, and participatory governance, are not only central but synergistically integrated. The ERP system’s capacity to embed new principles in response to crisis conditions underscores its role as a transformative governance platform, redefining sustainability auditing as a strategic, forward-looking, and inclusive practice.

Egypt’s ERP-enabled participatory sustainability auditing system represents a significant institutional innovation in public sector governance. By embedding sustainability KPIs at the project level, it departs from conventional models reliant on national aggregates or fragmented local indicators—approaches long criticised for their limited operational relevance and accountability [46,47]. As internal auditing manager M3 noted,

Integrating KPIs directly into the ERP infrastructure enables real-time tracking, targeted evaluation, and strategic alignment with national urban development goals.

This shift is evident across four flagship projects. In the public healthcare project (National Code AA059), KPIs such as outreach campaign reach and blood donation volumes revealed regional disparities, prompting resource reallocation in underserved areas. In the human development project (AA936), vocational training KPIs exposed stagnant promotion rates, leading to mentorship schemes and performance-linked advancement policies. For infrastructure sustainability (AA607), audits showed that while physical targets were met, digital integration lagged, resulting in a national interoperability framework for smart city systems. In the environmental project (AA360), uneven inspection frequencies near Alexandria led to the deployment of mobile units and revised protocols. As internal auditing manager E4 and senior auditor E5 explained, these interventions were directly informed by ERP-enabled KPIs analysis.

These findings illustrate how project-level KPIs, embedded within ERP infrastructure, function as institutional mechanisms for operationalising sustainability governance. By enabling granular, real-time insights, the system shifts auditing from retrospective evaluation to proactive intervention, enhancing responsiveness and accountability. The integration of sustainability KPIs into ERP systems enabled proactive environmental interventions, such as reducing emissions and improving water management. Governance performance was reinforced through real-time dashboards and public disclosure, institutionalising accountability and reducing opportunities for corruption. From an institutional theory perspective, this transformation reflects a strategic reconciliation of divergent logics, compliance, performance, and participatory governance, within a unified digital framework. Applying Besharov and Smith’s [12] alignment typology, Egypt’s model exemplifies an “aligned” configuration, where multiple logics are central and mutually reinforcing. The ERP system not only facilitates technical oversight but institutionalises a new auditing logic, one that embeds ethical governance, stakeholder responsiveness, and strategic sustainability management into the core of public sector operations.

The integration of artificial intelligence (AI) analytics into Egypt’s ERP-enabled participatory sustainability auditing system marks a significant enhancement in its analytical capacity. As reported in focus groups (E2–E8) and supported by documentary analysis, AI tools now support predictive modelling, anomaly detection, and contextual analysis of project-level KPIs. This is consistent with Schrage et al. [48], who explain that AI-driven enhancements transform KPIs from static indicators into dynamic strategic instruments. Their argument emphasises that predictive insights and contextual interpretation enable organisations to anticipate risks and optimise performance. This perspective is reflected in Egypt’s use of AI for forecasting resource shortages and compliance risks. For instance, in the public healthcare project, AI models forecast seasonal shortfalls in blood donations, enabling proactive outreach planning. In the environmental sustainability project, AI-assisted analysis of pollutant dispersion patterns informs inspection scheduling, improving regulatory compliance and risk mitigation. As M1, deputy minister, noted,

AI also enables the incorporation of unstructured data, such as stakeholder feedback and social media sentiment, into KPIs evaluation, offering a more nuanced understanding of performance beyond quantitative thresholds. AI-driven predictive models further strengthened environmental sustainability by anticipating resource shortages and compliance risks, while social equity was promoted through data-informed resource allocation to vulnerable communities.

However, as the number of audited projects expands, scalability has emerged as a critical concern. Technical scalability is being addressed through modular ERP architecture and cloud-based infrastructure, while institutional scalability requires ongoing training, stakeholder engagement, and policy alignment. The ministry’s auditing committee is exploring AI-driven dashboards and automated reporting tools to manage complexity and enhance decision-making. As senior auditor E7 observed,

The evolving KPIs framework, enhanced by AI and supported by emerging data governance standards, offers a replicable model for intelligent, adaptive, and accountable public sector auditing.

The collaborative audit committee played a pivotal role in the implementation of Egypt’s participatory sustainability auditing system, exercising institutional power through both structural authority and relational influence. Drawing on Besharov and Smith’s [12] framework, the committee facilitated alignment between the ministry’s compliance-oriented logic and EYD’s performance-driven logic, leveraging technical expertise and credibility. As internal auditing manager E4 noted, digitalisation enabled more efficient and innovative practices. However, perceptions of the committee’s authority varied. While some stakeholders viewed its role as enabling and inclusive, others, such as financial manager E2, criticised its top-down decision-making, suggesting a lack of negotiation and autonomy. M4, senior auditor, acknowledged minimal resistance due to the committee’s support and communication, yet E6, regulatory compliance manager, highlighted staff discomfort with the pace of change and KPIs complexity. M3, internal auditing manager, reflected on the delicate balance between guidance and imposition, noting the risk of disengagement when control is overly centralised. Despite these tensions, the committee’s participatory ethos, evident in its iterative feedback mechanisms and inclusive KPIs validation, helped foster trust and shared ownership. As the board director E1 remarked, “We felt part of the process, not just subjects of change,” while a senior auditor M6 concluded, “Real power is not in control, but in building trust and shared ownership.”

The committee’s role illustrates the dual nature of institutional power in organisational change, aligning with Hardy and Clegg’s [49] conception of power as both enabling and constraining. While the committee successfully mediated between divergent logics, its authority was not uniformly experienced, revealing the complexities of power deployment in reform contexts. The tension between collaboration and control underscores the importance of reflexivity in institutional leadership, particularly when navigating change across hierarchically structured organisations. Applying Besharov and Smith’s [12] alignment typology, the committee’s actions reflect a negotiated movement toward an “aligned” configuration, where compliance and performance logics are central and increasingly compatible. However, the uneven perceptions of power suggest that alignment is not a static achievement but a dynamic process requiring continuous engagement, trust-building, and sensitivity to organisational autonomy. The committee’s participatory approach, while imperfect, played a critical role in mitigating resistance and embedding sustainability auditing as a shared institutional practice.

The reflexive function of online sustainability assurance reporting within Egypt’s ERP-enabled participatory auditing system has played a pivotal role in shaping both corporate decision-making at EYD and broader public governance outcomes. Documentary analysis and focus group data (E1–E7, M1–M8) show that ERP-generated reports, featuring real-time dashboards and analytics, enhanced transparency, data integrity, and strategic coordination across institutional boundaries. These reports informed joint decisions between the ministry and EYD, such as tailoring project-based budgets for solar-powered community centres and rainwater harvesting systems, reallocating healthcare resources in response to virus outbreaks, and expanding vocational training based on pilot success metrics. In infrastructure, ERP reporting prioritised unified electronic portals for citizen services, while environmental audits led to stricter emission targets aligned with World Health Organization (WHO) standards. As M8, senior auditor, noted, these decisions emerged through iterative, data-driven dialogue facilitated by the audit committee. Yet, the centralisation of decision-making via dashboards also raised concerns about marginalising qualitative insights and less powerful stakeholders. To mitigate this, inclusive practices were adopted, involving auditors like M6 and E4 in data interpretation and stakeholder engagement. As the board director E1 reflected,

Assurance reporting did not merely reflect performance—it actively shaped it, fostering a sense of ownership and participatory governance.

These findings highlight the transformative potential of reflexive reporting as an institutional mechanism that enables adaptive governance. By converting KPIs into actionable insights, ERP-enabled assurance reporting shifts sustainability auditing from a retrospective exercise to a dynamic, participatory process. This reflexivity supports strategic alignment across organisational boundaries and enhances responsiveness to urban development pressures. From an institutional theory perspective, the system exemplifies how digital infrastructures can mediate and harmonise divergent logics, compliance, performance, and stakeholder engagement, within a centralised governance framework. Applying Besharov and Smith’s [12] alignment typology, Egypt’s model reflects a mature “aligned” configuration, where multiple logics are not only central but mutually reinforcing. However, the tensions around centralisation and perceived loss of agency underscore the need for reflexivity in power deployment. The committee’s inclusive approach to assurance reporting demonstrates how participatory mechanisms can mitigate resistance and foster shared ownership, reinforcing the democratic potential of digital governance when embedded within inclusive institutional structures.

In sum, financial, political-military, and regulatory pressures have acted as key institutional drivers in transforming internal auditing practices within Egypt’s public sector. These forces catalysed the development of a participatory sustainability auditing system that aligns the divergent logics of central government and SOEs, particularly entities like EYD operating under market-oriented priorities. At the organisational level, this alignment has been operationalised through ERP technologies, collaborative audit committees, and project-level sustainability KPIs. Despite initial resistance, the system has fostered a new governance paradigm marked by transparency, accountability, and inter-organisational collaboration. These findings underscore the system’s dual role: a response to external pressures and a mechanism for institutional alignment.

6. Discussion

The preceding empirical findings of this study contribute meaningfully to the literature on public sector auditing, institutional theory, and sustainable urban development by demonstrating how participatory sustainability auditing systems can reconcile divergent institutional logics within a centralised governance context. In contrast to prior studies that focus on citizen-led audits in decentralised settings—e.g., [7,8]—this research introduces a state-centric, inter-organisational model that operationally aligns the social rationality of central government ministries with the economic rationality of SOEs. This alignment is achieved through ERP-enabled collaboration and participatory audit committees. The findings challenge the prevailing assumption—e.g., [4,26]—that institutional logics in public sector auditing are inherently incompatible or prone to fragmentation. Instead, the Egyptian case illustrates that institutional alignment is achievable when supported by digital infrastructure and inclusive governance mechanisms.

Theoretically, this study extends Besharov and Smith’s [12] framework by demonstrating how high centrality and compatibility of institutional logics can be sustained through technological and organisational innovation. While prior applications of the framework have focused on hybrid organisations in sectors such as healthcare and ICT [30], this research is among the first to apply it to public sector auditing within the context of national urban development. Egypt’s participatory audit committee exemplifies an “aligned organisation,” where multiple logics are not only central but also harmoniously integrated. This contrasts with contested or estranged configurations—e.g., [16,17]—where audit systems struggle to reconcile performance, compliance, and stakeholder engagement. The Egyptian case shows that alignment is not a static condition but a dynamic process, enabled by reflexive reporting, iterative decision-making, and strategic deployment of ERP technologies.

Empirically, this study addresses key gaps in the literature. First, it responds to Nerantzidis et al.’s [17] critique that public sector auditing often lacks theoretical depth and contextual sensitivity. By employing Burawoy’s [15] extended case study method, the research captures the longitudinal evolution of audit practices and the interaction of institutional logics across governance layers. Second, it moves beyond the narrow scope of performance audits typical of NPM-era studies—e.g., [23,24]—by incorporating sustainability KPIs that reflect environmental, social, and financial dimensions. This holistic approach aligns with calls for more integrated and participatory auditing frameworks [5,6,50,51,52], and further demonstrates how such frameworks can be institutionalised within a centralised, politically embedded governance system.

This study’s participatory sustainability auditing model directly supports Egypt’s Vision 2030 and the United Nations SDGs by embedding sustainability KPIs into ERP-enabled governance processes [25,27]. Vision 2030 emphasises integrated governance, transparency, and inclusive development, principles operationalised through real-time monitoring of KPIs such as emissions reduction, renewable energy adoption, water efficiency, and social equity in service delivery [25,36]. These indicators correspond to SDG targets under Goal 6 (Clean Water and Sanitation), Goal 7 (Affordable and Clean Energy), Goal 11 (Sustainable Cities and Communities), and Goal 16 (Peace, Justice, and Strong Institutions) [27,38]. By institutionalising these KPIs within ERP systems, the model transforms auditing from a compliance exercise into a strategic governance tool, enabling proactive interventions and cross-subsidisation strategies that promote equity [35,40]. Furthermore, the integration of AI analytics enhances predictive capacity, aligning with Vision 2030’s digital transformation agenda and SDG 17’s call for partnerships and technology-driven governance [44,45]. This alignment demonstrates that the model is not only technically robust but also normatively coherent with Egypt’s national and global sustainability commitments [25,27].

The role of ERP technologies in this transformation is particularly significant. Beyond technological efficiency, these mechanisms delivered measurable sustainability outcomes: improved social equity through cross-subsidisation, enhanced environmental performance via emissions control and resource optimisation, and stronger governance through transparent reporting and participatory decision-making. Consistent with Karim et al. [2], our findings reveal that organisations do not simply transfer sustainability costs to end-users but adopt structural and technological innovations to maintain financial viability while advancing sustainability objectives. Although Grossi et al. [6] promote digitalisation in public sector auditing, their discussion remains largely theoretical. This study offers empirical insight into how ERP systems operate as governance infrastructures, embedding audit principles into routine processes and enabling real-time tracking of sustainability KPIs. The integration of AI analytics further enhances responsiveness and interpretive depth, converting KPIs from static indicators into dynamic governance instruments [48]. This advancement overcomes the limitations of traditional audit models, which rely on retrospective assessments and aggregate data that mask local variations [46,47]. In contrast, Egypt’s system facilitates targeted interventions and strategic resource allocation, as demonstrated by its influence on healthcare, education, infrastructure, and environmental initiatives.

This study also advances the literature on power and governance in auditing. Drawing on Hardy and Clegg’s [49] conceptualisation of power, the findings show that the audit committee’s authority is both enabling and constraining, facilitating institutional alignment while centralising control and potentially sidelining less influential stakeholders. This tension highlights the need for reflexivity in participatory governance, where directive leadership must be balanced with inclusive engagement. The committee’s success in promoting shared ownership and reducing estrangement supports Parker et al.’s [4] view that participatory audit systems must reconcile competing logics through dialogue and responsiveness. The Egyptian case extends this argument by demonstrating how such reconciliation can be institutionalised via digital platforms and structured collaboration.

While the Egyptian case illustrates the potential of ERP-enabled participatory sustainability auditing to reconcile divergent institutional logics, its replicability is contingent on boundary conditions that shape an organisation’s position within Besharov and Smith’s [12] alignment typology. First, the model assumes high centrality of logics and strong political commitment; in decentralised or fragmented systems, weak leadership may hinder coordination, increasing the risk of contested configurations, as observed in Parker et al.’s [4] analysis of audit resistance. Second, institutional compatibility is essential—compliance, performance, and participatory logics must coexist without persistent conflict. In contexts marked by bureaucratic inertia or adversarial inter-ministerial relations, such compatibility may be low, echoing the fragmentation noted by Kim [26] and Nerantzidis et al. [17]. Third, the model’s reflexive and real-time capabilities depend on mature digital infrastructure; without robust ERP systems and data governance, centrality may be undermined, pushing organisations toward dominant or estranged types, as seen in conventional ERP deployments [43,45]. Finally, stakeholder engagement capacity is critical. In environments with weak civil society, limited transparency norms, or low digital literacy, participatory mechanisms may lack legitimacy, reinforcing hierarchical control and reducing compatibility—issues highlighted in citizen-centric audit models [7,8,9]. These conditions suggest that while Egypt’s model exemplifies an aligned configuration, its effectiveness elsewhere depends on institutional, technological, and political enablers that support both centrality and compatibility of logics.

Building on this, it is important to consider how the observed alignment of institutional logics might vary under different political or financial conditions. For instance, if political pressures were less pronounced or if the SOE had greater financial autonomy, the impetus for alignment through participatory auditing mechanisms may have been weaker or more contested. As Parker et al. [4] and Kim [26] suggest, institutional alignment is often fragile in the absence of strong central coordination or when actors operate under divergent logics without effective mediating structures. Similarly, Nerantzidis et al. [17] highlight how audit effectiveness can be undermined by institutional fragmentation or weak regulatory enforcement. These insights underscore that the success of Egypt’s model is not universally guaranteed but is contingent on specific institutional, political, and economic configurations.

While the involvement of military institutions has demonstrably enhanced coordination, efficiency, and legitimacy in Egypt’s participatory sustainability auditing system, it is important to acknowledge potential limitations. Deep military engagement in civilian governance and public auditing may raise concerns about audit independence, particularly in contexts where hierarchical authority could constrain critical scrutiny or dissent. As noted by Kim [26], participatory mechanisms often clash with compliance-driven logics, especially in politically centralised systems. Similarly, Nerantzidis et al. [17] highlight how institutional diversity and socio-political dynamics can undermine audit neutrality and effectiveness. Moreover, the militarised and centralised nature of Egypt’s governance model may limit the replicability of this approach in more decentralised or democratic settings, where civilian oversight and institutional autonomy are prioritised. Recognising these tensions adds nuance to the analysis and underscores the importance of context-specific governance adaptations.

In sum, this study makes a substantive theoretical and empirical contribution to public sector auditing and institutional theory. It challenges dominant assumptions about the incompatibility of institutional logics, demonstrates the transformative potential of ERP-enabled participatory auditing, and offers a replicable model for sustainable urban governance. By situating its findings within the broader literature and providing critical comparisons, the study not only addresses existing gaps but also sets a forward-looking agenda for research on auditing, governance, and sustainability in complex public sector contexts.

7. Conclusions

This study examined the implementation of the internal auditing system in response to national urban development pressures. It was guided by the central research question: How is such a system implemented under these conditions? Two subsidiary questions shaped the inquiry: How do urban development projects create pressures that influence the adoption of a participatory sustainability auditing system? and How is this system operationalised through ERP technologies and participatory audit committees? To address these questions, the study employed Besharov and Smith’s [12] institutional theory framework, which provides a typology for analysing the coexistence and compatibility of multiple institutional logics. Methodologically, Burawoy’s [15] extended case study approach enabled a longitudinal, multi-layered analysis of institutional transformation within Egypt’s public sector. The research responds to critical gaps in the literature on sustainability auditing in urban development, including the absence of empirical evidence on inter-organisational collaboration between central governments and SOEs, limited theorisation of institutional alignment mechanisms, and insufficient exploration of digital technologies, particularly ERP systems, in participatory audit frameworks. Furthermore, existing studies have largely focused on citizen-led models in decentralised contexts, leaving state-centric, digitally enabled approaches underexplored.

The findings indicate a substantial institutional transformation in Egypt’s public sector auditing practices. In contrast to traditional models focused on hierarchical oversight and compliance, the participatory sustainability auditing system introduced in this study promotes collaborative governance between ministries and SOEs. This system integrates ERP technologies, establishes participatory audit committees, and embeds project-level sustainability KPIs. These mechanisms have facilitated the alignment of divergent institutional logics, namely the ministry’s social rationality and the SOEs’ economic rationality, through shared digital infrastructure and inclusive decision-making. Unlike prior studies that report fragmentation and resistance in public sector auditing, this research demonstrates that institutional coherence can be achieved through strategic design and technological integration. The ERP-enabled participatory auditing system operationalises Egypt’s Vision 2030 pillars of economic development, social justice, and environmental sustainability by embedding project-level KPIs into governance routines. These KPIs serve as actionable levers for achieving SDG-aligned outcomes, including resource efficiency, inclusive urban planning, and transparent decision-making. By linking institutional alignment with sustainability performance, the model offers a replicable pathway for governments seeking to integrate Vision 2030 and SDG objectives into public sector auditing frameworks. Theoretically, the study extends Besharov and Smith’s [12] framework by showing how ERP systems and participatory structures sustain alignment across organisational boundaries. Empirically, it contributes a context-rich account of how sustainability auditing systems evolve under national development pressures, particularly within politically embedded and centralised governance environments.

This study contributes a novel adaptation of participatory auditing for state-led urban development, offering a governance-oriented framework that addresses institutional fragmentation and enhances accountability beyond corporate sustainability paradigms. By reframing participatory auditing within a state-centric context, the research expands the theoretical scope of audit models and provides actionable insights for public sector governance reforms in emerging economies. This approach not only strengthens institutional alignment but also promotes transparency and participatory oversight in large-scale development projects. Additionally, this study advances institutional alignment through ERP-enabled participatory auditing in public sector sustainability governance, highlighting the role of digital infrastructures in embedding accountability and collaborative practices.

The practical and social implications of these findings are considerable. Practically, the study offers a replicable model for designing participatory auditing systems that strengthen transparency, accountability, and financial sustainability in public sector projects. The integration of ERP platforms supports real-time monitoring, data-driven decision-making, and collaborative reporting, all of which are critical for managing complex urban development initiatives. Socially, the system advances equity by enabling cross-subsidisation of services and prioritising underserved regions, aligning audit practices with broader public welfare objectives. These implications also extend to accounting education and professional certification. Universities should incorporate participatory governance, sustainability KPIs, and ERP-enabled auditing into curricula to prepare future auditors for evolving public sector demands. Professional bodies may consider revising certification standards to include competencies in digital auditing platforms, stakeholder engagement, and institutional alignment, ensuring practitioners are equipped to address the complexities of sustainability auditing in diverse governance contexts.

For public sector managers, this case underscores the importance of investing in ERP capabilities and fostering participatory audit committees to strengthen collaborative governance and transparency. Auditors can apply these lessons by embedding sustainability KPIs into routine audit processes and leveraging ERP dashboards for real-time monitoring and assurance reporting. Policymakers should consider mandating participatory audit structures and providing incentives for digital governance reforms to institutionalise accountability and sustainability. Collectively, these actionable steps offer a practical roadmap for replicating the benefits observed in Egypt’s model while adapting to diverse governance contexts.

This study’s findings should be interpreted in light of certain limitations. First, the research is based on a single case study within Egypt’s highly centralised governance structure, which includes strong political and military involvement. These contextual specificities may constrain the direct transferability of the model to more decentralised or democratic settings. Second, while the ERP-enabled participatory auditing system demonstrates significant potential, its effectiveness elsewhere depends on enabling conditions such as robust digital infrastructure, regulatory support, and stakeholder engagement capacity. Recognising these limitations underscores the need for caution in generalising the findings and highlights the importance of comparative research across diverse governance contexts.

Looking ahead, this study identifies several promising directions for future research. First, comparative studies across different national contexts could explore how participatory sustainability auditing systems operate in decentralised versus centralised governance structures. Second, longitudinal research should examine the long-term impact of ERP-enabled auditing on institutional resilience, transparency, and stakeholder trust. Third, future work could investigate the role of emerging technologies such as AI, blockchain, and predictive analytics in improving the responsiveness and scalability of sustainability auditing systems. Fourth, interdisciplinary studies may consider how participatory auditing intersects with urban planning, environmental policy, and social equity frameworks. Finally, scholars could build on this study to develop new theoretical models that integrate institutional logics, digital governance, and participatory mechanisms, advancing public sector auditing and supporting more inclusive and sustainable urban development.