ACCOUNTING STANDARDS FOR THE PUBLIC SECTOR IN AUSTRALIA

The need for better financial reporting by public sector entities as a means towards greater accountability has been widely canvassed. This paper discusses the development and application of accounting standards in Australia in this context. The responses of the accounting profession, through its standard setting process, and of the Commonwealth and several State governments are described and the conclusion reached that these developments will mean significant improvement in the information content of public sector financial reports.     

Evaluating the Implementation of a Mandatory Dual Reporting System: The Case of Indonesian Local Government

Informative and transparent financial information in the public sector is crucial for improving public sector management and eradicating corruption. Given this, Indonesia has reformed its public sector accounting, reporting and accountability systems by implementing a dual reporting system known as ‘cash towards accrual’, following similar reforms in developed countries. Drawing on the experience of five local governments (districts) in Indonesia, this study finds that the implementation of the dual reporting system has helped local governments to produce transparent and informative reports. However, the accrual‐based contents of the dual reports produced by the new reporting system are underused for decision making. In addition, there has been a significant increase in costs associated with the implementation of the new accounting regime in the jurisdictions studied. The study also finds that the ability of the users to use information generated by the new accounting system is more important than just a legal and mandatory requirement to use the new system.     

The Public Accountability Value of a Triple Bottom Line Approach to Performance Reporting in the Water Sector

Global water resources are subject to increasing supply constraints. We respond by exploring how novel public sector performance reporting can service public accountability. Here our focus is an exploration of the drivers and utility of a unique ‘sustainability’‐focused, publicly disclosed, performance reporting initiative undertaken by a water agency in Australia. Semi‐structured interviews were conducted with a range of individuals from 2013 to 2014. A disclosure index was also constructed to assess the quality of the disclosures. While the key purpose of the reports was to provide managerial accountability with intra‐governmental stakeholders, they were also drawn on to serve a secondary public accountability purpose with external stakeholders. We argue that the prioritisation of internal stakeholders could threaten utility for public accountability purposes. However, in this case, the reports were also found to be largely relevant to the general public. The study demonstrates that reporting developed for managerial accountability purposes can be designed and targeted also to contribute usefully to ancillary public accountability objectives. Our engagement with the public sector to explore the role and effectiveness of novel reporting strategies in support of sustainability and accountability objectives is topical, and contributes to understanding potential solutions in other contexts.     

Government Accounting: An Assessment of Theory, Purposes and Standards

Government accounting and financial reporting aims to protect and manage public money and discharge accountability. These purposes, and the nature of public goods and tax financing, give rise to differences with commercial accounting. This is not yet reflected either in government accounting standards in English–speaking developed nations or in international public sector accounting standards. All of these are heavily influenced by private sector practices, which favour the accrual basis and consolidated reporting. This article argues for a gradual symmetric approach to accruals and a combination of government–wide and fund reporting. The author also proposes some broad accounting principles to promote political and economic accountability.     

Accountability and corporate governance of public private partnerships

Brennan and Solomon (2008) identify six new frontiers in accountability and corporate governance research to stimulate research. This paper contributes to such research by devising a reporting framework and research agenda that relates to Brennan and Solomon's fourth frontier, sectors and context, focusing on the regulated hybrid organisational forms of Public Private Partnerships, which operate at the interface of the public and private sectors.As the framework shows, these organisations are subject to multiple influences and demands. There is a need for more and different reporting than is the norm under the private sector's decision-useful reporting framework. Although the framework focuses on what Mulgan (2000) describes as the core of accountability, it is not only a financial reporting framework but it also seeks to make concrete Kamuf's (2007) argument that accountability might include accounting through narrative as well as the prevailing numeric evaluation.The paper stresses the need for information to be accessible to the public, and in particular argues that a stream of information between the public and private sector partners needs to be developed and disseminated to achieve accountability for public money that is increasingly spent in the private sector.     

Research horizons for public and private not‐for‐profit sector reporting: moving the bar in the right direction

The examination of public and private not‐for‐profit sector financial reporting has been a topic of interest on a cyclical basis in Australia over the last 30 years. Traditional topics have included examinations of the intended and unintended consequences of specific standards, the accountability value of financial reports, transaction neutrality, compliance with the accounting standards, and more recently, the prospective implications of new, differently focused reporting standards considering such issues as income measurement and outcomes reporting. With increased recent attention from standard setters and regulators, and greater data availability, the opportunities for undertaking impactful research in these and related areas are increasing. In this paper, we focus on research that has examined the following questions: (i) Which private and public NFPOs lodge financial reports and what is reported; (ii) Who are the users and what are their information needs? (iii) Which private and public NFPs should lodge financial reports and what should be included in them; and (iv) How should the accounting frameworks for NFP sector reporting be set? For each of these issues, we identify the research gaps and opportunities for further research.     

IPSAS or IFRS as the Framework for Public Sector Financial Reporting? New Zealand Preparers’ Perspectives

The last 30 years have seen public sector accounting in many countries undergo considerable change. More recently, some governments adopted accrual accounting and International Public Sector Accounting Standards (IPSAS), some adopted modified International Financial Reporting Standards (IFRS) while others continued with cash‐based accounting. New Zealand (NZ) has, for more than two decades, followed a sector neutral approach to financial reporting and standard setting where the same accounting standards were applied to all entities in all sectors: for‐profit, not‐for‐profit and the public sector. This period included the adoption of IFRS by for‐profit entities with minor modifications for the public sector. The suitability of IFRS for the public sector has been questioned and, recently, standard setters in NZ decided to adopt a sector‐specific standard‐setting approach with multiple tiers for each sector. The for‐profit sector will continue to follow IFRS but reporting standards for the public sector will be based on IPSAS. In this period of change we sought the views of preparers of public sector financial reports regarding the users of such reports and their preferences for the public sector reporting framework. We also sought the views of the preparers regarding the usefulness of each financial statement for users, and whether the benefits of reporting by their organisations exceeds the costs. The findings indicate support for maintaining IFRS as a basis for reporting in the NZ public sector. However, IPSAS modified to NZ conditions is also perceived as an acceptable option by respondents in this study. The income statement is, in the opinion of the respondents in this study, the most useful statement while cash flows appear to hold little value. A high proportion of respondents believe that the benefits of reporting exceed the costs, which contradicts the view that such reports are mainly compliance documents that provide little value. This finding contributes to the continuing debate on costs versus benefits on the recent introduction of IPSAS as the reporting framework for the public sector and the perceived appropriateness of IPSAS in public sector reporting.     

From New Public Management to New Public Governance? Hybridization and Implications for Public Sector Consumerism

This paper examines how variations in the notion of public sector consumerism become embedded in diverse governance practices. To this end, we extend the literature on public governance logics with insights from research on public sector consumerism and hybridization in public sector management reforms. Through a comparative, multi‐level analysis we trace the development of two governance logics largely corresponding to the distinction between New Public Management (NPM) and New Public Governance (NPG) in Swedish transport infrastructure policy. In contrast to research predicting or prescribing a relatively radical shift between such governance logics we show how they partly co‐evolved along two reform paths entailing notable variations in the degree of hybridization and the embedding of consumerist notions in emerging governance practices. In doing so, we draw attention to how the hybridization of governance logics is contingent on the alignment of diverse interests and differences in the process through which such logics are brought together. We discuss the implications of these findings for future research into public sector consumerism and hybridization in public sector management reforms.     

An International Comparison of Materiality Guidance for Governments, Public Services and Charities

The annual report is promoted and regarded as the primary medium of accountability for government agencies. In Australia, anecdotal evidence suggests the quality of annual reports is variable. However, there is scant empirical evidence on the quality of reports. The aim of this research is to gauge the quality of annual reporting by local governments in Queensland, and to investigate the factors that may contribute to that level of quality. The results of the study indicate that although the quality of reporting by local governments has improved over time, councils generally do not report information on aspects of corporate governance, remuneration of executive staff, personnel, occupational health and safety, equal opportunity policies, and performance information. In addition, the results indicate there is a correlation between the size of the local government and the quality of reporting but the quality of disclosures is not correlated with the timeliness of reports. The study will be of interest to the accounting profession, public sector regulators who are responsible for the integrity of the accountability mechanisms and public sector accounting practitioners. It will form the basis for future longitudinal research, which will map changes in the quality of local government annual reporting.     

Institutional Logics and Responses to Performance Measurement Systems

Abstract: This comparative study analyzes institutional logics and categorizes organizational responses to performance measurement systems (PMSs) in two Finnish cities. We refine the typology of organizational responses and suggest how the choice of response depends on the institutionalized logic in the public sector accounting context (cf. Oliver, 1991 ). Further, we discuss and refine the types of successful co‐operation under competing institutional logics (cf. Reay and Hinings, 2009 ). Our study also sheds light on practice variation in public sector accounting such as how and why PMS use materializes in different forms in units with different institutional logics.     

Are Financial Reports Useful? The Views of New Zealand Public Versus Private Users

This study reports on surveys conducted with users of financial reports in New Zealand. We compare findings for users of reports of two types of for‐profit entities, namely those with public accountability (public entities) and those with no public accountability (private entities). The findings indicate that both types of users have similar perceptions regarding the usefulness of financial statements, with the income statement and balance sheet rated as the most useful components. Furthermore, both types of users, especially private users, perceive financial statements as the most important information source for decision making. Public users have a greater interest in supplementary information than private users. The findings of this study contribute to the debate around differential reporting for private companies and have policy implications with regard to the user‐needs approach to accounting standard setting.     

Novel approaches to the regulatory control of financial services providers: The importance of cultural context

This study investigates the effectiveness of a public sector financial management initiative. Specifically, the powers awarded to the Irish Financial Services Ombudsman (FSO) in 2013 to name and shame malfeasance by financial service providers (FSPs) in its annual reports. As the first country to award such powers to its public sector financial ombudsman, Ireland represents a novel setting in which to test the impact of regulatory disclosure as a way to promote accountability and transparency. Our results show that the number of complaints lodged against malfeasants dropped in the immediate aftermath of this and, following a one-year lag, so did the percentage of complaints lodged that proceeded to a full investigation and legally binding finding. Despite the failure of such strategies in some jurisdictions, the Irish experience indicates that regulatory disclosure can, in line with Neo-Durkheimian institutional theory and consistent with the accounting and accountability literature, have considerable impact where and when contextual preconditions are met. These findings have important implications for the operationalisation of regulatory disclosure as an accountability enhancing measure in other jurisdictions.     

Application of Accrual Accounting in the Australian Public Sector – Rhetoric or Reality

This paper presents a contextual. historical analysis of recent accrual accounting developments in the Australian Public Sector (APS). It takes a critical stance in that it questions the accrual accounting developments on a number of grounds. The paper examines changes in public sector financial management and accountability in four distinct settings, being: accrual financial reporting, accrual management systems, whole of government reporting, and accrual based budgeting. The findings show that already in Australia accrual accounting has made significant encroachments into some areas of annual financial and budget reporting. This influx has meant that terms such as 'deficit', 'debt', 'liabilities', 'operating results', 'assets', etc. have begun to change in meaning, which it is argued has important implications for the current process of transformation of aspects of the APS.     

Academic entrepreneurial hybrids: Accounting and accountability in the case of MegaRide

The current paper focuses on how multiple values shape accounting and accountability practices in hybrid organizations. It concentrates on the complex domain of academic spin-offs, more fully described as hybrid knowledge-intensive organizations, aiming to understand how accounting and accountability practices can be constitutive of hybrid academic entrepreneurial logics and identities and how these, in turn, favor the development of accounting and accountability practices. The study employs a theoretically informed in-depth single case study of the academic spin-off MegaRide of the University of Naples Federico II (Italy) for the period January to May 2021. The findings show how, in MegaRide, hybrid academic entrepreneurial identities emerged at both the individual and organizational levels, leading to successful technology transfer, with an undeniable impact on the local context and society.     

`Sector Neutrality' and NPM'Incentives': Their Use in Eroding the Public Sector

Despite New Zealans public-sector reformers' claims that financial reporting changes promote competitive neutrality and improved accountability and transparency, privatisation-favouring "incentives" were designed into the system at a hidden detailed level. That distorted system has been encompassed within the accounting profession's standard-setting activities through standard-setters' erroneous claims, in Australia and New Zealand, that the accounting profession's conceptual framework and accounting standards are sector-neutral. These claims help to conceal the fact that the public-sector financial management system has been designed to be partial, with its incentives structured to erode the public sector and favour privatisation.     

'Sector Neutrality' and NPM 'Incentives': Their Use in Eroding the Public Sector

Despite New Zealans public-sector reformers' claims that financial reporting changes promote competitive neutrality and improved accountability and transparency, privatisation-favouring "incentives" were designed into the system at a hidden detailed level. That distorted system has been encompassed within the accounting profession's standard-setting activities through standard-setters' erroneous claims, in Australia and New Zealand, that the accounting profession's conceptual framework and accounting standards are sector-neutral. These claims help to conceal the fact that the public-sector financial management system has been designed to be partial, with its incentives structured to erode the public sector and favour privatisation.     

The governance of public bodies in times of austerity

Private sector governance arrangements have been imported into UK public bodies under the influence of New Public Management reforms. This paper draws on a cohort study of 14 public bodies to assess the appropriateness of this practice and the impact of fiscal austerity during the study period of 2010–16. Based on multiple sources, including interviews with Chairs and Chief Executives, it shows that, though similar to private corporate Boards in appearance, public Boards are often excluded from the strategy role. They are also vulnerable to the elastic definition of policy over which Ministers assert dominance, thereby blurring accountability. It demonstrates the tension between vertical accountability to government principals and horizontal accountability to stakeholders. During the study window, public bodies were abolished, broken up, merged, reconfigured or taken back into core government, as the UK Government imposed austerity measures to reduce the size of the fiscal deficit and to diminish government roles in delivery, financing and regulation of public services. Surviving public bodies in the study suffered deep budget cuts and less autonomy from central control. These findings are interpreted as evidence of the re-territorialisation of the UK public sector, with accruals accounting and accounting consolidation practices playing a facilitating role.     

The New Business of Government Budgeting: Reporting Non-Financial Performance Information in Victoria

Since the early 1990s the general and financial management of the Victorian public sector has been significantly transformed. This research examines and explains the content, nature and quality of non-financial disclosures, including those related to performance indicators, through a disclosure indicator analysis of reporting practices in recent government budget papers. It reports the results of its application to the last three years' budget papers. The findings highlight the problems in the reporting of non-financial performance indicators in the Victorian budget papers. These results indicate a significant gap between "official" expectations of the type of items required to be reported and actual budgetary reporting practices – some many years after regulation and major financial accountability reforms have taken place.     

New development: Consolidated financial reporting as a stimulus for change in Italian local government

This article analyses the potential effect of consolidated financial reporting (CFR) on the accounting and reporting systems in Italian local government. As consequence of the increased use of decentralized entities in delivering a variety of public services, Italian local government needs to improve internal and external accountability. Although a number of obstacles (technical, legal and cultural) have been encountered in Italy, initial experience in Tuscany has demonstrated that CFR has benefits for internal and external users. CFR, in addition, is a potential stimulus for the full implementation of accrual accounting and reporting.