Local government amalgamation policy: A highway maintenance evaluation

Evaluating the effects of a change in public policy setting is a critical element in the chain of accountability. Factors such as effectiveness and efficiency in government operations are often difficult to measure. In this study of efficiency outcomes, we follow events before and after significant structural change arising from local authority amalgamation. The study focuses on highway maintenance and uses Data Envelopment Analysis (DEA) to evaluate whether greater efficiency was achieved. Results (confined to highway management activities) show no evidence that amalgamation was justified in terms of diseconomies arising from smallness (i.e. increasing returns to scale). While new governance practices introduced contemporaneously lifted the level of performance of local authorities in terms of higher technical efficiency, there is no evidence that the amalgamation policy contributed to this improvement. The policy impact evaluation methodology developed in this paper has potential for application to other local government service activities.     

Setting consolidated reporting standards for local government

Under a corporatization trend, traditional financial reporting is generally considered unable to offer a complete view of the economic and financial activities of a group of public entities. Consequently, several reforms and standards have been introduced related to consolidated financial reports. Through interviews with key actors, the authors analysed the normativity process for issuing consolidated reporting standards for local governments in three European countries: Italy, Spain, and Sweden.     

The usefulness of performance reporting in local government: comparing Italy and Spain

This article presents a comparative analysis of the perceived usefulness of performance information by managers in local authorities in Italy and Spain. Italy and Spain have similar cultural and administrative characteristics and in both countries there are external requirements (from central government) to adopt performance indicators. The adoption of performance indicators was found to be almost symbolic in both states.     

Rethinking the relationship between local government and financial markets

In the past 20 years local governments have increasingly looked to financial markets for capital financing. The markets want local governments to change their accounting systems and become more transparent, in order to offer information that is more appropriate to private sector investors. The authors argue that this approach is only a partial solution, and that local government and financial institutions would both benefit from changes in their relationships. The article identifies a double knowledge gap that needs to be filled if the public and private sectors want to work together as long-term financial partners.     

Social justice in a cold climate: Could social accounting make a difference?

Building on the argument that justice should be the transcendent principle in accounting, we argue that social accounting invokes notions of community, shared social values, and fairness in the distribution of social resources. These ideas are elaborated in relation to local government, which provides a window on how communities make decisions about distributing their social resources and the accounting processes which guide these decisions. Fieldwork in two large but contrasting English local authorities suggests that the potential of social accounting is not reflected in the predominant accounting systems in local government organisations, but in more subtle and successful forms of ‘enacted social accounting’. Its utility relates to the achievement of short-term social goals where social injustices persist and accountants, managers and politicians seek to accommodate financial pressures to protect the most vulnerable members of the community. We identify local government accountants as morally responsible for the further development of social accounting which envisions a future for local government, and establishes links between social justice, environmentalism and localism.     

Sustainability reporting: The role of “Search”, “Experience” and “Credence” information

Corporate sustainability reporting quality has been frequently criticised as being unbalanced, presenting an overly positive view or failing to address material issues. The purpose of this article is to provide a fresh explanation for poor quality sustainability reporting and to propose how quality issues may be addressed. The theoretical framework combines the legitimacy and accountability perspectives using Akerlof's (1970) Market for Lemons theory. Akerlof's approach is extended by differentiating between three types of information in sustainability reports namely search, experience and credence. The article concludes that the type of information must be considered when determining measures to improve report quality.     

The influence of the nature of government accounting and reporting in decision-making: evidence from Switzerland

A key objective of government accounting and reporting has been to achieve accountability and its use in that respect has been well documented, however its use for decision-making has had less coverage. This article addresses the latter issue, providing evidence from Switzerland that the accounting basis used (accrual versus cash) influences decision-making. This is the result of the effect that the different approaches have on the nature of the information used for decision-making. Switzerland was among the first western democracies to adopt accrual accounting at both state (canton) and local levels of government in the 1980s. The Swiss federal government followed in 2007. The main examples of the use of accrual information in decision-making are: the focus on self-financing of investments in order to control borrowing, as well as the fiscal policy targets of debt reduction and maintenance of capital. All three require accrual basis information. Therefore accrual basis information is key in fiscal decision-making in Switzerland.     

Materiality in an integrated reporting setting: Insights using an institutional logics framework

Using institutional logics as a theoretical framework and interviews with 20 preparers from 14 large organisations listed on the Johannesburg Stock Exchange (JSE), this paper focuses on examining differences in integrated reporting practices. The results reveal how a finance-centric market and professional logic interact with a stakeholder logic, leading to differences in the materiality determination process. Market-dominated firms have an internally focused approach to setting materiality which emphasises value-relevance for financial capital providers. Where logics are contested, materiality becomes an amalgamation of the factors which are important for shareholders and other stakeholders and essential for demonstrating compliance with codes of best practice. Organisations with market, professional and stakeholder logics aligned have the most sophisticated materiality determination processes. The emphasis shifts from lengthy reporting and compliance to providing a comprehensive account of the value creation process and how the business ensures long-term sustainability. In this way, how logics are instantiated may explain the considerable variation being observed in integrated reports. There are also implications for the propensity of firms either to view integrated reporting as a hegemonic challenge or to internalise it as part of a process of positive organisational change.     

Technologies of government in public sector's networks: In search of cooperation through management control innovations

In recent years, the public sector has been the subject of a thorough reassessment in a significant number of countries. During this process of modernization, issues such as inter-organizational collaboration and managerial innovation have been progressively placed at the forefront of practice and research. In particular, a number of countries have recently re-organized their public sectors around more or less formalized networks or hybrid inter-organizational forms, which are often led by a regulatory body and governed by a cooperation agreement. The literature on inter-organizational relationships in the public sector has evolved alongside the development of such cooperation agreements and innovative forms of organizing. Nevertheless, despite the fact that networks formed by public organizations, not-for-profit organizations, and private firms provide important services to their relevant communities, limited attention has been dedicated to studying the role of management control practices within inter-organizational relationships in public organizations. This is an important gap in the existing literature that this Special Issue intends to address. For this reason, and most importantly because public sector forms of inter-organizational collaborations are likely to differ significantly from those observed in the private sector, in the first part of this Editorial we draw attention to some of the themes that characterize the management and control of inter-organizational relations in the domain of public administration. Next, we introduce the six papers which comprise this Special Issue, and we briefly illustrate how each of them enhances our understanding of the role of control systems within public sector networks. Building on the empirical evidence and theoretical arguments offered by these studies, and after a brief review on the possible alternative ways of conceptualizing the process of adopting new management practices, we point to the further research that needs to be done if we are to understand the role that management control practices play in public sector networks. In particular, we suggest that there is a need to look inside management control practices, to explore what these practices are and, how and why they enable the cooperative “ideal” to become real, as well as to stimulate or hinder opportunities for public sector managerial innovation. It is concluded that there are a number of issues yet to be explored if we are to deepen our understanding of the formal and informal mechanisms of control which are the active elements of the so-called “regulatory hybrids” in the public sector.     

Keeping it private: financial reporting by large proprietary companies in Australia

Since 2010, proprietary companies have had a choice of preparing three types of financial reports that vary in scope. We find that between 2010 and 2015, most proprietary companies in our random sample chose the lowest scope option, with very low quality financial reports. Few adopted the new option provided by AASB 1053 Application of Tiers of Australian Accounting Standards. The characteristics of the firms that adopted each type of report are consistent with the regulator's intention. Our findings should provide a better understanding of how accounting standards impact practice, and should assist regulators to reform private company financial reporting.     

Implementation and challenges of introducing NPM and accrual accounting in Indonesian local government

This article provides insights into the implementation of New Public Management (NPM) practices in Indonesia, including the introduction of an accrual accounting system for local government. The adoption of NPM practices was part of political, economic and public sector reforms introduced after 1998. The article discusses the background and obstacles to the reforms and the nature of the accrual accounting system adopted by Indonesian local government.

Finally, the authors make recommendations for policy-makers in Indonesia and other developing nations.     

Climate change reporting and multinational companies: Insights from institutional theory and international business

Multinational companies (MNCs) have an important impact on climate change, but knowledge on the greenhouse gas (GHG) reporting practices of MNCs is limited. A theoretical framework is developed to provide an explanation of GHG emissions reporting by MNCs. The framework combines institutional theory with the notion of MNC typology from International Business and explains how institutional pressure acting on each typology of MNC influences standardization of reporting practices and GHG emissions data quality. Propositions are developed and empirically investigated using a case study. Global MNCs are predicted to have better quality GHG emissions reporting compared to multi-domestic or transnational MNCs.     

A process (re)turn?: Path dependencies,institutions and performance management in Swedish central government

Recent central government reforms have signalled a transition away from output-based governance and control to a more citizen-orientated and outcome-focused performance management ethos. Prior research suggests that this may give rise to institutional inconsistencies related to conflicting performance management logics. In this paper, we argue that rather than resulting in growing pre-occupation with outcomes and effectiveness, the emerging reform agenda may somewhat paradoxically reinforce managerial concerns with the operating processes underpinning public service delivery. Drawing on policy studies and management accounting research informed by new institutional sociology, we theorise these developments by invoking the notion of path dependency. We provide an empirical illustration based on field work in Swedish central government and adopt a multi-level approach in examining the evolution of performance management practices. While evidence of strongly constraining path dependencies is found at the overall policy level a case study in the Swedish Tax Agency shows that these may also embody an element of flexibility such that the meaning of inconsistent performance management logics is re-constructed over time. This illustrates how individual government agencies may link outcomes to operating process concerns and manage implementation problems related to conflicting and uncoordinated reform initiatives.     

From intention to action on sustainability reporting: The role of individual,organisational and institutional factors during war and post-war periods

This study examines the role of individual, organisational, and institutional factors in influencing the decision to engage in sustainability reporting (SR) and, how these factors change from war to post-war periods. Drawing on semi-structured interviews of Sri Lankan top and middle-level managers, the study finds that while individual and institutional factors play a role in SR, organisational factors predominate as both facilitators and inhibitors of SR in both war and post-war periods. This finding suggests the organisational level ultimately is the conduit of SR, although shaped by individuals and by institutional forces that come into confluence therein. The end of the civil war enabled the country to focus on economic and social development, a phase that witnessed the amplification of the role of organisational factors in SR. The social and economic impacts of the civil war manifested themselves contemporaneously and well after hostilities ceased; organisations experienced inflated expectations from government and communities, for example, through soldiers’ rehabilitation and infrastructure development. By employing a multi-level analysis, the study offers insights into the dynamic between individual, organisational, and institutional factors influencing SR, highlighting the merit of this research approach.     

Valuation-based accounting research: Implications for financial reporting and opportunities for future research

This paper discusses the relation between financial reporting research and practice, particularly standard setters. Many studies addressing financial reporting issues use a valuation approach. The paper describes alternative approaches to valuation research and summarises the findings relating to four major current issues: fair value accounting for financial, tangible, and intangible assets, cash flows versus accruals, recognition versus disclosure, and international harmonisation of accounting standards. The summaries include identifying what standard setters and others would like to learn from research, what we have learned, and what is left to learn. The paper concludes with observations about future financial reporting academic research.     

Credit risk and bond pricing of local government in China

The relationship between credit risk and the pricing of local government bonds in China is explored in this paper. The pricing of local government bonds was found to reflect credit risk, but the risk premium was small. The type of bond (‘directional’ or ‘non-directional’) significantly affected pricing. Repayment source had no effect. The authors make recommendations for the central government, local governments and investors.     

我国地方债可持续性研究*--以澳大利亚地方政府融资模式为鉴

在我国金融机构贷款规模收紧、项目投资收益有限、地方政府土地财政模式受到遏制以及举新债偿旧债压力倍增的背景下,地方政府探索新的投融资模式、缓解地方债压力成为当务之急。本文梳理了国内有关地方债的研究成果,介绍了我国地方债的基本情况,分析其可持续发展的隐患,在总结和借鉴澳大利亚地方政府融资经验的基础上,提出了探索发展市政债券市场和创新地方政府融资模式的建议。     

Scenario projects in Japanese government: Strategic approaches for overcoming psychological and institutional barriers

Scenario planning in the public sector has significant differences from scenario planning in the corporate world. Scenario planning in the government not only tends to be focused on issues of higher complexity and significance to public policy, but also in comparison to people in the private business, public officials have fundamental psychological and institutional constraints in their scenario thinking. These constraints make it difficult for them to contemplate multiple ‘untidy’ futures and imagine the possibility of policy failure: skills which are essential for successful scenario projects. Based on specific characteristics of scenario planning in the Japanese government, this paper contributes on better understanding the challenges and strategic solutions in providing more successful scenario planning in the public sector. Specifically, this paper argues that possible solutions in overcoming these constraints may be to shake public bureaucrats out of their thinking by providing free and open venues of conversation and more importantly through ‘derailment’ exercises.     

New development: China promotes government financial accounting and management accounting

In late 2013, China's political leadership decided to require the government to practice accrual accounting and prepare whole-of-government financial reports. This decision was codified in the new budget law and followed up by a State Council directive endorsing the reform proposal of the Ministry of Finance. Some basic government accounting standards have been made public for comment. In the same timeframe, the ministry also decided to promote management accounting in order to raise the competency and contributions of China's millions of accounting personnel.