IDENTIFYING THE MODERATOR FACTORS OF FINANCIAL PERFORMANCE IN GREEK MUNICIPALITIES

The use of financial ratios is a widespread method for assessing the financial performance of private sector companies. However, the application of an analogous exercise in the public sector is a less straightforward one. In the later case it is a multifaceted task that involves judgments about the interplay of complex social, organizational and financial factors. In this paper we use accrual end of the year financial statements data of Greek Municipalities for the period 2002–2004 to compute nine commonly used performance assessment financial ratios. We find corroborative evidence that factors, which are exogenous to the municipalities’ control, such as their wealth and size, have statistically significant impact on ratio values. Thus, as financial ratios are significantly influenced by socio‐economic factors like municipal wealth and size, cross sectional comparisons on the basis of these ratios should be made with caution and performed for municipalities that exhibit similarities in terms of size and wealth.     

THE RISE AND USE OF BALANCED SCORECARD MEASURES IN AUSTRALIAN GOVERNMENT DEPARTMENTS

This paper examines the rise and use of balanced scorecard performance measurement systems in Australian government departments. Through a survey of all Australian federal, state and territory government departments we find that Australian government departments include a broad set of financial and non‐financial measures within a balanced scorecard approach. Theoretically, our findings lend support for both economic and ‘external’ institutional rationales for the implementation and use of balanced scorecard measures. We find that those government departments reporting greater implementation of balanced scorecard performance measures also report greater benefits for organisational decisions. Our findings shed light on the use, and further potential, of BSC performance measurement systems as part of the management control system in Government departments.     

PREPARING PERFORMANCE INFORMATION IN THE PUBLIC SECTOR: AN AUSTRALIAN PERSPECTIVE

This paper examines performance information and reporting issues through a survey of the views of public sector managers in Australia regarding the importance of selected performance information in achieving the objectives of an organization, the extent of information development, usefulness for reporting in annual reports, and actual reporting. The results reveal the existence of a gap between information considered important, the extent of development, and information considered useful for annual reporting. Most non‐financial performance information is still being developed and less frequently reported, particularly output quality information.     

EXAMINING THE PRACTICAL RELEVANCE OF PUBLIC SECTOR MANAGEMENT ACCOUNTING RESEARCH

Concerns exist that practical relevance is becoming devalued as accounting scholars respond to signals about what sort of research ‘counts’. We categorize public sector management accounting papers in six leading journals according to two criteria: the practical orientation of the research objective(s), and whether the conclusions communicate issues of practical relevance. The findings reveal that most of the papers are directed towards understanding or critiquing the use of management accounting techniques, while other practically oriented research objectives are largely absent. Although half of the papers identify practical research implications, few suggest guidelines for practice. Reflections are offered on the role of leading journals in shaping how practical relevance is valued in accounting research.     

MIND YOUR ACCRUALS: PERCEIVED USEFULNESS OF FINANCIAL INFORMATION IN THE AUSTRALIAN PUBLIC SECTOR UNDER DIFFERENT ACCOUNTING SYSTEMS

This study examines the usefulness of three accounting systems (cash, Generally Accepted Accounting Principles (GAAP) accrual, and Government Finance Statistics (GFS) accrual) for public sector decision‐making. From a survey of internal users, external users, and preparers in Australia, we find that GAAP accrual information is perceived to be relatively more useful and understandable than the other two systems for most decisions examined. The relatively higher ratings for GAAP accrual information differ from earlier studies and may reflect an experience or familiarity effect whereby perceptions of usefulness are enhanced because respondents have become more used to the system. This effect might also explain the lower ratings for GFS accrual.     

EXPLAINING THE UTILIZATION OF RELATIVE PERFORMANCE EVALUATION IN LOCAL GOVERNMENT: A MULTI-THEORETICAL STUDY USING DATA FROM SWEDEN

One of the more lasting imprints that New Public Management (NPM) has made in the public sector is an increase in the popularity of performance measurement. In Sweden, performance measurement has gained popularity in the public sector, not least at the local government level with the use of relative performance evaluation (RPE). Because utilization of RPE is a decentralized and optional mode of governance, a somewhat heterogeneous practice has evolved. The aim of this paper is to examine the causes of this differentiated practice. We jointly examine economic, political and institutional/cultural explanations in order to account for the utilization of RPE. The empirical material consists of archival data and a questionnaire sent to all Swedish municipalities in late 2005. We show that RPE adoption and use partly has different antecedents and that the institutional/cultural perspective appears to have greater explanatory power than economic and political, not least as a consequence of the potential to explain decoupling and the importance of change facilitating capabilities. The investigation contributes specifically to the literature on the utilization of RPE in local governments and more generally to the literature on why and to what extent management accounting practices are utilized.     

Value for money: a broken piñata?

In public management a key driver of effectiveness is value for money (VfM). This paper argues that the VfM concept suffers from conceptual ambiguity, and thus ethical implications arise when VfM is used to legitimize public buying decisions. A conceptual framework, which clarifies properties and boundaries of VfM, is proposed. Empirical data collected from public employees involved in public procurement in Ireland and a perceptual map of subjective meaning and impact of VfM are discussed. While the conceptual framework is broadly supported, it highlights different interpretations of VfM and distinguishes those employees who dent the VfM piñata from those who break it. The implications of the research in this paper include a need for more debate concerning the usefulness of the VfM concept.     

Continuity and Discontinuity in Accounting Technology in Danish State Institutions

The development of accounting technology in the Danish state sector is characterised by episodes of disruption and the longevity of certain principles that define accounting's accountability as involved in producing the state as a unit, as providing a continuous concern for productivity, and as providing the means by which a parliamentary democracy may work. The episodes of disruption may often repair on this trinity of issues. The recent transformations are radical as they introduce a new form of management via individualised 'accounting-cultured' institutions and managers. They do so via a heightened emphasis on a core technology already in place supplemented by a new mode of output orientation rather than input orientation via a Company Accounts . In addition to reporting on spending, this set of accounts introduced a series of non-financial measures such as productivity, quality, and customer satisfaction.     

The measurement of turnaround management strategies in local authorities

The use of turnaround management strategies (TMS) in the public context is beginning to be researched, however adjusted measurement tools are still needed. This article describes the construction and validation of a new scale for measuring TMS in local authorities.     

Engaging the economic facts and valuations underlying value for money in public procurement

This paper examines the possibilities and limitations in pursuing value for money (VfM) in public procurement. There is ambiguity about the VfM concept and the methods that public procurers should be using. It is difficult for decision-makers to thoroughly understand the economic facts and valuations underlying VfM. The authors explain the conceptual VfM challenges and present a path to overcoming these with a lifecycle costing (LCC) approach in an indepth case study in the Finnish waste management context.     

CREATIVE ACCRUAL ACCOUNTING IN THE PUBLIC SECTOR: ‘MILKING’ WATER UTILITIES TO BALANCE MUNICIPAL BUDGETS AND ACCOUNTS

Traditionally, the financial balance of public sector economic entities has been determined by balanced budgets and cash‐based or modified cash‐based budgetary accounting. Since the 1990s the superiority of accrual accounting in the public sector context has been emphasized by both practitioners and academics. This paper demonstrates that accrual accounting also offers opportunities for the use of creative accounting, or earnings management, in the public sector, at least as long as accounting is performed in accordance with diverse national norms instead of internationally acceptable accounting standards.     

Performance information in the Irish public sector: a comparison with the UK

Public sector organizations (PSOs) are expected to account for not only the monies spent but what has been achieved with this money. Therefore, performance reporting has become a key issue for PSOs. In a comparable sample of PSOs in the UK and Ireland with an operational focus, it was found that UK PSOs provide substantially more performance information. Irish PSOs are particularly hesitant about producing performance targets. A key lesson from this paper is that the establishment of performance targets must be driven by the political system.     

A Study of the Use of Targets in the Planning Documents of Executive Agencies

The use of quantitative, often non-financial, targets and performance measures in the plans of both businesses and not-for-profit organisations has recently received increasing attention in the academic literature. In the UK public sector this has been particularly important, given the rise of New Public Management. This has resulted in a shift from issues of policy to issues of management, and the break-up of traditional bureaucratic structures. These changes have been supported by an increasing focus on setting quantitative targets which cover all aspects of an organisation's performance. This paper seeks to examine the possible role of quantitative targets in planning and control in public sector organisations. Furthermore, through an exploratory study of over eighty planning documents from executive agencies, the nature and breadth of targets being used are examined and discussed.     

New development: Integrating risk management in management control systems—lessons for public sector managers

Exploring multiple dimensions of management control systems (MCS), this article proposes a new framework to integrate risk management with strategy, MCS and performance measurement systems (PMS). Considering the public sector as a focal point, the article points to some enterprise risk management (ERM) issues and argues that ERM-enabled MCS has potential to improve PMS and strategic decision-making, leading to a more proactive risk management framework and a culture that promotes performance driven accountability. Consequently, the article calls for further research towards solving the public sector’s risk management problems, motivating its managers to adopt best practices, and stimulating suitable policy developments.     

The Impact of New Zealand's Public Sector Accounting Reforms on Performance Control in Museums

Accounting by most New Zealand museums was subject to public sector reforms requiring private sector -style financial reporting, and service performance reporting. This study into the impact of the reforms on how museum managements pursue successful performance found museums adopting a more accounting-oriented approach to planning and evaluation. Service performance reporting has facilitated the periodic evaluation of non-financial targets by managements, but as currently constituted the reporting model is flawed, particularly in its implications for essential long-term resource capacity of museums. This threatens its effectiveness for promoting good performance. Non-accounting based professional practices also have a role in museum success.     

INSTITUTIONAL RESEARCH ON PERFORMANCE MEASUREMENT AND MANAGEMENT IN THE PUBLIC SECTOR ACCOUNTING LITERATURE: A REVIEW AND ASSESSMENT

This paper reviews the evolution of institutional research on performance measurement and management (PMM) in the public sector accounting literature. An assessment of the progress of this research programme is offered in light of some key developments in the broader neo-institutional sociology (NIS) literature, such as the growing recognition of the role of embedded agency, the need to bridge institutional and rational choice explanations of action and the extension of empirical research across different levels of institutional fields. Some progress has been made in this respect and has contributed to shift the emphasis from a one-sided focus on institutional effects  on  PMM, treating institutional pressures as largely exogenous, to recognize its more intricate roles as an outcome of, as well as a medium for, change. However, further research is required into the micro dynamics involved in transforming and reproducing PMM practices at different levels of analysis and how such practices become infused with meanings conditioned by higher-order institutional logics across various levels of institutional fields. Some research strategies for addressing these issues are outlined.     

Implementing budgetary control in the performing arts: games in the organizational theatre

When administrators or political bodies try to enforce implementation of new management control systems on organizations, various forms of conflicts and games may be observed in the implementation process. Different rationalities are brought face-to-face in the discourse on implementation, and the process will be influenced by some form of political behaviour. A political perspective will call attention to such issues as the players, power and games. By adopting the concept of budget games in an analysis of the actions related to the implementation process we try to show how we can gain a better understanding of the behaviour exhibited by the various groups involved and of the outcome of the process. Observations from a case study of the Royal Danish Theatre show how different budget games emerge in a process in which the Theatre, the Danish Treasury Department, and various actors inside and outside the theatre have been engaged over a period of 15 years, in an attempt to implement a new management control system at the theatre. The management control system being implemented is a combination of a new accounting system and a new planning and budget system. First, we will discuss the strengths of the concept of budget games and the possibilities that it offers for a better understanding of organizational actions related to the implementation of budgeting systems. In addition, we will look at reforms in the public sector with a special view to the role of budgetary control systems. A framework for using budget games as an analytical tool in understanding implementation processes is developed and applied to the case. The analysis shows how various budget games emerge in the organizational field. The budget games start when an individual or a group wants to address an issue and encounters opponents. The analysis also demonstrates how one budget game may create a counter-game. Finally, the findings and their implications are discussed. The analysis demonstrates the usefulness of the budget game perspective in understanding the implementation of accounting systems and the behaviour of the various groups involved or af fected by the system.     

THE POWER OF TESTS OF FUND MANAGER PERFORMANCE

Recent work in this and other journals has re-examined the econometric pro-cedures which are used to investigate the performance of fund managers. This has resulted in considerable refinement of the methodology used to assess whether fund managers can time the relative proportions of equity and fixed interest securities in their portfolios. In this paper the power of these refine-ments is examined. It is shown that at the level of forecasting ability observed in market professionals, a statistically significant superior performance is unlikely to be found in ex-post investigations of the performance of individual fund managers. It is argued though that this observed level of forecasting ability is still sufficient to produce a significant improvement in the returns on managed funds.     

Influence of Value for Money Audit on Public Administrations: Looking Beyond Appearances

Value for money (VFM) auditing will soon have been part of the control environment in European and North American public administrations for thirty years, yet, despite its many interesting features, it has received very little attention from researchers. Chief among the VFM audit'sstill unexplored features, would doubtless be the value of its performance as an instrument to control and improve the management of public affairs. In order to partially fill this research gap, I am proposing 14 indicators to measure the effectiveness of VFM audits. But I don't stop there, for pointing out the successes or failures of VFM audits would finally be futile unless one also pointed to their causes. So, turning my attention to causes, I also propose 11 factors which can be used to explain the successes of Auditors General in carrying out VFM audits of public organizations as well as their inevitable failures.