Without 'Reinventing the Wheel': Business Accounting Applied to the Public Sector

This article considers why a business accounting model was applied in an early adoption of public-sector accrual accounting. The history of that change shows that large private-sector consulting firms were active in the promotion and implementation of a commercial model of public-sector accrual accounting. It is argued here that the consulting firms' actions are best understood using concepts of mimetic isomorphism and the interplay between self-interest and perceived public interest. They formed an epistemic community in which self-interest was present but with a zealous belief that private-sector accounting was an inherently righteous objective for the public sector.     

Public‐Sector Accounting:A Common Reporting Framework? A Rejoinder

This article responds to some criticisms in Newberry's recent article in Australian Accounting Review concerning whether there is, or should be, a common reporting framework for public-sector and private-sector accounting. The Public Sector Accounting Standards Board supported this approach. Here, it is argued that business accounting is not appropriate for those parts of the public sector concerned with the provision of public goods to citizens. Following this article is a further rejoinder by Carnegie and Wolnizer, and a response by Newberry to both commentaries.     

Competing Regulatory Agencies With Conflicting Agendas: Setting Standards For Cash Flow Reporting In Australia

Financial accounting regulatory arrangements adopted in most Western countries often involve the participation of (and interactions between) public-sector and private-sector regulatory agencies. The political process associated with the development of accounting rules not only involves the efforts of interested parties seeking to secure the content of rules favourable to their interests but also the behaviours of regulatory agencies as they compete to influence or control the regulatory 'agenda'.
Regulatory agencies develop their own agendas, in light of their own perceived priorities and the regulatory initiatives of other agencies. The placing of an accounting issue on the agenda of one agency may be warmly supported by other agencies or, alternatively, be viewed as a threat to the regulatory ambitions of those other agencies.
This case study reviews the emergence and eventual resolution of an accounting issue that was initially promoted by a government agency in April 1984 but then ultimately developed as a professional accounting standard in December 1991. The study describes the activities of public and private-sector agencies during this eight-year period as they responded to proposals for the introduction of disclosure rules concerning cash flows. Evidence was obtained from public records, documents provided by interest groups, and structured and semi-structured interviews with key participants in the events described.
The analysis is underscored by our understanding of competitive regulatory interactions and formal models for analysing agenda entrance (Cobb et al. 1976). This analysis shows how the profession's standard-setting body was unable to control the global agenda for accounting rule-making as a consequence of the intervention of another body, the Australian Stock Exchange.     

The Use and Abuse of Accounting in the Public Sector Financial Management Reform Program in Australia

Accrual accounting has been central to financial management reforms designed to promote greater efficiency, effectiveness and accountability in the Australian public sector. This is the setting for the article; however, the issues covered apply to all nations that have reformed their public sectors over recent years. The results of the reforms have been mixed. While accrual accounting has had some beneficial results for the above purposes, the benefits have been offset by aspects of accounting misuse resulting largely from adoption of the business model of accrual accounting, termination of the former cash accounting system, and adoption of some questionable marketization reforms which appear to be more driven by the objective of reducing the size of government rather than enhancing efficiency of operations. Because Treasury believed that the business model was not appropriate for budget fiscal policy purposes, it introduced a second combined accrual and cash accounting system—the Government Finance Statistics system. The use of two accrual accounting systems reporting different results caused much confusion in parliament.     

Risk Weighting and Accounting Choices in Public-Private Partnerships: Case Study of a Failed Prison Contract

A case study of a failed PPP contract shows how ex ante assessments of the extent of risk transfer from public-sector agencies to private-sector contractors were inadequate. Those assessments placed undue weight on some risks, and failed to assess others. The experience suggests that it is inappropriate to choose accounting treatments on the basis of ex ante assessments of risk transfer and risk sharing.     

AAS 29 And Public-Sector Reporting: Unresolved Issues

The latest Australian accounting standard on public-sector accounting (AAS 29) requires government departments at all levels to comply with private-sector accounting and reporting principles and standards. But this commercially oriented framework may appear alien to departmental managers and may not accommodate many of the unique characteristics of departmental financial accountability. The underlying concepts and terms which take their meaning from the commercial world of profit-driven markets may be misunderstood, misinterpreted or lead to unintended welfare and distributional consequences. This article examines some of the underlying terms that may be misinterpreted and the possible consequences of their operation in the departmental context.     

Measuring Compliance with the Golden Rule

The golden rule of public finance is based upon the notin that intergenerational equity requires that the cost of public expenditures be spread over time in a manner that reflects the intertemporal distribution of the benefits generated by those expenditures. This is often translated into a rule that the budget be structurally balanced in accrual accounting terms. This article considers the form of accrual accounting that is most suited to the task of measuring the consistency of fiscal policy with the golden rule. It recommends a combination of the real capital maintenance approach (also known as ‘current purchasing power accounting’) and annuity depreciation. Such an approach differs from ‘current cost accounting’, which has dominated public sector models of accrual accounting in recent years. The meaning of balance-sheet measures is also considered, and it is concluded that the golden rule is more appropriately expressed as an accrual balanced budget requirement than as a requirement for the maintenance of constant net worth. JEL classification: H6, M40.     

Decision Usefulness of Cash and Accrual Information: Public Sector Managers’ Perceptions

This study examines the usefulness of accrual accounting information for internal decision‐making contexts in the Western Australian public sector. Based on questionnaire responses of public sector managers, it was found that accrual accounting is perceived to be more useful than cash accounting in 16 of the 19 decision situations. These results suggest that the perceived usefulness of the accrual accounting system has improved with the passage of time. It may well be that perceptions of the usefulness of information derived from an accounting system will change over time as users gain familiarity and experience with a system.     

The PSASB: The Accounting Profession in Regulatory Space

This study uses the "regulatory space" construct to examine the role of the organised accounting profession in expanding and enhancing the domain of accrual accounting to Australian public-sector financial reporting, through the advent, operations and output of the PSASB as its participant in regulatory space. To fully understand the role of the accounting profession, its actions and impacts are placed in historical and political contexts that also give consideration to the roles of other participants in regulatory space.     

The PSASB: The Accounting Profession in Regulatory Space

This study uses the "regulatory space" construct to examine the role of the organised accounting profession in expanding and enhancing the domain of accrual accounting to Australian public-sector financial reporting, through the advent, operations and output of the PSASB as its participant in regulatory space. To fully understand the role of the accounting profession, its actions and impacts are placed in historical and political contexts that also give consideration to the roles of other participants in regulatory space.     

Selective Commercialisation of Public-Sector Accounting and its Consequences for Public Accountability

This paper examines the exclusion of two accounting standards from the commercialised public-sector accounting model in Australia. It locates the commercialisation in the wider context of the global neo-liberal reform ideology and argues that the selective commercialisation is a product of the neo-corporatist standard-setting process and policy networks that can be explained by public choice and agency theories. It is found that the exclusions have resulted in a significant erosion of public accountability. As implementing the excluded standards will constitute a contradiction in policy, abrogation of the commercialised accounting model might be feasible and appropriate     

`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.     

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.     

Accrual Accounting and the Efficiency of the Core Public Sector

This paper evaluates the 'microeconomic' case for the extension of accrual accounting to the core government for the purposes of performance measurement, competitive tendering and asset management. Having found the microeconomic case to be weak, it suggests that it is the potential role of accrual accounting as an indicator of the fiscal stance of the public sector (particularly in respect to intergenerational equity) which provides a convincing rationale for its introduction in core government, and that this has significant methodological implications.     

A cash flow cost-volume-profit model

The traditional cost-volume-profit (CVP) model assumes the accounting flows follow the accrual accounting model. No distinction is made between accrual cost flows and cash flows. This paper looks at several different cash flow break-even models.One model assumes there is no opportunity to use an accrual accounting taxable loss by other profitable product lines or through a tax loss carryback. When graphed, this model presents a “dog-leg” at the accrual accounting breakeven point. A more general model assumes that an accrual tax loss is usable. When graphed, this model presents a line parallel to the after-tax accrual-based cost line, shifted downward in the amount of the noncash fixed costs.     

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.     

我国政府会计权责制改革初探

随着“新公共管理运动”的兴起,改革政府会计引入权责发生制逐渐成为世界上许多国家的共识.而我国经过30多年的改革开放,市场经济环境已经发生了巨大变化,尤其是政府职能的转换、公共财政体制的改革、政府绩效评价制度的建设等,均对反映政府经济活动的政府会计信息提出了更高的要求,实行政府会计改革、引入权责制的呼声也日益高涨.本文从...     

Managed care as a public cost-containment mechanism

This article identifies the impact of managed-care reforms on the utilization of medical services within the military health-services system. The data come from a recent demonstration project that substituted an HMO and PPO for traditional FFS arrangements. Results from a semiparametric model indicate that the generosity of benefits in the HMO increased demand for ambulatory services. Unlike the private-sector experience with managed care, aggressive utilization review did not significantly curtail inpatient stays. These results vitiate the presumed effectiveness of reform strategies that rely on large, geographically diffused managed-care networks to contain public-sector health costs.     

Framing public governance in Malaysia: Rhetorical appeals through accrual accounting

In government, the challenges of governance and anti-corruption are exacerbated by accounting not being fit for purpose. In developing countries, many governments adopt accrual accounting as a panacea. Drawing on Goffman's frame analysis, and rhetorical appeals to logic, credibility and emotion, this paper examines the adoption of accrual accounting in Malaysia. It was found accrual accounting has potential for keying governance and anti-corruption. However, rhetorical appeals that attempt to legitimate neo-liberalism and engender public support in the name of progress were hindered by perceptions of endemic corruption and relatively weak democratic institutions of ‘good’ governance common to developing countries.