Understanding cost differences in the public sector—a cost drivers approach

Estimation of cost causality has always been an important part of the accountant’s work. This includes the identification, classification and estimation of factors causing a change in the total cost of a related cost object. In the recent literature these factors are called cost drivers. Different approaches and conceptual frameworks for understanding cost causality are found in the economics, strategy and accounting literature. This paper examines different cost driver approaches in a public sector setting. The study is based on data from primary and secondary schools in the four largest cities in Norway. The findings show that a strategic management accounting approach provides a framework for selecting a broader set of explanatory variables than the traditional cost estimation literature. This set includes product attributes, institutional factors and government policy as cost drivers in the public sector.     

Between bricolage and breakthroughs—framing the many faces of public sector innovation

Public sector innovation is often seen through the lens of private sector frameworks. This paper discusses to what extent the innovation typology derived from the private sector is appropriate for public sector contexts. Based on a discretionary classification of 1,536 qualitative examples of public sector innovations, the authors examine the nuances of change spanning from learning and incremental change to radical and systemic innovation. Measurement frameworks should better reflect the heterogeneity of learning and innovation in the public sector.     

New development: Public sector controllership—reinventing the financial specialist as a countervailing power

Different types of ‘controllers’ can be distinguished in the public sector. The authors’ research indicates that public sector controllers acknowledge the distinctive characteristics of ‘hybrid’ controllers, but question some of the possible advantages of ‘pure’ controllers. This result could signal a decreasing share of pure controllers and thus a loss of financial expertise in the public sector. This article calls for the controller to be ‘re-invented’ as a professional who combines solid financial expertise with an independent and critical attitude towards overly ambitious politicians and managers. The general public’s support for public sector organizations could be enhanced if strong controllers counterbalance the sometimes too optimistic views of managers and politicians.     

Efficiency potential and determinants of efficiency: an analysis of the care for the elderly sector in Norway

The paper provides an analysis of efficiency in the care for the elderly sector in Norway. In a first step, we perform DEA analysis to calculate the degree of efficiency in each municipality and the national level efficiency potential. The analysis reveals substantial variation in efficiency across municipalities, and the national level efficiency potential is calculated to 10%. Tobit regressions and recently developed bootstrap methods are applied in a second stage to explain the variation in efficiency. The second stage analyses indicate that high fiscal capacity, a low degree of user charge financing, and a fragmented local council are associated with low efficiency.     

Time for interactive control systems in the public sector? The case of the Every Child Matters policy change in England

The present study employs the Simons, 1990, Simons, 1995 to analyse a shift in the use of control systems by government in the policy area of children and young people in England. At a time when the public is becoming increasingly disillusioned with the government's control over the work of the agencies in this policy area, high-profile cases of crises involving children (e.g. Department of Health, 1991, Laming, 2003) have raised doubts about the effectiveness of the conventional systems of control in place to keep these organisations accountable. Indeed, there is a growing body of evidence suggesting that the traditional type of control systems in government, meant to strengthen public accountability, consistently fail to promote high standards of care.This paper utilises a middle range thinking methodology (Broadbent and Laughlin, 1998) to describe and interpret changes in the policy area of children and young people in England highlighting implications for inter-organisational control. Through the lens of the Simons's levers of control (LOC) framework (1995), it advances the argument that the government is complementing their traditional diagnostic control systems with more interactive ones, principally in an attempt to manage more effectively the risk and uncertainty increasingly present in their environment. An in-depth study of a Local Safeguarding Children Board (LSCB) in ‘Brempton’, North West England, balanced with case evidence from policy documents, extends existing research in the area of control of inter-organisational relationships in the public sector.     

Is provision for old-age the main saving motive of the future?—An empirical analysis for Germany

The demographic development is a big challenge for public and private pension schemes. In this context it is important to know if individuals recognize the problem and if this reflects on their attitude towards private pension schemes. The aim of our study is to analyze the general importance of the saving motive old-age provision as well as its impact on the ownership and the demand for old-age provision linked insurance products. We apply panel analysis techniques to show among others that old-age provision as a saving motive primarily impacts the ownership and the demand for annuities. On the contrary to this result, the state funding seems to be the dominant motivation behind the decision to buy state promoted annuities.     

A critical financial analysis of the Private Finance Initiative: selecting a financing method or allocating economic wealth?

The UK government’s Private Finance Initiative (PFI) policy raises a series of questions about the rationality and distributive implications of using private finance, inevitably more expensive than public finance, in essential public services. This paper, by examining the process, the financial methodology, its assumptions and the data used in the system of appraisal for new hospital builds under PFI, shows that the decisions rested upon the ambiguous concepts of risk transfer and value for money at the level of the individual hospital rather than the system or society as a whole. These concepts were far from neutral and provided the rationalising motif for a process that transfers resources from the public at large to the financial elite, thereby obscuring the distribution issues that were largely missing from the policy debate.     

Completeness,interconnectedness and distribution of interbank exposures—a parameterized analysis of the stability of financial networks

This paper assesses the impact of a certain structure of interbank exposures on the stability of a stylized financial system. Given a certain balance sheet structure of financial institutions, a large number of valid matrices of interbank exposures is created by a random generator. Assuming a certain loss given default, domino effects are simulated. The main results are, first, that financial stability depends not only on the completeness and interconnectedness of the network, but also on the distribution of interbank exposures within the system (measured by entropy). Second, looking at random graphs, the sign of the correlation between the degree of equality of the distribution of claims and financial stability depends on the connectivity of the financial system as well as on additional parameters that affect the vulnerability of the system to interbank contagion. Third, the more concentrated the assets are within a money center model, the less stable it is. Fourth, a money center model with asset concentration among core banks is less stable than a random graph with banks of homogeneous size.     

New development: Value for money (VFM) in public services—the importance of organizational culture

VFM has been a key aspect of public service management for several decades and its importance has been raised in recent years as a consequence of austerity. Organizational culture is recognized in research literature as a key driver of organizational performance. However, little attention has been paid to the topic of organizational culture in relation to VFM in public services. This article presents the findings of new research in this area.     

The German Capital Markets Model Case Act (KapMuG): a European role model for increasing the efficiency of capital markets? Analysis and suggestions for reform

Abstract

The purpose of this study is to examine the determinants of the sovereign credit ratings provided by the three major rating agencies: Fitch Ratings, Moody’s and Standard and Poor. A principal component analysis is employed in order to identify the common factors affecting these ratings. The impact of the variables correlated with these factors on ratings is then assessed through an ordered logistic model. Results show that sovereign ratings are mostly influenced by per capita income, government income, real exchange rate changes, inflation rate and default history. The study also highlights the importance of corruption, as measured by Transparency International’s Corruption Perceptions Index, which appears as a proxy for both economic development and the quality of the governance of a country.