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.     

The use of performance measurement systems in the public sector: Effects on performance

We study the use of performance measurement systems in the public sector. We hypothesize that the way in which these systems are being used affects organizational performance, and that these performance effects depend on contractibility. Contractibility encompasses clarity of goals, the ability to select undistorted performance metrics, and the degree to which managers know and control the transformation process. We expect that public sector organizations that use their performance measurement systems in ways that match the characteristics of their activities outperform those that fail to achieve such fit. We test our hypotheses using survey data from 101 public sector organizations. Our findings indicate that contractibility moderates the relationship between the incentive-oriented use of the performance measurement system and performance. Using the performance measurement system for incentive purposes negatively influences organizational performance, but this effect is less severe when contractibility is high. We also find that an exploratory use of the performance measurement system tends to enhance performance; this positive effect is independent of the level of contractibility. The effectiveness of the introduction of performance measurement systems in public sector organizations thus depends both on contractibility and on how the system is being used by managers. These findings have important implications, both for practice and for public policy.     

关于权责发生制预算的几点思考

各国进行公共支出管理的改革给我们提供了一个重要的课题 :作为公共支出管理中最核心的预算制度如何支持我们现在进行的改革尝试。传统的以收付实现制为基础的预算暴露出越来越多的问题 ,本文结合OECD国家进行权责发生制预算改革的经验 ,对权责发生制预算对改进预算信息、政府业绩管理方面的一些优点进行了几点分析 ,以期对我国的预算改革提供一些可借鉴之处     

Professional Accounting Standards and the Public Sector—a Mismatch

Professional accounting standards have been applied to the public sector in Australia as part of the process of adopting accrual accounting. However, the reason given for their application to the public sector is questionable. The modes of operation of governments and of the business sector are very different, and accounting standards must be tailored to suit the specific information needs of each sector for the accounting systems to provide relevant information. The four Accounting Concepts Statements and the broad requirements of AAS 29 and AAS 31 are examined to show where changes are needed in the standards to make their information more relevant to the needs of the public sector. These changes would better enable accrual accounting information systems to assist in enhancing the efficiency and effectiveness of public sector operations and the accountability of governments to parliament and citizens.     

Accounting for the Public Sector at a Time of Crisis

This Special Issue is based on papers initially presented at the ‘Accounting for the Public Sector at a Time of Crisis’ Conference at the Centre for Not-for-profit and Public-sector Research, Queen's University Belfast, UK in 2018. The public sector consists of organizations that are owned and operated by government; organizations that exist to provide goods and services for a country's citizens. What is particularly distinctive about such organizations, and what makes them different from businesses, is that they are (or, at least perhaps, should be) not-for-profit. In addition, they frequently have wide social and cultural goals that are central to what they do. They are pervasive in most societies. Yet, it is argued, they face crisis on a number of fronts: in terms of the influence of potentially inappropriate, business-like new public management ideas related to performance management and the embracing of related accounting and budgeting approaches; and in terms of the impact of austerity, following the Great Recession in 2008. In such a context it is suggested that public sector governance, accounting, and accountability systems are heavily involved. The papers included in this Special Issue present an opportunity to reflect on aspects of this crisis in terms of how it connects with accounting systems and accounting changes. Key arguments of these papers, and overarching themes of this Special Issue, are explored in this editorial.     

Public service motivation and public sector employment preference: Comparing Italian and British students

ABSTRACT

Previous research has suggested that an individual’s public service motivation (PSM) is positively linked to a preference for public sector employment. The authors explore this link using a sample of British and Italian undergraduate students. They found a positive relationship between PSM and public sector job preferences among Italian students but not with the British students. The UK has implemented more NPM-style reforms than Italy and this could be impacting on public sector recruitment. Implications for recruitment and retention the public sector are discussed.     

Further evidence on the determinants of audit pricing in universities

This study investigates the determinants of audit fees for UK universities, involving an analysis of 451 university-year observations over the period 2007–2010. The study contributes to a fledgling strand of research examining audit pricing in the public sector. In seeking to identify an appropriate model to explain audit fees we interview a number of university auditors and use their insights in conjunction with prior findings from both private and public sector studies of audit pricing. Our findings show that audit fees in UK universities are positively influenced by size, the number of subsidiary companies, the amount of endowments, the level of debtors, being located in England and the use of a London-based auditor. We also find that more research-intensive universities (using a range of measures) and universities with greater operating surpluses pay lower audit fees.     

Adoption of activity management practices in public sector organizations

This paper examines the extent to which activity management practices are adopted by Australian public sector organizations at each of Gosselin's (1997) levels of Activity Analysis, Activity Cost Analysis, and Activity‐based Costing. The present paper replicates Baird et al. (2004), thereby enabling a comparison of the extent of adoption of activity management in the public sector with that reported in the private sector in Baird et al. (2004). The results reveal that the adoption of higher level activity management practices (Activity Cost Analysis and Activity‐based Costing) is less prevalent in public sector organizations, whereas they adopt Activity Analysis to the same extent as the private sector.     

Public Sector Consolidated Statements—an Assessment

Judgments potentially made by various participants in (or observers of) the public sector on the basis of aggregative financial information about governments are reviewed. Distinctions are drawn between judgments that are made routinely , or under certain conditions, by decision makers or observers. It is recognized that (in Australia) the financial information that is relevant to the majority of these judgments is already supplied by other sources (principally budget documents, or in Government Finance Statistics) rather than by public sector consolidated statements. It is concluded that a number of routine judgments could be based on financial information presented in the form of consolidated statements (of varying scope). Alternative criteria for determining the scope of consolidated statements are reviewed. Accountability and control are noted as potential bases. Depending on the adopted objective, it is concluded that tests of control are either not relevant, or inappropriate. It is contended that prior studies that have recommended use of control have focused on processes (trying to find a suitable test for determining the ambit of consolidated statements) rather than on objectives , and examining in some detail what information would be relevant to different users and uses.     

Accounting control,governance and anti-corruption initiatives in public sector organisations

This special issue focuses on the interactions between accounting, public sector organisations and the socio-economic and political environments in which they operate, with a specific focus on the critical analysis of policy and practice in the fight against corruption. The aim of the special issue is to disseminate knowledge to enable a more sustainable, accountable and less corrupt public sector, regardless of where it is located in the world. It presents the work of a global community of scholars engaged in research projects on policies and strategies related to accountability, transparency, auditing, regulatory disclosure, governance, investor protection and anti-corruption initiatives in public sector organisations. The papers presented here address many different angles of corruption and aspects of the way in which it is reported using a broad range of methodologies, theoretical frameworks and research locations. Collectively, these papers demonstrate that more attention needs be given to investigating the human cost associated with illegal activity that leads to human suffering, inequality, and lifetime costs. They further emphasise that we have much to learn about regulatory disclosure and jurisprudential practice in the fight against fraud and corruption.     

In whose interest? An examination of public sector governance in Brunei Darussalam

This paper uses institutional and elite theories to interpret research interviews concerned with public sector governance in the Sultanate of Brunei Darussalam over the period 1998–2005. Despite the suggestion from international agencies (such as the WTO and the IMF) to improve governance in the public sector, the recent governance reform in the post-royal dynasty crisis period in Brunei is overtly displayed and covertly ignored by the main actors. The results show that public governance is not well developed. Using elite and institutional theories it is understood that the royal family played a dominant role in legitimizing their absolute power (using elites) over governance in public sector organizations.     

Keeping secrets? Or what government performance auditors might not need to know

This paper examines the claims made in a recent paper in Critical Perspectives on Accounting by Vaughan Radcliffe about the way in which public sector auditors report their findings. Drawing upon the work of Taussig, he argues that while public sector auditors may know the truth, as may others, they choose not always to tell the truth in their reports and instead to treat what may be publicly unpalatable as a public secret. They modify their findings to ensure that these will be more acceptable to governments and, thereby, enhance their opportunity to influence government. These claims are shown in this paper to overstate the public sector auditor's response to difficult issues. Rather than keeping secrets, the contents of the auditor's reports may instead reflect the constitutional and institutional limitations in which they must work. Most importantly in most jurisdictions they are not to comment on matters of policy which are the domain of the government.     

Ten years after: The rise and fall of managerial autonomy in Pompeii

In September 1997, an ad hoc law (Law no. 352/1997) gave the archaeological site of Pompeii a new status. Its previous status as a local branch of the Ministry of Culture (the Soprintendenza) was reconfigured as an autonomous entity (Soprintendenza autonoma). In July 2008, the Italian Prime Minister declared a one year state of emergency in Pompeii, appointing a special Commissioner (Commissario straordinario) in order to cope with “the serious critical situation of the archeological area” (OPCM 3692/2008). The aim of the paper is to review the process of change in Pompeii over ten years, observing major institutional transformations and analyzing the evolution of activities and human and financial resources management. Beyond the substantive elements of interest (the mis-management of one of the most important archaeological sites in the world), the paper sheds lights on the role of accountability in the cultural sector and on the distinctive features of Italian public administration, questioning the existence of a path of international convergence in public sector change.     

Yardstick competition and public sector innovation

The paper addresses the incentives of the public sector to implement new technologies in public service provision. The focus is on the role of local governments under decentralization. Exploiting variation in the level of innovation in a large sample of US school districts, the impact of yardstick competition on the choice of public sector technologies is identified. It is shown that the impact of other districts’ innovation activity on a district’s innovation score is much stronger in communities where incumbents face a high risk of being elected out of office. This finding suggests that under decentralization, yardstick competition is an important force shaping the decisions of local governments to adopt new technologies.      

Institutionalising multiple accountability logics in public services: Insights from Australia

This paper reports on a field study of how a range of inter-institutional and inter-organisational forces shape the evolving rhetoric and practice of multiple accountabilities in public services. Drawing on the institutional logics perspective, we carried out a qualitative field study in the Australian Commonwealth Public Service involving semi-structured interviews, two focus group discussions, and the examination of internal accounting, management reports, and government archival records. The findings suggest that emphasis on conventional instrumental mechanisms and reporting tools, such as budgeting and accrual-based reporting, support managerial (instrumental) accountability through compliance logics. We conclude that an emphasis on public (relational) accountability through public dialogue is central to the public sector accountability debate, and that more attention needs to be paid to the question of how to balance the dual logics (instrumental and relational) in public services. The findings provide practical insights for public sector managers, policymakers and governments responsible for designing and implementing reforms, accounting tools, and accountability practices.     

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 role of accountability in determining the relationship between financial reporting quality and the performance of public organizations: Evidence from Vietnam

Drawing on the new public management and agency theory, this study examines the mediating role of accountability in the relationship between financial-reporting quality and the performance of public organizations. The research model and hypotheses tested with a survey of 177 responses obtained from accountants and managers working in the public sector in Vietnam. Our analysis shows that accountability has a mediating role on the relationship between financial-reporting quality and performance, with significant implications for public organizations seeking to improve both their financial-reporting quality and their organizational performance with better designed systems of accountability.     

Public Sector Accounting Reform at Local Government Level in Indonesia

This paper describes and analyses the challenges encountered in attempting to reform public sector accounting in Indonesia, the main objective of which is to combat corruption and thus help improve governance. Our observations suggest that this reform has been seriously hindered by a lack of staff with adequate accounting skills — a problem exacerbated by the decision to continue to prepare old‐style cash‐based reports alongside the new accrual‐based reports. Our key contribution is to demonstrate the danger of rushing to copy public sector financial management techniques from quite different country contexts, especially when there are significant differences of opinion as to the appropriate design of these reforms among the influential policy‐making agencies.     

Lean in a cold fiscal climate: the public sector in an age of reduced resources

Reflecting on recent public sector reform, this paper examines the use of Lean during a period of financial austerity. The paper outlines several challenges for public sector organizations as they manage performance targets, and engage in service re-design. The author challenges the current use of Lean working arguing for a re-evaluation of the traditional public sector model of work and for a collective approach to co-production of service redesign.     

Financial reporting standards for the public sector: New Zealand's 21st-century experience

New Zealand was seen as world-leading when public sector financial reports were prepared using sector-neutral accounting standards from 1995 onwards. The decision in 2002 to adopt IFRS was disruptive, effecting new understandings of ‘sector-neutral’, and the standard-setter's approach was unsuccessful in meeting public sector users’ needs. The development of a new strategy finalized in 2012 has created a multi-standards framework, including adapted IPSASB standards applicable from 1 July 2014. While neutrality is still prized, it is within a framework of meeting users’ needs. This paper traces the influences expediting these changes.