Inconsistent Depreciation Practice and Public Policymaking: Local Government Reform in New South Wales

Public policy based on numerical indicators – a form of ‘public management by numbers’ – has become commonplace across the world. Whereas a good deal is known about the deleterious effects of this type of policymaking – including ratcheting, output distortion and ‘gaming’ – unfortunately little attention has focused on the adverse local government policy consequences of inconsistent depreciation accruals by local authorities. This paper seeks to address this gap in the empirical literature on local government performance. After examining the use of accounting data by local government policymakers, the paper reviews available empirical evidence of inconsistent depreciation practice both in Australia and abroad. We then consider the recent New South Wales (NSW) Independent Local Government Review Panel's use of accounting ratios as supporting evidence for boundary change in local government as a case study of the adverse impact of inconsistent depreciation practice. The NSW experience clearly demonstrates the distortionary effects of empirical evidence resulting from significant variation in depreciation accruals by individual local councils. The paper concludes with an assessment of the options available to local government policymakers wishing to obtain more accurate accounting accrual data for policy formulation purposes.     

Hired Guns: Local Government Mergers in New South Wales and the KPMG Modelling Report

Across the developed world, including Australia, public policymaking now rests heavily on commissioned reports generated by for‐profit consultants, contrasting starkly with the earlier customary reliance on the civil service to provide informed policy advice to political decision makers. Dependence on commercial consultants is problematic, especially given the moral hazards involved in ‘hired guns’ providing support for policy ‘solutions’ desired by their political paymasters. This paper provides a vivid illustration of some of the dangers flowing from the use of consultants by examining the methodology employed by KPMG in its empirical analysis of the pecuniary consequences of proposed municipal mergers as part of the New South Wales’ (NSW) Government's Fit for the Future local government reform program. We show that the KPMG (2016) modelling methodology is awash with errors which render its conclusions on the financial viability of the NSW merger proposals fatally flawed.     

Replacement Cost Asset Valuation and Regulation of Energy Infrastructure Tariffs

In Australia, access tariffs (rental charges) paid by third party users to the owners of energy transmission assets (e.g., gas pipelines) are determined by regulators on the basis of their depreciated optimized replacement cost (known as DORC). Reliance on the replacement cost, rather than actual cost, of existing assets inflates tariffs and incites the criticism that asset owners earn a return on investments of a scale never made. The economic rationale of the regulators' model is that it emulates the workings of a contestable market, by setting tariffs at a level just short of that required to motivate a new entrant (system duplication). Properly reconstructed, this model constitutes a dynamic and internally consistent theory of replacement cost valuation and depreciation. Its mathematical consequences, however, especially with regard to the valuation of sunk assets with long times to expiry, are shown to be practically and politically unpalatable. In particular, the implied tariff levels for such assets are very close to those that would apply to new infrastructure assets built today at today's prices. Regulators unwilling to accept this implication of a new-entrant-exclusion pricing logic are left with no alternative framework for DORC.     

A Factor Analytic Assessment of Financial Sustainability: The Case of New South Wales Local Government

Financial sustainability in local government remains a pressing problem which has seen a host of public policy interventions, including compulsory consolidation and performance monitoring through financial sustainability ratios. In September 2014, the New South Wales (NSW) Government announced a reform program centred on increasing scale in local government to make councils ‘fit for the future’. We apply factor analysis to the financial ratios informing the NSW Government's reform initiative to identify the underlying factors for observed financial performance data. We find evidence indicating that three independent underlying factors account for the adopted measures of financial sustainability. The public policy implication arising from this study suggests that the reforms imposed by the NSW Government on NSW municipalities may only meet with limited successa.     

Intergenerational Equity: Treatment of Infrastructure in New Zealand Local Government Financial Planning

This paper examines how local government authorities plan and financially provide for infrastructure while considering the needs of current and future communities. In New Zealand the Local Government Act 2002 provides a mandate for local authority planning through the requirement to publish Long Term Council Community Plans (LTCCPs). Our content analysis of the LTCCPs, annual plans and annual reports of five New Zealand local authorities reveals that these local authorities make conscious decisions about infrastructure that reflect concern for matters of intergenerational equity. They do so despite problems in relation to valuation, depreciation, deferred maintenance and financing of infrastructure assets.     

资产证券化的会计问题研究

资产证券化是20世纪70年代以来，国际资本市场上金融创新的一部分。资产证券化增加了企业融资的渠道，盘活了企业的存量资产，可以较低的成本筹集所需资金，优化了财务比率。然而，在丰富、活跃证券市场的同时，资产证券化也给会计界带来了许多问题，这主要包括证券化资产的会计确认、定价计量、会计报表合并及会计报表披露。对此应根据资产证券化的运作机理和会计准则，对其相关会计问题进行分析和处理。     

基础设施公募REITs与地方政府债务风险化解

2022年新国发2号文件明确提出,将防范和化解地方政府债务风险作为保障国家经济安全的重要工作。本文基于贵州省地方政府债务风险现状及基础设施公募REITs在中国的发展情况,探究基础设施公募REITs作为权益型融资渠道,通过降低政府杠杆率在传统融资渠道模式困境中实现金融创新,并向市场注入经济发展动能,从而防范和化解地方政府债务风险。针对公募REITs推行过程中的项目筛选难度大、专业水平人才缺乏、治理机制不健全、政策仍处于探索阶段等问题,提出做好优质项目的储备和孵化、公募REITs智库组建等应对措施。本文为化解地方政府债务风险提供了有益参考,对稳步推进基础设施公募REITs后续发展具有一定的借鉴意义。     

Valuation Risk and Asset Pricing

Standard representative‐agent models fail to account for the weak correlation between stock returns and measurable fundamentals, such as consumption and output growth. This failing, which underlies virtually all modern asset pricing puzzles, arises because these models load all uncertainty onto the supply side of the economy. We propose a simple theory of asset pricing in which demand shocks play a central role. These shocks give rise to valuation risk that allows the model to account for key asset pricing moments, such as the equity premium, the bond term premium, and the weak correlation between stock returns and fundamentals.     

地方政府债务问题剖析

正2011年,"欧猪五国"和美国主权债务危机此起彼伏,日本、法国等国也都面临巨大的债务压力,负债率高企呈现全球化趋势。根据经济合作与发展组织公布的数据,截至2010年末,除了澳大利亚、丹麦、瑞典和芬兰等少数国家外,其他发达国家政府债务余额与GDP之比都超过了60%这一公认的警戒线。     

Accounting for Infrastructure Service Delivery by Government: Generational Issues

Infrastructure service provision by government creates huge distributional issues about service availability and performance over time and the relative funding burdens borne by successive generations of consumers across time. But providing financial disclosure on these issues through inter-generational accounting pre-supposes that accounting measurement is both generationally neutral (temporal neutrality) and does not legitimate any particular pattern of distribution. At the very least, accounting measurements of service provision costs should possess the attribute of distributional fairness. They should not bias the inter-generational allocation of cost or funding burdens. We argue that the forced application of inappropriate commercial accounting concepts of asset valuation, depreciation and capital maintenance does produce significant generational bias. More flexibility is required to produce the necessary accounting measurement attributes for financial disclosure on whether government has discharged its continuing accountability for inter-generational equity in burden sharing. We discuss three conceptual issues and illustrate the need for flexibility by proposing an alternative 'flow of obligations' approach which does not require reference to valuations of community service resources or arbitrary cost allocations under depreciation.     

地方政府专项债券拉动基础设施投资的效应

本文构建一般均衡理论模型,从融资约束角度分析政府债券、融资平台、税收收入、土地出让等因素与中国基础设施投资的正相关关系,并利用中国2006-2018年省级面板数据评估以地方政府专项债券为首的融资渠道对基建投资的拉动效应,研究发现:(1)地方政府专项债券和融资平台融资规模对基础设施投资均存在显著正向影响,尤其是专项债券的...     

Infrastructure Accounting for Local Authorities: Technical Management and Political Context

Internationally, there has been mounting interest in the subject of accounting for infrastructure assets and their deterioration. In New Zealand, the adoption of full accrual accounting across the public sector from 1989 has meant that local authorities have been grappling for some time with the problem of how best to account for these assets in a manner which is relevant for both managers and elected representatives. This paper reviews methods of accounting for infrastructure in New Zealand local authorities, and explores how infrastructure assets and related expenses might be accounted for in a manner which is consistent with both the New Zealand accounting profession's conceptual framework and the requirements of democratic decision making over the allocation of resources.     

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.