Politics of Financial Reporting and the Consequences for the Public Sector

This article examines the political processes surrounding public sector accounting standard setting, in particular, the Australian decision to adopt sector-neutral International Financial Reporting Standards (IFRS). It contends that the history of private and public sector involvement in the accounting standard setting process to date, and recourse to regulatory theory, assist in understanding these contemporary developments. The article reveals that private sector interests have dominated accounting standard setters at all important stages of standard setting in Australia. It concludes by arguing that, given this continued neglect by standard setters, if public sector financial reporting standards are to remain relevant to the public sector, then it may be necessary for public sector regulators to set their own standards.     

Wage Structures in the Private and Public Sectors in West Germany

In this paper, we investigate pay structures in the private and public sectors for West Germany. We commence by describing some basic features of the public sector. We use micro-data from the German Socio-Economic Panel for the years 1984–93 to analyse developments and differences in public and private sector wage distributions for both males and females. We break wages down into different education groups and age-groups, and use regressions to construct conditional wage differentials. Our results differ in many aspects from findings for the UK. For instance, we find that although mean wages are higher in the public sector for both males and females, conditional wages are higher in the private sector for all education groups for males, but higher in the public sector for females. JEL classification: J3.     

New development: Mutual solutions to shaping public service delivery

There have been a number of developments in approaches to public service delivery in the UK, partly as a response to austerity measures, as well as a shift to new models of public sector, private and third sector provision. This article considers the development of public service mutuals—those organizations that have spun out of the public sector, and where employees of the new providers play a key role in shaping and delivering public services at local and national levels. The authors identify areas where further work is needed to better understand these new models and to consider whether the perceived benefits associated with traditional mutual models are applicable when applied to public service provision.     

The use of Call Centres by local public administrations

European local public administrations (PA) are rapidly adopting information and communications technologies often with a view to offering e-commerce. Call Centres (CCs) feature prominently in the technology mix used by private sector e-commerce, but as a survey in this paper shows, CCs are less often used in public sector. This paper analyses the differences between private and public sector commerce and their implications for public sector e-commerce and its prospective use of CCs over the next ten years. It outlines the evolution of CC technologies and argues that current developments make the technology increasingly appropriate for the public sector. A model of e-commerce featuring connectivity, interactivity and agility is developed in the paper. From this it is concluded that many of the advantages from the use of CCs by PAs, are in system integration and process re-engineering — attributes positioned in terms of bridging technology and acting as a learning organisation. From this perspective, the paper concludes that CCs are likely to increasingly feature in the information and communications technology-mix for e-commerce delivery of PAs over the next ten years.     

New development: Leveraging ‘big data’ analytics in the public sector

This article examines the opportunities presented by effectively harnessing big data in the public sector context. The article is exploratory and reviews both academic- and practitioner–oriented literature related to big data developments. The findings suggest that big data will have an impact on the future role of public sector organizations in functional areas. However, the author also reveals that there are challenges to be addressed by governments in adopting big data applications. To realize the benefits of big data, policy-makers need to: invest in research; create incentives for private and public sector entities to share data; and set up programmes to develop appropriate skills.     

The Private Finance Initiative: Clarification of a Future Research Agenda

The Private Finance Initiative in the UK, whereby the public sector actively seeks private finance for developments in its services/buildings, can be traced to the Chancellor of the the Exchequer's Autumn Statement of 1992. However, the seeking of private finance had been a Government concern for many years before this time even though it was only in 1992 that it gained a real impetus and direction. Since then it has developed and expanded into all areas of Government and into local authorities and has been carried forward, with equal, if not greater, enthusiasm, by the recently elected Labour Government. This paper provides an introduction to this new development in the public sector in the UK, tracing its historical development from its 'macro' emphasis, through to the 'micro' outworking of these policies across the entire public sector. This summary provides the base to draw up a future research agenda for PFI, which forms the major concern of the paper.     

Cost of capital and valuation in the public and private sectors: Tax,risk and debt capacity

Cost of capital and valuation differ in the private and public sectors, because taxes are a cost to the private sector but are only a transfer to the public sector. We show how to transform the after-tax private sector cost of capital into its pre-tax equivalent, for comparison with the public sector cost of capital. We establish the existence of a tax induced wedge between these two costs of capital. The wedge introduces a preference on the part of the private sector for assets with rapid tax depreciation, high debt capacity and low risk. We show that, in circumstances where an asset has identical public and private sector valuation in the absence of taxes, the tax induced difference in valuation is identical to the change in government tax receipts that results from having the asset owned by the private rather than the public sector. We provide some examples of distortions that result from failure to adjust for changes in tax revenues, and show how to effect such adjustment.     

Social protection and private insurance: Reassessing the role of public sector versus private sector in insurance

This paper first discusses the standard reasons why private insurance cannot be expected to function well and why public intervention in or public provision of insurance can improve on private market outcomes. These arguments are based on efficiency but also on equity considerations. Then the paper turns to new developments in modern societies that might affect the balance between social and private insurance. They pertain to the current working of labor markets, to the openness of our economies and the ensuing fiscal competition, and to the crediblity and commitment problems faced by the state. The paper concludes that the public sector will find it less and less affordable to provide both insurance and assistance and recommends that it focus on the latter objective by awarding tax-financed uniform benefits on the basis of specified contingencies.     

A comparative study of cross-selling practices in public and private sector banks in India

This paper is a study of cross-selling practices in Indian public and private sector banks through the case study method. The study revealed that cross-selling practices in public sector and private sector banks are quite different. These differences emerge mainly from their different philosophy, background and distinct target customer segments. However, both sectors can learn from each other; public sector banks can introduce specialised training and incentives, whereas private sector banks need to introduce appropriate control mechanisms and avoid indiscriminate cross-selling. The paper also brings out the elements of successful cross-selling in India.     

MEETING THE CHALLENGE: ACCOUNTING FOR CHANGE

This paper examines the challenge mounted against long established management accounting practices by Kaplan (1983) and Johnson and Kaplan (1987) from a public sector perspective. It seeks to determine the extent to which this challenge to the private sector - of a lack of innovation in management accounting practice in the face of a rapidly changing environment - holds true for public sector organisations. Furthermore, by drawing on substantive studies of management change in both the private sector and the public sector, this paper assesses (a) the tsunsfeubilitv of ideas and practices from the private to the: public sector (b) the need to study process of change and (c) the potential role of strategic management accounting as an innovative practice in addressing the agenda for change which confronts the public sector.     

PFIs involving multiple public partners: a case study from the Italian healthcare sector

The financial crisis experienced by many countries since 2008 has given new importance to private finance initiatives (PFIs) for providing public services. This paper analyses the relationships between multiple public and private sector actors participating in a PFI in the healthcare sector in order to better understand the motives and behaviour of public and private sector partners. High levels of trust and the active participation of a regulatory body were found to be significant factors in terms of creating a partnership that benefits all sides.     

Public and Private Sector Accounting - The Non-identical Twins

A debate in this journal, spanning severa1 years, over the accounting treatment of public assets has concentrated attention on the appropriateness of the Public Sector Accounting Standards Board's decision to apply private sector accounting concepts to the development of public sector accounting standards. The Case is examined here and it is shown why private sector accounting standards must be appropriately adapted to suit a very different and varied operating environment in the public sector. These differences have been largely ignored, with resulting problems for public sector accounting standards.     

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.     

Major Issues Associated With the Reporting of Government Net Worth

Modern governments are increasingly making legislative commitments to adopt responsible fiscal policies and, as part of those commitments, undertaking to maintain their net worth and to report against that undertaking. With recent developments in public-sector accounting, reporting of government net worth and change of net worth has become possible. This paper examines some major issues relating to the reporting of government net worth. As attempts to provide for the measurement of assets and liabilities (the components of net worth) on a current value basis have met significant opposition in the private sector, some implications for the public sector are considered.     

Substance, Form and PFI Contracts

The Private Finance Initiative (PFI) was launched by the United Kingdom Government in 1992 in order to encourage the private sector in the UK to become more involved in public sector development projects. A key theme of the initiative was that the public should receive 'value for money'. This article investigates the accounting issue as to whether or not the private or the public sector should record any property related to PFI projects on balance sheet. It argues that although both HM Treasury and the Accounting Standards Board (ASB) might agree on the accounting principles, the practical impact is that in order for related properties to stay off the public sector's balance sheet, substantial risk needs to be transferred to the private sector. As a consequence of this, the objective of providing value for money to the public may not be achieved.     

Public private partnerships: Incentives, risk transfer and real options

Private financing of large-scale infrastructure projects through public private partnerships (PPPs) has grown in recent decades. Together with changes in conventional construction procedures, there have been changes in the project financing model. The use of PPPs raises questions as to the role of the private sector in infrastructure provision and the conditions governing the long-term contractual relationships between the private and public sectors. In some early examples of PPPs, the government guaranteed a minimum profitability over the cash flows using a set of contractual terms which transferred some of the risk of the project from the private provider back to the government. Using a large toll road project, the Melbourne CityLink Project, as a case study we show how the imposed conditions can be treated as real options, how these options affect the incentive to invest and how the public sector may be transferring considerable value to the private sector through government guarantees.     

Corruption,growth, and governance: Private vs. state-owned firms in Vietnam

We provide a firm-level analysis of the relation between corruption and growth for private firms and state-owned enterprises (SOEs) in Vietnam. We obtain three different measures of the perceived corruption severity from a 2005 survey among 741 private firms and 133 SOEs. We find that corruption hampers the growth of Vietnam’s private sector, but is not detrimental for growth in the state sector. We document significant differences in the corruption severity across 24 provinces in Vietnam that can be explained by the quality of provincial public governance (such as the costs of new business entry, land access, and private sector development policies). Our results suggest that corruption may harm economic growth because it favors the state sector at the expense of the private sector and that improving the quality of local public governance can help to mitigate corruption and stimulate economic growth.     

Jurisdictional Competition Between Private and Public Sector Auditors:The Case of the Danish Certified Public Sector Auditor Qualification

Abstract: This paper explores the apparent paradox that while public sector auditors have become more powerful by claiming performance auditing expertise and linking this to New Public Management reforms, the same reforms have provided an opening for competition between private and public sector auditors. In Denmark, the competitive relation has led to a jurisdictional dispute between public and private sector auditors in which the former have developed a special qualification for public sector auditors. The paper analyses the development of this qualification using Abbott's (1988) theory of the system of professions, thus focusing on how the involved groups have attempted to build networks of support for their competing jurisdictional claims of expertise. The case contributes to knowledge about the potential for development of a distinct public sector auditor identity. The case suggests that to develop such an identity and gain professional recognition, public sector auditors need to convince parliaments, standard‐setting bodies and universities that a public sector auditing qualification serves as a solution to some of their problems, too.     

Use of derivatives in public sector organizations

The present paper develops and tests a model explaining public sector derivative use in terms of budget discrepancy minimization. The model is different from private sector models. Private sector models do not readily translate into the public sector, which typically faces different objectives. Hypotheses are developed and tested using logistic regression over a sample of Australian Commonwealth public sector organizations. It is found that public sector organization derivative use is positively correlated with liabilities and size consistent with the hypotheses concerning budget discrepancy management.     

The Market for External Audit Services in the Public Sector: An Empirical Analysis of NHS Trusts

This study investigates the market for audit services in the UK National Health Service (NHS). The market has a number of interesting features, including the presence of the Audit Commission as a regulator, appointer and provider of audit services. Following a theoretical overview of audit pricing in the NHS, evidence is provided on the behaviour of private sector auditors in an environment where audit risk characteristics differ from the private sector. The research also investigates, for the first time in the public sector, the relationship between audit fees and non–audit (consultancy) fees. Comparisons are also drawn between audit fees in the public and private sectors in an analysis of audit fees by industry. Despite some key similarities, the study shows that a number of differences exist between private and public sector audit fee models. In particular, we find no evidence of Big 6 (or mid–tier) auditor premiums, but we do find a significant negative relationship between audit and consultancy fees providing support for the 'knowledge spill–over' hypothesis. In addition, the fees charged to trusts appear significantly lower than their private sector counterparts, despite trust auditors having additional duties to perform. Possible explanations for this finding are offered in the paper.