Susan Newberry

Public sector accrual accounting: institutionalising neo‐liberal principles?

Purpose - The purpose of this paper is to examine the role of public sector accounting in implementing neoliberal reforms. Design/methodology/approach - The proposition that the adoption and development of accrual accounting in the public sector is a technical development intended to improve transparency and accountability is investigated. The paper compares the development and use of accrual accounting in public sector financial management reforms in the UK and New Zealand. Findings - The findings in this paper suggest that in both countries, accrual accounting, as developed, also provides a means to reduce the governments role to that of procurer of services and enforcer of rules set by others, thus advancing a controversial privatisation and trade liberalisation agenda which is consistent with neo-liberal principles. Research limitations/implications - The paper shows that in contrast to more usual claims about the need for accrual accounting to provide a “read across between the sectors” or that public interest motives assure the neutrality of accounting, seemingly technical accrual accounting developments seem to function as a political tool to aid a controversial political agenda. There is a need to look at the overall effect of public sector financial management reforms and the role of, and implications for, accounting standard-setters. Originality/value - The information in the paper applies to accounting the new political economics literature on agenda control and information based structures where control is achieved through information asymmetries.

Fiscal (ir)responsibility: privileging PPPs in New Zealand

This article explains the structures and rules built into the New Zealand government’s financial management system which encourage entry into commitments such as public private partnerships. That the system provides a means of escape from the tight constraints imposed by fiscal targets, and escapes public and parliamentary scrutiny in the process, seems at odds with espoused objectives of fiscal responsibility, debt reduction and transparency. In terms of furthering a privatization agenda, however, it is highly logical.

Theme: Whole of government accounting— international trends

Whole of government accounting (WGA) is an integral part of the accruals accounting and financial reporting changes accompanying public sector reforms internationally. The adoption of accruals accounting is generally rationalized for micro-economic purposes, such as economic efficiency. At this micro-economic level, WGA reflects the governance changes in the public sector involving the provision of public services through decentralized entities (public, private or public and private), and the increasing role of co-ordination and control performed by governments (Osborne and Gaebler, 1992; Christensen and Laegraid, 2007). According to the Organization for Economic Co-operation and Development (OECD, 2004, p. 4), these decentralized governance structures ‘created new challenges for governments to maintain central direction and control’. Consequently, WGA developments help governments to retain a whole of government approach towards the fulfilment of public interest, as well as to be accountable for the ‘whole basket’ of services provided (Grossi and Mussari, 2008). Macro-economic rationales support the use by governments of fiscal rules, such as commitments to balanced budgets and specified debt levels. With the introduction of such rules, rationales for WGA have been extended to include macro-economic purposes as well, and the reporting boundaries have been extended. HM Treasury in the UK has gone furthest with this, seeking to encompass the whole of the public sector, including all levels of government within one WGA. The idea of WGA is ambiguous, because it may refer to a government (central, regional or local) producing a single financial report that encompasses all government activity within its area of authority. Alternatively, it may refer to a central government’s efforts to produce a single financial report that encompasses public sector activities throughout the country. This would mean including the WGAs of all governments at lower levels, as well as the central government’s activities in its own right. Clearly WGA is a complex development that carries with it multiple tensions, both in relation to the stated aims, and in relation to the accounting rules adopted. In attempting to fulfil micro-level objectives, efforts to converge governmental accounting practices with business-style accounting—such as the International Federation of Accountants’ efforts to converge International Public Sector Accounting Standards (IPSAS) with the International Accounting Standards Board’s International Financial Reporting Standards (IFRS)—may be difficult, but they become even more complicated with efforts to fulfil macrolevel objectives at the same time by aligning the accounting requirements with macro-level statistical accounting requirements (see, for example, IPSAS 22). This themed edition of Public Money & Management contains articles based on papers initially presented last year at an international workshop in Italy on ‘Whole of government financial reporting: international trends’. The workshop, organized jointly by the University of Siena and the University of Sydney, was held at Santa Chiara College in Siena from 31 August to 2 September 2008 with the aim of creating an atmosphere in which scholars and practitioners could analyse and debate the similarities and differences among diverse WGA approaches adopted internationally. Attending the workshop were approximately 50 scholars and experts from 16 countries (Australia, Belgium, China, Estonia, Finland, Germany, Italy, The Netherlands, New Zealand, Norway, South Korea, Spain, Sweden, Switzerland, the UK and the USA), as well as representatives from extra-national organizations (the European Commission and the United Nations). The workshop commenced with guest speakers. The first, Professor Klaus Lüder of Speyer University, noted that, although the fragmentation of governmental structures as part of the public sector reforms had increased the perceived need for WGA, reform proponents, especially those from the AngloAmerican countries, had sought WGA from the beginning. Lüder observed a lack of clarity surrounding what is meant by WGA and a gradual extension of the concept of ‘whole of government’ for financial reporting purposes. While WGA may begin at the level he labelled Theme: Whole of government accounting— international trends

Whole of government accounting in New Zealand: the ownership form of control

There are lessons to be learned from the emergence of comprehensive government financial reporting in New Zealand. Developments suggest ownership assumptions shaped policy and implied a particular role of government. These lessons are instructive on the relationship between reporting, organizational form, and constitutional considerations, and, importantly, about usefulness.

New Zealand's Financial Management System: Implications for Democracy

New Zealands new public management (NPM) financial management reforms were widely hailed as ground-breaking. This article explains how some of the accounting techniques used in New Zealands reforms undermine fundamental democratic controls. In the light of the evidence presented, other countries might review their own constitutional conventions and examine closely the extent to which the accounting techniques adopted and developed in financial management reforms enhance or undermine the fundamental mechanisms of democracy.

Reshaping Community Mental Health Services in a Restructured State: New Zealand 1984-97

The concept of the hollow state has been proposed as a general framework for public sector restructuring, with New Zealand seen as a leader in reforming social and welfare services, including mental health. This article reports on documentary and interview research into the provision of community-based mental health services in terms of hollow state characteristics: privatization, decentralization and flexibilization. The evidence suggests that privatization occurred only at the margins, that decentralization led to significant regional differences in contractual arrangements and services and that flexibilization brought mixed blessings to the agencies involved. Consistent with findings from elsewhere related to hollow state mechanisms, performance assessment and accountability became more difficult. It is concluded that such frameworks are not appropriate for sectors such as mental health where there is high uncertainty and vulnerable service recipients. Recent policy changes suggest a retreat from privatization and flexibilization, and the emergence of a new balance between centralized and decentralized decision making.

Corporate governance and International Financial Reporting Standard (IFRS): The case of developing countries

Purpose – Corporate governance requirements imposed internationally as part of the New International Financial Architecture (NIFA) include compliance with International Financial Reporting Standards (IFRS). The appropriateness of applying IFRS in developing countries has long been controversial. Recently, the International Accounting Standards Board (IASB) extended its project on IFRS for Small and Medium Entities (SMEs) to include developing countries. This paper provides a history of the controversy over IFRS in developing countries and examines the SMEs project as it affects developing countries. Design/methodology/approach – This paper uses an agenda-setting theoretical framework and document analysis to analyse IASBs published documents as part of its formal due process. Findings – The controversies surrounding the application of IFRS in developing countries seem likely to continue. The public submission process may be ineffective and too late for those seeking to influence IFRS developments. The findings suggest that those seeking IFRS for developing countries may need to both devise an acceptable solution and obtain inside access to the standard-setting process to achieve this aim. Research limitations – The research is limited to literature review and documentary analysis and therefore subject to the known limitations of published project documentation in accounting standard-setting. Originality/value – Contributes to understanding of international accounting standard-setting, including why developing country issues seem likely to continue.

The Marketisation of Early Childhood Education and Care (ECEC) in Australia: A Structured Response

The marketisation of early childhood education and care (ECEC) offers opportunities to test assumptions about the benefits of a market framework. In Australia, where marketisation included reshaping, extending, and increasing government subsidies, one major listed company (ABC Learning Limited) emerged to dominate child care. Child care prices increased rapidly to become an election issue, and government subsidies increased. ABC acknowledged its economic dependence on government policy and subsidies. Until its collapse in 2008, ABC was the worlds largest listed child care operator, and operating internationally. ABCs structured business model separated child care properties (propco) from child care operations (opco). ABC was the opco and leased the child care properties from propcos. As ABC grew and replicated its structured model to other forms of property including intangible assets, the rising child care prices and government subsidies supported a growing array of other enterprises all seeking profitable operations. This paper explains the structured opco‐propco model, identifies its interaction with accounting and lessons to be learned from marketisation.

Negotiating the Network: The Contracting Experiences of Community Mental Health Agencies in New Zealand

Structural options for reforming New Zealandspublicly funded health services included a hierarchy, a market model, or hybrid arrangements such as quasi-markets and networks. A survey of 28 community mental health agencies, contracting with the four regional health authorities, found that three structures emerged: a quasi-market, a coercive network and a beneficent network. Further reforms to the publicly funded health services created a single purchaser and preferred a network structure. Performance assessment of these reformed health services requires assessment of the whole network and not just individual components. The accounting profession, although closely involved in the public sector reforms, appears to have overlooked this task.

Public sector accounting: shifting concepts of accountability

Allan Barton held strong views about governmental accounting reforms that failed to recognize the unique characteristics of the public sector, particularly the need for public accountability. The Allan Barton memorial lecture of 2013, developed in this paper, pointed out that Australias public finance legislation reinforces the need for public accountability, but through delegated regulatory powers terms such as accountability and public accountability are undergoing subtle reinterpretation. At issue is whether IFRS should apply to all governments, and whether government departments should be viewed as not publicly accountable and therefore permitted reduced disclosures in their published financial reports.