Accrual accounting in the public sector: the case of the New South Wales government

Abstract

Accounting technologies have dominated public sector management reforms and accrual based financial reporting has been significant amongst these technologies. This paper examines the process of change in the New South Wales Government’s early adoption of accrual based financial reporting. The study’s main objective is to present a history that identifies the agents of change promoting and facilitating an early adoption of public sector accrual accounting. The main primary data source for this research was interviews with three categories of participants who had some involvement in the decision that dates back to the late 1980s. Historical research methods were used within an analytical framework provided by a proposed variant of Luder’s (1994) Contingency Model. The paper finds that a revised Contingency Model is useful as a framework and that the major role played by management consultants was a significant aspect of the case study.

Keywords

public sector accrual accounting accounting history New South Wales

Get full access to this article

View all access options for this article.

References

Aiken, M. , (1994), “Parliamentary Sovereignty and Valuation Accruals: Uncongenial Conventions” , Financial Accountability and Management, Vol.10, No.1, pp. 17-32 .

Allan, P. , (1988), “Accrual Accounting To Be Or Not To Be?”, Accrual Accounting Seminar, Sydney: NSW Parliament , pp.33-41.

Ball, A. , (2001), “Discovering Its Own Relevance? Reflections on the ‘New’ Management Accounting in the Public Sector” , Accounting Forum, Vol.25, No.3, pp. 283-299 .

Barton, A. , (1999), “Public and Private Sector Accounting – The Non-Identical Twins” , Australian Accounting Review, Vol.9, No.2, pp. 22-31 .

Broadbent, J. , and Guthrie, J. , (1992), “Changes in the Public Sector: A Review of Recent ‘Alternative’ Accounting Research” , Accounting, Auditing & Accountability Journal,Vol.5, No.2, pp. 3-31 .

Brorstrom, B. , (1998), “Accrual Accounting, Politics and Politicians” , Financial Accountability and Management,Vol.14, No.4, pp. 319-333 .

Carnegie, G. and Napier, C. , (1996), “Critical and Interpretive Histories: Insights into Accounting’s Present and Future Through its Past” , Accounting, Auditing & Accountability Journal,Vol.9, No.3, pp. 7-39 .

Carnegie, G. and Wolnizer, P. , (1999), “Unravelling the Rhetoric about the Financial Reporting of Public Collections as Assets” , Australian Accounting Review, Vol.9, No.1, pp. 16-21 .

Chan, J. , Jones, R. and Luder, K. , (1996), “Modeling Governmental Accounting Innovations: An Assessment and Future Research Directions” , Research in Governmental and Nonprofit Accounting, Vol.9, pp. 1-20 .

10.

Clark-Lewis, M. , (1996), “Government Accrual Reports: Are They Better Than Cash?” , Australian Journal of Public Administration, Vol.55, No.1, pp. 86-87 .

11.

Coleman, W. and Skogstad, G. , (1990), “Introduction and Policy Communities and Policy Networks: A Structural Approach”, in Coleman, W. and Skogstad, G. , (eds.), Policy Communities and Public Policy in Canada, Toronto: Copp Clark Pitman , pp.1-33.

12.

Conn, N. , (1996), “Reservations about Governments Producing Balance Sheets” , Australian Journal of Public Administration, Vol.55, No.1, pp. 82-85 .

13.

Copley, P. , Cheng, R. , Harris, J. , Icerman, R. , Johnson, W. , Smith, G. , Smith, K. , Wrege, W. and Yaahr, R. , (1997), “The New Governmental Reporting Model: is a ‘Field of Dreams’?” , Accounting Horizons, Vol.11, No.3, pp. 91-101 .

14.

Coy, D. , Dixon, K. , Buchanan, J. and Tower, G. , (1997), “Recipients of Public Sector Annual Reports: Theory and an Empirical Study Compared” , British Accounting Review,Vol.29, No.2, pp. 103-127 .

15.

Douglas, L. , Roberts, A. and Thompson, R. , (1988), Oral History: A Handbook, Sydney: Allen & Unwin .

16.

Egol, M. , (1987), “Can Accrual Accounting Work in Government?”, Can Accrual Accounting Work in Government, Sydney, Canberra & Melbourne: Australian Society of Accountants .

17.

El-Batanoni, K. and Jones, R. , (1996), “Governmental Accounting in The Sudan” , Research in Governmental and Nonprofit Accounting,Vol.9, pp. 209-218 .

18.

Fleischman, R. , Kalbers, L. and Parker, L. , (1996a), “Expanding the Dialogue: Industrial Revolution Costing Historiography” , Critical Perspectives on Accounting, Vol.7, No.3, pp. 315-337 .

19.

Fleischman, R. , Mills, P. and Tyson, T. , (1996b), “A Theoretical Primer for Evaluating and Conducting Historical Research in Accounting” , Accounting History,NS Vol.1, No.1, pp. 55-75 .

20.

Fleischman, R. and Radcliffe, V. , (2000), “Divergent Streams of Accounting History: A Review and Call for Confluence” , Sixth Interdisciplinary Perspectives on Accounting Conference, Manchester.

21.

Funnell, W. , (2001), Government by Fiat: The Retreat from Responsibility, Sydney: UNSW Press .

22.

Funnell, W. and Cooper, K. , (1998), Public Sector Accounting and Accountability in Australia, Sydney: UNSW Press .

23.

Gaffikin, M. , (1998), “History is Dead, Long Live History” , Critical Perspectives on Accounting, Vol.9, No.6, pp. 631-639 .

24.

Godfrey, A. , Devlin, P. and Merrouche, M. , (2001), “A Diffusion-Contingency Model for Governmental Accounting Innovations”, in Bac, A. (ed.), International Comparative Issues in Government Accounting, Dordrecht: Kluwer Academic Publishers , pp.279-296.

25.

Godfrey, A. , Devlin, P. and Merrouche, C. , (1996), “Governmental Accounting in Kenya, Tanzania and Uganda” , Research in Governmental and Nonprofit Accounting,Vol.9, pp. 193-208 .

26.

Greiner, N. , (1993), “Keeping New South Wales a Triple-A State”, in James, C. , Jones, C. and Norton, A. , (eds.), A Defense of Economic Rationalism, St Leonards: Allen & Unwin , pp.51-61.

27.

Groom, E. , (1990), “The Curran Report and the Role of the State” , Australian Journal of Public Administration, Vol.49, No.2, pp. 144-154 .

28.

Guthrie, J., (1994), “Understanding Australian Federal Public Sector Accounting Developments in their Context,” Unpublished PhD, Kensington: University of New South Wales.

29.

Guthrie, J. , (1998), “Australian Experiences of Output Based Budgeting: A Critical Reflection” , Australasian Evaluation Society International Conference,Melbourne.

30.

Guthrie, J. , (1998a), “Application of Accrual Accounting in the Public Sector – Rhetoric or Reality?” , Financial Accountability and Management,Vol.14, No.1, pp. 1-19 .

31.

Guthrie, J. , Olson, O. and Humphrey, C. , (1999), “Debating Developments in New Public Financial Management: The Limits of Global Theorising and Some New Ways Forward” , Financial Accountability and Management,Vol.15 No.3&4, pp. 209-228 .

32.

Hammond, T. and Sikka, P. , (1996), “Radicalizing Accounting History: The Potential of Oral History” , Accounting, Auditing & Accountability Journal, Vol.9, No.3, pp. 79-97 .

33.

Harris, T. , (1995), “Your Friendly Auditor Wants to Say...”, Proceedings of the Seminar on Accrual Accounting – the Scorecard to Date, NSW Public Accounts Committee, Sydney: NSW Parliament , pp.53-57.

34.

Hay, D. , (1994), “Who Uses Public Sector External Reports? An Exploration” , Accounting Forum,Vol.17, No.4, pp. 47-65 .

35.

Hickling Corporation , (1997), “Financial Information Strategy: Study of the Implementation of Full Accrual Accounting in Government Organizations Lessons Learned”, on-line: http://www.tbs-sct.gc.ca/fin/FIS-SIF/sigs/fis_Discussion_Papers/LESSONS_e.html

36.

Hood, C. , (1995), “The ‘New Public Management’ in the 1980s: Variations on a Theme” , Accounting, Organizations and Society, Vol.20, No.2/3, pp. 93-109 .

37.

Jones, R. , (1998), “The Conceptual Framework of Resource Accounting”, Public Money and Management, April-June, pp.11-16.

38.

Jones, S. and Puglisi, N. , (1997), “The Relevance of AAS29 to the Australian Public Sector: A Cause for Doubt?” , Abacus, Vol.33, No.1, pp. 115-132 .

39.

Keenan, M. , (1998), “A Defence of ‘Traditional’ Accounting History Research Methodology” , Critical Perspectives on Accounting, Vol. 9, No.6, pp. 641-666 .

40.

Khumawala, S. , (1997), “Public Sector Accounting in India: A Historical Review and an Analysis Since Independence to the Economic Reforms of the Nineties” , Journal of Public Budgeting, Accounting and Financial Management,Vol.9, No.2, pp. 305-330 .

41.

Lapsley, I. , (1999), “Accounting and the New Public Management: Instruments of Substantive Efficiency or a Rationalising Modernity?” , Financial Accountability and Management,Vol.15, No.3&4, pp. 201-207 .

42.

Laughlin, R. and Pallot, J. , (1998), “Trends, Patterns and Influencing Factors: Some Reflections,” in Olson, O. , Guthrie, J. and Humphrey, C. , (eds.), Global Warning: International Financial Management Changes, Bergen, Norway: Cappelan Akademisk Forlag , pp.376-399.

43.

Likierman, A. , (1996), “The UK Government’s Accounting and Budgeting Revolution” , Research in Governmental and Nonprofit Accounting,Vol.9, pp. 303-322 .

44.

Luder, K. , (1992), “A Contingency Model of Governmental Accounting Innovations in the Political-Administrative Environment” , Research in Governmental and Nonprofit Accounting,Vol.7, pp. 77-129 .

45.

Luder, K. , (1994), “The ‘Contingency Model’ Reconsidered: Experiences from Italy, Japan and Spain” , Research in Governmental and Nonprofit Accounting, Vol.8, pp. 1-15 .

46.

Luder, K. , (2000), Personal Discussion, 8 March, Sydney.

47.

McGinniss, M. , (1988), “Commentary”, Accrual Accounting Seminar, NSW Public Accounts Committee, Sydney: NSW Parliament , pp.100-114.

48.

Mayston, D. , (1992), “Capital Accounting, User Needs and the Foundations of a Conceptual Framework for Public Sector Financial Reporting” , Financial Accountability & Management,Vol.8, No.4, pp. 227-248 .

49.

Mellor, T. , (1995), “The View of the Treasury as the Regulator”, Proceedings of the Seminar on Accrual Accounting – the Scorecard to Date, NSW Public Accounts Committee, Sydney: NSW Parliament , pp.15-21.

50.

Micallef, F. , (1997), “AAS31 – Drawing the Big Picture” , Australian Accountant, Vol.67, No.2, pp. 38-39 .

51.

Miley, F. and Read, A. , (2000), “Comparing Government Reporting: Looking for Accountability” , Australian CPA, Vol.70 No.1, pp. 26-27 .

52.

Miller, P. and Napier, C. , (1993), “Genealogies of Calculation” , Accounting, Organizations and Society, Vol.18, No.7/8, pp. 631-647 .

53.

Monsen, N. and Nasi, S. , (1998), “The Contingency Model of Governmental Accounting Innovations: A Discussion” , The European Accounting Review, Vol.7, No.2, pp. 275-288 .

54.

Monsen, N. and Nasi, S. , (1999), “Comparing Cameral and Accrual Accounting in Local Governments”, in Bac, A. (ed.), International Comparative Issues in Government Accounting, Dordrecht: Kluwer Academic Publishers , pp.135-158.

55.

Montesinos, V. and Bargues, J. , (1996), “Governmental Accounting in Spain: Evolution and Reforms” , Research in Governmental and Nonprofit Accounting, Vol.9, pp. 219-238 .

56.

Moore, B. , (1988), “Administrative Chronicle – New South Wales” , Australian Journal of Public Administration,Vol.47, No.2, pp. 164-170 .

57.

Moore, B. , (1989), “Developments in New South Wales Public Administration” , Australian Journal of Public Administration,Vol.48, No.2, pp. 109-122 .

58.

Ng, C. and Shead, B. , (1999), “Major Issues Associated with the Reporting of Government Net Worth” , Australian Accounting Review, Vol.9, No.3, pp. 61-68 .

59.

NSW Commission of Audit , (1988), Focus on Reform: Report on the State’s Finances, Sydney: NSW Government Printer .

60.

NSW Government , (1991), Office of Financial Management Annual Report, Sydney: NSW Government Printer .

61.

Oldroyd, D. , (1999), “Historiography, Causality and Positioning: An Unsystematic View of Accounting History” , Accounting Historians Journal,Vol.26, No.1, pp. 83-102 .

62.

Olson, O. , Guthrie, J. and Humphrey, C. (eds.), (1998), Global Warning: International Financial Management Changes, Bergen, Norway: Cappelan Akademisk Forlag .

63.

Painter, M. , (1990), “Commentary (The Curran Report and the Role of the State)” , Australian Journal of Public Administration, Vol.49, No.2, pp. 154-156 .

64.

Pallot, J. , (1992), “Elements of a Theoretical Framework for Public Sector Accounting” , Accounting, Auditing and Accountability Journal,Vol.5, No.1, pp. 38-59 .

65.

Pallot, J. , (1996), “Innovations in National Government Accounting and Budgeting in New Zealand” , Research in Governmental and Nonprofit Accounting, Vol.9, pp. 323-348 .

66.

Parker, L. , (1997), “Informing Historical Research in Accounting and Management: Traditions, Philosophies and Opportunities” , The Accounting Historians Journal, Vol.24, No.2, pp. 111-149 .

67.

Parker, L. , (1999), “Historiography for the New Millennium: Adventures in Accounting and Management” , Accounting History,NS Vol.4, No.2, pp. 11-42 .

68.

Parker, L. and Guthrie, J. , (1990), “Public Sector Accounting and the Challenge of Managerialism”, in Forster, J. and Wanna, J. (eds.), Budgetary Management and Control: the Public Sector in Australasia, Melbourne: Macmillan , pp.114-127.

69.

Perrin, J. , (1998), “From Cash to Accruals in 25 Years”, Public Money and Management, April-June, pp.7-10.

70.

Plater, I. , (1988), “The United States Experience”, Accrual Accounting Seminar, NSW Public Accounts Committee, Sydney: NSW Parliament , pp.52-63.

71.

Pollitt, C. , (1995), “Justification by Works or by Faith: Evaluating the New Public Management” , Evaluation,Vol.1, No.2, pp. 133-154 .

72.

Pollitt, C. and Bouckaert, G. , (2000), Public Management Reform: A Comparative Analysis, Oxford: Oxford University Press .

73.

Potter, B. , (1999), “The Power of Words: Explaining Recent Accounting Reforms in the Australian Public Sector” , Accounting History, NS Vol.4, No.2, pp. 43-72 .

74.

Potter, B. , (2002), “Financial Accounting Reforms in the Australian Public Sector: An Episode in Institutional Thinking” , Accounting, Auditing & Accountability Journal, Vol.15, No.1, pp. 69-93 .

75.

Previts, G. , Parker, L. and Coffman, E. , (1990a), “Accounting History: Definition and Relevance” , Abacus,Vol.26, No.1, pp. 1-16 .

76.

Previts, G. , Parker, L. and Coffman, E. , (1990b), “An Accounting Historiography: Subject Matter and Methodology” , Abacus,Vol.26, No.2, pp. 136-158 .

77.

Public Accounts Committee , (1995), “Proceedings of the Seminar on Accrual Accounting – the Scorecard to Date” , Report 89, Sydney: NSW Parliament .

78.

Public Accounts Committee , (1996), “Pioneers – Progress But at a Price: Implementation of Accrual Accounting in the NSW Public Sector” , Report 100 (10/51), Sydney: NSW Parliament .

79.

Public Accounts and Estimates Committee , (1999), “Report on the Inquiry into Annual Reporting in the Victorian Public Sector”, 26th Session 1998-99, Melbourne: Government Printer for the State of Victoria .

80.

Regan, E. , (1987), “Accrual Accounting in Government”, Can Accrual Accounting Work in Government, Sydney: Australian Society of Accountants .

81.

Rhodes, R. , (1998), “Different Roads to Unfamiliar Places: UK Experience in Comparative Perspective” , Australian Journal of Public Administration,Vol.57, No.4, pp. 19-31 .

82.

Robinson, M. , (1998), “Accrual Accounting and the Efficiency of the Core Public Sector” , Financial Accountability and Management, Vol.14, No.1, pp. 21-37 .

83.

Robinson, M. , (1999), “Accrual Financial Reporting in the Australian Public Sector: An Economic Perspective”, Discussion Paper 65, Brisbane: Queensland University of Technology .

84.

Robson, K. , (1987), “Should Accrual Accounting Apply to the Public Sector?”, Can Accrual Accounting Work in Government, Sydney: Australian Society of Accountants .

85.

Rowe, S., (1991), “Public Sector Annual Reporting: a Comparison of Australian Legislative Requirements,” Master of Arts in Accountancy Thesis, Adelaide: University of South Australia.

86.

Rutherford, B. , (1992), “Developing a Conceptual Framework for Central Government Financial Reporting, Intermediate Users and Indirect Control” , Financial Accountability and Management, Vol.8, No.4, pp. 265-280 .

87.

Ryan, C., (1995), “Australian Public Sector Financial Reporting 1976 to 1993: Reforming Policy Agendas,” Unpublished PhD Thesis, Griffith University.

88.

Ryan, C. , (1998), “The Introduction of Accrual Reporting Policy in the Australian Public Sector: An Agenda Setting Explanation” , Accounting Auditing & Accountability Journal,Vol.11, No.5, pp. 518-539 .

89.

Ryan, C. , (1999), “Australian Public Sector Financial Reporting: A Case of Cooperative Policy Formation” , Accounting, Auditing & Accountability Journal, Vol.12, No.5, pp. 561-582 .

90.

Ryan, C. , Dunstan, K. and Stanley, T. , (1999), “Constituent Participation in the Australian Public Sector Accounting Standard-Setting Process: The Case of ED55” , Financial Accountability and Management,Vol.15, No.2, pp. 173-200 .

91.

Ryan, C. , Dunstan, K. and Brown, J. , (2000), “The Value of Public Sector Annual Reports and the Contribution of Annual Reporting Awards” , International Conference on Accounting, Auditing and Management in Public Sector Reforms, Zaragoza.

92.

Saint-Martin, D. , (1998), “The New Managerialism and the Policy Influence of Consultants in Government: An Historical-Institutionalist Analysis of Britain, Canada and France” , Governance,Vol.11, No.3, pp. 319-356 .

93.

Scullion, B. , (1991), “Accrual Accounting”, National Accountants in Government Convention, Gold Coast: Australian Society of Accountants .

94.

Shand, D. , (1990), “Australia Moves to Accrual Accounting: Problems and Prospects”, in Forster, J. and Wanna, J. (eds.), Budgetary Management and Control: the Public Sector in Australasia, Melbourne: Macmillan , pp.142-150.

95.

Sharpe, M. , (1992), “A Private Sector View”, Report on the Proceedings of the Seminar to Review Progress of Financial Reform in the New South Wales Public Sector, Sydney: NSW Parliament , pp.1-8.

96.

Soh, D. , (1992), “After Seven Years at the Helm, Robson Decides to Hit the Road” , New Accountant,Vol.5, No.8, p. 12-12 .

97.

Tyson, T. , (1993), “Keeping the Record Straight: Foucauldian Revisionism and Nineteenth Century US Cost Accounting History” , Accounting, Auditing & Accountability Journal, Vol.6, No.2, pp. 4-16 .

98.

Walker, N. , (1987), “Accrual Accounting for the Government Sector”, Australian Society of Accountants Victorian State Congress, Melbourne: Australian Society of Accountants .

99.

Walker, R. , (1988), “Accrual Accounting: Necessary But Not Sufficient”, Accrual Accounting Seminar, NSW Public Accounts Committee, Sydney: NSW Parliament , pp.20-32.

100.

Walker, R. , (1989), “Should There be Common Standards for the Public and Private Sectors?” Research Lecture in Government Accounting, Melbourne: Australian Society of Accountants , pp.1-20.

101.

Walker, R. , (1995a), “Public Sector Consolidated Financial Statements”, UNSW Working Paper Series, Kensington: University of NSW .

102.

Walker, R. , (1995b), “State Finances – An Assessment of the NSW Coalition Government'’ Record in Financial Management – 1988-1995”, UNSW Working Paper Series, Kensington: University of NSW .

103.

Walker, R. , Clarke, F. and Dean, G. , (1999), “Reporting on the State of Infrastructure by Local Government” , Accounting, Auditing & Accountability Journal, Vol.12, No.4, pp. 441-458 .

104.

Wildavsky, A. , (1988), “Understanding Organizational Change – OMB and GAO – A Review” , Accounting, Organizations and Society, Vol.13, No.1, pp. 107-109 .

105.

Yamamoto, K. , (1999), “Accounting System Reform in Japanese Local Governments” , Financial Accountability and Management,Vol.15, No.3&4, pp. 291-307 .