Ezzamel, M., Hyndman, N., Johnsen, A.,
& Lapsley, I. (2014). Reforming
central government accounting: an evaluation of an accounting innovation, Critical
Perspectives on Accounting, 25 (4/5):
409-422.
This is an important study of the introduction of accrual
accounting in the Scottish Parliament as an example of the results of this
reform introduced by the UK central government from 2001. It was undertaken by four eminent
professors in the field of public financial management who had direct access to
parliamentarians as one was an expert advisor to the Finance Committee. As a result, the authors had access to
both documents in the public domain and privileged access to the accountability
process of members of parliament. The
study included interviews with members of the first two Scottish parliaments
from 1999 to 2007. This covered
the first five years of the introduction of the new accounting reforms and so
went beyond the initial period which may have included both teething problems
and enthusiasm for the reforms.
The authors conclusions are that the move to accrual
accounting was part of the reforms of New Public Management and were not
directly conducive to addressing the information needs of members of
parliament, so they say that:
“there
is evidence in this paper, particularly from government policy documents, which
suggest that a major motive for this innovation was managerial... any
privileging of the managerial interest group may have attenuated the position
of parliamentarians. (page 421)
Thus the move to accrual accounting did not lead to
increased accountability.
This study also confirms the view that one of the key
beneficiaries of a move to accrual accounting are members of the accounting
profession and especially the consulting firms (which explains why IFAC, the
accounting institutes and the major accountancy firms are so keen to promote
this type of reform). The authors
state that:
“there
is a suggestion that the advancement of the case for accrual accounting by
central government has given an opportunity to vested interests – management
consultants and leading international accounting firms – to gain commercial
opportunities (Christensen, 2002; Christensen and Parker, 2010).” (page 415)
The studies major concern is that the adoption of accrual
accounting did not address the information needs of members of parliament and
so was not able to increase their ability to hold the executive to account, as
the following quotations demonstrate:
“this
innovation did not connect with the focus of our study – parliamentarians. RAB
[accrual accounting] had started life as an NPM type managerial reform. It was
latterly re-branded as a useful tool for parliamentarians.” (page 416)
“expert
advisers to Members of the Scottish Parliament express the view that only a
minority of MSPs can challenge the financial information in a meaningful way.”
(page 419)
The
present system of RAB is too complex for parliamentarians who struggle to make
effective use of it. (page 420)
There
is evidence that Members of the Scottish Parliament are not confident in the
handling of RAB-type information. However, in part this is a reflection of the
sheer volume of information to which these Members of Parliament are exposed –
information overload. (page 421)
The paper ends with
the following important conclusion:
“The
literature suggests elected members of parliament have limited financial
expertise. This study suggested the RAB innovation was flawed with respect to
parliamentarians, because, while, on the face of it, this form of accounting
went beyond narrow financials, it failed to represent the parliamentarians’
interest in issues of activity, outcomes and of quality of service within its
financial framework in a manner in which they could utilise this information
effectively.” (page 421)
The paper also
includes the following interesting quotations:
“The
idea of externally induced innovation was advanced by Van de Ven (1986), who
considered such induced innovations as potential valuable to successful
organisations. However, he argued that induced innovation in poorly performing
organisations may simply perpetuate poor performance.” (page 411)
Van
de Ven AA. (1986) Central problems in the management of innovation. Management
Science 1986;32(5):590–607.
‘‘In
any discussion of the expenditure information provided by the government, there
is at least one aspect on which there is agreement. It is difficult. Difficult
to compile and difficult to understand. In part, the difficulties are due to
the size and complexity of the government’s financial transactions. In part to
the requirements of users, who differ greatly in what they want and in their
experience and expertise. But there are many who have said that difficulties
also arise because of the way information is presented.’’ (Likierman and Vass,
1984, p. 5) (page 414)
The paper includes the following reference that argued for
the introduction of accrual accounting:
National
Audit Office (NAO). Financial reporting to parliament, report by the
comptroller and auditor general, July 1986. HMSO; 1986.
However, subsequent reports from the NAO have suggested that
many of the supposed benefits of accrual accounting have not actually been
delivered.
The authors go on to quote one former Finance Minister as
saying:
“I think the negotiation of
the budget is just a nightmarish process as it involves the Parliament and the
Ministers, so I suppose they [members of parliament] probably feel that they
only really check that there is nothing fraudulent, and also maybe influence a bit
at the margins. And that is probably fair. I think this is partly to do with
the volume of the information and the complexity of it” (page 419)
They go on to emphasise the general incremental of budgets
in the public sector, at least from the perspective of members of parliament:
“the incremental nature of
budget setting in the public sector, in which all of the focus is on the size
of the increment or ‘growth’ monies and the prioritisation of these resources.”
(page 421)
The authors also indicate that whilst financial reporting to
members of Parliament may be difficult, reporting the results of public sector
expenditure are even more problematical:
“these MSPs displayed a high
level of understanding of what RAB was seeking to achieve. They exhibited major
concerns with the setting of targets, their relationship to policies and wider
objectives and resources devoted to thematic priorities. (page 421)
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