Accrual Accounting in the Public Sector - NSW Case

http://ach.sagepub.comAccounting History

DOI: 10.1177/103237320200700205 2002; 7; 93 Accounting History

Mark Christensen Wales government

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

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Accrual accounting in thepublic sector: the case ofthe New South Walesgovernment

MMaarrkk CChhrriisstteennsseennSouthern Cross University

AAbbssttrraaccttAccounting technologies have dominated public sector managementreforms and accrual based financial reporting has been significantamongst these technologies. This paper examines the process of changein the New South Wales Governments early adoption of accrual basedfinancial reporting. The studys main objective is to present a historythat identifies the agents of change promoting and facilitating an earlyadoption of public sector accrual accounting. The main primary datasource for this research was interviews with three categories ofparticipants who had some involvement in the decision that dates backto the late 1980s. Historical research methods were used within ananalytical framework provided by a proposed variant of Luders (1994)Contingency Model. The paper finds that a revised Contingency Modelis useful as a framework and that the major role played by managementconsultants was a significant aspect of the case study.

KKeeyywwoorrddss:: public sector; accrual accounting; accounting history; NewSouth Wales

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Acknowledgements: The author gratefully acknowledges the participation and generous donation of time by eachof the interviewees. The paper has also benefited from the comments of two anonymous reviewers, ProfessorsGarry Carnegie and Don Scott and participants at the Third APIRA Conference held in Adelaide in July 2001and the 9th World Congress of Accounting Historians held in Melbourne in July/August 2002.

This paper is dedicated to the memory of Dr Barry Moore, chronicler of NSW administrative history andcontributor to improvements and understanding of NSW public sector administration during the 1970s and1980s. Dr Moore died in a self-administered euthanasia pact with his wife, Dr Erica Bates, in March 1989 afterboth had been diagnosed with terminal illnesses. Dr Moore chronicled developments in NSW administrativehistory and that history provides the context within which this paper needs to be understood.

Address for correspondence:Mark ChristensenSchool of Commerce & ManagementSouthern Cross UniversityP.O. Box 157Lismore NSW 2480AustraliaTelephone: +61 2 6620 3787Facsimile: +61 2 6621 3428E-mail: [email protected]

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AAccccoouunnttiinngg HHiissttoorryy NS Vol 7, No 2 - 2002


IInnttrroodduuccttiioonn

The dramatic emergence of public sector accounting from a prolonged period ofossification represents a juncture in accounting history that demands some analysis.Such analysis could be an apt instance of where research of public sectoraccounting history has been identified as a fruitful area (Carnegie & Napier, 1996,p.27) even though it remains still grossly under-researched. Whilst there has beena rapidly growing literature on New Public Management (NPM), includingcontributions from authors debating the worth of the term itself, there is not asignificant accounting history literature dealing with specific NPM accountingreforms such as the adoption of accrual accounting. Instead the literature has notedthat accounting technologies have dominated NPM reforms (Guthrie et al., 1999;Hood, 1995; Lapsley, 1999; Olson et al., 1998) whilst some researchers havequestioned whether the accounting changes have been a rhetorical support for otherchanges with hidden objectives (Guthrie, 1998a; Lapsley, 1999; Pollitt, 1995).Related to that literature is some evidence that the adoption of accrual accountinghas not produced the gains originally expected of it (Jones & Puglisi, 1997; Miley& Read, 2000; Olson et al., 1998; Perrin, 1998; Potter, 1999; Robinson, 1998).

A definitive assessment of the cost-benefit of adopting accrual accounting isan outstanding task. Although some argue that an assessment may not be possible(Funnell & Cooper, 1998), before such an assessment can be attempted it is usefulto develop a literature on the history of public sector accrual accounting inAustralia. It is the history of one early adopter of accrual based financial reportingthat this study addresses. The New South Wales Government (NSWG) was thesecond government in the world and the first government in Australia to adoptaccrual based financial reporting (ABFR). As such an early adopter, its story isuseful in particular to researchers interested in the widespread adoption of publicsector accrual accounting whilst also adding to the mosaic that is emerging on howNew Public Management financial technologies came to dominate recent publicadministration. An additional motivation for this paper is that a history of thedevelopment of ABFR in NSW can form a base from which evaluations of ABFRmay be developed.

Currently, accounting history stands as a vibrant discipline, characterised byinternational interest, a breadth of scope that is near unique in academicaccountancy, and a passion among its adherents that has driven its successes(Fleischman & Radcliffe, 2000, p.35). In the spirit of such vibrancy this paper usesan oral history approach as prompted by Carnegie and Napier (1996), Hammondand Sikka (1996), and Parker (1999) to derive some of its primary data. Individualswho were prominent in the decision to adopt ABFR are interviewed to generatemuch of the primary data. These individuals include the then NSW Premier andTreasurer, the Director-General of the Premiers Department and the Under-

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CChhrriisstteennsseenn:: Accrual accounting in the public sector


Secretary of the NSW Treasury as well as others who formed a decision elite andan interested group of outsiders. Analysis of data is undertaken with the aid of aninterpretational model derived from a contingency view of public sector accountingchange (Luder, 1992, 1994).

This paper is structured as follows. Firstly a review of the relevant literatureis presented. Following this review a proposed model for interpretation of thehistorical data is briefly presented. An interpretational history of NSW ABFR isthen presented in a manner that facilitates testing of five hypotheses developedfrom a model of public sector accounting change. Conclusions together withsuggestions for further research are presented in the final section.

RReelleevvaanntt lliitteerraattuurree

With the exception of official-type advocacies on behalf of accrual accounting aswell as various seminars, such as those organised by the NSW Public AccountsCommittee in 1988 and 1994, the literature regarding public sector accrualaccounting is relatively limited. One part of the literature has debated whether partsof the change have been worthwhile (Aiken, 1994; Brorstrom, 1998; Clark-Lewis,1996; Conn, 1996; Guthrie, 1998; Jones & Puglisi, 1997; Lapsley, 1999; Monsen& Nasi, 1999; Olson et al., 1998; Rhodes, 1998; Robinson, 1998; Shand, 1990).Other elements of the literature have discussed technical aspects of public sectoraccrual accounting (Jones, 1998; Micallef, 1997; Ng & Shead, 1999; Pallot, 1992;Walker et al., 1999); whether public sector assets confound accrual accounting (seeespecially various contributions in Australian Accounting Review issues in the1990s); whether the change is more than rhetoric (Guthrie, 1998a); and, whetherthe change will have unintended consequences (Potter, 1999; Robinson, 1999).Whilst this body of literature is important, in the absence of a history of publicsector accrual accounting, it is built on an incomplete base. Only recently hasattention turned in part to presenting an historical view of why and how the changeto accrual accounting took place (Ryan, 1999; Ryan et al., 1999; Ryan, 1998).

Ryans work (especially 1995) provides an indepth analysis of eventsbetween 1976 and 1993 that led to reforms of Australian public sector financialreporting. Ryans contribution is significant but it does not deal specifically withNSW nor does it apply a set of lenses that lead to the analysis of the type providedhere. That there has been no substantive analysis of the NSW case is perhaps notsurprising since there is generally a dearth of research on either the origins or theconsequences of public sector accounting change (Guthrie, 1998a; Ryan, 1995).Further, with the exception of the work of Guthrie (1994), Ryan (1995) and Walker(1995a and 1995b), there remains a lack of detailed case studies of public sectoraccounting practices in the context of the prevailing organisational elements(Broadbent & Guthrie, 1992; Wildavsky, 1988, p.107). This study attempts to

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partly redress that void. However, one element in the literature that has developedsome cases of public sector accounting change is in the international comparativefield where Luders work has been central.

In the last decade, the most significant contribution to understanding publicsector accounting change has been Luders Governmental Accounting InnovationModel (hereafter, known as the Contingency Model) (Luder, 1992). TheContingency Model was formulated to better understand factors affecting adoptionof public sector accounting innovations. It posits that change is explained byinteractions between four modules: stimuli, structural variables of informationusers, structural variables of information producers, and implementation barriers(Luder, 1992). The model has been widely applied (El-Batanoni and Jones, 1996;Godfrey, et al., 1996; Godfrey, et al., 2001; Khumawala, 1997; Likierman, 1996;Luder, 1992 and 1994; Monsen & Nasi, 1998; Montesinos & Bargues, 1996; Pallot,1996; Yamamoto, 1999; ) such that it has proven to be robust and adaptable (Chanet al., 1996, p.9). As such Luders model offers itself as a suitable candidate to usein a theoretically informed history of the adoption of ABFR.

Notwithstanding criticisms of efforts to use theoretically informed histories todetermine causality (Oldroyd, 1999), this paper will use a variant of theContingency Model as a framework from which the historical data can be sievedand analysed. The underlying goal is to present a coherent and probable picture(Fleischman et al., 1996b, p.62) of why ABFR was adopted by the NSWG.Additional methodology issues are discussed in the next section following anoutline of the revised Contingency Model.

AA rreevviisseedd ccoonnttiinnggeennccyy mmooddeell ooff ppuubblliicc sseeccttoorr aaccccoouunnttiinngg cchhaannggee

The model proposed here is a variant of Luders Contingency Model developedafter the benefit of discussions with Professor Luder (2000). Whilst theContingency Model has been used without modification to inform a history ofpublic sector accounting (Khumawala, 1997), a number of factors promptmodification of the model for this study. Firstly, empirical support cannot be foundfor Luders inclusion of the general public as an influential force on public sectoraccounting (Copley et al., 1997; Coy et al., 1997; Hay, 1994; Mayston, 1992;Public Accounts and Estimates Committee, 1999; Rowe, 1991; Rutherford, 1992;Ryan et al., 2000; Walker, 1995a). Secondly, it has been argued that the role ofindividuals needs to be incorporated in explanations of public sector accountingchange (Godfrey et al., 2001, p.280) and so the Contingency Model could benefitfrom a behavioural orientation. Thirdly, Luders model focuses on the likelihood ofchange rather than the purpose of change. To better understand the latter it isnecessary to consider how the accounting change has been harmonised with themanagement system (Yamamoto, 1999, p.296). As a result, there is worth in

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considering the relationship between management accounting and financialaccounting when examining public sector accounting change.1

Incorporating responses to these three difficulties of Luders model hasresulted in development of a variant model. The proposed model consists of threegroups of actors that respond in part to each other but also react to a stimuli forchange whilst taking into account barriers which impede the change. The modelthus has five parts:

1. External stimuli for change (an exogenous force): relatively wide discussioncentred on a perceived problem and offering a philosophically based solutionto that problem.

2. Promoters of change: people and organisations with a vested interest inwanting change.

3. Producers of information: public servants in central agencies and governmentagency managers (CEOs, accountants, line managers).

4. Users of information: politicians holding responsibility for individualportfolios or whole-of-government as well as Opposition politicians andParliamentary adjuncts such as the Auditors-General, Public AccountsCommittees and Parliamentary Committees.

5. Implementation barriers (an endogenous force): characteristics of the publicsector and its accounting system that act to restrict the options available toimplement change.

The model is depicted in Figure 1 (see over) and each of the five parts of the modelis briefly described below. For each of the models parts a hypothesis is proposedand subsequently considered in light of the data revealed in the history presented inthis paper.

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FFiigguurree 11:: PPrroocceessss MMooddeell ooff PPuubblliicc SSeeccttoorr AAccccoouunnttiinngg CChhaannggee

Legend: Determinant influence

Significant influence

Minor influence

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Promotors of change: Consultants Commentators Academics Organisations

representingprofessionalinterests

Users of information: Ministers Political advisors Opposition members Parliamentary

adjuncts such asAuditors-General,Public AccountantsCommittees &ParliamentaryCommittees

Producers ofinformation: Central agencies Managers of line

agencies Public sector

accountants

Stimuli

Implementationbarriers

Implementation of a new public sector accounting system


SSttiimmuulliiExternal to the public sector is a context established by the prevailing political andsocial environment. This context is manifested in the collective debate that isobserved in popular media (print and electronic) and tangential sources such asacademic discourse, and comments of international bodies and professionalrepresentative organisations. The coherency of the debate is reflected in some levelof repetitiveness in commentaries demonstrating, firstly, that there is a problemand, secondly, that there is a solution available to the problem.

With respect to the adoption of ABFR, it is hypothesised (H1) that the ideaswhich have been characterised as New Public Management (Hood, 1995) and,consistent with a neo-liberal view of government in society (Funnell, 2001), wereimportant stimuli. That is, hypothesis H1 is that the stimuli leading to theaccounting change were arguments that public sector debt needed to be reducedand private sector technologies needed to be adopted by public sector managers.

PPrroommootteerrss ooff CChhaannggee ((PPooCC))PoCs are identifiable people and/or organisations that promote recognition of theproblem and promulgate a solution. Although these promoters are identifiable, theymay not be publicly active nor necessarily known to the general public. However,they are known to the Users of Information (UoI) either through personal contactor through the office held by the Promoter. The motivation of PoC to use theiraccess to a UoI is influenced by epistemic considerations (Laughlin & Pallot, 1998)or self-interest, including financial gain.

With respect to the adoption of ABFR, it is hypothesised (H2) that globalaccounting firms acting as management consultants were prominent PoCs. Inaddition there was also a less important, but influential, reinforcing effect from theactivities of both the accounting profession and public commentators.

UUsseerrss ooff IInnffoorrmmaattiioonn ((UUooII))UoIs are political actors including Ministers, Opposition members and politicaladvisors but also include the Auditors-General, Public Accounts Committees andParliamentary Committees. In contrast to Luder (1992, 1994) but consistent withthe evidence cited above regarding low or no usage of public sector accountingreports by citizens, the revised model does not attribute any significant role to thegeneral public or citizens. The advantage of excluding the general public is that itavoids the uncertainty surrounding the usefulness of annual reports to the public(Ryan et al., 2000). Additionally, operationalising the general public as a conceptand measuring the socio-structural variables suggested by Luder present difficultiesthat outweigh the benefit of considering this variable which, at best, is thought tobe a background influence (Pollitt & Bouckaert, 2000, p.33). Exclusion of thegeneral public means the UoI category of actors consists of political andadministrative operatives. Such a categorisation is similar to Luders Reconsidered

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Contingency Model in an application designed to suit Non-American Anglo-Saxon countries (Luder, 1994, p.12). The rationale for this is that political actorsare motivated by the pressure to remain politically competitive to use public sectoraccounting reports. Similarly, administrative actors with an accountability role(Auditors-General and Public Accounts Committees) will also turn to accountinginformation.2 This depiction of UoIs is consistent with Pollitt and Bouckaertsdescription of the role played by a political and administrative elite in publicmanagement reform (2000, pp.24-38).

With respect to the adoption of ABFR, it is hypothesised (H3) that the UoIsresponded to the NPM stimuli and pressure from PoCs; in turn the UoIs exertedpressure on the Producers of Information to implement ABFR.

PPrroodduucceerrss ooff IInnffoorrmmaattiioonn ((PPooII))PoIs are bureaucratic actors with some responsibility for accounting information.This responsibility can be exerted by a central agency (typically Treasury orPremiers Department) as well as by managers of line agencies where CEOs,financial controllers and accountants hold responsibility for accounting outputs.

The PoIs are hypothesised (H4) as being largely responsive to the needs ofUoIs, although they may in some instances be proactive (Ryan, 1995).Accordingly, there is a two-way relationship expected here since the PoIs are bestplaced to advise UoIs regarding the impact of a proposed accounting change. Partof the advice given by the PoIs will relate to barriers to implementation of theaccounting change.

IImmpplleemmeennttaattiioonn BBaarrrriieerrssImplementation Barriers are features of the political or bureaucratic environmentsthat act to increase the cost or time required to implement accounting change.Implementation Barriers are changed through the efforts of UoIs and PoIs but thereis also a two-way relationship with Promoters of Change since they must takeImplementation Barriers into account in their arguments. Also, the ImplementationBarriers may form part of the reason for subsequent actions by the Promoters as,for example, when a consulting firm subsequently provides services with respect toways in which an Implementation Barrier may be overcome.

With respect to the adoption of ABFR, it is hypothesised (H5) that theImplementation Barriers were inadequate public sector accounting expertise andalso flawed accounting records, especially asset records.

CCaassee ssttuuddyy ooff ppuubblliicc sseeccttoorr aaccccoouunnttiinngg cchhaannggee

The above description of the modified contingency model and identification of fivehypotheses lays the foundation upon which a history of NSWs early adoption ofABFR, as a particular accounting change, may be undertaken. This section consistsof three parts. It firstly describes the methodology used to develop that history. The

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second part of this section presents a chronology and context of the events whilstthe third part analyses the history by using the framework of the modifiedcontingency model. The analysis reports findings with respect to each of the fivehypotheses posed above.

MMeetthhooddoollooggyyThe case study has been constructed using an historical analysis (Previts et al.,1990a) of primary data gathered from interviews of elite decision-makers andreviews of documentary sources. The documentary sources included working partyreports and minutes, annual reports, politicians and senior bureaucrats speeches,policy statements, and reports of and submissions to various bodies of enquiry.

To develop a history, facts are necessarily selected and organised through ajudgemental process constrained by time and are provisional according to thehistorians perception of the contextual variables of the period studied (Previts etal., 1990b, p.147). The revised contingency model was used to order the datagathering for development of the history. The use of a model in any history carriesa number of risks, not the least being that the researcher may be prompted tointerweave fact and opinion in a predisposition to find only confirming evidence(Tyson, 1993, p.13). However, it must be recognised that it is impossible toseparate the past from our interpretations of it (Gaffikin, 1998, p.633) and the useof a model, such as the one proposed in this study, is a justifiable technique aimedat making the resulting interpretation coherent. This paper does not enter the debatearound the relation of historical research and explanation (Keenan, 1998; Miller &Napier, 1993) but instead aims to clearly articulate its methodology as an aid to thereader (Fleischman et al., 1996b; Fleischman & Radcliffe, 2000; Parker, 1997).Further, it is hoped that calls for multi-paradigmatic histories (Fleischman et al.,1996a; Fleischman et al., 1996b; Parker, 1999) may prompt other researchers toconsider the history of ABFR from another perspective and so demonstrate theimportant point that there are many plausible histories of the same events(Carnegie & Napier, 1996, p.17).

The interview-based primary data was gathered from face-to-face interviewsstructured around a series of open-ended questions that were the same for eachinterviewee within a cohort (but different between cohorts). In one case a telephoneinterview was substituted where a face-to-face interview could not be arranged.Interviewees were grouped into three cohorts of elites (Coleman & Skogstad, 1990)on the basis of the revised contingency model:1. Users of information: two interviewees Interviews Number 1 and 2.2. Producers of information: three interviewees Interviews Number 3, 4 and 5.3. Promoters of change: two interviewees Interviews Number 6 and 7.

Interviews were conducted between March and June 2000 and typically took onehour but ranged in length from 50 minutes to 2.5 hours. All interviewees agreed to

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the audiotaping of their interview and whilst note-taking did take place during theinterviews, this was kept to a minimum. Confidentiality of interviewees commentswas promised and so attribution of comments here is by way of reference to aunique Interview Number linked to a cohort but not identifying the interviewee.Names and relevant roles of interviewees within each cohort are given in Table 1.

TTaabbllee 11:: IInntteerrvviieewweeeess ((nnoottee:: oorrddeerr ooff mmeennttiioonn ddooeess nnoott eeqquuaattee ttoo IInntteerrvviieewwNNuummbbeerr))

CCoohhoorrtt NNaammee ooff IInntteerrvviieewweeee PPrriioorr rreelleevvaanntt rroollee ooff IInntteerrvviieewweeee

User of Nick Greiner Premier and TreasurerInformation Peter Collins Treasurer and Deputy Premier(UoI)Producer of Percy Allan Under-Secretary, TreasuryInformation Richard Humphry Director-General, Premiers Department;(PoI) Victorian Auditor-General; Chairman,

Public Sector Accounting Standards Board

Don Nicholls Deputy Secretary, Treasury; Executive Director, NSW Commission of Audit; Executive Member of Tasmanian and South AustralianCommissions of Audit; Secretary,Victorian Treasury and author of An Independent Review of Victorias Finances

Promoter of Bob Walker Professor of Accounting and author of weeklyChange (PoC) commentary on public sector administration

and finance

Michael Sharpe Senior Partner, Coopers & Lybrand consulting firm;President of the Institute of Chartered Accountants in Australia; member of the Treasurers AccountingAdvisory Panel

Since the interview data is a significant part of the primary data for this researchsome comments on oral history techniques are warranted. Whilst oral evidence israre in accounting histories it does have a long lineage of usage by historians(Douglas et al., 1988; Parker, 1999). The advantages of oral evidence are many(Carnegie & Napier, 1996; Hammond & Sikka, 1996) but the outstanding reasonfor its use in this history lies in the realisation that as a relatively recent event withsome degree of commercial confidentiality, the adoption of ABFR lacksdocumentary evidence other than official pronouncements. Official documentsare typically written with a narrow perspective and a sanitised rendition of eventssuch that they are inadequate in highlighting problems, disagreements and the self-interested manoeurvings of individuals and organisations. Therefore oral evidence

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proves an invaluable resource to achieve a better understanding of the actions andmotivations of the decision-makers in this case (Parker, 1997, p.142). Nevertheless,warnings about the dangers of oral evidence need to be heeded. It can be self-serving in the interests of the interviewees, contaminated by nostalgia, at the mercyof interviewees memories, censored by a reluctance to reveal potentially sensitiveand controversial information, influenced by the researchers behaviour and dilutedby the act of transcription (Hammond & Sikka, 1996; Parker, 1999). With thesewarnings in mind, the remainder of this section relates to the history of theNSWGs adoption of ABFR.

TThhee eevveennttssLike all historical accounts, the history of the NSW Governments decision toimplement ABFR should be considered in the context of its time. Overwhelmingly,that context was one of increasingly rapid change. Two major enquiries heraldedthe period of change: the Royal Commission on Australian GovernmentAdministration reporting in 1976 (for a useful summary of this RoyalCommissions accounting impacts refer to Parker and Guthrie, 1990, pp.116-7);and, the Review of NSW Government Administration conducted by ProfessorWilenski and reporting in 1977 and 1978. Neither of these enquiries recommendedABFR but both set in train a series of changes that were to make ABFR appear tobe consistent with the overall direction of change.3 ABFR should not be seen as anisolated event in an indeterminate sea of change. Instead it was consistent with, andreinforcing of, the general tide of movement reflecting adoption of private sectorpractices in the management of public sector organisations. Although the wave ofthat tide was only beginning to crest in the late 1980s, Dr Barry Moore, as aninterested chronicler of public sector change, was able to identify the principles ofcorporatisation as being the essence of the sea change to that date. These principlesare summarised as follows: (Moore, 1989, p.109-115):

Demands for clear objectives, including explicit financial objectives, for allgovernment bodies.

Downstream autonomy as a means of diminishing the control of centralagencies.

Increased emphasis on performance monitoring which had been a pervasivefeature of administrative life for at least 15 years (Moore, 1989, p.112).

Changed management incentives including performance related pay, externaladvertising of vacancies, abolition of seniority-based promotions, and market-based pay scales.

Ensuring competitive neutrality through mechanisms like transfer pricing andcompetitive tendering.

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The principles of corporatisation identified by Moore went beyond GovernmentTrading Enterprises and were implemented in inner budget organisations. Amongthe consequences of these changes that have most relevance to the history of ABFRin NSW were:

Expectations of increased accountability. Moves towards a smaller public sector in both functions delivered and assets

controlled. Emphasis on productivity and economy.

Moores analysis is confined to NSW but it is not contradicted by others with anAustralia-wide perspective at the same time (see, for example, Parker & Guthrie,1990). Two milestones assisted Moore in his understanding of the sea of change hewas experiencing and chronicling. Firstly, the election of a government led by MrNick Greiner and secondly production of the Curran Report (NSW Commissionof Audit, 1988) requested by Mr Greiner in the first months of his government. Theelection of the Greiner Government was important because of its espoused visionof NSW Incorporated and the attached importance of running the State like abusiness. The Curran Report was an explicit statement arguing the benefits ofapplying a corporate management framework which features many of themanagement tools widely employed in the private sector ... in tune with theapproaches to public sector reform which are being quite widely proposed andadopted (Groom, 1990, p.144). The Curran Report tied together most of the sea ofchange in which the NSW public sector found itself in 1988. Further, the CurranReports recommendation that accrual accounting be adopted by the NSW publicsector has been described as its most innovative and radical (Groom, 1990,p.153).

The above-mentioned context identifies the themes of change relevant to theNSWG decision in 1988 to adopt ABFR and its initial implementation in 1992 forthe 1992/1993 financial statements. Appendix 1 provides a chronology of theevents surrounding the history. The chronology can be roughly split into threephases: the pre-1987 discussion/agitation phase, when the case for accrual accounting

was being put; the 1988 decision phase, when government made a commitment to adopt accrual

accounting; and, the post-1988 implementation phase, when actions were taken at a Departmental

level to enact the change.

Within the discussion phase, pre-1988, the role of the Auditors-General, both Stateand Commonwealth, deserves special note. Ryan (1998, p.527) provides evidenceof the activities of the Auditors-General in arguing for accrual accounting but there

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is also evidence that these arguments were largely unsuccessful. Perhaps the mostactive Auditor-General, Mr Ken Robson of NSW, put it best when he stated:Everybody and I mean everybody was against me (about the need for accrualaccounting). They thought I was an idiot or something. But I believed strongly thatunless accrual accounting was used, there wouldnt be proper decisions made(Soh, 1992). Robson went on to explain that only when Greiner turned accrualaccounting into an election issue did it achieve acceptance. As a result it is arguedhere that whilst the Auditors-General may have been active in their support forchange, they were not able to exert enough influence to make any difference in thefirst phase of the history.4 The second phase of the history is marked by Greinerspolitical commitment in early 1988 and the subsequent Curran Commissionreport endorsing accrual accounting in NSW. In the final phase the main activity ischange of accounting systems and a series of reviews examining implementationprogress. A notable feature of this phase was the inability of the accountingprofession to match the speed of the NSW reforms and so accounting standardslagged behind. In effect NSW was forced to push ahead with its accounting reformsin the absence of agreed standards from the profession.

Given this broad chronology and its context, the remainder of this sectiondiscusses the history as interpreted with the aid of the Revised Contingency Model.

SSttiimmuulliiAll three cohorts of interviewees identified two information seminars on publicsector accrual accounting as being crucial milestones associated with a shift fromdiscussion to commitment. Whilst these seminars were not the stimuli for change,they provide evidence as to the stimuli that were having an impact on the groups ofactors considered in this case. These seminars were organised firstly by theAustralian Society of Accountants (now CPA Australia) in conjunction with ArthurAndersen & Co. (1987) and secondly the NSW Public Accounts Committee (1988).Secondary sources written close to the events (Moore, 1988; Soh, 1992) and thosewith more time to introspect (Ryan, 1995 and 1998) also confirm this attribution.This finding is a crucial one since it begins the identification of the effectivepromoters5 behind the idea of adopting ABFR and it identifies the stimuli forchange. Whilst this is consistent with Ryan (1995) an influential UoI also identifiedan earlier seminar that influenced his thinking: a Harvard Business School financeProfessor (M Colyer Crum) argued for public sector accrual accounting whilstvisiting Sydney perhaps as early as 1974 (UoI, Interview 1).

The seminars concentrated on the need for government to constrain debt (theproblem) and argued the benefits of applying private sector discipline ongovernment (the solution). The arguments presented bore a strong consistencywith a number of doctrines that Hood (1995) identifies as underlying NPM and thespeakers propositions are firmly embedded in a neo-liberal concept of governmentin society. For example, one speaker cites public choice theory as the grounding for

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public sector accrual accounting (Regan, 1987, pp.7-8). Following the seminars andthe election of the Greiner Government in 1988, the issue of being seen to haverobust and professional debt management was confirmed as being a goal sought bythe government (UoI, Interviews 1 and 2) although there was confusion betweendebt and liabilities (PoC, Interview 6). Some PoIs recognised the opportunities forchange presented by the stimuli: reform was in the air you know the RogerDouglas thing in a different era we wouldnt have been able to do it (introduceaccrual accounting) (PoI, Interview 4).

The evidence regarding stimuli for change supports Hypothesis H1. A numberof stimuli for change are identified. The single most important one was the desireto bring the public sector and private sector closer together in their managementbecause of the philosophy of the Greiner government. However, this was eitherinitiated or legitimated by an espoused concern regarding better economicmanagement and improved public sector debt control (Greiner, 1993). The stimulifor change were strong in motivating the PoCs and UoIs but of small influence onthe PoIs as evidenced by the clear statement of priorities by the Treasury Secretaryplacing accrual accounting below other reforms (Allan, 1988, p.41).PPrroommootteerrss ooff CChhaannggeeWhilst the 1987 ASA and 1988 Public Accounts Committee seminars identify thestimuli, they also identity management consulting firms as being the importantPoCs. Management consulting firm partners dominated both seminars and arguedthat ABFR was necessary for asset management and debt control (Egol, 1987;McGinniss, 1988; Plater, 1988; Regan, 1987). Amongst the arguments presentedwas the assertion that public sector accrual accounting had been implementedoverseas (although this point was subsequently refuted by the NSW Treasury aftera quickly arranged study tour of the USA in 1988; PoI, Interview 5; PoI, Interview3; PoC, Interview 7). Indicative of their influence at this early stage was theconsultants organising of overseas contacts for a bureaucrats study tour and onefirm, Arthur Andersen, writing select parts of the Greiner Governments AuditCommission discussion of the desirability of implementing accrual accounting(NSW Commission of Audit, 1988, Appendix F). Further, at the urging of a majorfirm (PoC; Interview 7) a Treasurers Accounting Advisory Panel (the Panel)comprising senior partners from all the major accounting firms was instigated bythe Premier and Treasurer.

The Panel provided an independent source of advice to the Treasurer andTreasury on emerging accounting issues affecting the public sector (NSWGovernment, 1991, p.30). The Panel institutionalised the influence of consultantson accrual accounting issues and it followed an $83,250 consultancy competitivelywon by Coopers & Lybrand to advise on development of a Financial ReportingCode for Budget Sector agencies converting to accrual accounting (NSWGovernment, 1991, p.101). Recognition of the Panels importance has been

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explicit: the Panel was very important and was very successful (PoI, Interview 4)and it was a group of experts saying this is the right thing to do (UoI, Interview1). Further evidence of the importance of consultants is strong: I dont know howmany consultants we employed but they were right through the place (PoI,Interview 4). I would like to acknowledge the contribution from the big sixaccounting firms (Mellor, 1995, p.18) and, a number of consultants approachedTreasury promoting accrual accounting (prior to 1988) (PoI, Interview 3).

The actions of the consulting firms during implementation of the change wereparticularly influential. The Premier arranged a meeting with the ManagingPartners of KPMG Peat Marwick, Price Waterhouse, Coopers & Lybrand, ArthurAndersens, Deloittes and Ernst & Young (and that meeting resulted in) thesecondment of a manager from each firm into a department for approximately sixmonths to act as project manager (Scullion, 1991, p.30-1) for the implementationof accrual accounting in select departments. The importance of consultants isconfirmed in interviews with all three cohorts of interviewees. For example, theywere supportive of it and it was helpful to them it would be too cynical a view tosay that public sector work was previously a whole area that their firms did nothave available to them and that they were only looking for work but they werecertainly supportive of a convergence of public and private accounting standardsbecause it was in the interests of the good management of the State (UoI,Interview 1). Further, it was expected, and I think it is now realised, that such skilltransfer and such exchange (with consultants) is beneficial to NSW agencies asmuch as it is to the firms themselves (Mellor, 1995, p.18).

It is hypothesised in the Revised Contingency Model that there are PoCs inaddition to the consulting firms. However, the data from this case does not supportan argument that the other PoCs were influential in the adoption of ABFR.Although a number of other academic and commentator PoCs were urging caution(Groom, 1990; Moore, 1989; Painter, 1990; Walker, 1989; Walker, 1988) they donot appear to have had an influence (UoI, Interview 1; PoI, Interview 3).

In consideration of Hypothesis H2, it is concluded that the most importantPoCs were the management consulting firms since they initiated discussion ofaccrual accounting and then provided the necessary wherewithal to achieve itsimplementation. The ability of the firms to provide the wherewithal in terms ofcomputing systems and technical accounting advice meant that the consultantswere not simply used to legitimate philosophical change: they were at the core ofimplementing real accounting change. There was a sense of epistemic strength(Laughlin & Pallot, 1998) behind this since it was initially consistent withprofessional body support and there was a sense that it was right (PoC, Interview7). However, it would be naive to believe that participation in the reform process,including representation on the important Treasurers Accounting Advisory Panel,would not lead to economic gain as the public sector opened up for advisory work

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(PoC, Interview 6; PoC, Interview 7). Whatever their motives, the consultantsdominated the process of change and controlled the discourse and wereinstitutionalised at the centre of the executive machinery (Saint-Martin, 1998,p.346). However, this domination of the changes encouraged little criticalreflection or a full appreciation of several practical difficulties associated with theirimplementation (Potter, 1999, p.46). In this regard, two PoIs commented on theresultant frustration with the accounting profession in not resolving technicalaccounting issues related, in most part, to asset measurement quandaries (PoI,Interview 4; PoI Interview 3).UUsseerrss ooff IInnffoorrmmaattiioonnThe most dominant player in the entire case study was Mr Nick Greiner, Premierand Treasurer, as a UoI. Each interviewee acknowledged this and some even arguedthat he may have been the only politician who understood the difference betweencash and accrual accounting. His demand for different information was insistentand determinant. As a result, Treasury priorities were changed (PoI, Interview 3),resources were devoted to the task (PoI, Interview 4), private sector advisors wereused (PoC, Interview 7), and impediments such as inadequate skills or prioraccounting records were not allowed to divert the change (UoI, Interview 2).Indeed, Greiners role in this historical account provides a strong example ofOldroyds (1999) accident and personality as being at the core of why causaltheories of history are undermined. Other UoIs such as the Public AccountsCommittees and Auditors-General had a minor influence limited only to earlystages in the history.

The arguments presented by the PoCs captured the attention of political actors(Ryan, 1995) since they were based around depictions of the stimuli for change.These arguments were in accord with the philosophical bases of an incoming newgovernment even though they were not vote winners. Even in 12 years retrospectit would be kidding to suggest that it (accrual accounting) was a basic part of theelection plank the basic plank was NSW Inc and it was consistent with that(UoI, Interview 1).

Some non-political UoIs also argued for ABFR. The most important of thesewere external to the responsible central agencies of Treasury, Public Service Boardor Premiers Department: the Auditors-General (Harris, 1995; Robson, 1987).However, as noted above, the Auditors-General activism was limited to the earlypart of the history and it was not successful. Indeed, the most active Auditor-General, Mr Ken Robson, retired early before the first accrual based reports wereprepared. Additional evidence of the lack of influence Auditors-General was theexclusion of Audit Office representation on the Premiers Accounting AdvisoryPanel until its influence had declined under the next Premier, Mr Fahey (PoC,Interview 7).

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Some individuals wore a number of hats such that they were influential overthe full process of change. A notable instance of this was the role of Mr RichardHumphry in three pivotal positions: Chairman and Member of the Public SectorAccounting Standards Board (1983 to 1993), Victorian Auditor-General (1986 to1988) and Director-General, NSW Premiers Department (1988 to 1994). Hisprogression through these positions meant that ultimately he was at the centre ofthe implementation of ABFR in NSW (Ryan, 1998, p.527).

A synergy developed between the UoIs and the PoIs as soon as the UoIs hadsignaled their support for change. For example, If the politician shows an interestin something the public servants will become enthused about it and there was asense in Treasury of a desire to be at the forefront (UoI, Interview 1). The sensethat Treasury was at the cutting edge of public financial reform was publiclyexpressed with pride in the form of gratitude for the Treasurers encouragementand support in changing the States financial management, accounting andreporting systems to amongst the most advanced in the world (NSW Government,1991, p.i).

There is strong evidence to support Hypothesis H3 since the UoIs noted thatthey were following an agenda set by NPM ideas (the stimuli for change) and thatthey demanded change from the PoIs to implement ABFR (UoI, Interviews 1 and2).PPrroodduucceerrss ooff IInnffoorrmmaattiioonnAlthough the PoIs were content to implement government policy on accrualaccounting, they were initially unenthusiastic: for the moment (other reforms)have a higher administrative priority than accrual accounting (Allan, 1988, p.41).Their later enthusiasm for accrual accounting has been described as turningadversity into triumph (PoC, Interview 6).

One reason advanced as to why adoption of ABFR was later favoured by thePoIs was to avoid problems associated with updating accounting systems andrecruiting staff. It was considered that accrual accounting would mean standardaccounting software could be used and accounting graduates recruited with greatersuccess (PoI, Interview 5). However, more importantly, the PoIs enthusiasmseems to emanate from a desire to meet the needs of the forceful UoIs. It is alsoworth noting that the PoIs outside of the central agencies were not of anysignificant positive or negative influence in the change. These PoIs were reluctantto use accrual based reports and did not demonstrate a complete acceptance andinternal use of accrual information (Public Accounts Committee, 1996, p.80).Nevertheless, this reluctance did not impede implementation of ABFR which hassince been characterised as having taken on a crash-through approach (Funnell &Cooper, 1998, p.202).

Accounting staff in Treasury and the Premiers Department were happy torespond to the demands of the UoIs and to use this influence to bring themselves to

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the forefront of their profession. In the case of the head of Premiers Departmentthis response was consistent with his earlier work as a UoI in the CommonwealthDepartment of Finance and the Victorian Auditor-General Office whereas in thecase of Treasury it involved realigned priorities.

There is data to support Hypothesis H4 by demonstrating responsiveness fromsome PoIs to pressure from the UoIs. But there is not sufficient data to argue that atruly two-way relationship existed. That is, the PoIs were not successful inmodifying the manner of implementing ABFR so as to minimise the impact of theimplementation barriers as discussed next.

IImmpplleemmeennttaattiioonn bbaarrrriieerrssThere were varying levels of concern with impediments to a smoothimplementation of accrual accounting. The PoIs noted the lack of accounting skillsin the public sector as an impediment; for example, many of the accountants ingovernment were not accountants as you would think of them in the private sector for many of them it was a nightmare for them to move across to an accrualsystem (PoI, Interview 4). This was confirmed in 1994 by the Public AccountsCommittee arguing that there was still a need to improve the skills and training foraccounting and finance officers (Public Accounts Committee, 1995, p.i).However, the UoIs paid less attention to the impact of this impediment. Forexample, I dont think that the cost of conversion from cash accounting to accrualwould have been any reason to delay its implementation whether it was fairlycostly or not costly it would not have made any difference (UoI, Interview 2).Another impediment that worried PoIs was the inadequate state of asset records:We had things (assets) we didnt even know about! (PoI, Interview 4). However,the UoIs were only interested in this problem as a reason to push accrual accountingfaster rather than to become more cautious: how could we manage if we didntknow what assets we owned? (so) our general approach to government was topush on all fronts if you take a very careful, measured approach all it means isthat nothing ever happens (UoI, Interview 1). Again, consistent with NPM, thegovernment was explicit in trying to use accrual accounting to force departments torecognise and value assets in their control (Greiner, 1993, p.54).

Two PoIs noted that the absence of public sector accounting standards was aproblem. However, given that this was not an issue to other actors, it is notexamined here as a barrier to implementation. The apparently resigned acceptanceof this problem probably results from another accident of history: the Head ofPremiers Department had been a Chairman of the PSASB and so was not preparedto allow technical accounting debates to interfere with the pace of reform.

With respect to Hypothesis H5, barriers to implementation were of lessimportance than expected. Explicit statements from both UoIs noted that cost ofimplementation was not important (and not even estimated). Since higherimplementation barriers impose higher implementation costs it is apparent that they

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were not important in the decision to proceed or not. However, both barriersmentioned by almost all interviewees (low level of accounting skill in the publicsector and poor asset records) provided the promoters of change with theopportunity to sell their wares. That is, significant expense was incurred onconsultancies to advise on accrual accounting, train staff and review asset records.As an aside, it is interesting that information on the cost of implementing a newaccounting system designed to provide improved information is unlikely ever tobe reached as agency records in this respect are unreliable (Public AccountsCommittee, 1996, p.59).

CCoonncclluussiioonn

Implementation of ABFR has been a reform that has been promulgated widely at asignificant cost (Public Accounts Committee, 1996). The fact that NSW wasamongst the first implementing jurisdictions in the world makes the case studyworthwhile since it can throw light on the process of change. So as to order the datagathered in this case study a Revised Contingency Model was proposed and fromthis five hypotheses were developed. These hypotheses were examined in light oforal evidence gathered from individuals who were central in the events surroundingthe decision to adopt ABFR.

The history identifies stimuli that made certain pro-active political Users ofInformation receptive to the arguments presented by consulting firms in the role ofPromoters of Change. These arguments were solidly based within the managementdoctrines described by Hood (1995) as characterising NPM. The Userssubsequently exerted significant force on central agencies in their role as Producersof Information. This force was designed to achieve the adoption of ABFR withlittle concern for any associated problems. As a consequence the central agenciesof Treasury and Premiers Department responded with enthusiasm to implementABFR. The subsequent implementation of ABFR was heavily dependent on theservices of management consultants of whom some had been very vocal in thearguments advanced for the change to accrual accounting. Thus, the prime actorsin the NSWG decision to adopt ABFR were the Premier and private sectorconsultants. To this team were added central agency PoIs at the implementation ofthe decision.

A significant aspect of the history presented in this study is the explicitacknowledgment that implementation cost was not considered as a barrier tochange. Indeed, increased cost in the form of significant usage of externalconsultants was seen as a necessary strategy to overcome the acknowledgedimplementation barriers of inadequate accounting skills and poor asset records.Whilst this strategy resulted in more speedy change it probably was the genesis ofsubsequent criticisms. Two main criticisms of the (probable) high cost and rushedapproach stand out. Firstly that the cost of implementation is not known (Public

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Accounts Committee, 1996). Secondly, that insufficient planning anddevelopment work was done initially in linking accrual accounting back to thebudgeting process, in exploring and defining the likely problems and in developingoptions and solutions (Hickling Corporation, 1997, pp.iv-v). These criticisms andthe finding that implementation cost was not important in the decision to undertakethe change point increasingly to the usefulness of researching whether ABFR hasbeen worthwhile.

Two other significant aspects of the history relate to the promoters of ABFR:the Auditors-General, whilst being active, were not effective in their advocacy butthe Big Six accounting firms were successful in their calls for ABFR. This contrastraises questions now of whether the accountability rationale for ABFR, asadvanced by the Auditors-General, has been delivered in the private sector versionof public sector ABFR, as implemented by a large number of consultants. TheAuditors-General and Public Accounts Committees are now in a position toinvestigate this outstanding question. The longstanding and continuing debateabout the appropriate degree of fit of commercial accounting and reportingpractices for public sector organisations increasingly calls for further research ofthese issues (Barton, 1999; Carnegie & Wolnizer, 1999; Guthrie, 1998a; Potter,2002; Walker, 1989).

The data of the case study confirms Hypotheses H1, H2 and H3 whilst offeringmixed support for H4 and rejecting H5. Collectively these results demonstrate theusefulness of the Revised Contingency Model. However, the ImplementationBarrier module deserves modification to incorporate the possibility, as in this case,that implementation problems, such as high implementation costs, may not beperceived as impedients to change, especially where such implementation costs arenot readily ascertainable and/or are perceived to not outweigh the anticipatedbenefits of the change.

It is acknowledged that in its approach and in its evidence this historicalaccount presents foci of potential conflict, just as Carnegie and Napier (1996,pp.14-5) aptly warn are features of most accounting histories. Whilst these conflictsmay stand as legitimate limitations to the research they are also pointers to areaswhere additional research should be fruitful.

This research has a number of limitations. These limitations result from thecase study being an interpretational history and as such it cannot promise to presenta definitive view of events (Previts et al., 1990a). The interpretation of this historyprovided by way of applying the revised contingency model may be criticised asbeing a doctrinaire approach (Tyson, 1993). However, it is not argued that itprecludes alternative interpretations. Were the facts or the personalities to bedifferent there is no guarantee that the cases outcome would substantially differ.Although an interesting dinner party conversation amusement, the second guessingof history is the unattainable test of the analysis presented in interpretational

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histories (for example, would accrual accounting have been implemented if NickGreiner was not elected in 1988?). Such second guessing is especially fraught incases such as this where the history is relatively recent and is shrouded incommercially confidential practices. It is appropriate to note that it should notsurprise us in the least that histories will be written and rewritten as layers ofnarrative, interpretation and explanation are developed with the lapse of time andthe revisiting of archives by successive generations of scholars (Parker, 1999,p.24).

Other limitations to the research emerge from the model that has been used toinform the history. For example, more finely detailed differentiation of the modelsgroups of actors could have been developed. This is perhaps most important withrespect to the Users of Information where there are substantive differences betweengovernment and opposition political users as well as lobbyists. Further, the modelonly allows an individual to be in one category of actors at a particular point of timeand this proves to be a limitation in understanding this history since somesignificant individuals moved between roles as the history progressed. Forexample, Mr Richard Humphry held three pivotal positions; Mr Don Nichollsmoved from being at the centre of NSWs adoption of accrual accounting to beingthe author of four States audit commissions for incoming governments.

Further research justified by the issues considered here probably needs toaddress the outstanding question of costs and benefits from accrual accounting; thatis, whether ABFR and accrual budgeting, have delivered the benefits as promisedby its vocal advocates in the 1980s. Such research would do well to work from themost important conclusion of this history: the role of management consultants inthe promotion, design and execution of public sector accrual accounting has beenone of the most significant exercises of epistemic influence over the internalworkings of government in the last two decades.

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AAppppeennddiixx 11:: CChhrroonnoollooggyy ooff eevveennttss

DDaattee EEvveenntt

1983 March: Nick Greiner becomes Leader of Opposition

1985 Public Sector Accounting Standards Board publishes Research Monograph (no.5)raising, amongst other matters, whether accrual or cash accounting is best for thepublic sector

1986 Victorian A-G (Richard Humphry) argues for AA SA PAC recommends AA for agencies with operating expenses greater than $5m. Tony Harris (later to become NSW A-G) supports AA for all government in his

commentary on ASA Annual Research in Government Accounting Lecture

1987 The NSW and Victorian As-G present papers to the PACs Biennial ConferenceGovernment A Big Business advocating AA

SA PAC repeats recommendation of AA for major asset holding agencies November: ASA convenes Sydney seminar on AA with New York Comptroller

(Edward Regan) and Arthur Andersen US Partner & Director of Government ServicesIndustry Program (Morton Egol) as keynote speakers

1988 February: NSW PAC convenes Accrual Accounting Seminar (200 attendees) A few days after the PAC Seminar (Moore 1988, p.166), Opposition Leader Greiner

outlines his management strategy including AA and a week later Labor TreasurerBooth indicates he is thinking about AA

March: Greiner Government elected July: Curran Report published. One term of reference was to advise on the impact

of, and procedures involved in, applying full AA (NSW Commission of Audit 1988).Arthur Andersen commissioned to prepare an appendix on AA for the final report.

1989 SA PAC recommends AA for all government agencies in its 1988 Annual Report PSASB issues Exposure Draft ED50 Financial Reporting by Local Government

1990 May: Premiers Conference: NSWG requests a Working party on financialinformation harmonisation; Premiers establish the Working Party on GovernmentFinancial Information (WPonGFI)

December: PSASB issues AAS27 Financial Reporting by Local Government

1991 February: Treasury Heads set up the Working Party on AA May: Premiers Conference: receives WponGFI report recommending a Working

Party on Accrual Accounting July: Special Premiers Conference: sets up Steering Committee for National

Performance Monitoring of GTEs and asks it to refine national accounting standardsincluding asset valuation

1991/92 NSW Budget Paper No. 2 notes 3 year strategy to adopt AA AARF, PSASB issues Discussion Paper No.16, Financial Reporting by Government

Departments Special Premiers Conference agrees that the States will move towards uniformity in

budget presentation and show a reconciliation of budget results and data on aGovernment Finance Statistics (GFS) basis (Walker 1995a, p.4)

October: Victorian Government commits to implementing AA... continued

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1992 January: All Treasuries decide to fund the PSASB to produce a standard onDepartments (Ryan, 1999, p.176)

May: Heads of Treasuries Working Party on Accrual Accounting produceunpublished Commonwealth report Accounting and Financial Reporting in thePublic Sector; recommendations appear lukewarm and allow adoption or not; PercyAllan later says its recommendations were not as averse to AA as most of itsmembers were at the outset of the exercise (Ryan, 1995, p.208)

June: AARF issues Exposure Draft ED55 Financial Reporting by GovernmentDepartments

1992/93 NSW Budget Papers present 1st whole of government financial report onan accrual basis called comprehensive accounting

November: Commonwealth Government commits to implementing AA

1993 Public Finance & Audit (Budget) Amendment Act empowers NSWG Treasurer todepart from ABS standards on reporting by changing definition of GFS

Report of the Victorian Commission of Audit Vol 1 argues that the VictorianGovernment should introduce a system of full accrual accounting (p.iv)

June: Independent Commission to Review State Finances in Western Australiareports on the benefits of comprehensive financial reporting on an accrual basis butnotes that NSW has had to move ahead of the accounting profession and with a lackof consensus on conceptual issues (Walker, 1995b, p.10)

December: AARF issues AAS29 Financial Reporting by Government Departments (tohave effect 31.12.96)

1994 First NSW Public Accounts (1993-94) prepared on an accrual basis for the budgetsector (Walker, 1995b, p.5)

April: Treasurer requests PAC enquiry into accrual accounting implementation inNSW

Commonwealth Government presents trial basis whole of government financial reporton an accrual basis

December: PAC holds seminar on AA implementation progress

1995 March: ED62 Financial Reporting by Governments

1996 June: PAC concludes NSW can be proud of its achievement as the 1st jurisdiction toimplement AA; estimates minimum implementation cost at $52m. (Public AccountsCommittee, 1996)

November: PSASB issues AAS31 Financial Reporting by Governments (to have effect30.6.99)

Abbreviations:AA: Accrual AccountingAARF: Australian Accounting Research FoundationABS: Australian Bureau of StatisticsA-G: Auditor-GeneralASA: Australian Society of Accountants (later Australian Society of Certified Practising

Accountants and later CPA Australia)GFS: Government Finance StatisticsGTE: Government Trading EnterprisePAC: Public Accounts CommitteePASAB: Public Sector Accounting Standards BoardSA: South AustraliaWPonGFI: Working Party on Government Financial Information

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NNootteess

1. This is notwithstanding Balls point that in the public sector the predominance ofthe accounting imperative suggests that management accounting never has beendistinct from financial accounting (2001, p.297).

2. There may be some scepticism that users as defined in this study would necessarilyrely on ABFR as their primary data source. Such scepticism points to an unfulfilledresearch area which is outside the ambit of this paper and has been highlighted byothers as an important future research question (Guthrie, 1998a; Potter, 2002).

3. I am grateful to Professor Allan Barton for the insight that draws a lineage fromWilenskis work to NSW ABFR. Wilenskis two reports now stand as a forcefulargument for breaking the inertia of NSW public administration in many fields.

4. One contributor to the Victorian Congress of the Australian Society of Accountantsnoted in November 1987 I am well aware that the majority of the accountingprofession is disinterested in the topic (of public sector accrual accounting) and many government accountants are hostile at any suggestion of accrual accounting(Walker, 1987, p.1). He went on however to acknowledge the efforts of the thenVictorian Auditor-General in attempting to overcome this negative attitude to publicsector accrual accounting.

5. These seminars were dominated by management consultants from the Big Sixaccounting firms and their activity signposts the failure of prior promoters such asthe Auditors-General in contrast to the Big Six promoters. Support for theassessment that the Auditors-General and some interested public servants had failedto achieve change to this point (1988) is provided by Ryan (1995, p.195) in whichshe cites a PSASB Chairperson: Humphry and Shand who were both high profiledid not make any progress (Richard Humphry then being the Victorian Auditor-General and David Shand then being a senior Commonwealth public servant). Inadditional support of this observation it can be noted that David Shand had beenadvocating public sector accrual accounting, without any success, from as early as1983 when employed in the Victorian public sector.

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Accrual Accounting in the Public Sector - NSW Case