Accounting History 2002 Christensen 93 124

8/10/2019 Accounting History 2002 Christensen 93 124

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

Wales government

Mark ChristensenSouthern Cross University

AbstractAccounting technologies have dominated public sector management

reforms and accrual based nancial reporting has been signicant amongst these

technologies. This paper examines the process of change in the New South Wales

Governments earl adoption of accrual based nancial reporting. The studs

main ob!ective is to present a histor that identies the agents of change

promoting and facilitating an earl adoption of public sector accrual accounting.

The main primar data source for this research was interviews with three

categories of participants who had some involvement in the decision that dates

bac" to the late #$%&s. 'istorical research methods were used within an

analtical framewor" provided b a proposed variant of (uders )#$$*+

,ontingenc -odel. The paper nds that a revised ,ontingenc -odel is useful as

a framewor" and that the ma!or role plaed b management consultants was a

signicant aspect of the case stud.

.ewords/public sector; accrual accounting; accounting history; NewSouth Wales

Introduction

The dramatic emergence of public sector accounting from a prolonged

period of ossication represents a !uncture in accounting histor that demands

some analsis. Such analsis could be an apt instance of where research of public

sector accounting histor has been identied as a fruitful area ),arnegie 0

Napier1 #$$21 p.34+ even though it remains still grossl under5researched. Whilst

there has been a rapidl growing literature on 6New 7ublic -anagement8 )N7-+1

including contributions from authors debating the worth of the term itself1 there is

not a signicant accounting histor literature dealing with specic N7-accounting reforms such as the adoption of accrual accounting. 9nstead the

literature has noted that accounting technologies have dominated N7- reforms

)Guthrie et al.1 #$$$: 'ood1 #$$;: (apsle1 #$$$: elated to that literature is some evidence that the

adoption of accrual accounting has not produced the gains originall expected of

it )?ones 0 7uglisi1 #$$4: -ile 0 >ead1 3&&&: obinson1 #$$%+.

A denitive assessment of the cost5benet of adopting accrual accounting

is an outstanding tas". Although some argue that an assessment ma not be

possible )@unnell 0 ,ooper1 #$$%+1 before such an assessment can be attempted

it is useful to develop a literature on the histor of public sector accrual

accounting in Australia. 9t is the histor of one earl adopter of accrual based


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nancial reporting that this stud addresses. The New South Wales Government

)NSWG+ was the second government in the world and the rst government in

Australia to adopt accrual based nancial reporting )A@>+. As such an earl

adopter1 its stor is useful in particular to researchers interested in the

widespread adoption of public sector accrual accounting whilst also adding to the

mosaic that is emerging on how New 7ublic -anagement nancial technologies

came to dominate recent public administration. An additional motivation for this

paper is that a histor of the development of A@> in NSW can form a base from

which evaluations of A@> ma be developed.

,urrentl1 6accounting histor stands as a vibrant discipline1 characterised

b international interest1 a breadth of scope that is near uni=ue in academic

accountanc1 and a passion among its adherents that has driven its successes8

)@leischman 0 >adcliBe1 3&&&1 p.C;+. 9n the spirit of such vibranc this paper uses

an oral histor approach as prompted b ,arnegie and Napier )#$$2+1 'ammond

and Si""a )#$$2+1 and 7ar"er )#$$$+ to derive some of its primar data.

9ndividuals who were prominent in the decision to adopt A@> are interviewed to

generate much of the primar data. These individuals include the then NSW

7remier and Treasurer1 the Director5General of the 7remiers Department andthe Ender5Secretar of the NSW Treasur as well as others who formed a decision

elite and an interested group of outsiders. Analsis of data is underta"en with the

aid of an interpretational model derived from a contingenc view of public sector

accounting change )(uder1 #$$31 #$$*+.

This paper is structured as follows. @irstl a review of the relevant literature

is presented. @ollowing this review a proposed model for interpretation of the

historical data is brieF presented. An interpretational histor of NSW A@> is

then presented in a manner that facilitates testing of ve hpotheses developed

from a model of public sector accounting change. ,onclusions together with

suggestions for further research are presented in the nal section.

Relevant literature

With the exception of ocial5tpe advocacies on behalf of accrual

accounting as well as various seminars1 such as those organised b the NSW

7ublic Accounts ,ommittee in #$%% and #$$*1 the literature regarding public

sector accrual accounting is relativel limited. obinson1 #$$%: Shand1 #$$&+. an1 #$$$: >an et al., #$$$: >an1 #$$%+.

>ans wor" )especiall #$$;+ provides an indepth analsis of events

between #$42 and #$$C that led to reforms of Australian public sector nancial

reporting. >ans contribution is signicant but it does not deal specicall with

NSW nor does it appl a set of lenses that lead to the analsis of the tpe


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provided here. That there has been no substantive analsis of the NSW case is

perhaps not surprising since there is generall a dearth of research on either the

origins or the conse=uences of public sector accounting change )Guthrie1 #$$%a:

>an1 #$$;+. @urther1 with the exception of the wor" of Guthrie )#$$*+1 >an

)#$$;+ and Wal"er )#$$;a and #$$;b+1 there remains a lac" of detailed case

studies of public sector accounting practices in the context of the prevailing

organisational elements )roadbent 0 Guthrie1 #$$3: Wildavs"1 #$%%1 p.#&4+.

This stud attempts to partl redress that void. 'owever1 one element in the

literature that has developed some cases of public sector accounting change is in

the international comparative eld where (uders wor" has been central.

9n the last decade1 the most signicant contribution to understanding public

sector accounting change has been (uders Governmental Accounting 9nnovation

-odel )hereafter1 "nown as the 6,ontingenc -odel8+ )(uder1 #$$3+. The

,ontingenc -odel was formulated to better understand factors aBecting

adoption of public sector accounting innovations. 9t posits that change is

explained b interactions between four modules/ stimuli1 structural variables of

information users1 structural variables of information producers1 and

implementation barriers )(uder1 #$$3+. The model has been widel applied )Hl5atanoni and ?ones1 #$$2: Godfre1 et al., #$$2: Godfre1 et al., 3&:

humawala1 #$$4: (i"ierman1 #$$2: (uder1 #$$3 and #$$*: -onsen 0 Nasi1 #$$%:

-ontesinos 0 argues1 #$$2: 7allot1

#$$2: Iamamoto1 #$$$: + such that it has proven to be robust and adaptable

),han et al.1 #$$21 p.$+. As such (uders model oBers itself as a suitable

candidate to use in a theoreticall informed histor of the adoption of A@>.

Notwithstanding criticisms of eBorts to use theoreticall informed histories

to determine causalit )


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activities of both the accounting profession and public commentators.

$sers of Information"$oI#

Eo9s are political actors including -inisters1 an et al., 3&&&+. Additionall1 operationalising the

6general public8 as a concept and measuring the socio5structural variables

suggested b (uder present diculties that outweigh the benet of considering

this variable which1 at best1 is thought to be a 6bac"ground inFuence8 )7ollitt 0

ouc"aert1 3&&&1 p.CC+. Hxclusion of the general public means the Eo9 categor of

actors consists of political and administrative operatives. Such a categorisation is

similar to (uders >econsidered,ontingenc -odel in an application designed to

suit 6Non5American Anglo5 Saxon countries8 )(uder1 #$$*1 p.#3+. The rationale for

this is that political actors are motivated b the pressure to remain politicallcompetitive to use public sector accounting reports. Similarl1 administrative

actors with an accountabilit role )Auditors5General and 7ublic Accounts

,ommittees+ will also turn to accounting information.3 This depiction of Eo9s is

consistent with 7ollitt and ouc"aerts description of the role plaed b a political

and administrative elite in public management reform )3&&&1 pp.3*5C%+.

With respect to the adoption of A@>1 it is hpothesised )'C+ that the Eo9s

responded to the N7- stimuli and pressure from 7o,s: in turn the Eo9s exertedpressure on the 7roducers of 9nformation to implement A@>.

!roducers of Information"!oI#7o9s are bureaucratic actors with some responsibilit for accounting

information. This responsibilit can be exerted b a central agenc )tpicall

Treasur or 7remiers Department+ as well as b managers of line agencies where

,H


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Casestud of public sector accounting change

The above description of the modied contingenc model and identication

of ve hpotheses las the foundation upon which a histor of NSWs earl

adoption of A@>1 as a particular accounting change1 ma be underta"en. This

section consists of three parts. 9t rstl describes the methodolog used to

develop that histor. The second part of this section presents a chronolog and

context of the events whilst the third part analses the histor b using theframewor" of the modied contingenc model. The analsis reports ndings with

respect to each of the ve hpotheses posed above.

Methodolog

The case stud has been constructed using an historical analsis )7revitset al.1

#$$&a+ of primar data gathered from interviews of elite decision5ma"ers and

reviews of documentar sources. The documentar sources included wor"ing

part reports and minutes1 annual reports1 politicians and senior bureaucrats

speeches1 polic statements1 and reports of and submissions to various bodies of

en=uir.

To develop a histor1 6facts are necessaril selected and organised through

a !udgemental process constrained b time and are provisional according to the

historians perception of the contextual variables of the period studied8 )7revits

et al., #$$&b1 p.#*4+. The revised contingenc model was used to order the data

gathering for development of the histor. The use of a model in an histor

carries a number of ris"s1 not the least being that the researcher ma be

prompted to interweave fact and opinion in a predisposition to nd onl

conrming evidence )Tson1 #$$C1 p.#C+. 'owever1 it must be recognised that it is

6impossible to separate the past from our interpretations of it8 )Ga"in1 #$$%1p.2CC+ and the use of a model1 such as the one proposed in this stud1 is a

!ustiable techni=ue aimed at ma"ing the resulting interpretation coherent. This

paper does not enter the debate around the relation of historical research and

explanation )eenan1 #$$%: -iller 0 Napier1 #$$C+ but instead aims to clearl

articulate its methodolog as an aid to the reader )@leischman et al., #$$2b:

@leischman 0 >adcliBe1 3&&&: 7ar"er1 #$$4+. @urther1 it is hoped that calls for

multi5paradigmatic histories )@leischman et al.1 #$$2a: @leischman et al., #$$2b:

7ar"er1 #$$$+ ma prompt other researchers to consider the histor of A@> from

another perspective and so demonstrate the important point that there are

6man plausible histories of the same events8 ),arnegie 0 Napier1 #$$21 p.#4+.The interview5based primar data was gathered from face5to5face

interviews structured around a series of open5ended =uestions that were the

same for each interviewee within a cohort )but diBerent between cohorts+. 9n one

case a telephone interview was substituted where a face5to5face interview could

not be arranged. 9nterviewees were grouped into three cohorts of elites ),oleman

0 S"ogstad1 #$$&+ on the basis of the revised contingenc model/

1. Esers of information/ two interviewees L 9nterviews Number # and 3.

2. 7roducers of information/ three interviewees L 9nterviews Number C1 * and ;.

3. 7romoters of change/ two interviewees L 9nterviews Number 2 and 4.

9nterviews were conducted between -arch and ?une 3&&& and tpicall too"

one hour but ranged in length from ;& minutes to 3.; hours. All interviewees

agreed to the audiotaping of their interview and whilst note5ta"ing did ta"e place

during the interviews1 this was "ept to a minimum. ,ondentialit of

interviewees comments was promised and so attribution of comments here is b


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wa of reference to a uni=ue 9nterview Number lin"ed to a cohort but not

identifing the interviewee. Names and relevant roles of interviewees within each

cohort are given in Table #.

Since the interview data is a signicant part of the primar data for this

research some comments on oral histor techni=ues are warranted. Whilst oral

evidence is rare in accounting histories it does have a long lineage of usage b

historians )Douglas et al.1 #$%%: 7ar"er1 #$$$+. The advantages of oral evidence

are man ),arnegie 0 Napier1 #$$2: 'ammond 0 Si""a1 #$$2+ but theoutstanding reason for its use in this histor lies in the realisation that as a

relativel recent event with some degree of commercial condentialit1 the

adoption of A@> lac"s documentar evidence other than 6ocial8

pronouncements.


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advertising of vacancies1 abolition of seniorit5based promotions1 and mar"et5

based pa scales.

M Hnsuring 6competitive neutralit8 through mechanisms li"e transfer pricing

and competitive tendering.

The principles of corporatisation identied b -oore went beond

Government Trading Hnterprises and were implemented in inner budget

organisations. Among the conse=uences of these changes that have most

relevance to the histor of A@> in NSW were/

M Hxpectations of increased accountabilit.

M -oves towards a smaller public sector in both functions delivered and assets

controlled.

M Hmphasis on productivit and econom.

-oores analsis is conned to NSW but it is not contradicted b otherswith an Australia5wide perspective at the same time )see1 for example1 7ar"er 0Guthrie1 #$$&+. Two milestones assisted -oore in his understanding of the sea ofchange he was experiencing and chronicling. @irstl1 the election of a government

led b -r Nic" Greiner and secondl production of the 6,urran >eport8 )NSW,ommission of Audit1 #$%%+ re=uested b -r Greiner in the rst months of hisgovernment. The election of the Greiner Government was important because ofits espoused vision of 6NSW 9ncorporated8 and the attached importance ofrunning the State li"e a business. The ,urran >eport was an explicit statementarguing the benets of appling a 6corporate management framewor"8 which6features man of the management tools widel emploed in the private sector ...in tune with the approaches to public sector reform which are being =uite widelproposed and adopted8 )Groom1 #$$&1 p.#**+. The ,urran >eport tied togethermost of the sea of change in which the NSW public sector found itself in #$%%.

@urther1 the ,urran >eports recommendation that accrual accounting be adoptedb the NSW public sector has been described as its 6most innovative and radical8)Groom1 #$$&1 p.#;C+.

The above5mentioned context identies the themes of change relevant to the

NSWG decision in #$%% to adopt A@> and its initial implementation in #$$3 for

the #$$3J#$$C nancial statements. Appendix # provides a chronolog of the

events surrounding the histor. The chronolog can be roughl split into three

phases/

M the pre5#$%4 discussionJagitation phase1 when the case for accrual

accounting was being put:

M the #$%% decision phase1 when government made a commitment to adoptaccrual accounting: and1

M the post5#$%% implementation phase1 when actions were ta"en at a

Departmental level to enact the change.

Within the discussion phase1 pre5#$%%1 the role of the Auditors5General1

both State and ,ommonwealth1 deserves special note. >an )#$$%1 p.;34+

provides evidence of the activities of the Auditors5General in arguing for accrual

accounting but there is also evidence that these arguments were largel

unsuccessful. 7erhaps the most active Auditor5General1 -r en >obson of NSW1

put it best when he stated/ 6Hverbod L and 9 mean everbod L was against me

)about the need for accrual accounting+. The thought 9 was an idiot or

something. ut 9 believed strongl that unless accrual accounting was used1 there

wouldnt be proper decisions made8 )Soh1 #$$3+. >obson went on to explain that

onl when Greiner turned accrual accounting into an election issue did it achieve

acceptance. As a result it is argued here that whilst the Auditors5General ma


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have been active in their support for change1 the were not able to exert enough

inFuence to ma"e an diBerence in the rst phase of the histor.* The second

phase of the histor is mar"ed b Greiners political commitment in earl #$%%

and the subse=uent 6,urran ,ommission8 report endorsing accrual accounting in

NSW. 9n the nal phase the main activit is change of accounting sstems and a

series of reviews examining implementation progress. A notable feature of this

phase was the inabilit of the accounting profession to match the speed of the

NSW reforms and so accounting standards lagged behind. 9n eBect NSW wasforced to push ahead with its accounting reforms in the absence of agreed

standards from the profession.

Given this broad chronolog and its context1 the remainder of this section

discusses the histor as interpreted with the aid of the >evised ,ontingenc

-odel.

Stimuli

All three cohorts of interviewees identied two information seminars on

public sector accrual accounting as being crucial milestones associated with a

shift from discussion to commitment. Whilst these seminars were not the stimuli

for change1 the provide evidence as to the stimuli that were having an impact on

the groups of actors considered in this case. These seminars were organised

rstl b the Australian Societ of Accountants )now ,7A Australia+ in con!unction

with Arthur Andersen 0 ,o. )#$%4+ and secondl the NSW 7ublic Accounts

,ommittee )#$%%+. Secondar sources written close to the events )-oore1 #$%%:

Soh1 #$$3+ and those with more time to introspect )>an1 #$$; and #$$%+ also

conrm this attribution. This nding is a crucial one since it begins the

identication of the eBective promoters; behind the idea of adopting A@> and

it identies the stimuli for change. Whilst this is consistent with >an )#$$;+ an

inFuential Eo9 also identied an earlier seminar that inFuenced his thin"ing/ a'arvard usiness School nance 7rofessor )- ,oler ,rum+ argued for public

sector accrual accounting whilst visiting Sdne perhaps as earl as #$4* )Eo91

9nterview #+.

The seminars concentrated on the need for government to constrain debt )the

6problem8+ and argued the benets of appling private sector discipline on

government )the 6solution8+. The arguments presented bore a strong consistenc

with a number of doctrines that 'ood )#$$;+ identies as underling N7- and the

spea"ers propositions are rml embedded in a neo5liberal concept of

government in societ. @or example1 one spea"er cites public choice theor as the

grounding for public sector accrual accounting )>egan1 #$%41 pp.45%+. @ollowingthe seminars and the election of the Greiner Government in #$%%1 the issue of

being seen to have robust and professional debt management was conrmed as

being a goal sought b the government )Eo91 9nterviews # and 3+ although there

was confusion between debt and liabilities )7o,1 9nterview 2+. Some 7o9s

recognised the opportunities for change presented b the stimuli/ 6reform was in

the air L ou "now the >oger Douglas thing L in a diBerent era we wouldnt have

been able to do it )introduce accrual accounting+8 )7o91 9nterview *+.

The evidence regarding stimuli for change supports 'pothesis '#. A

number of stimuli for change are identied. The single most important one wasthe desire to bring the public sector and private sector closer together in theirmanagement because of the philosoph of the Greiner government. 'owever1this was either initiated or legitimated b an espoused concern regarding 6better8economic management and improved public sector debt control )Greiner1 #$$C+.The stimuli for change were strong in motivating the 7o,s and Eo9s but of smallinFuence on the 7o9s as evidenced b the clear statement of priorities b the


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Treasur Secretar placing accrual accounting below other reforms )Allan1 #$%%1p.*#+.

!romoters of Change

Whilst the #$%4 ASA and #$%% 7ublic Accounts ,ommittee seminars identif

the stimuli1 the also identit management consulting rms as being the

important 7o,s. -anagement consulting rm partners dominated both seminars

and argued that A@> was necessar for asset management and debt control

)Hgol1 #$%4: -cGinniss1 #$%%: 7later1 #$%%: >egan1 #$%4+. Amongst thearguments presented was the assertion that public sector accrual accounting had

been implemented overseas )although this point was subse=uentl refuted b the

NSW Treasur after a =uic"l arranged stud tour of the ESA in #$%%: 7o91

9nterview ;: 7o91 9nterview

C: 7o,1 9nterview 4+. 9ndicative of their inFuence at this earl stage was the

consultants organising of overseas contacts for a bureaucrats stud tour and

one rm1 Arthur Andersen1 writing select parts of the Greiner Governments Audit

,ommission discussion of the desirabilit of implementing accrual accounting

)NSW ,ommission of Audit1 #$%%1 Appendix @+. @urther1 at the urging of a ma!or

rm )7o,: 9nterview 4+ a Treasurers Accounting Advisor 7anel )the 7anel+comprising senior partners from all the ma!or accounting rms was instigated b

the 7remier and Treasurer.

The 7anel provided 6an independent source of advice to the Treasurer and

Treasur on emerging accounting issues aBecting the public sector8 )NSW

Government1 #$$#1 p.C&+. The 7anel institutionalised the inFuence of consultants

on accrual accounting issues and it followed an %C13;& consultanc

competitivel won b ,oopers 0 (brand to advise on 6development of a @inancial

>eporting ,ode for udget Sector agencies converting to accrual accounting8

)NSW Government1 #$$#1 p.#+. >ecognition of the 7anels importance has

been explicit/ 6the 7anel was ver important and was ver successful8 )7o919nterview *+

and 6it was a group of experts saing this is the right thing to do8 )Eo91 9nterview

#+. @urther evidence of the importance of consultants is strong/ 69 dont "now how

man consultants we emploed but the were right through the place8 )7o91

9nterview *+. 69 would li"e to ac"nowledge the contribution from the Obig six

accounting rms8 )-ellor1 #$$;1 p.#%+ and1 6a number of consultants approached

Treasur promoting accrual accounting )prior to #$%%+8 )7o91 9nterview C+.

The actions of the consulting rms during implementation of the change

were particularl inFuential. 6The 7remier arranged a meeting with the -anaging

7artners of 7-G 7eat -arwic"1 7rice Waterhouse1 ,oopers 0 (brand1 Arthur

Andersens1 Deloittes and Hrnst 0 Ioung )and that meeting resulted in+ the

secondment of a manager from each rm into a department for approximatel six

months to act as pro!ect manager8 )Scullion1 #$$#1 p.C&5#+ for the

implementation of accrual accounting in select departments. The importance of

consultants is conrmed in interviews with all three cohorts of interviewees. @or

example1 6the were supportive of it and it was helpful to them L it would be too

cnical a view to sa that public sector wor" was previousl a whole area that

their rms did not have available to them and that the were onl loo"ing for

wor" L but the were certainl supportive of a convergence of public and privateaccounting standards because it was in the interests of the good management of

the State8 )Eo91 9nterview #+. @urther1 6it was expected1 and 9 thin" it is now

realised1 that such s"ill transfer and such exchange )with consultants+ is

benecial to NSW agencies as much as it is to the rms themselves8 )-ellor1

#$$;1 p.#%+.


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9t is hpothesised in the >evised ,ontingenc -odel that there are 7o,s in

addition to the consulting rms. 'owever1 the data from this case does not

support an argument that the other 7o,s were inFuential in the adoption of A@>.

Although a number of other academic and commentator 7o,s were urging

caution )Groom1 #$$&: -oore1 #$%$: 7ainter1 #$$&: Wal"er1 #$%$: Wal"er1 #$%%+

the do not appear to have had an inFuence )Eo91 9nterview #: 7o91 9nterview C+.

9n consideration of 'pothesis '31 it is concluded that the most important

7o,s were the management consulting rms since the initiated discussion ofaccrual accounting and then provided the necessar wherewithal to achieve its

implementation. The abilit of the rms to provide the wherewithal in terms of

computing sstems and technical accounting advice meant that the consultants

were not simpl used to legitimate philosophical change/ the were at the core of

implementing real accounting change. There was a sense of epistemic strength

)(aughlin 0 7allot1 #$$%+ behind this since it was initiall consistent with

professional bod support and there was a sense that 6it was right8 )7o,1

9nterview

4+. 'owever1 it would be naive to believe that participation in the reform process1

including representation on the important Treasurers Accounting Advisor 7anel1would not lead to economic gain as the public sector opened up for advisor wor"

)7o,1 9nterview 2: 7o,1 9nterview 4+. Whatever their motives1 the consultants

dominated the process of change and controlled the discourse and were

6institutionalised at the centre of the executive machiner8 )Saint5-artin1 #$$%1

p.C*2+. 'owever1 this domination of the changes 6encouraged little critical

reFection or a full appreciation of several practical diculties associated with

their implementation8 )7otter1 #$$$1 p.*2+. 9n this regard1 two 7o9s commented on

the resultant frustration with the accounting profession in not resolving technical

accounting issues related1 in most part1 to asset measurement =uandaries )7o91

9nterview *: 7o9 9nterview C+.

$sers of Information

The most dominant plaer in the entire case stud was -r Nic" Greiner1

7remier and Treasurer1 as a Eo9. Hach interviewee ac"nowledged this and some

even argued that he ma have been the onl politician who understood the

diBerence between cash and accrual accounting. 'is demand for diBerent

information was insistent and determinant. As a result1 Treasur priorities were

changed )7o91 9nterview C+1 resources were devoted to the tas" )7o91 9nterview *+1

private sector advisors were used )7o,1 9nterview 4+1 and impediments such as

inade=uate s"ills or prior accounting records were not allowed to divert thechange )Eo91 9nterview 3+. 9ndeed1 Greiners role in this historical account provides

a strong example of


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#$%4+. 'owever1 as noted above1 the Auditors5General activism was limited to

the earl part of the histor and it was not successful. 9ndeed1 the most active

Auditor5 General1 -r en >obson1 retired earl before the rst accrual based

reports were prepared. Additional evidence of the lac" of inFuence Auditors5

General was the exclusion of Audit ichard

'umphr in three pivotal positions/ ,hairman and -ember of the 7ublic Sector

Accounting Standards oard )#$%C to #$$C+1 Pictorian Auditor5General )#$%2 to

#$%%+ and Director5General1 NSW 7remiers Department )#$%% to #$$*+. 'is

progression through these positions meant that ultimatel he was at the centre of

the implementation of A@> in NSW )>an1 #$$%1 p.;34+.

A snerg developed between the Eo9s and the 7o9s as soon as the Eo9s had

signaled their support for change. @or example1 69f the politician shows an interest

in something the public servants will become enthused about it L and there was a

sense in Treasur of a desire to be at the forefront8 )Eo91 9nterview #+. The sensethat Treasur was at the cutting edge of public nancial reform was publicl

expressed with pride in the form of gratitude for the Treasurers 6encouragement

and support Q in changing the States nancial management1 accounting and

reporting sstems to amongst the most advanced in the world8 )NSW

Government1

#$$#1 p.i+.

There is strong evidence to support 'pothesis 'C since the Eo9s noted that

the were following an agenda set b N7- ideas )the stimuli for change+ and thatthe demanded change from the 7o9s to implement A@> )Eo91 9nterviews # and

3+.

!roducers of Information

Although the 7o9s were content to implement government polic on accrual

accounting1 the were initiall unenthusiastic/ 6for the moment )other reforms+

have a higher administrative priorit than accrual accounting8 )Allan1 #$%%1 p.*#+.

Their later enthusiasm for accrual accounting has been described as 6turning

adversit into triumph8 )7o,1 9nterview 2+.

was later favoured b the

7o9s was to avoid problems associated with updating accounting sstems and

recruiting staB. 9t was considered that accrual accounting would mean standardaccounting software could be used and accounting graduates recruited with

greater success )7o91 9nterview ;+. 'owever1 more importantl1 the 7o9s

enthusiasm seems to emanate from a desire to meet the needs of the forceful

Eo9s. 9t is also worth noting that the 7o9s outside of the central agencies were not

of an signicant positive or negative inFuence in the change. These 7o9s were

reluctant to use accrual based reports and did not demonstrate a 6complete

acceptance and internal use of accrual information8 )7ublic Accounts ,ommittee1

#$$21 p.%&+. Nevertheless1 this reluctance did not impede implementation of

A@> which has since been characterised as having ta"en on a 6crash5through8

approach )@unnell 0 ,ooper1 #$$%1 p.3&3+.

Accounting staB in Treasur and the 7remiers Department were happ to

respond to the demands of the Eo9s and to use this inFuence to bring themselves

to the forefront of their profession. 9n the case of the head of 7remiers

Department this response was consistent with his earlier wor" as a Eo9 in the


13/15

,ommonwealth Department of @inance and the Pictorian Auditor5General so as to minimise the impact of the

implementation barriers as discussed next.

Implementationbarriers

There were varing levels of concern with impediments to a smooth

implementation of accrual accounting. The 7o9s noted the lac" of accounting s"ills

in the public sector as an impediment: for example1 6man of the accountants in

government were not accountants as ou would thin" of them in the private

sector L for man of them it was a nightmare for them to move across to an

accrual sstem8 )7o91 9nterview *+. This was conrmed in #$$* b the 7ublic

Accounts ,ommittee arguing that there was still a 6need to improve the s"ills and

training for accounting and nance ocers8 )7ublic Accounts ,ommittee1 #$$;1

p.i+. 'owever1 the Eo9s paid less attention to the impact of this impediment. @orexample1 69 dont thin" that the cost of conversion from cash accounting to

accrual would have been an reason to dela its implementation L whether it was

fairl costl or not costl it would not have made an diBerence8 )Eo91 9nterview

3+. Another impediment that worried 7o9s was the inade=uate state of asset

records/ 6We had things )assets+ we didnt even "now aboutR8 )7o91 9nterview *+.

'owever1 the Eo9s were onl interested in this problem as a reason to push

accrual accounting faster rather than to become more cautious/ 6how could we

manage if we didnt "now what assets we owned Q )so+ our general approach to

government was to push on all fronts L if ou ta"e a ver careful1 measured

approach all it means is that nothing ever happens8 )Eo91 9nterview #+. Again1consistent with N7-1 the government was explicit in tring to use accrual

accounting to force departments to recognise and value assets in their control

)Greiner1 #$$C1 p.;*+.

Two 7o9s noted that the absence of public sector accounting standards was

a problem. 'owever1 given that this was not an issue to other actors1 it is not

examined here as a barrier to implementation. The apparentl resigned

acceptance of this problem probabl results from another accident of histor/ the

'ead of 7remiers Department had been a ,hairman of the 7SAS and so was not

prepared to allow technical accounting debates to interfere with the pace of

reform.

With respect to 'pothesis ';1 barriers to implementation were of less

importance than expected. Hxplicit statements from both Eo9s noted that cost ofimplementation was not important )and not even estimated+. Sincehigher implementation barriers impose higher implementation costs it is apparentthat the were not important in the decision to proceed or not. 'owever1 bothbarriers mentioned b almost all interviewees )low level of accounting s"ill in thepublic sector and poor asset records+ provided the promoters of change with theopportunit to sell their wares. That is1 signicant expense was incurred onconsultancies to advise on accrual accounting1 train staB and review assetrecords. As an aside1 it is interesting that information on the cost of implementinga new accounting sstem designed to provide improved information 6is unli"elever to be reached as agenc records in this respect are unreliable8 )7ublicAccounts ,ommittee1 #$$21 p.;$+.

Conclusion


14/15

9mplementation of A@> has been a reform that has been promulgated

widel at a signicant cost )7ublic Accounts ,ommittee1 #$$2+. The fact that NSW

was amongst the rst implementing !urisdictions in the world ma"es the case

stud worthwhile since it can throw light on the process of change. So as to order

the data gathered in this case stud a >evised ,ontingenc -odel was proposed

and from this ve hpotheses were developed. These hpotheses were examined

in light of oral evidence gathered from individuals who were central in the events

surrounding the decision to adopt A@>.The histor identies stimuli that made certain pro5active political Esers of

9nformation receptive to the arguments presented b consulting rms in the role

of 7romoters of ,hange. These arguments were solidl based within the

management doctrines described b 'ood )#$$;+ as characterising N7-. The

Esers subse=uentl exerted signicant force on central agencies in their role as

7roducers of 9nformation. This force was designed to achieve the adoption of

A@> with little concern for an associated problems. As a conse=uence the

central agencies of Treasur and 7remiers Department responded with

enthusiasm to implement A@>. The subse=uent implementation of A@> was

heavil dependent on the services of management consultants of whom some

had been ver vocal in the arguments advanced for the change to accrual

accounting. Thus1 the prime actors in the NSWG decision to adopt A@> were the

7remier and private sector consultants. To this team were added central agenc

7o9s at the implementation of the decision.

A signicant aspect of the histor presented in this stud is the explicit

ac"nowledgment that implementation cost was not considered as a barrier to

change. 9ndeed1 increased cost in the form of signicant usage of external

consultants was seen as a necessar strateg to overcome the ac"nowledged

implementation barriers of inade=uate accounting s"ills and poor asset records.Whilst this strateg resulted in more speed change it probabl was the genesis

of subse=uent criticisms. Two main criticisms of the )probable+ high cost and

rushed approach stand out. @irstl that the cost of implementation is not "nown

)7ublic

Accounts ,ommittee1 #$$2+. Secondl1 that 6insucient planning and

development wor" was done initiall in lin"ing accrual accounting bac" to the

budgeting process1 in exploring and dening the li"el problems and in

developing options and solutions8 )'ic"ling ,orporation1 #$$41 pp.iv5v+. These

criticisms and the nding that implementation cost was not important in the

decision to underta"e the change point increasingl to the usefulness ofresearching whether A@> has been worthwhile.

Two other signicant aspects of the histor relate to the promoters of A@>/

the Auditors5General1 whilst being active1 were not eBective in their advocac but

the ig Six accounting rms were successful in their calls for A@>. This contrast

raises =uestions now of whether the accountabilit rationale for A@>1 as

advanced b the Auditors5General1 has been delivered in the private sector

version of public sector A@>1 as implemented b a large number of consultants.

The Auditors5General and 7ublic Accounts ,ommittees are now in a position to

investigate this outstanding =uestion. The longstanding and continuing

debate about the appropriate degree of t of commercial accounting andreporting practices for public sector organisations increasingl calls for further

research of these issues )arton1 #$$$: ,arnegie 0 WolniKer1 #$$$: Guthrie1

#$$%a: 7otter1

3&&3: Wal"er1 #$%$+.


15/15

The data of the case stud conrms 'potheses '#1 '3 and 'C whilst

oBering mixed support for '* and re!ecting ';. ,ollectivel these results

demonstrate the usefulness of the >evised ,ontingenc -odel. 'owever1 the9mplementation arrier module deserves modication to incorporate thepossibilit1 as in this case1 that implementation problems1 such as highimplementation costs1 ma not be perceived as impedients to change1 especiallwhere such implementation costs are not readil ascertainable andJor areperceived to not outweigh the anticipated benets of the change.

9t is ac"nowledged that in its approach and in its 6evidence8 this historicalaccount presents foci of potential conFict1 !ust as ,arnegie and Napier )#$$21

pp.#*5;+ aptl warn are features of most accounting histories. Whilst these

conFicts ma stand as legitimate limitations to the research the are also pointers

to areas where additional research should be fruitful.

This research has a number of limitations. These limitations result from the

case stud being an interpretational histor and as such it cannot promise to

present a denitive view of events )7revits et al.1 #$$&a+. The interpretation of

this histor provided b wa of appling the revised contingenc model ma be

criticised as being a 6doctrinaire8 approach )Tson1 #$$C+. 'owever1 it is not

argued that it precludes alternative interpretations. Were the facts or the

personalities to be diBerent there is no guarantee that the cases outcome would

substantiall diBer. Although an interesting dinner part conversation

amusement1 the second guessing of histor is the unattainable test of the

analsis presented in interpretational histories )for example1 6would accrual

accounting have been implemented if Nic" Greiner was not elected in #$%%8+.

Such second guessing is especiall fraught in cases such as this where the histor

is relativel recent and is shrouded in commerciall condential practices. 9t is

appropriate to note that 6it should not surprise us in the least that histories will

be written and rewritten as laers of narrative1 interpretation and explanation aredeveloped with the lapse of time and the revisiting of archives b successive

generations of scholars8 )7ar"er1 #$$$1 p.3*+.

ichard 'umphr held three

pivotal positions: -r Don Nicholls moved from being at the centre of NSWs

adoption of accrual accounting to being the author of four States audit

commissions for incoming governments.

@urther research !ustied b the issues considered here probabl needs to

address the outstanding =uestion of costs and benets from accrual accounting:

that is1 whether A@> and accrual budgeting1 have delivered the benets as

promised b its vocal advocates in the #$%&s. Such research would do well to

wor" from the most important conclusion of this histor/ the role of management

consultants in the promotion1 design and execution of public sector accrualaccounting has been one of the most signicant exercises of epistemic inFuence

over the internal wor"ings of government in the last two decades.

Documents

Accounting History 2002 Christensen 93 124