The construction of an new accrual accounting system evidence from laboratory life: Campania region

Abstract

In recent decades the dissemination and the adoption of New Public Management (NPM) ideas has been significant within the new public sector (Hood 1991, 1995). The New Public Management is a model that privileges “quantification”, often by adopting managerial instruments from the business sector. The main points of NPM could be summarized as a replication of private sector practices focus on quantification, especially in accounting (Olson , et al., 1998). One such key innovation is the adoption of accrual accounting from business enterprise. The debates about the adoption of accrual accounting and financial reporting techniques by the public sector have been widespread over the last decade. Accrual-based system are not necessarily consistent with Public entities. Many scholars have discussed the (in)appropriateness of accrual-based accounting systems, as an alternative to cash-based or obligation-based systems (Pollit & Bouckaert, 2004; Broadbent & Guthrie, 2008). Conversely, some note that cash-based accounting does not allow the government to obtain all necessary information regarding liabilities and potential benefits related to investments (Christensen & Parker, 2010). Thus, the study of accrual accounting by governments is challenging for researches. In the literature on accrual accounting in the public sector, it is possible to distinguish at least two big opposite main streams, the first of these reflect questions as “why the adoption is desirable”. The study underlines the benefit and useful of information in terms of managerial effectiveness to move to accrual accounting (Hyndman & Connolly, 2011; Ryan, 1998); proponents of public sector reform depict bundles of techniques as politically neutral mechanisms for enhancing strategic decision making and for improved efficiency in evaluating performance and service costs (Guthrie, 1998). Most accrual accounting studies are ex-post studies; however, recently, the debate about accrual accounting has shifted recently onto implementation issue (Caccia & Steccolini, 2006; Lapsley & Wright, 2004; Broadbent & Guthrie, 2008). Thus, the second one ponders questions pertaining to the “complexity” in the translation of the accrual based methodologies adopted by private sector organizations into public sector agencies. This research is located in this stream. A literature review on NPM reveals that accrual accounting is depicted as self-evident in New Public Management literature (Lapsley, et al., 2009 ). However is problematic its implementations. After several years of this reform the unresolved question is: what is accrual accounting means in practice for government? For the majority of cases, our current knowledge is based on ex post studies, that is why we focus on the emergence of a system to enrich our understanding of what accrual accounting means in practice for government. This research analyzes the initial stage of development of an accrual accounting system. The research site is Italy, a country where a process of reform is underway across the whole government (Legislative Decree n. 118/2011). This research focus on the specific context of regional government also offers distinctive evidence because it has been neglected by the extant national (Caperchione, 2008) and international (Broadbent and Guthrie, 2008; Jagalla et al., 2011) literature. This research is largely informed by the social construction of science studies, whose most eminent scholar is Latour (Latour, 1979, 2013). Indeed, in science and technology studies there is a body of social studies that focuses on the creation of scientific facts and examines how the scientist interact to produce accepted technologies: the “social construction of technology” (SCOT). This research analyzes the initial stage of development of an accrual accounting system as the emergence of new technologies (Latour, 1987). Policy documents are the text by which government reform takes place. Adopting this framework, (policy as a blueprint) the analysis of relevant policy documents facilitates the capture of the meaning of accrual accounting and enhances understanding of how the process of reform takes place. Before analyzing the shaping of accrual accounting in the public sector, it is necessary to understand the meaning of accounting and to focus our attention on the analysis of two key elements behind a government process of reform: the first one is the policy documents by which the reform is disclosed; the second one is the networking of institutional actors behind the text and controversies between key institutional players, the policy makers. In this research the social-constructionism approach is adopted. The study setting for this research is the regional level of government (Campania region) where a trial period is underway. This work aims to participate in the debate on the effects of the decision to adopt accrual accounting in government, particularly in regional bodies. Campania is a region in the South of Italy where accrual accounting has not yet been implemented. Thus, the experimental introduction of accrual accounting in regional government offers an exceptional opportunity to study the manner by which such systems are enacted, constructed, fabricated (Preston, et al., 1992). The data for this study was collected in several ways: compiling and analyzing law and key policy documents, monitoring dedicated institutional websites. The discussions which took place through video- conversations in a region in the trial are analyzed. The main result of this research is: the adoption of accrual accounting is seen as self-evident by NPM advocates (Lapsley, et al., 2009 ). However, the evidence collected to date reveals an absence of a well- defined template for the implementation of accrual accounting in government. In particular problematic aspects in some technical issues: the interpretation and fabrications related to the shaping of the standard; the identification of administrative phenomena on an accrual basis, the introduction of new procedures to carry out the process, adaption of the structure for managing new information flows. This study contributes to understand the complexity of apparently neutral tools involved in a Public Sector reform. This research reveals the emergence of an accrual accounting system that relates to technical, managerial, and political influence. Accrual accounting implementation in central government has been studied in many countries with similar findings of difficulties in detecting effective systems in use. More recent studies of accrual accounting in Australia highlight the significant role of management consultants as interpreters of what accrual accounting is, or should be, the authors talked about a phantom image of accrual accounting” (Christensen and Parker, 2010). A recent study reveals that the reform in UK established accounting practice was reshaped by the adopters of accrual accounting, but the subsequent practices were still very different from private sector practice. The policy outcome is defined as “accounting mutations” (Lapsley, 2012). This work aims to participate in the debate on the effects of the decision to adopt accrual accounting in government, particularly in regional bodies. In the past, this perspective has been deployed in studies of accounting in action (Miller & O’Leary, 1990; Robson, 1992; Preston et al., 1992). [edited by author]