Public Sector to Public Services: 20 years of ‘Contextual’ Accounting Research

1 ‘Alternative’ accounting research was defined in detail in Broadbent and Guthrie (1992, pp. 3-31). As indicated in the body of this paper, there have been a substantial number of articles since 1992 and ‘contextual’ accounting research is well established.

2 See, various other papers in this special issue that review ‘contextual’ accounting research, AAAJ, Vol. 21, No. 2, 2008.

3 The request was to review and critique the subject area allocated, in this case public sector accounting. Each review and critique was to engage a range of literature, not just AAAJ. We chose to include a range of ‘contextual’ accounting journals. Commissioned papers were asked to outline the state of the sub-discipline, a discussion of its relevance to accounting and policy making and exploration of avenues for future research.

4 Particular topics have been explored, for example in Financial Accountability and Management’s special edition on the Modernisation of the Public Sector in November 2001.

5 Public service accounting research (PSAR) is the term used in our review to describe this area.

6 In undertaking this analysis we were strongly influenced by Parker’s (2005) approach to a literature review and are grateful for his support in adopting this approach.

7See, for more details http://web.worldbank.org/WBSITE/EXTERNAL/WBI/WBIPROGRAMS/PSGLP/0,,menuPK:461646~pagePK:64156143~piPK:64154155~theSitePK:461606,00.html (Accessed 10^th May 2007).

8 This study reviews papers up to December 2006, which when considered with those reviewed in Broadbent and Guthrie (1992), means that at least 20 years of accounting research has been reviewed.

9 Other journals, such as Australian Accounting Review (AAR), were excluded because they are not available in public electronic form and therefore would have been very difficult to analyse.

10 American Mainstream is that research which has become mainstream in the US, but which we would see as providing a very narrow view of accounting. Hence the label here of ‘American Mainstream’ to signify the American-centricity of the approach. In 1992, we used the label ‘alternative’ to indicate the contextual and critical emphasis of the work we reviewed at that time and we retain that label. Now in using the labels ‘mainstream’ and ‘contextual’, we recognise the extent to which this might signify relative rankings and do not wish to concede a primacy to the notion of mainstream. Instead we simply wish to note the strength of this approach in the US whilst highlighting the strength of the ‘contextual’ approach in other parts of the scholarly world.

11 The database was constructed from a review of the selected journals and is populated with nearly 500 journal articles. The full list of journal articles reviewed and the coding criteria and worksheets are available from the authors. The reference list to this paper includes illustrations from the literature review used in the paper.

12 See, Hutton (2006), executive summary report of The Work Foundation’s public value consortium November 2006. ‘Deliberative democracy and the role of public managers.’ The full report is to be found at http://www.theworkfoundtion.com/publicvalue/research/index.aspx (accessed 20 April 2007).

13 Because the authors have focused their own research interests in the UK (Broadbent) and Australia (Guthrie), these are the two countries from which illustrations are drawn, however many other nation states could equally be used as examples.

14 In retrospect different structures of administration in different nations make this bounding more complex (see, for instance, Olson et al., 1998, Guthrie et al., 2005, Jones et al., 2002).

15 The use of the words ‘private’ and ‘third’ sectors indicates a different ownership, control and legal governance structure for organisations located in these sectors. For instance, in the private sector, characterised by private ownership of capital, we have private companies, listed companies, trusts, etc. Whilst in the third sector we have charities, churches, non-profit organisations and other bodies, which are characterised not by state ownership but by community bodies, whether these are motivated by religion, politics or other beliefs, and a not-for-profit objective. However, we use the word private to indicate both private ownership and third sector involvement.

16 Not only individual reviews of the literature have been produced, but also aspects of PSAR have been explore in special editions of various journals. For instance, “special themed” editions of AAAJ on public private partnerships and FAM on modernisation (2001) and performance audit (2007).

17 See, for example, see the Sydney Morning Herald who have produced an extensive press report http://www.smh.com.au/pdf/waterreport.pdf (accessed 1 May 2007).

18 PPPs are partnerships of public and private providers working together usually in a contractual relationship to provide services (English and Guthrie, 2003). A significant element of this is where private contractors build and service infrastructure that provide public services for a contractual fee. In the UK a significant sub-set of these are called Private Finance Initiative schemes. They have been used to build infrastructure such as roads and hospitals. This is also the case in Australia. It is argued that costs are reduced as risk is handed to those best able to manage it thus reducing overall cost. The failure of schemes such as the Cross City Tunnel link in Sydney and the Royal Armouries Museum in Leeds in the UK demonstrates that risk is not necessarily transferred (English, 2007).

19 The modernisation of the public sector was early characterised as New Public Management (Hood, 1995) and later accounting technologies as New Public Financial Management (Olson et al., 1998).

20 As well as ensure that agents do what the nation state requires.

21 As will be discussed in some detail in section 5.

22 Also they have different accountability and governance arrangements and are regulated through contractual relationships rather than share ownership or an independent regulatory body. PPPs are now an established means of service provision and, like PBE, they introduce an element of private sector involvement into the provision of public services. PPP/PFIs nevertheless remain part of the public services and are, in many nations, a significant means of service delivery.

23 A further discussion of the differences between technical accounting, technical contextual accounting and contextually technical accounting can be found in Broadbent and Guthrie (1992),

24 Illustrations from the reviewed literature only are provided. It would be impracticable to list all authors and articles within the text and references.

25 These will be discussed at some length in section 5 and will not be detailed here but comprise the introduction of accrual accounting and the use of partnership working in the context of PPP/PFI.

26 The articles were also coded for various fields and from these the three dominant trends are reported here. Full details of this analysis are available from the authors.

27 For instance, Laughlin, who has looked more widely at accounting regulation as well as having researched in the public services more generally, now sits upon the UK’s Accounting Standards Board’s Committee for Accounting for Public-Benefit Entities (CAPE) looking at the development of Statements of Recommended Accounting Practices (SORPs) for public service organisations. Lapsley was a previous holder of this position, whilst Heald sits upon the Financial Reporting Advisory Board (FRAB) advising the Treasury on public sector accounting. David Mayston has also acted as an advisor to government. Allan Barton is active in the policy circles in Australia.

28 The Langlands (2004) ‘good practice’ guide emerged from the work of a commission chaired by Sir Alan Langlands and sought to set out generic guidelines for the range of organisations providing public services. The thrust of the approach to governance is founded on the importance of outside membership at Board level – in order to provide a more detached view along with particular expertise – and on the issue of risk management.

29 A themed issue of Public Money and Management (Volume 7 Number 4, September 2007) provides a set of papers illustrating a range of views from academics as well as practitioners that illustrate the variety of positions that are taken in this respect.

30 Started in 2004 and running for 5 years, directed by Professor Christopher Hood, see www.publicservices.ac.uk (accessed 1 September 2007).

31 The work is indeed individually significant.