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DOI: 10.1177/103237320200700205

2002 7: 93Accounting History Mark Christensen

governmentAccrual accounting in the public sector: the case of the New South Wales

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Accrual accounting in the

public sector: the case of the New South Walesgovernment

Mark ChristensenSouthern Cross University

Abstract Accounting technologies have dominated public sector management

reforms and accrual based financial reporting has been significant

amongst these technologies. This paper examines the process of change

in the New South Wales Government’s early adoption of accrual based

financial reporting. The study’s main objective is to present a history

that identifies the agents of change promoting and facilitating an early

adoption of public sector accrual accounting. The main primary data

source for this research was interviews with three categories of

participants who had some involvement in the decision that dates back

to the late 1980s. Historical research methods were used within an

analytical framework provided by a proposed variant of Luder’s (1994)

Contingency Model. The paper finds that a revised Contingency Model

is useful as a framework and that the major role played by management

consultants was a significant aspect of the case study.

Keywords: public sector; accrual accounting; accounting history; New

South Wales

93








Acknowledgements: The author gratefully acknowledges the participation and generous donation of time by each

of the interviewees. The paper has also benefited from the comments of two anonymous reviewers, Professors

Garry Carnegie and Don Scott and participants at the Third APIRA Conference held in Adelaide in July 2001

and 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 and

contributor to improvements and understanding of NSW public sector administration during the 1970s and

1980s. Dr Moore died in a self-administered euthanasia pact with his wife, Dr Erica Bates, in March 1989 after

both had been diagnosed with terminal illnesses. Dr Moore chronicled developments in NSW administrative

history and that history provides the context within which this paper needs to be understood.

Address for correspondence:

Mark Christensen

School of Commerce & Management

Southern Cross University

P.O. Box 157

Lismore NSW 2480

Australia

Telephone: +61 2 6620 3787

Facsimile: +61 2 6621 3428

E-mail: [email protected]

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Introduction

The dramatic emergence of public sector accounting from a prolonged period of

ossification represents a juncture in accounting history that demands some analysis.

Such analysis could be an apt instance of where research of public sector

accounting history has been identified as a fruitful area (Carnegie & Napier, 1996,

p.27) even though it remains still grossly under-researched. Whilst there has been

a rapidly growing literature on “New Public Management” (NPM), including

contributions from authors debating the worth of the term itself, there is not a

significant accounting history literature dealing with specific NPM accounting

reforms such as the adoption of accrual accounting. Instead the literature has noted

that accounting technologies have dominated NPM reforms (Guthrie et al., 1999;

Hood, 1995; Lapsley, 1999; Olson et al., 1998) whilst some researchers have

questioned whether the accounting changes have been a rhetorical support for other

changes with hidden objectives (Guthrie, 1998a; Lapsley, 1999; Pollitt, 1995).

Related to that literature is some evidence that the adoption of accrual accounting

has 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 is

an 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 in

Australia. It is the history of one early adopter of accrual based financial reporting

that this study addresses. The New South Wales Government (NSWG) was the

second government in the world and the first government in Australia to adopt

accrual based financial reporting (ABFR). As such an early adopter, its story 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 Public Management financial technologies came to dominate recent public

administration. An additional motivation for this paper is that a history of thedevelopment of ABFR in NSW can form a base from which evaluations of ABFR

may be developed.

Currently, “accounting history stands as a vibrant discipline, characterised by

international interest, a breadth of scope that is near unique in academic

accountancy, and a passion among its adherents that has driven its successes”

(Fleischman & Radcliffe, 2000, p.35). In the spirit of such vibrancy this paper uses

an oral history approach as prompted by Carnegie and Napier (1996), Hammond

and Sikka (1996), and Parker (1999) to derive some of its primary data. Individuals

who were prominent in the decision to adopt ABFR are interviewed to generatemuch of the primary data. These individuals include the then NSW Premier and

Treasurer, the Director-General of the Premier’s Department and the Under-

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Christensen: Accrual accounting in the public sector








Secretary of the NSW Treasury as well as others who formed a decision elite and

an interested group of outsiders. Analysis of data is undertaken with the aid of an

interpretational 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 literature

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

historical data is briefly presented. An interpretational history of NSW ABFR is

then presented in a manner that facilitates testing of five hypotheses developed

from a model of public sector accounting change. Conclusions together with

suggestions for further research are presented in the final section.

Relevant literature

With the exception of official-type advocacies on behalf of accrual accounting as

well as various seminars, such as those organised by the NSW Public Accounts

Committee in 1988 and 1994, the literature regarding public sector accrual

accounting is relatively limited. One part of the literature has debated whether parts

of 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 (see

especially various contributions in Australian Accounting Review issues in the

1990s); whether the change is more than rhetoric (Guthrie, 1998a); and, whether

the change will have unintended consequences (Potter, 1999; Robinson, 1999).

Whilst this body of literature is important, in the absence of a history of public

sector accrual accounting, it is built on an incomplete base. Only recently has

attention turned in part to presenting an historical view of why and how the change

to accrual accounting took place (Ryan, 1999; Ryan et al., 1999; Ryan, 1998).Ryan’s work (especially 1995) provides an indepth analysis of events

between 1976 and 1993 that led to reforms of Australian public sector financial

reporting. Ryan’s contribution is significant but it does not deal specifically with

NSW nor does it apply a set of lenses that lead to the analysis of the type provided

here. That there has been no substantive analysis of the NSW case is perhaps not

surprising since there is generally a dearth of research on either the origins or the

consequences 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 developed

some cases of public sector accounting change is in the international comparative

field where Luder’s work has been central.In the last decade, the most significant contribution to understanding public

sector accounting change has been Luder’s Governmental Accounting Innovation

Model (hereafter, known as the “Contingency Model”) (Luder, 1992). The

Contingency Model was formulated to better understand factors affecting adoption

of public sector accounting innovations. It posits that change is explained by

interactions between four modules: stimuli, structural variables of information

users, 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 (Chan

et al., 1996, p.9). As such Luder’s model offers itself as a suitable candidate to use

in a theoretically informed history of the adoption of ABFR.

Notwithstanding criticisms of efforts to use theoretically informed histories to

determine causality (Oldroyd, 1999), this paper will use a variant of the

Contingency Model as a framework from which the historical data can be sieved

and 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 an

outline of the revised Contingency Model.

A revised contingency model of public sector accounting change

The model proposed here is a variant of Luder’s Contingency Model developed

after the benefit of discussions with Professor Luder (2000). Whilst the

Contingency Model has been used without modification to inform a history of

public sector accounting (Khumawala, 1997), a number of factors promptmodification of the model for this study. Firstly, empirical support cannot be found

for Luder’s inclusion of the general public as an influential force on public sector

accounting (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 of

individuals needs to be incorporated in explanations of public sector accounting

change (Godfrey et al., 2001, p.280) and so the Contingency Model could benefit

from a behavioural orientation. Thirdly, Luder’s model focuses on the likelihood of

change rather than the purpose of change. To better understand the latter it isnecessary to consider how the accounting change has been harmonised with the

management system (Yamamoto, 1999, p.296). As a result, there is worth in

97









considering the relationship between management accounting and financial

accounting when examining public sector accounting change.1

Incorporating responses to these three difficulties of Luder’s model hasresulted in development of a variant model. The proposed model consists of three

groups of actors that respond in part to each other but also react to a stimuli for

change whilst taking into account barriers which impede the change. The model

thus has five parts:

1. External stimuli for change (an exogenous force): relatively wide discussion

centred on a perceived problem and offering a philosophically based solution

to that problem.

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

wanting change.

3. Producers of information: public servants in central agencies and government

agency managers (CEOs, accountants, line managers).

4. Users of information: politicians holding responsibility for individual

portfolios or whole-of-government as well as Opposition politicians and

Parliamentary adjuncts such as the Auditors-General, Public Accounts

Committees and Parliamentary Committees.

5. Implementation barriers (an endogenous force): characteristics of the public

sector 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 model

is briefly described below. For each of the model’s parts a hypothesis is proposed

and subsequently considered in light of the data revealed in the history presented in

this paper.

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Figure 1: Process Model of Public Sector Accounting Change

Legend: Determinant influence

Significant influence

Minor influence

99


Promotors of change:

• Consultants

• Commentators

• Academics• Organisations

representing

professional

interests

Users of information:

• Ministers

• Political advisors

• Opposition members• Parliamentary

adjuncts such as

Auditors-General,

Public Accountants

Committees &

Parliamentary

Committees

Producers of

information:

• Central agencies

• Managers of lineagencies

• Public sector

accountants

Stimuli

Implementation

barriers

Implementation of a new public sector accounting system








Stimuli

External to the public sector is a context established by the prevailing political and

social environment. This context is manifested in the collective debate that isobserved in popular media (print and electronic) and tangential sources such as

academic discourse, and comments of international bodies and professional

representative organisations. The coherency of the debate is reflected in some level

of repetitiveness in commentaries demonstrating, firstly, that there is a problem

and, secondly, that there is a solution available to the problem.

With respect to the adoption of ABFR, it is hypothesised (H1) that the ideas

which have been characterised as “New Public Management” (Hood, 1995) and,

consistent with a neo-liberal view of government in society (Funnell, 2001), were

important stimuli. That is, hypothesis H1 is that the stimuli leading to theaccounting change were arguments that public sector debt needed to be reduced

and private sector technologies needed to be adopted by public sector managers.

Promoters of Change (PoC)

PoCs are identifiable people and/or organisations that promote recognition of the

problem and promulgate a solution. Although these promoters are identifiable, they

may not be publicly active nor necessarily known to the general public. However,

they are known to the Users of Information (UoI) either through personal contact

or through the office held by the Promoter. The motivation of PoC to use their

access 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 global

accounting firms acting as management consultants were prominent PoCs. In

addition there was also a less important, but influential, reinforcing effect from the

activities of both the accounting profession and public commentators.

Users of Information (UoI)

UoIs are political actors including Ministers, Opposition members and political

advisors but also include the Auditors-General, Public Accounts Committees andParliamentary Committees. In contrast to Luder (1992, 1994) but consistent with

the evidence cited above regarding low or no usage of public sector accounting

reports by citizens, the revised model does not attribute any significant role to the

general public or citizens. The advantage of excluding the general public is that it

avoids the uncertainty surrounding the usefulness of annual reports to the public

(Ryan et al., 2000). Additionally, operationalising the “general public” as a concept

and measuring the socio-structural variables suggested by Luder present difficulties

that outweigh the benefit of considering this variable which, at best, is thought to

be a “background influence” (Pollitt & Bouckaert, 2000, p.33). Exclusion of thegeneral public means the UoI category of actors consists of political and

administrative operatives. Such a categorisation is similar to Luder’s 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 actors

are motivated by the pressure to remain politically competitive to use public sector

accounting reports. Similarly, administrative actors with an accountability role

(Auditors-General and Public Accounts Committees) will also turn to accounting

information.2 This depiction of UoIs is consistent with Pollitt and Bouckaert’s

description of the role played by a political and administrative elite in public

management reform (2000, pp.24-38).

With respect to the adoption of ABFR, it is hypothesised (H3) that the UoIs

responded to the NPM stimuli and pressure from PoCs; in turn the UoIs exerted

pressure on the Producers of Information to implement ABFR.

Producers of Information (PoI)PoIs are bureaucratic actors with some responsibility for accounting information.

This responsibility can be exerted by a central agency (typically Treasury or

Premier’s 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 of

UoIs, although they may in some instances be proactive (Ryan, 1995).

Accordingly, there is a two-way relationship expected here since the PoIs are best

placed to advise UoIs regarding the impact of a proposed accounting change. Part

of the advice given by the PoIs will relate to barriers to implementation of the

accounting change.

Implementation Barriers

Implementation Barriers are features of the political or bureaucratic environments

that act to increase the cost or time required to implement accounting change.

Implementation Barriers are changed through the efforts of UoIs and PoIs but there

is also a two-way relationship with Promoters of Change since they must take

Implementation Barriers into account in their arguments. Also, the Implementation

Barriers may form part of the reason for subsequent actions by the Promoters as,for example, when a consulting firm subsequently provides services with respect to

ways in which an Implementation Barrier may be overcome.

With respect to the adoption of ABFR, it is hypothesised (H5) that the

Implementation Barriers were inadequate public sector accounting expertise and

also flawed accounting records, especially asset records.

Case study of public sector accounting change

The above description of the modified contingency model and identification of fivehypotheses lays the foundation upon which a history of NSW’s early adoption of

ABFR, as a particular accounting change, may be undertaken. This section consists

of three parts. It firstly describes the methodology used to develop that history. The

101









second part of this section presents a chronology and context of the events whilst

the third part analyses the history by using the framework of the modified

contingency model. The analysis reports findings with respect to each of the fivehypotheses posed above.

Methodology

The case study has been constructed using an historical analysis (Previts et al.,

1990a) of primary data gathered from interviews of elite decision-makers and

reviews of documentary sources. The documentary sources included working party

reports 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 a

judgemental process constrained by time and are provisional according to thehistorian’s perception of the contextual variables of the period studied” (Previts et

al., 1990b, p.147). The revised contingency model was used to order the data

gathering for development of the history. The use of a model in any history carries

a number of risks, not the least being that the researcher may be prompted to

interweave fact and opinion in a predisposition to find only confirming evidence

(Tyson, 1993, p.13). However, it must be recognised that it is “impossible to

separate the past from our interpretations of it” (Gaffikin, 1998, p.633) and the use

of a model, such as the one proposed in this study, is a justifiable technique aimed

at making the resulting interpretation coherent. This paper does not enter the debate

around the relation of historical research and explanation (Keenan, 1998; Miller &

Napier, 1993) but instead aims to clearly articulate its methodology as an aid to the

reader (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 to

consider the history of ABFR from another perspective and so demonstrate the

important 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 interviews

structured around a series of open-ended questions that were the same for each

interviewee within a cohort (but different between cohorts). In one case a telephone

interview 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 one

hour 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 the

interviews, this was kept to a minimum. Confidentiality of interviewees’ comments

was 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.

Table 1: Interviewees (note: order of mention does not equate to Inter

viewNumber)

Cohor

t Name of Inter

viewee Prior relevant role of Inter

viewee

User of Nick Greiner Premier and TreasurerInformation Peter Collins Treasurer and Deputy Premier

(UoI)

Producer of Percy Allan Under-Secretary, Treasury

Information Richard Humphry Director-General, Premier’s 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 Australian

Commissions of Audit; Secretary,Victorian Treasury and author of “An Independent

Review of Victoria’s Finances”

Promoter of Bob Walker Professor of Accounting and author of weekly

Change (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 Treasurer’s Accounting

Advisory Panel

Since the interview data is a significant part of the primary data for this research

some comments on oral history techniques are warranted. Whilst oral evidence is

rare 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 reason

for its use in this history lies in the realisation that as a relatively recent event with

some degree of commercial confidentiality, the adoption of ABFR lacks

documentary evidence other than “official” pronouncements. Official documentsare typically written with a narrow perspective and a sanitised rendition of events

such that they are inadequate in highlighting problems, disagreements and the self-

interested manoeurvings of individuals and organisations. Therefore oral evidence

103









proves an invaluable resource to achieve a better understanding of the actions and

motivations 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 mercy

of interviewees’ memories, censored by a reluctance to reveal potentially sensitive

and controversial information, influenced by the researcher’s behaviour and diluted

by the act of transcription (Hammond & Sikka, 1996; Parker, 1999). With these

warnings in mind, the remainder of this section relates to the history of the

NSWG’s adoption of ABFR.

The events

Like all historical accounts, the history of the NSW Government’s decision to

implement ABFR should be considered in the context of its time. Overwhelmingly,that context was one of increasingly rapid change. Two major enquiries heralded

the period of change: the Royal Commission on Australian Government

Administration reporting in 1976 (for a useful summary of this Royal

Commission’s accounting impacts refer to Parker and Guthrie, 1990, pp.116-7);

and, the Review of NSW Government Administration conducted by Professor

Wilenski and reporting in 1977 and 1978. Neither of these enquiries recommended

ABFR but both set in train a series of changes that were to make ABFR appear to

be consistent with the overall direction of change.3 ABFR should not be seen as an

isolated event in an indeterminate sea of change. Instead it was consistent with, and

reinforcing of, the general tide of movement reflecting adoption of private sector

practices in the management of public sector organisations. Although the wave of

that tide was only beginning to crest in the late 1980s, Dr Barry Moore, as an

interested chronicler of public sector change, was able to identify the principles of

corporatisation as being the essence of the sea change to that date. These principles

are summarised as follows: (Moore, 1989, p.109-115):

• Demands for clear objectives, including explicit financial objectives, for all

government bodies.• Downstream autonomy as a means of diminishing the control of central

agencies.

• Increased emphasis on performance monitoring which had been “a pervasive

feature of administrative life for at least 15 years” (Moore, 1989, p.112).

• Changed management incentives including performance related pay, external

advertising of vacancies, abolition of seniority-based promotions, and market-

based pay scales.

• Ensuring “competitive neutrality” through mechanisms like transfer pricing and

competitive tendering.

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The principles of corporatisation identified by Moore went beyond Government

Trading Enterprises and were implemented in inner budget organisations. Among

the 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.

Moore’s analysis is confined to NSW but it is not contradicted by others with an

Australia-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 Mr

Nick Greiner and secondly production of the “Curran Report” (NSW Commission

of Audit, 1988) requested by Mr Greiner in the first months of his government. The

election of the Greiner Government was important because of its espoused vision

of “NSW Incorporated” and the attached importance of running the State like a

business. The Curran Report was an explicit statement arguing the benefits of

applying a “corporate management framework” which “features many of the

management tools widely employed in the private sector ... in tune with the

approaches to public sector reform which are being quite widely proposed and

adopted” (Groom, 1990, p.144). The Curran Report tied together most of the sea of

change in which the NSW public sector found itself in 1988. Further, the Curran

Report’s recommendation that accrual accounting be adopted by the NSW public

sector has been described as its “most innovative and radical” (Groom, 1990,

p.153).

The above-mentioned context identifies the themes of change relevant to the

NSWG decision in 1988 to adopt ABFR and its initial implementation in 1992 for

the 1992/1993 financial statements. Appendix 1 provides a chronology of the

events surrounding the history. The chronology can be roughly split into three

phases:

• 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 State

and Commonwealth, deserves special note. Ryan (1998, p.527) provides evidence

of the activities of the Auditors-General in arguing for accrual accounting but there

105









is also evidence that these arguments were largely unsuccessful. Perhaps the most

active 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 accrual

accounting). They thought I was an idiot or something. But I believed strongly that

unless accrual accounting was used, there wouldn’t be proper decisions made”

(Soh, 1992). Robson went on to explain that only when Greiner turned accrual

accounting into an election issue did it achieve acceptance. As a result it is argued

here that whilst the Auditors-General may have been active in their support for

change, they were not able to exert enough influence to make any difference in the

first phase of the history.4 The second phase of the history is marked by Greiner’s

political commitment in early 1988 and the subsequent “Curran Commission”

report endorsing accrual accounting in NSW. In the final phase the main activity ischange of accounting systems and a series of reviews examining implementation

progress. A notable feature of this phase was the inability of the accounting

profession to match the speed of the NSW reforms and so accounting standards

lagged behind. In effect NSW was forced to push ahead with its accounting reforms

in the absence of agreed standards from the profession.

Given this broad chronology and its context, the remainder of this section

discusses the history as interpreted with the aid of the Revised Contingency Model.

Stimuli

All three cohorts of interviewees identified 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 change,

they provide evidence as to the stimuli that were having an impact on the groups of

actors considered in this case. These seminars were organised firstly by the

Australian Society of Accountants (now CPA Australia) in conjunction with Arthur

Andersen & Co. (1987) and secondly the NSW Public Accounts Committee (1988).

Secondary sources written close to the events (Moore, 1988; Soh, 1992) and those

with 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 effective

promoters5 behind the idea of adopting ABFR and it identifies the stimuli for

change. Whilst this is consistent with Ryan (1995) an influential UoI also identified

an earlier seminar that influenced his thinking: a Harvard Business School finance

Professor (M Colyer Crum) argued for public sector accrual accounting whilst

visiting Sydney perhaps as early as 1974 (UoI, Interview 1).

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

“problem”) and argued the benefits of applying private sector discipline on

government (the “solution”). The arguments presented bore a strong consistencywith a number of doctrines that Hood (1995) identifies as underlying NPM and the

speakers’ propositions are firmly embedded in a neo-liberal concept of government

in 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 and

the election of the Greiner Government in 1988, the issue of being seen to have

robust and professional debt management was confirmed as being a goal sought bythe government (UoI, Interviews 1 and 2) although there was confusion between

debt and liabilities (PoC, Interview 6). Some PoIs recognised the opportunities for

change presented by the stimuli: “reform was in the air – you know the Roger

Douglas thing – in a different era we wouldn’t have been able to do it (introduce

accrual accounting)” (PoI, Interview 4).

The evidence regarding stimuli for change supports Hypothesis H1. A number

of stimuli for change are identified. The single most important one was the desire

to bring the public sector and private sector closer together in their management

because of the philosophy of the Greiner government. However, this was eitherinitiated or legitimated by an espoused concern regarding “better” economic

management and improved public sector debt control (Greiner, 1993). The stimuli

for change were strong in motivating the PoCs and UoIs but of small influence on

the PoIs as evidenced by the clear statement of priorities by the Treasury Secretary

placing accrual accounting below other reforms (Allan, 1988, p.41).

Promoters of Change

Whilst the 1987 ASA and 1988 Public Accounts Committee seminars identify the

stimuli, they also identity management consulting firms as being the important

PoCs. Management consulting firm partners dominated both seminars and argued

that ABFR was necessary for asset management and debt control (Egol, 1987;

McGinniss, 1988; Plater, 1988; Regan, 1987). Amongst the arguments presented

was the assertion that public sector accrual accounting had been implemented

overseas (although this point was subsequently refuted by the NSW Treasury after

a quickly arranged study tour of the USA in 1988; PoI, Interview 5; PoI, Interview

3; PoC, Interview 7). Indicative of their influence at this early stage was the

consultants’ organising of overseas contacts for a bureaucrats’ study tour and one

firm, Arthur Andersen, writing select parts of the Greiner Government’s Audit

Commission discussion of the desirability of implementing accrual accounting

(NSW Commission of Audit, 1988, Appendix F). Further, at the urging of a major

firm (PoC; Interview 7) a Treasurer’s Accounting Advisory Panel (the Panel)

comprising senior partners from all the major accounting firms was instigated by

the Premier and Treasurer.

The Panel provided “an independent source of advice to the Treasurer and

Treasury on emerging accounting issues affecting the public sector” (NSW

Government, 1991, p.30). The Panel institutionalised the influence of consultants

on accrual accounting issues and it followed an $83,250 consultancy competitivelywon by Coopers & Lybrand to advise on “development of a Financial Reporting

Code for Budget Sector agencies converting to accrual accounting” (NSW

Government, 1991, p.101). Recognition of the Panel’s 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, Interview

1). Further evidence of the importance of consultants is strong: “I don’t 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 six’

accounting firms” (Mellor, 1995, p.18) and, “a number of consultants approached

Treasury promoting accrual accounting (prior to 1988)” (PoI, Interview 3).

The actions of the consulting firms during implementation of the change were

particularly influential. “The Premier arranged a meeting with the Managing

Partners of KPMG Peat Marwick, Price Waterhouse, Coopers & Lybrand, Arthur

Andersens, Deloittes and Ernst & Young (and that meeting resulted in) the

secondment of a manager from each firm into a department for approximately sixmonths to act as project manager” (Scullion, 1991, p.30-1) for the implementation

of accrual accounting in select departments. The importance of consultants is

confirmed in interviews with all three cohorts of interviewees. For example, “they

were supportive of it and it was helpful to them – it would be too cynical a view to

say that public sector work was previously a whole area that their firms did not

have available to them and that they were only looking for work – but they were

certainly supportive of a convergence of public and private accounting standards

because 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 as

much as it is to the firms themselves” (Mellor, 1995, p.18).

It is hypothesised in the Revised Contingency Model that there are PoCs in

addition to the consulting firms. However, the data from this case does not support

an 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 do

not 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 of

accrual accounting and then provided the necessary wherewithal to achieve its

implementation. The ability of the firms to provide the wherewithal in terms of

computing systems and technical accounting advice meant that the consultants

were not simply used to legitimate philosophical change: they were at the core of

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

(Laughlin & Pallot, 1998) behind this since it was initially consistent with

professional body support and there was a sense that “it was right” (PoC, Interview

7). However, it would be naive to believe that participation in the reform process,including representation on the important Treasurer’s 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 consultants

dominated the process of change and controlled the discourse and were

“institutionalised at the centre of the executive machinery” (Saint-Martin, 1998,p.346). However, this domination of the changes “encouraged little critical

reflection or a full appreciation of several practical difficulties associated with their

implementation” (Potter, 1999, p.46). In this regard, two PoIs commented on the

resultant frustration with the accounting profession in not resolving technical

accounting issues related, in most part, to asset measurement quandaries (PoI,

Interview 4; PoI Interview 3).

Users of Information

The most dominant player in the entire case study was Mr Nick Greiner, Premier

and Treasurer, as a UoI. Each interviewee acknowledged this and some even arguedthat he may have been the only politician who understood the difference between

cash and accrual accounting. His demand for different information was insistent

and determinant. As a result, Treasury priorities were changed (PoI, Interview 3),

resources were devoted to the task (PoI, Interview 4), private sector advisors were

used (PoC, Interview 7), and impediments such as inadequate skills or prior

accounting records were not allowed to divert the change (UoI, Interview 2).

Indeed, Greiner’s role in this historical account provides a strong example of

Oldroyd’s (1999) “accident and personality” as being at the core of why causal

theories of history are undermined. Other UoIs such as the Public Accounts

Committees and Auditors-General had a minor influence limited only to early

stages 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 new

government even though they were not vote winners. “Even in 12 years’ retrospect

it would be kidding to suggest that it (accrual accounting) was a basic part of the

election 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 these

were external to the responsible central agencies of Treasury, Public Service Board

or Premier’s Department: the Auditors-General (Harris, 1995; Robson, 1987).

However, as noted above, the Auditors’-General activism was limited to the early

part 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 were

prepared. Additional evidence of the lack of influence Auditors-General was the

exclusion of Audit Office representation on the Premier’s 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 over

the full process of change. A notable instance of this was the role of Mr Richard

Humphry in three pivotal positions: Chairman and Member of the Public SectorAccounting Standards Board (1983 to 1993), Victorian Auditor-General (1986 to

1988) and Director-General, NSW Premier’s Department (1988 to 1994). His

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

the implementation of ABFR in NSW (Ryan, 1998, p.527).

A synergy developed between the UoIs and the PoIs as soon as the UoIs had

signaled their support for change. For example, “If the politician shows an interest

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

sense in Treasury of a desire to be at the forefront” (UoI, Interview 1). The sense

that Treasury was at the cutting edge of public financial reform was publiclyexpressed with pride in the form of gratitude for the Treasurer’s “encouragement

and support … in changing the State’s financial management, accounting and

reporting 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 that

they were following an agenda set by NPM ideas (the stimuli for change) and that

they demanded change from the PoIs to implement ABFR (UoI, Interviews 1 and

2).

Producers of Information

Although the PoIs were content to implement government policy on accrual

accounting, 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 “turning

adversity into triumph” (PoC, Interview 6).

One reason advanced as to why adoption of ABFR was later favoured by the

PoIs was to avoid problems associated with updating accounting systems and

recruiting staff. It was considered that accrual accounting would mean standard

accounting software could be used and accounting graduates recruited with greater

success (PoI, Interview 5). However, more importantly, the PoI’s enthusiasm

seems to emanate from a desire to meet the needs of the forceful UoIs. It is also

worth noting that the PoIs outside of the central agencies were not of any

significant positive or negative influence in the change. These PoIs were reluctant

to use accrual based reports and did not demonstrate a “complete acceptance and

internal use of accrual information” (Public Accounts Committee, 1996, p.80).

Nevertheless, this reluctance did not impede implementation of ABFR which has

since been characterised as having taken on a “crash-through” approach (Funnell &Cooper, 1998, p.202).

Accounting staff in Treasury and the Premier’s Department were happy to

respond 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 Premier’s Department

this response was consistent with his earlier work as a UoI in the Commonwealth

Department of Finance and the Victorian Auditor-General Office whereas in the

case of Treasury it involved realigned priorities.

There is data to support Hypothesis H4 by demonstrating responsiveness from

some PoIs to pressure from the UoIs. But there is not sufficient data to argue that a

truly two-way relationship existed. That is, the PoIs were not successful in

modifying the manner of implementing ABFR so as to minimise the impact of the

implementation barriers as discussed next.

Implementation barriers

There were varying levels of concern with impediments to a smooth

implementation of accrual accounting. The PoIs noted the lack of accounting skillsin the public sector as an impediment; for example, “many of the accountants in

government 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 accrual

system” (PoI, Interview 4). This was confirmed in 1994 by the Public Accounts

Committee arguing that there was still a “need to improve the skills and training for

accounting and finance officers” (Public Accounts Committee, 1995, p.i).

However, the UoIs paid less attention to the impact of this impediment. For

example, “I don’t think that the cost of conversion from cash accounting to accrual

would have been any reason to delay its implementation – whether it was fairly

costly 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 didn’t even know about!” (PoI, Interview 4). However,

the UoIs were only interested in this problem as a reason to push accrual accounting

faster rather than to become more cautious: “how could we manage if we didn’t

know what assets we owned? … (so) our general approach to government was to

push on all fronts – if you take a very careful, measured approach all it means is

that nothing ever happens” (UoI, Interview 1). Again, consistent with NPM, the

government was explicit in trying to use accrual accounting to force departments to

recognise and value assets in their control (Greiner, 1993, p.54).

Two PoIs noted that the absence of public sector accounting standards was a

problem. However, given that this was not an issue to other actors, it is not

examined here as a barrier to implementation. The apparently resigned acceptance

of this problem probably results from another accident of history: the Head of

Premier’s Department had been a Chairman of the PSASB and so was not prepared

to 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 of

implementation was not important (and not even estimated). Since higher

implementation 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 barriers

mentioned by almost all interviewees (low level of accounting skill in the public

sector and poor asset records) provided the promoters of change with theopportunity to sell their wares. That is, significant expense was incurred on

consultancies 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 new

accounting system designed to provide improved information “is unlikely ever to

be reached as agency records in this respect are unreliable” (Public Accounts

Committee, 1996, p.59).

Conclusion

Implementation of ABFR has been a reform that has been promulgated widely at a

significant cost (Public Accounts Committee, 1996). The fact that NSW was

amongst the first implementing jurisdictions in the world makes the case study

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

gathered in this case study a Revised Contingency Model was proposed and from

this five hypotheses were developed. These hypotheses were examined in light of

oral evidence gathered from individuals who were central in the events surrounding

the decision to adopt ABFR.

The history identifies stimuli that made certain pro-active political Users of Information receptive to the arguments presented by consulting firms in the role of

Promoters of Change. These arguments were solidly based within the management

doctrines described by Hood (1995) as characterising NPM. The Users

subsequently exerted significant force on central agencies in their role as Producers

of Information. This force was designed to achieve the adoption of ABFR with

little concern for any associated problems. As a consequence the central agencies

of Treasury and Premier’s Department responded with enthusiasm to implement

ABFR. The subsequent implementation of ABFR was heavily dependent on the

services of management consultants of whom some had been very vocal in thearguments advanced for the change to accrual accounting. Thus, the prime actors

in the NSWG decision to adopt ABFR were the Premier and private sector

consultants. To this team were added central agency PoIs at the implementation of

the decision.

A significant aspect of the history presented in this study is the explicit

acknowledgment that implementation cost was not considered as a barrier to

change. Indeed, increased cost in the form of significant usage of external

consultants was seen as a necessary strategy to overcome the acknowledged

implementation barriers of inadequate accounting skills and poor asset records.Whilst this strategy resulted in more speedy change it probably was the genesis of

subsequent criticisms. Two main criticisms of the (probable) high cost and rushed

approach stand out. Firstly that the cost of implementation is not known (Public

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Accounts Committee, 1996). Secondly, that “insufficient planning and

development work was done initially in linking accrual accounting back to the

budgeting process, in exploring and defining the likely problems and in developing

options and solutions” (Hickling Corporation, 1997, pp.iv-v). These criticisms and

the finding that implementation cost was not important in the decision to undertake

the change point increasingly to the usefulness of researching whether ABFR has

been 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 but

the Big Six accounting firms were successful in their calls for ABFR. This contrast

raises questions now of whether the accountability rationale for ABFR, as

advanced by the Auditors-General, has been delivered in the private sector versionof public sector ABFR, as implemented by a large number of consultants. The

Auditors-General and Public Accounts Committees are now in a position to

investigate this outstanding question. The longstanding and continuing debate

about the appropriate degree of fit of commercial accounting and reporting

practices for public sector organisations increasingly calls for further research of

these 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 offering

mixed support for H4 and rejecting H5. Collectively these results demonstrate theusefulness of the Revised Contingency Model. However, the Implementation

Barrier module deserves modification to incorporate the possibility, as in this case,

that implementation problems, such as high implementation costs, may not be

perceived as impedients to change, especially where such implementation costs are

not readily ascertainable and/or are perceived to not outweigh the anticipated

benefits of the change.

It is acknowledged that in its approach and in its “evidence” this historical

account 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 areas

where additional research should be fruitful.

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

case study being an interpretational history and as such it cannot promise to present

a definitive view of events (Previts et al., 1990a). The interpretation of this history

provided by way of applying the revised contingency model may be criticised as

being a “doctrinaire” approach (Tyson, 1993). However, it is not argued that it

precludes alternative interpretations. Were the facts or the personalities to be

different there is no guarantee that the case’s outcome would substantially differ.Although an interesting dinner party conversation amusement, the second guessing

of 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 Nick

Greiner was not elected in 1988?”). Such second guessing is especially fraught in

cases such as this where the history is relatively recent and is shrouded incommercially confidential practices. It is appropriate to note that “it should not

surprise us in the least that histories will be written and rewritten as layers of

narrative, interpretation and explanation are developed with the lapse of time and

the 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 to

inform the history. For example, more finely detailed differentiation of the models’

groups of actors could have been developed. This is perhaps most important with

respect to the Users of Information where there are substantive differences betweengovernment and opposition political users as well as lobbyists. Further, the model

only allows an individual to be in one category of actors at a particular point of time

and this proves to be a limitation in understanding this history since some

significant individuals moved between roles as the history progressed. For

example, Mr Richard Humphry held three pivotal positions; Mr Don Nicholls

moved from being at the centre of NSW’s adoption of accrual accounting to being

the author of four State’s audit commissions for incoming governments.

Further research justified by the issues considered here probably needs to

address the outstanding question of costs and benefits from accrual accounting; thatis, whether ABFR and accrual budgeting, have delivered the benefits as promised

by its vocal advocates in the 1980s. Such research would do well to work from the

most important conclusion of this history: the role of management consultants in

the promotion, design and execution of public sector accrual accounting has been

one of the most significant exercises of epistemic influence over the internal

workings of government in the last two decades.

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Appendix 1: Chronology of events

Date Event

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 the

public 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 Conference

“Government – 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 Services

Industry 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 Treasurer

Booth 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 financial

information harmonisation; Premiers establish the Working Party on Government

Financial 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 standards

including 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 inbudget presentation and show a reconciliation of budget results and data on a

Government 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 on

Departments (Ryan, 1999, p.176)

• May: Heads of Treasuries Working Party on Accrual Accounting produce

unpublished Commonwealth report “Accounting and Financial Reporting in thePublic Sector”; recommendations appear lukewarm and allow adoption or not; Percy

Allan later says “its recommendations were not as averse to AA as most of its

members were at the outset of the exercise” (Ryan, 1995, p.208)

• June: AARF issues Exposure Draft ED55 “Financial Reporting by Government

Departments”

• 1992/93 NSW Budget Papers present 1st “whole of government” financial report on

an accrual basis called “comprehensive accounting”

• November: Commonwealth Government commits to implementing AA

1993 • Public Finance & Audit (Budget) Amendment Act empowers NSWG Treasurer to

depart from ABS standards on reporting by changing definition of GFS• Report of the Victorian Commission of Audit Vol 1 argues that “the Victorian

Government should introduce a system of full accrual accounting” (p.iv)

• June: Independent Commission to Review State Finances in Western Australia

reports on the “benefits of comprehensive financial reporting on an accrual basis” but

notes that NSW has had to move ahead of the accounting profession and with a lack

of consensus on conceptual issues (Walker, 1995b, p.10)

• December: AARF issues AAS29 Financial Reporting by Government Departments (to

have effect 31.12.96)

1994 • First NSW Public Accounts (1993-94) prepared on an accrual basis for the “budget

sector” (Walker, 1995b, p.5)• April: Treasurer requests PAC enquiry into accrual accounting implementation in

NSW

• Commonwealth Government presents trial basis whole of government financial report

on 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 to

implement AA; estimates minimum implementation cost at $52m. (Public Accounts

Committee, 1996)

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

Abbreviations:

AA: Accrual Accounting

AARF: Australian Accounting Research Foundation

ABS: Australian Bureau of Statistics

A-G: Auditor-General

ASA: Australian Society of Accountants (later Australian Society of Certified Practising

Accountants and later CPA Australia)

GFS: Government Finance Statistics

GTE: Government Trading EnterprisePAC: Public Accounts Committee

PASAB: Public Sector Accounting Standards Board

SA: South Australia

WPonGFI: Working Party on Government Financial Information

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Notes

1. This is notwithstanding Ball’s point that in the public sector the predominance of

the accounting imperative suggests that management accounting never has been

distinct from financial accounting (2001, p.297).

2. There may be some scepticism that users as defined in this study would necessarily

rely on ABFR as their primary data source. Such scepticism points to an unfulfilled

research area which is outside the ambit of this paper and has been highlighted by

others 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 from

Wilenski’s work to NSW ABFR. Wilenski’s two reports now stand as a forceful

argument for breaking the inertia of NSW public administration in many fields.

4. One contributor to the Victorian Congress of the Australian Society of Accountants

noted in November 1987 “I am well aware that the majority of the accounting

profession 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 then

Victorian Auditor-General in attempting to overcome this negative attitude to public

sector accrual accounting.

5. These seminars were dominated by management consultants from the Big Six

accounting firms and their activity signposts the failure of prior promoters such as

the Auditors-General in contrast to the Big Six promoters. Support for the

assessment that the Auditors-General and some interested public servants had failed

to achieve change to this point (1988) is provided by Ryan (1995, p.195) in which

she cites a PSASB Chairperson: “Humphry and Shand who were both high profile

did not make any progress” (Richard Humphry then being the Victorian Auditor-

General and David Shand then being a senior Commonwealth public servant). In

additional support of this observation it can be noted that David Shand had been

advocating public sector accrual accounting, without any success, from as early as

1983 when employed in the Victorian public sector.

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