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158 Trang 12 List of Acronyms and Abbreviations AARF Australian Accounting Research Foundation AAS Australian Accounting Standard AASB Australian Accounting Standards Board ABC Activit
ACCRUAL ACCOUNTING AND PUBLIC SECTOR REFORM: NORTHERN TERRITORY EXPERIENCE Ali Rkein (Bachelor of Business and Finance, Master of Accounting Studies, Master of Business Administration in Finance) School of Law and Business Faculty of Law, Business and Arts Charles Darwin University A thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy May 2008 Declaration I hereby declare that the work herein, now submitted as a thesis for the degree of Doctor of Philosophy of the Charles Darwin University, is the result of my own investigations, and all references to ideas and work of other researchers have been specifically acknowledged I hereby certify that the work embodied in this thesis has not already been accepted in substance for any degree, and is not being currently submitted in candidature for any other degree Ali Rkein May 2008 ii Abstract The reform of the public sector has been a continuing challenge for many governments around the world In recent years, this reform has become dominated by such terms as ‘new public management’, ‘managerialism’, ‘marketisation’, ‘privatisation’ and ‘commercialisation’ These terms reflect a broadly-based commercial direction that governments started taking in response to reform’s pressures resulting from a perceived crisis of legitimacy, responsiveness, efficiency and accountability in public sectors A significant feature of this commercial orientation was the adoption of private sector practices and economic market models by governments and public sector organisations The underlying principle was competition Governments believed that competition plays a major role in improving organisational performance, and by subjecting government organisations to relevant forms of competition they would become more cost conscious and results focused, leading to increased efficiency, effectiveness and accountability In Australia, this commercial orientation has taken momentum with the introduction of the National Competition Policy, which advocated that to become more economic, efficient and effective, public sector organisations should operate on the same commercial principles as the private sector In this regard, the policy required Australian governments to ensure competitive neutrality by eliminating resource allocation distortions arising out of government ownership, such as tax exemptions, regulatory advantages, discounted interest rates on loans, and crosssubsidization Accounting has been a key element of this reform process, with a change being required as the traditional cash accounting system was not capable of providing the additional financial information that was needed as a result of the commercial orientation In this regard, governments in Australia have introduced a commercial accounting system through the adoption of accrual-based accounting, budgeting and reporting practices At first, the adoption of these practices started in organisations that provide business-like services and are in competition with private providers At a later stage, Australian governments started also to introduce the practices into their whole public sector iii While accrual accounting was believed to be useful in a competitive operating environment, this study aims to analyse its working in the Northern Territory of Australia where competition is very limited The high cost of production resulting from a relatively small and dispersed population and the lack of economies of scale have resulted in a small private sector in the Territory This has made the provision of many government services driven more by social imperatives than economic imperatives In this regard, the study intends to assess the extent that commercial accounting practices have achieved their intended reform objectives This study highlights a number of findings based on an assessment of the Northern Territory public sector’s responses overall, supported by more detailed analyses of accounting changes in two departments First, the small private sector in the Northern Territory has not supported the creation of a competitive market for most government goods and services Second, although accrual accounting has been able to provide full cost information, the heterogeneity of some government services has resulted in a questionable full cost figure The use of full cost in pricing has not achieved its intended benefits because of the absence of competitive market pressures Also, the use of cost information in benchmarking has been fragile, mainly because higher costs of services are the result of ‘capital cost disabilities’ that exist in the Northern Territory and may have nothing to with performance efficiency Third, this study shows that accrual budgeting has not been used properly and therefore it has failed to achieve its objectives Finally, while accrual reporting has improved the completeness of the accounting information available, especially at the whole of government level, it has not changed much from cash reporting in discharging accountability at organisational and whole of government levels iv Acknowledgements Many people have contributed directly and indirectly to the production of this thesis and it could not have finished without their assistance and patience, to all I am eternally grateful First, I would like to thank my supervisors Professor Brian Andrew, Professor Ian Thynne, and Associate Professor Ram Vemuri I am very grateful to you Brian and I would like to express my sincere appreciation and deepest thanks for your encouragement, wisdom and support that went beyond anything I could have expected Your good sense, your generosity with time and ideas helped me to bring this work to life Ian, thank you for your insightful comments and probing questions which resulted in significant contributions to the development of this thesis, and also for your excellent contributions to the ordering and presentation of ideas I can not adequately express my gratitude to you Ram for your undying belief in me in those moments I was riddled with self-doubt, for your motivation that often meant the difference between progress and stagnation when my energy and interest faded away Second, I would like to thank the School of Law and Business at Charles Darwin University for giving me the opportunity to teach and gain invaluable experience while undertaking my PhD Also, I am indebted for the support and encouragement of my colleagues, especially Professor Gweneth Norris Third, a special thanks to all staff at the Department of Corporate and Information Services, the Department of Health and Community Services, and other Northern Territory government agencies, who agreed to participate in this study and devoted their time to provide me with the relevant information required to complete this thesis Finally, I would like to thank my parents for their encouragement and support, especially my father who instilled in my mind the determination to pursue the PhD level from long time ago A special thanks to my wife Leila and my two daughters Fatima and Mariam, to whom I dedicate this thesis, for their love, support and patience v Table of Contents Declaration ii Abstract iii Acknowledgements v Table of Contents vi Table of Tables x Table of Figures xi List of Acronyms and Abbreviations xii Chapter Introduction 1.1 Background to the Study 1.2 Research Motivation 1.3 Research Questions 1.4 Importance of the Study 10 1.5 Outline of the Thesis 11 Chapter International Trends in Public Sector Reform 15 2.1 Introduction 15 2.2 Public Sector Reform, an International Perspective 17 2.2.1 Reform Pressures 18 2.2.2 Reform Responses 24 2.3 Organisational Change as a Key Component of Public Sector Reform 28 2.4 Organisational Performance: Accounting & Accountability 34 2.4.1 Elements of Performance .34 2.4.2 Accounting as a Key Element 37 2.4.3 Underlying Significance of Accountability 50 2.5 Conclusion 53 vi Chapter Public Sector Reform: Australian Responses 55 3.1 Introduction 55 3.2 Public Sector Reform, an Australian Perspective 56 3.2.1 Drivers of Reform 56 3.2.2 Reform Responses 59 3.3 Organisational Change 70 3.4 Organisational Performance and Accounting Change 75 3.4.1 Organisational Performance .75 3.4.2 Accounting Responses 80 3.5 Conclusion 96 Chapter Methodology and Theory 98 4.1 Introduction 98 4.2 Approach to Research 99 4.3 Case Studies and Data Collection 102 4.3.1 Case Study Interpretive Approach .102 4.3.2 Data Collection 107 4.4 Theories and Accounting Research 109 4.5 Organisational Change Focus 111 4.6 Immediate Relevance of Theories and Models 117 4.7 Research Site 121 4.8 Summary 123 Chapter Northern Territory Public Sector Reform 124 5.1 Introduction 124 5.2 Northern Territory Profile 125 5.3 Northern Territory Public Sector 127 5.4 Institutional Pressures for Reform 129 vii 5.5 Organisational Responses in the NT Public Sector 131 5.5.1 Privatisation 132 5.5.2 Outsourcing 134 5.5.3 National Competition Policy and the Organisational Reform 138 5.5.4 Corporatisation and Commercialisation 142 5.6 Management and Accounting Responses in the Northern Territory Public Sector 147 5.6.1 Main Management and Accounting Initiatives 148 5.6.2 Last Government to Adopt the Change 152 5.7 Working for Outcomes Framework 156 5.7.1 Outputs .157 5.7.2 Performance .159 5.7.3 Accruals 161 5.8 Conclusion 168 Chapter The Usefulness of Accrual Accounting in DCIS – an Internal Shared Services Provider – 172 6.1 Introduction 172 6.2 Historical Background 173 6.3 Accrual Accounting 178 6.3.1 Criteria for Usefulness of Accounting Information 180 6.3.2 Accrual Accounting Relevance to Decision Making 183 6.3.3 The Rationale for Full Cost Information 193 6.4 Accrual Budgeting 204 6.4.1 Greater Customer Focus 207 6.4.2 Better Resource Allocation 211 6.4.3 Enhanced Performance and Accountability .221 6.5 Accrual Reporting 223 6.5.1 Financial Reporting 224 viii 6.5.2 Output Reporting 231 6.6 Conclusion 235 Chapter Department of Health and Community Services: The Domination of Social Responsibility 239 7.1 Introduction 239 7.2 Historical Background 240 7.3 Unique Environment 241 7.4 Social Responsibility of DHCS 246 7.5 Usefulness of Accounting Information in DHCS 248 7.5.1 Operational Relations between DHCS and DCIS 249 7.5.2 Accrual Accounting 251 7.5.3 Accrual Budgeting .258 7.5.4 Accrual Reporting 260 7.6 Conclusion 263 Chapter Summary and Conclusion 265 8.1 Summary and Discussion of Findings 265 8.1.1 Accrual Accounting 269 8.1.2 Accrual Budgeting .273 8.1.3 Accrual Reporting 276 8.2 Conclusion 278 Appendices 283 Bibliography 298 ix Table of Tables Table Series of statements of accounting concepts 85 Table Development trend of government accounting (AAS) 90 Table Strategic responses to institutional processes 114 Table Example of outputs list at DHCS 158 Table Example of performance measures of an output 160 Table List of financial statements before accrual accounting 165 Table Comparison between budgeted capital appropriation and actual capital asset purchases 214 Table Budget outcome to cash reconciliation 216 Table Reconciliation of accrual deficit and accrual deficit at DCIS 218 Table 10 Average salary across states and territories 243 Table 11 Number of public and private hospitals by states and territories 244 Table 12 Medical practitioners by sector across states and territories in 2005 245 x