some like it non-financial... politicians' and managers' views on the importance of accounting

liguori_sicilia_steccolini1
Some like it non-financial... Politicians’ and managers’ views on the importance of accounting information
Mariannunziata Liguori
Lecturer, Queen’s University, Belfast and Visiting professor, SDA Bocconi, Milan
Queen’s School of Management, 25 University Square
Belfast, BT7 1NN
[email protected].
Management, Milan
+39 (0) 2 58365475
Associate professor, Università Bocconi and Director of the Public Management and Policy
Department, SDA Bocconi School of Management, Milan
SDA Bocconi, Public Management and Policy Department
Via Bocconi, 8, 20136 Milano
+39 (0) 2 5836 2087
[email protected]
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ABSTRACT
The modernization of the public sector translated into the adoption of new accounting techniques,
such as accruals accounting and non-financial performance measurement systems, in addition to the
traditional system of budgetary accounting. The purpose of the paper is to test some hypotheses on
the different perceptions of politicians and managers as to the importance of accounting
information. Our findings suggest that the importance attached to accounting information by
politicians and managers is more similar than expected. They also show that the accounting
innovations are in some cases embraced with enthusiasm (non-financial performance), whereas in
others find difficult recognition (accruals accounting).
Keywords: Politicians, public managers, accruals accounting, accounting information, non-
financial information.
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1. Introduction
The modernization of the public sector has often translated into an increased focus on accounting
information and in the adoption of new accounting techniques, such as accruals accounting and
non-financial performance measurement systems, in addition to or replacement of the traditional
system of budgetary cash- and commitment- based accounting (Hood, 1991, 1995; Olson et al.,
1998; Lapsley, 1999). These changes have often been criticized for being “one fits all” and for their
scant consideration of the politicians’ points of view (Schedler, 2007).
As a consequence of this, several authors have tried to study how these tools and the related
information are perceived by their users. Some of these studies focus on external users, such as
citizens (e.g. Brusca and Montesinos, 2006) and finance institutions (e.g. Lopez Hernandez and
Capa Perez, 2004), whereas others compare internal and external users’ preferences (e.g. Steccolini,
2004; Mack and Ryan, 2006). Among the studies that focus on internal users (Ter Bogt and Van
Helden, 2000; Lee, 2008; Kober et al., 2010), only a few take into separate account politicians and
managers’ views on accounting systems and tools, often adopting a qualitative stance, and pointing
out that politicians tend to show less interest and to use less accounting information (Brusca
Alijarde, 1997; Olson and Shalin-Andersson, 1998; Ter Bogt, 2004; Flury and Schedler, 2006;
Paulsson, 2006; Ezzamel et al., 2007). These results seem to support the idea, diffused in public
administration and management literature, that the political and the administrative spheres are
separate, although complementary and interdependent (Frederickson and Smith, 2003; Riggs, 1987;
Svara, 1998, 19991, 1999b, 2001, 2006; Svara and Brunet, 2003), and driven by different
rationalities (Schedler, 2007). Politicians have been generally considered responsible for defining
missions and general plans, driven by the search of consensus. Administrators have been seen as
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responsible for plans neutral execution (Wilson, 1887; Weber, 1922), driven by the search for
efficiency and effectiveness (Schedler, 2007).
The purpose of our paper is to present the results of an empirical study aimed at testing hypotheses
on the different perceptions of politicians and managers as to the importance of accounting
information. In formulating the hypotheses, we take into consideration both the traditional
budgetary information and the new types of information introduced by the managerial wave of
reforms, i.e. accruals accounting and non-financial performance information.
Our findings, far from supporting the idea of diverging perspectives and rationalities, suggest that
the boundaries between politicians and managers, at least in Italian Local Governments (LGs), tend
to be quite blurred and that the importance the two actors attach to accounting information is more
similar than expected or found in previous literature. Moreover, they also show that the accounting
innovations introduced by the wave of modernization of the public sector have in some cases been
embraced with enthusiasm (see non-financial performance measures), whereas in others they found
it difficult to gain recognition (accruals accounting).
The paper is structured as follows. Section two discusses the evolution of politicians and managers’
roles as well as the development of the accounting tools and information from the Public
Administration to the New Public Management (NPM) paradigms. Section three reviews the
literature on the users of public sector accounting information and their preferences and develops
the hypotheses to be tested. Section four describes methods and context. Section five presents the
results of the analysis. Finally, discussion, conclusions, implications and further research avenues
are drawn in Section six.
2. Politics, administration and…accounting
The roles of politicians and administrators and the types of accounting information used by these
actors have been shaped by the evolution of the public sector and the shift from the Public
Administration to the NPM paradigm.
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In the traditional model of public administration, politics and administration are separated (Behn,
1998, Wilson, 1887; Weber, 1922). Politicians are responsible for defining general plans, whereas
the administration is made up of professionals who are responsible for executing them. Control is
hierarchical and bureaucratic, exerted through rules, formal procedures and norms that legitimize
and regulate administrative action. In the accounting systems, the central role is played by the
budget, which is the basis for the political negotiation and the (generally incremental) allocation of
resources among different political programmes and purposes (Wildavsky, 1964). The attention is
focused on the legitimacy and the comparison between actual and estimated expenditure (Ter Bogt,
2003). The budget is seen as a political act, which translates political goals into appropriations of
financial resources (Wildasky, 1964). The administration is responsible for executing the budget,
spending the resources allocated for the various purposes. The “neutral” language of expenditure is
the common means of communication between politicians and bureaucrats, allowing them (at least
in theory) to maintain as separate as possible their respective roles. In brief, in the “traditional”
model of public administration, accounting is intended primarily to ensure compliance with budget
and limit spending. Under budgetary accounting, the adopted bases are obligation/commitment
and/or cash. Thus, the types of information available to users generally consist of expenditures
(classified either by nature or destination), revenues and funding sources, budgetary surplus/deficit,
cash.
NPM (Hood, 1991, 1995; Humphrey et al., 1993; Van Helden, 1998; Olson et al. 1998) undermines
the traditional model of Public Administration by introducing private-like and managerial logics
and tools (Ferlie et al., 1996) with an emphasis on outputs, decentralization, explicit standard setting
and performance measurement (Hood, 1991, 1995; Dunleavy and Hood, 1994). NPM advocates
strive to transform the old bureaucrats into managers, seen as central actors in the process of
change, since they embody economic rationality and focus on efficiency, effectiveness and results.
Moreover, NPM underlines the importance of “letting the managers manage”, by allowing them
greater autonomy from the political bodies. Thus, it resumes the division of roles between
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politicians and managers, who are expected to carry out different activities (Wilson, 1887; Weber,
1922; Walsh, 1995). Politicians are to draw up visions, goals and general principles of action and
develop strategies, while managers are to implement the politicians’ wishes and run the day-to-day
administration. Politicians are supposed to play a strategic role, deciding on broad policies and
setting targets for managers, rather than being involved in day-to-day operation issues (Audit
Commission, 1990).
In the NPM model, the primacy of politics gives way to the primacy of management, whereby the
principles and tools put the latter at the centre of the process of change. NPM finds practical and
actual implementation through the introduction and development of managerial and accounting
tools, often focused and tailored on managerial needs and influenced by economic and managerial
rationality: output-based budgeting, accruals and resource accounting, annual reports, extended
performance measurement and reporting, managerial control systems, balanced scorecards, etc.
Thus, the focus of accounting tools and processes gradually shifts from spending power and
incremental budget allocation to costs and revenues, assets and liabilities, definition of goals in
terms of outputs, efficiency and effectiveness. Accounting tools become the fundamental means
through which managers or external agencies and bodies are made accountable for the results
attained. In brief, the processes of modernization of the public sector which have taken place over
the last few decades have witnessed an increasing role for accruals accounting and non-financial
performance measures (Hood, 1991, 1995; Broadbent and Guthrie, 2008). However, the actual
implementation of these processes has taken different flavours in different countries and levels of
government. In some cases, accruals accounting has replaced traditional budgetary accounting
(especially in Anglo-Saxon countries), while elsewhere the latter has remained firmly in place
(PriceWhatehouseandCooper 2005; Broadbent and Guthrie, 2008). In between, a large variety of
approaches can be found, ranging from the adoption of accruals reporting in conjunction with cash
or commitment-based budgeting (especially in continental Europe), to the use of accruals data only
for specific purposes or classes of items within an otherwise traditional budgetary-accounting
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adopted (ex-ante, ex-post, focusing on inputs, outputs, outcomes, etc.).
As a consequence of these processes, and taking into consideration the different experiences
described above, three different types of information seem to be available to politicians and
managers today: budgetary, accruals-based and non-financial information.
If budgetary cash- and commitment- based accounting had been seen as “old fashioned” by NPM
reformers, the tools and information introduced with the NPM, too, have been criticized as one-fits-
all and not enough focused on the needs of specific users, especially of politicians (Schedler, 2007,
Hood, 1998; Olson et al., 1998). The usefulness of the various types of information is far from
being straightforward. Moreover, the importance attached to them by these users remains
controversial.
hypotheses
Several authors have tried to study how accounting tools and the related information are perceived
by their users. Some of these studies focus on external users, such as citizens (e.g., Brusca and
Montesinos, 2006) and finance institutions (e.g., Lopez Hernandez and Capa Perez, 2004),
highlighting that the former appear to show an increased attention towards LG accruals- based
reports, and that the latter appear to prefer budgetary information over accruals-based one.
Other authors take into consideration both internal and external users’ preferences (Robbins, 1984;
Jones et al., 1985; Hay and Antonio, 1990; Daniels and Daniels, 1991; Collins et al., 1991; Crain
and Bean, 1998; Priest et al., 1999; Mack and Ryan, 2006), pointing out that users prefer
performance information (i.e. information that goes beyond, but also include, financial information)
to general purpose financial information (Jones et al., 1985; Collins et al., 1991; Jones and Puglisi,
1997; Montesinos and Vela, 2000; Christiaens, 2006) and budgetary information to accruals one. A
dissenting voice comes from Kober et al. (2010), who examine the comparative usefulness of
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accruals- and cash-based systems of accounting according to internal and external users. They find
that accruals accounting is generally considered more useful than cash accounting, and some items
of accruals are deemed more useful for internal users. Compared with previous studies, this shows
that the acceptance of accrual information might have grown over time. However, they only take
into consideration financial information and do not distinguish among internal users.
Among the studies focusing on internal users, some do not distinguish between politicians’ and
managers’ views or study only one category of actors, and tend to focus on either financial or non-
financial information. For example, Lee (2008) finds that public managers consider performance
information important, but he does not take into consideration politicians’ views or other types of
information. Likierman and Vass (1984), Olson and Shalin-Andersson (1998), Ezzamel et al.
(2007), Guthrie et al. (1999) point out the limited degree of understanding and use of accounting
and budget numbers by most politicians. Ter Bogt (2004) argues that politicians hardly appreciate
and use performance measures and tend to rely on informal communication. This seems to be
confirmed by Wang (2000), who finds that performance measurement is supported more by
managers than by elected officials.
Only a narrow number of studies specifically take into consideration politicians’ views or compare
them with managers’, generally with a qualitative perspective. Jansen (2008), taking into
consideration on the differences between politicians and managers, points out that the former focus
on the citizens' and the financial perspectives, whereas managers focus on the internal
(input/output) one. According to Flury and Schedler (2006), politicians and managers place
different expectations on cost and performance accounting, as the former will prefer full costing and
the latter variable costing. Brusca Alijarde (1997), surveying Spanish municipalities’ CFOs, finds
that in the latter’s view, politicians are among the least important users of financial reporting, due to
insufficient training, whereas managers the most important users. According to Ter Bogt and Van
Helden (2000), both politicians and managers prefer the old accounting tools and the related
information. They tend to use mainly input-oriented information and hardly use the output-oriented
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information available. Finally, Paulsson (2006), studying the introduction of accruals accounting in
the Swedish central government, finds that accruals accounting is used more in management than in
politics and policy making.
The above literature review points out that the number of authors who have compared the
information preferences of politicians and managers is still limited, that evidence tends to be still of
a qualitative nature and very mixed. In the light of these gaps, the purpose of our paper is to
compare politicians’ and managers’ views on both financial (budgetary and accruals accounting)
and non-financial information, by testing some hypotheses against the data gathered in a survey of
Italian municipalities. The hypotheses will first take into consideration the importance generally
attached by politicians and managers to every type of accounting information, and then contrast
financial and non-financial measures, and internal vs. external measures. Finally, we will consider
their different perception on accruals accounting.
Previous authors who take into consideration politicians’ views highlight their limited interest in
and use of both financial (Olson and Shalin-Andersson, 1998; Ezzamel et al., 2007; Likierman and
Vass, 1984) and non-financial (Ter Bogt, 2004, Wang, 2000) accounting information. Only a few
studies compare managers and politicians’ attitudes towards accounting information. In particular,
as discussed above, politicians appear to appreciate accounting information less than managers
(Brusca Alijarde, 1997; Ter Bogt, 2004; Paulsson, 2006). Looking at both financial and non-
financial accounting information, then, the following hypothesis can be drawn:
Hp 1: Politicians will attach less importance to accounting (financial and non-financial)
information than public managers
With specific reference to the three types of information (budgetary, accrual and non-financial),
empirical research shows that performance measures appear to be used more extensively than
financial ones by both politicians and managers (see, for example, Ter Bogt, 2001, 2003, 2004).
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Many authors find that both politicians and managers are interested in performance information
rather than general-purpose financial information (Mack and Ryan, 2006; Jones et al., 1985; Hay
and Antonio, 1990; Crain and Bean, 1998; Lee, 2008). This is consistent with a view of public
administrations as characterized by heterogeneity of activities, complexity of interests at stake (Nutt
and Backoff, 1993, p. 223), and, thus, a multifaceted performance, that cannot be captured by a
single financial “bottom-line” measure (Boyne, 2002; Farnham and Horton, 1996, p. 31). The
complexity, ambiguity and multiplicity of performance and the absence of market pressures and
competition are often identified as the reasons for the scant relevance of profit and traditional
financial viability measures in the public sector (Farnham and Horton, 1996, p. 31; Ma and
Matthews, 1993; Guthrie and Johnson, 1994; Lewis, 1995; Guthrie, 1998). The “public value”
cannot simply be captured by financial statements and its evaluation encompasses not only financial
viability, but also the long-term sustainability of political programmes and policies, and the capacity
to pursue the public interest through the use of assets and the provision of services (Mautz, 1981,
1988; Pallot, 1990, 1992, 1997; Carnegie and Wolnizer, 1995, 1996, 1997, 1999; O’Faircheallaigh
et al., 2000; Lee, 2008). In public organizations profit is not a goal; financial structure and solvency
are not perceived as relevant (Guthrie and Johnson, 1994; Lewis, 1995; Guthrie, 1998); financial
information does not measure outcomes and provides a narrow idea of performance (Montesinos et
al. 1995; Monsen and Näsi 1998; 1999; 2000; Monsen, 2002; Ma and Matthews, 1993). The level
of attention paid to broader non-financial information is also associated with the specific knowledge
required by the use and understanding of financial documents. For instance, politicians are often
said to lack the ability to read financial information (Olson and Shalin-Andersson, 1998; Ezzamel et
al., 2007; Likierman and Vass, 1984). From this, the following hypotheses flow:
Hp 2: Politicians will attach more importance to non-financial performance measures than to
financial ones.
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Hp 3: Public managers will attach more importance to non-financial performance measures than to
financial ones.
Although the general literature would suggest that the two actors tend to recognize more importance
to non-financial information, both traditional public administration literature and NPM authors
underline that they play different roles within the organization. Politicians are responsible for
defining missions and strategies, whereas managers are more focused on their implementation
(Svara, 1998, 1999a, 1999b, 2001, 2006; Svara and Brunet, 2003; Hansen and Ejersbo, 2002). The
former are thus driven by political rationality informed by external impacts of government’s action,
which influence the general public’s satisfaction and perceptions (Weber, 1968; Aberbach et al.,
1981), while the latter follow managerial rationality, led by a search for economy and efficiency
(Schedler, 2007). As a consequence, we may expect politicians to adopt a predominantly outward-
looking perspective, being more focused on the external impact of governmental action (outcomes)
and service effectiveness (Anessi Pessina, 2002; Ter Bogt, 2004; Jansen, 2008). Managers, on the
opposite, may be expected to focus predominantly on internal processes and activities, being more
oriented towards efficiency, internal processes, inputs and outputs (Budding, 2004; Jansen, 2008).
From these considerations, these hypotheses follow:
Hp 4: Politicians will attach more importance than public managers to non-financial performance
information focused on external measures.
Hp 5: Public managers will attach more importance than politicians to non-financial performance
information focused on internal measures.
As far as financial information is concerned, an increasingly important body of literature has
focused on the importance of accruals accounting in public organizations (for a review see Anessi
Pessina and Steccolini, 2007). In the international literature, as well as in the “official” discourse on
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public-sector reforms, the “new” basis of accounting is claimed to have a number of advantages
(Barrett, 1993; Evans, 1995; Mellor, 1996; Funnel and Cooper, 1998; International Federation of
Accountants - Public Sector Committee, 2000, 2002: 7-10). Nevertheless, an increasing body of
literature has criticised the adoption of accruals accounting by public organisations on both
theoretical and practical grounds. From a theoretical viewpoint, it is claimed to be not consistent
with the intrinsic nature of government (Montesinos et al. 1995; Monsen and Näsi 1998; 1999;
2000; Monsen, 2002; Ma and Matthews, 1993; Guthrie and Johnson, 1994; Lewis, 1995; Guthrie,
1998). As far as empirical evidence is concerned, Christiaens (1999) and Ellwood (2001) emphasise
that current accrual-accounting experiments lack a conceptual framework and tend to shift business-
accounting concepts and techniques into non-business settings (see also McRae and Aiken, 1994;
Carnegie and Wolnizer, 1995; Guthrie, 1998; Stanton and Stanton, 1998). Oettle (1990) claims that
accruals accounting implantation is driven mainly by “reasons of prestige”. Moreover, the
introduction of accruals accounting has raised significant implementation problems (Guthrie, 1998;
Stanton and Stanton, 1998; Newberry, 2002; Carlin and Guthrie, 2003; Hodges and Mellett, 2003).
Some studies have specifically investigated the use and interest in accruals accounting by both
internal and external users, often pointing out its scant attitude to meet their information needs
(Kober et al, 2010; Paulsson, 2006; Carlin, 2005; Lòpez Hernàndez and Caba Pérez, 2004;
Christiensen, 2003, 2006; Newberry, 2003). Among the studies concerned with internal users, little
attention has been paid to investigate differences between politicians and managers’ interest in
accruals-based information (Collins et al., 1991; Priest et al., 1999; Robbins, 1984; Daniels and
Daniels, 1991; Crain and Bean, 1998). An exception is represented by Brusca Alijarde (1997), who
finds that, according to preparers, politicians are less important users of accruals-based reports than
managers. These findings are consistent with what NPM advocates, that is, that accruals accounting
represents the most typical managerial tool to such extent that often the term “accruals accounting”
has been used to identify a wider array of administrative innovations (Anessi Pessina et al., 2008).
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Thus, we might expect managers to attach a stronger importance to accruals-based information than
politicians. It follows:
Hp 6: Public managers will attach more importance to accruals accounting than politicians.
4. Methods
In order to carry out our research we conducted a survey on all Italian municipalities of at least
80.000 inhabitants (65 municipalities1). Italian municipalities are an interesting case since they
present a combination of the three types of information, whereby the traditional budgetary
accounting, kept under a commitment-and cash-basis, has been supplemented (but not replaced) by
accruals- based reporting (balance sheet and operating statement) and non-financial performance
indicators since 1995. This long-term coexistence allows for a joint evaluation of the three types of
information and is a good ground for the test of the hypotheses previously developed from the
literature.
For each municipality three Departments have been selected in order to account for the
heterogeneity of the activities, i.e. Environment, Public Infrastructure and Culture2. They can be
placed along a continuum, where Public Infrastructures show the highest output measurability,
followed by Environment and Culture. An ad hoc questionnaire has been prepared and administered
to the top managers of the Departments and the related elected politicians of the Cabinet (i.e. the
alderman directly responsible for the services). Respondents were asked to express their level of
agreement on the importance attached to the different items of accounting information (budgetary
accounting, accruals accounting and non-financial performance information) on the basis of a 1-5
1 From the total number of municipalities (68) we selected out those where the elected political bodies are temporarily replaced by a central government delegate (3). 2 The selection criterion drew on Brown and Potoski’s (2003) classification of output measurability of service provided. Measurability of output, in fact, affects both managers’ ability to identify indicators for monitoring activities and politicians’ ability to understand them. Moreover, it influences the contents of accounting tools.
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Likert-scale3 (where 1= not important at all; 5= very important). In particular, budgetary accounting
items (revenues and funding sources, current expenditure by nature, current expenditure by
destination, capital expenditure by nature, capital expenditure by destination, level of use of
transfers from other levels of government, budgetary surplus/deficit, establishment of accounts
receivable to be recovered and commitments to be paid) were adapted drawing on Pina and Torres
(1996, 2007) and Anessi Pessina and Steccolini (2007). Accruals accounting items (liability,
receivables, assets, cost of activities and services, depreciation) were identified in a way to point out
only the relevant and differential pieces of information, which distinguish accruals- from cash-
based accounting. They were selected on the basis of the relevant literature (Anthony, 2000; Kober
et al., 2010; Pina and Torres 2007; Barrett, 1993; Evans, 1995; Mellor, 1996; Funnel e Cooper,
1998), e.g. Anthony (2000), Kober et al. (2010), Pina and Torres (2007) and Barrett (1993) point
out the relevance of items such as costs, receivables, liability and assets; Anessi Pessina and
Steccolini (2007) and Pina and Torres (2007) emphasize the role of depreciation. Finally, non-
financial performance information was classified in terms of efficiency, customer satisfaction,
service appropriateness, future activities, activities and outputs (Willoughby, 2004; Ter Bogt, 2004;
Johnsen, 2005; Pina and Torres, 1996; Lee, 2008). Respondents were asked to score the importance
of all the above items. We investigated their overall perceived importance during the budgetary
cycle.
As shown in Table 1, where the summary statistics are displayed, the response rate across the
different items is quite consistent (the lowest rate is related to activities and outputs with 96% of
responses). The average importance overall attached to the items ranges from 2.76 (depreciation) to
4.28 (service appropriateness). The overall response rate for the survey is 23%, where managers
represent 54% and politicians 46%. A preliminary ANOVA analysis showed that the type of
Department is non-statistically significant in affecting the trend of responses.
3 Previous studies show that intrinsically ordinal variable with more than four categories can be treated as continuous (Bentler and Chou, 1987; Ter Bogt, 2004).
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In order to investigate the importance of the types of information across politicians and managers
(Hp 1, 4, 5 and 6), a statistical analysis was performed by testing their answers’ difference in
means. A two-sample t-test for unpaired observations was conducted through STATA.11. A one-
sample t-test was, instead, used to test importance between different types of information within the
same group of actors (Hp 2 and 3).
In order to test some of the hypotheses, additional specific measures were also computed. In
particular, accounting information (Hp 1), financial information and non-financial information (Hp
2 and 3), accruals accounting information and budgetary information (Hp 6) were derived and
tested as the mean of the scores of the relative items (see Table 1). Similarly, non-financial
performance information focused on external measures (Hp 4) represents the mean of the scores for
customer satisfaction and service appropriateness; non-financial performance information focused
on internal measures (Hp 5) is derived from the mean of the items “activities and outputs” and
“efficiency”.
5. Results
Table 2 summarizes the results of the hypothesis test. Hp1 is rejected at 5% since both actors appear
to attach the same importance to accounting information in general. This is in contrast with previous
literature that has generally pointed out the lower politicians’ interest in accounting information
(Collins, 1991; Brusca and Alijarde, 1997; Paulsson, 2006; Ezzamel et al., 2007). In order to
explain this result, we can argue that politicians might like to appear more attentive to accounting
information as a consequence of the NPM reform waves and the related fads that pressure them be
more accountable (Schedler, 2007; Abrahamson, 1996).
As far as non-financial information is concerned, both politicians and managers recognize it as the
most important. Both Hp2 and Hp3 are supported by the results and corroborate previous findings
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(Ter Bogt, 2001, 2003, 2004; Mack and Ryan, 2006). This may signal the importance of non-
financial measures in capturing the performance dimensions that the normal financial information
cannot depict, i.e. the external impact of organizational activities. Looking more in details at the
two actors’ perceptions, Hp4 and Hp5 show no significant difference in the importance recognised
to external and internal non-financial performance information (Table 2). The idea of “inward –
looking” managers and “outward-looking” politicians (see Svara, 1998, 1999a, 1999b, 2001, 2006;
Svara and Brunet, 2003; Hansen and Ejersbo, 2002; Schedler, 2007) doesn’t hold in this case.
Finally, Hp6 is supported at 5%, but showing a result opposite to what expected. Indeed, politicians
(mean 3.4091) attach more importance than public managers (mean 3.0519) to accrual accounting,
appearing overall more sensitive to the new tools introduced by NPM reforms (Schedler, 2007).
This view is consistent with the image of politicians willing to appear as innovators and energizers
of the administrative process (Aberbach and Rockam, 2006). If we relax the significance conditions
to 10%, however, differences in the importance politicians and managers attach to information are
not visible anymore. This would support the idea of increasingly blurred boundaries between the
two worlds (Hansen and Ejersbo, 2002). Moreover, the relatively low score given to accrual
accounting items recall the general users’ wariness towards new tools, which are seen as more
difficult to use and less matching the traditional existing culture (Montesino and Vela, 2000).
Insert Table 2 here
6. Discussion and conclusions
The results show that politicians and managers’ preferences tend to be more similar than expected,
since they recognize the same importance to accounting information and are both very focused on
external measures of performance rather than internal ones. Moreover, they both consider non-
financial information more important than financial figures and agree on the higher importance of
budgetary accounting over accruals accounting. The only area of divergence comes from the
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consideration of accruals accounting, which, though generally low, is better appreciated by
politicians than managers.
Our findings, far from supporting the idea of diverging perspectives and rationalities, suggest that
the boundaries between politicians and managers, at least in Italian LGs, tend to be quite blurred.
Moreover, they also suggest that the accounting innovations introduced by the wave of
modernization of the public sector have in some cases been embraced with enthusiasm (non-
financial performance measures), whereas in others they have found difficulties in gaining
recognition (see accruals accounting).
Such findings can be explained by the persistence of a traditional bureaucratic culture and the push
for change coming from external fads. Budgetary accounting, being used for a long time, could be
better known and understood by internal users. Nevertheless, an important role could have been
played also by managerial fashions (Abrahamson, 1996), to which a positive connotation has been
attached as a consequence of last decades reforms. Hence, politicians’ penchant for accruals
accounting which probably mirrors their willingness to appear as innovators. Managerial fashions,
however, are not enough to explain the importance recognized to different types of accounting
information. Over time this importance will not depend only on their being fashionable, but also on
their consistency with users’ needs and ease of use. This might be the case for non-financial versus
accrual-based information.
Our findings contribute to the ongoing debate on accruals accounting casting further doubts on its
usefulness for internal users (Guthrie, 1998; Paulsson, 2006). The analysis shows that accruals
accounting is probably preferred by politicians because of its symbolic power rather than its actual
usefulness in public organizations. Moreover, the importance of non-financial information suggests
that more attention should be devoted to this dimension by legislators and controllers in designing
accounting systems.
Previous literature that points out the distinct roles and needs of politicians and managers, also
suggests the necessity to design different accounting tools (Wildavsky, 1964; Ter Bogt, 2003;
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Schedler, 2007). The prevailing alignment of politicians and managers’ preferences found by this
study rather calls for more opportunities to share their complementary views on the same pieces of
information.
In order to investigate also the actual use of information by both politicians and managers, it would
be interesting to carry out further studies on their decision-making processes in different contexts
and situations. Moreover, it would be worthy of note to enlarge the categories of users investigated
(e.g. employees, external users, etc.) and to study the importance of information over time to
highlight possible cross-section and longitudinal differences, and identify the variables which are
more likely to affect them (such as bureaucratic and managerial culture, training, fads and fashions,
etc.).
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References
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22
Tables
Table 1 – Summary Statistics Variable Obs. Mean Std. Dev. Min Max
Budgetary Information Revenues and funding sources
100 4.19 .7745 2 5
Current expenditures by nature
Current expenditures by destination
Capital expenditures by nature
Capital expenditures by destination
Level of use of transfers from other levels of government
101 3.5742 1.0802 1 5
Budgetary surplus/deficit
100 3.61 1.0815 1 5
Establishments of account receivables to be recovered and commitments to be paid
99 3.7474 1.0335 1 5
Accruals accounting information Cost of activities 101 3.8119 .9024 1 5 Liability 101 3.1980 1.1577 1 5 Receivables 101 3.0792 1.1805 1 5 Assets 100 3.16 1.0609 1 5 Depreciation 99 2.7576 1.2213 1 5 Non-financial performance information Efficiency 101 3.8119 .9870 1 5 Activities and outputs
97 3.7423 .9604 1 5
Customer satisfaction
Future activities 101 4.2178 .7823 2 5 Service appropriateness
101 4.2772 .8731 1 5
Additional measure for hypothesis testing Accounting information
101 3.6733 .6798 2 5
Financial information
Non-financial information
Non-financial performance information focused on internal measures
Non-financial
23
Table 2 – Hypothesis test: summary of results
Hypothesis Test result T-test significance T-test means
Hp 1: Politicians will attach less importance to accounting (financial and non-financial) information than public managers
Rejected 0.2656 Managers: 3.7738 Politicians: 3.9231
Hp 2: Politicians will attach more importance to non-financial performance measures than to financial ones.
Supported 0.0110 Financial performance: 3.7325 Non-financial performance: 4.1136
Hp 3: Public managers will attach more importance to non-financial measures than to financial ones.
Supported 0.0003 Financial performance: 3.4677 Non-financial performance: 4.0526
Hp 4: Politicians will attach more importance than public managers to non-financial performance information focused on external measures
Hp 5: Public managers will attach more importance than politicians to non-financial performance information focused on internal measures
Hp 6: Public managers will attach more importance to accruals accounting than politicians.
Supported (reversed results) at 5% Rejected at 10%
0.0589 Managers: 3.0519 Politicians: 3.4091
24
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