Municipal Accounting Research Articles

Performance auditing in local government: an exploratory study of perceived efficiency of municipal value for money auditing in Finland and Norway

Performance auditing, or value for money (VFM) auditing, has been a long-standing component of accountability in public administration. During the 1980s and 1990s performance auditing has allegedly been increasingly adopted in the new public management. While there has been much research on public management and performance auditing in central government, local government has been relatively neglected in the literature. Municipalities and counties in local government have an important role in public sector service production in most European countries, and especially in the Nordic countries. It is therefore surprising that performance auditing in this context has received so little scholarly attention. This study is aimed at filling some of this gap. The purpose of this comparative study is, therefore, to explore how performance auditing practices, including performance measurement, are used to assess and verify value for money in local government and to enhance the accountability of municipalities and counties. This study analyses how informants from both auditors and auditees in Finland and Norway perceived the efficiency of conducting performance audits in local government. Despite some problems related to the quality of the performance audit reports, the informants perceived performance audit to function as a useful, rational public management tool.

Performance auditing in local government: an exploratory study of perceived efficiency of municipal value for money auditing in Finland and Norway

Performance auditing, or value for money (VFM) auditing, has been a long-standing component of accountability in public administration. During the 1980s and 1990s performance auditing has allegedly been increasingly adopted in the new public management. While there has been much research on public management and performance auditing in central government, local government has been relatively neglected in the literature. Municipalities and counties in local government have an important role in public sector service production in most European countries, and especially in the Nordic countries. It is therefore surprising that performance auditing in this context has received so little scholarly attention. This study is aimed at filling some of this gap. The purpose of this comparative study is, therefore, to explore how performance auditing practices, including performance measurement, are used to assess and verify value for money in local government and to enhance the accountability of municipalities and counties. This study analyses how informants from both auditors and auditees in Finland and Norway perceived the efficiency of conducting performance audits in local government. Despite some problems related to the quality of the performance audit reports, the informants perceived performance audit to function as a useful, rational public management tool.

Savivaldybių biudžetų sudarymas

Remiantis straipsnio autoriaus turimomis teorinėmis žiniomis ir iš atskirų Lietuvos savivaldybių surinkta informacija apžvelgiama dabar Lietuvoje egzistuojanti teisinė bazė ir esama savivaldybių biudžetų sudarymo ir vadybos situacija, iškeliamos svarbiausios problemos bei pasiūlomi būdai ir galimybes tas problemas spręsti; be to, siekiama paskatinti specialistus teoretikus ir praktikus kritiškai įvertinti straipsnyje pateiktus teiginius, pasidalyti savo žiniomis ir patirtimi, pasiūlyti būdų ir priemonių spręsti aktualius savivaldybių biudžetų sudarymo ir vadybos klausimus.

Financial Accounting Reform in Flemish Municipalities: An Empirical Investigation

This paper examines the cross‐sectional differences in the level of adoption and implementation of the financial accounting reform in Flemish municipalities. For the first time ever in Belgian governments a cash‐based budgetary accounting system is obligatorily being supplemented by an accrual accounting system. This study is based on an empirical analysis of municipal accounting practices and annual accounts 1995 in Flanders. The findings indicate that municipalities are coping with a lot of problems regarding transferability of business accounting and the study reveals significant factors explaining the level of compliance with the reformed accounting regulations.

THE TREASURER'S DEPARTMENT AS A BUFFER ORGANIZATION

The present paper attempts to throw some light on the context within which municipal accounting is used and administered by the Treasurer's Department. The analysis shows that the Treasurer's Department uses the accounting system, and especially the budget, primarily as a buffer between politics and action. This is achieved by constructing an ambiguous accounting system, which is continually being reformed. The Treasurer's Department is therefore described as a ‘buffer organization’ with a function that is very different from the ‘coupling’ function assigned to the accounting system in most of the literature in this field.

Institutionalization of municipal accounting — a comparative study between Sweden and Norway

This paper focuses on the way in which accounting is becoming institutionalized. A comparative and historical study of municipal accounting in Sweden and Norway is presented. Accounting is regarded as consisting of two systems — the norm system and the action system. The relations between norms, and action and their environment are discussed in light of ideas derived from institutional theory and organizational learning. Two modes of learning are revealed, one ideological and one hierarchic. Irrespective of the mode of learning, the norms are closely associated with the environment of accounting. In the ideological mode this link-up occurs via the action system and in the hierarchic mode via the norm system. Depending on how strongly the norm system forces the action system to respond, the learning processes in which accounting as a whole is involved will reveal a greater or lesser degree of variation.

AN ANALYSIS OF THE TOWN OFFICER (1791–1815): THE EARLIEST AMERICAN TREATISE ON MUNICIPAL ACCOUNTING?

Recent research has produced the earliest known treatise on Accounting written by an American. Samuel Freeman's The Town Officer [1791] is significant in that it recommended double-entry fund accounting for municipalities. The paper analyzes and compares Freeman's objectives of “a plain and regular Method” to modem municipal accounting concepts as articulated by the GASB. Additionally, the entries and the accounts recommended by Freeman are analyzed and compared to modern municipal accounting evidenced in current textbook material. These analyses show The Town Officer to be a significant contribution to accounting literature not only for its 1791 publication date, but also for the similarity of its content to present day municipal accounting objectives and requirements.

Municipal financial reporting and the general obligation bond market: New York City, 1961–1975

This study addresses the value of municipal accounting information to the municipal bond market by examining the association between New York City (City) bond yields and published accounting data in comparison to the association between City yields and accounting data which have been adjusted to conform to generally accepted accounting principles (GAAP). The report of the Securities and Exchange Commission (SEC) investigation that followed New York City's default in 1975 (SEC 1977) charged that the City's (non-GAAP) financial statements obscured the City's true financial condition and misled statement users, including general obligation bond investors. The results of my study indicate that whereas New York City's accounting practices significantly overstated revenues and understated expenditures, the primary bond market's assessment of the relative risk of the City's general obligation bonds was consistent with the adjusted (GAAP) revenue and expenditure numbers which were not disclosed in the City's financial statements.

Toward a framework for evaluating the role of accounting and auditing in political markets: The influence of political competition

This essay addresses the incentives of elected officials to disclose their actions in the political marketplace. The analysis differs from prior studies of municipal accounting practices in that it presumes that incentives to use these practices derive from relationships between incumbents and their prospective competitors, rather than relationships between incumbents and their constituents. This perspective leads to an alternative interpretation for empirical results reported elsewhere that indicate significant relations between the use of standard accounting and auditing practices and measures of political competition.

Reforms and Myths – A History of Swedish Municipal Accounting

The article deals with the development of Swedish municipal accounting since the middle of the last century to the present time. The article focuses on reforms of accounting norms on one hand and on myths of accounting on the other. The main conclusions are that the accounting norms will be reformed when the dominating myth of the norms is threatened or changed, that practice influences norms and that reforms of norms do not necessarily lead to changes of practice.

Data source and measurement differences in municipal accounting measures

Census Bureau data are relied on extensively in municipal accounting research. Building on the earlier work of Icerman and Welch [1987], this study presents a comparative analysis of the primary and secondary data sources (the Comprehensive Annual Financial Report and the Bureau of Census' Survey of Governments (1982; 1983), respectively) for fix key accounting measures. While the two data sources are highly correlated, large differences are detected in the accounting measures. The nature, extent, and implications of the data differences are discussed.

MUNICIPAL ACCOUNTING REFORM c. 1900: OHIO'S PROGRESSIVE ACCOUNTANTS

Despite the fact that municipal accounting was a significant and permanent reform of the Progressive era, historians have failed to accord accountants proper credit for their leadership roles. Ohio was an important Progressive state and is particularly suited to an investigation of the contribution made by accountants. Ohio was the first state to require uniform municipal accounting and one of the first to inaugurate budgeting. Municipal research bureaus in major Ohio cities were among the most dynamic in the nation, inspiring important steps forward in cost accounting, budgeting, and the installation of accounting systems. Progressive municipal administrations came to depend increasingly on expert accountants to devise new systems and to audit the results.

The effects of governmental accounting methods on asset-acquisition decisions: A theoretical model and three case studies

This study explores possible effects of municipal accounting practices on asset-acquisition decisions. Theoretical decision models are developed using expenditure and depreciation accounting for reporting performance. The models suggest that expenditure accounting may lead to uneconomical leasing. Case studies of three cities focused on comparing present values of their leases to purchase alternatives and on interviewing department administrators. Significant uneconomical leases were found. The case studies suggest that a complete model of municipal administrators' acquisition decisions include consideration of accounting methods used to report performance; perceived risk of obsolescence; restrictions of grantors, third-party reimbursers and higher management; and administrators' background and training.

The Association Between Municipal Market Measures and Selected Financial Reporting Practices: Additional Evidence

In the Autumn 1981 issue of this Journal, Wallace examined the association between selected accounting and auditing variables and two municipal bond measures: bond ratings (BR) and net interest cost (NIC). In general, she found that accounting variables were associated with NIC but not with BR, and that auditing variables were associated with BR but not with NIC. Wallace's study was the first to examine the extent to which market measures reflect cross-sectional differences in municipal accounting, auditing, and reporting practices, and therefore it represents an important contribution to the municipal accounting literature. However, her study contained inherent data limitations which reduced the external validity of her findings. Since such data limitations have been pervasive in municipal accounting research, validation of research findings must rely primarily on replication and extension as improved data become available.1

Economic Incentives and the Choice of State Government Accounting Practices

Several recent studies have examined possible economic determinants of accounting policy choices of local government entities. For example, Zimmerman [1977] and Maher and Keller [1978] proposed economic reasons for the current (diverse) state of municipal accounting and financial reporting, and Evans and Patton [1983] identified economic incentives leading to participation in the Municipal Finance Officers Association Certificate of Conformance program. A recent survey by the Council on State Governments (CSG) [1980], in its summary of major accounting and reporting practices for individual state governments, characterizes both the general status of state government accounting and the diversity of accounting practices observed across states. Using the data reported by the CSG and some of the economic arguments offered in earlier research, this study provides preliminary evidence on the association between economic factors and cross-sectional variations in accounting practices of state governments. The specific evidence presented is characteristic of states that report quantitatively

A BRIEF HISTORY OF PROPERTY AND DEPRECIATION ACCOUNTING IN MUNICIPAL ACCOUNTING

Generally accepted accounting principles require the exclusion of permanent property and the non-recognition of depreciation in most governmental funds. Although this issue was settled in the early 1930s fervent debate continued as to the merits of this practice from 1895 to around 1925. Several prominent accountants argued for the inclusion of permanent property and the recognition of depreciation in governmental funds during this earlier period.

The Association between Municipal Accounting Information and Bond Rating Changes

Considerable controversy exists regarding the usefulness of municipal accounting information. Efforts to modify the present reporting framework for municipalities are predicated upon assertions that the information is not timely, reliable, and/or otherwise useful. In this study, we examined the association between municipal bond rating changes and accounting information to assess (1) whether municipal accounting measures available prior to a bond rating change are useful for predicting the change, and (2) whether municipal accounting measures available subsequent to the rating change reflect the economic conditions which induced the change in ratings. Results are eunbiguous for objective (1) but supportive of objective (2). These results provide additional insights into the use of accounting information by bond rating agencies and into the correspondence between rating agency assessments of municipal quality attributes and Jissessments obtained from accounting numbers. Such considerations are important to creditors who wish to predict rating changes, since few alternative sources of information for assessing municipal bond risk are available, and to commercial bank investment portfolio managers, who face regulatory constraints on the quality of issues within their portfolios.'

The Second Wave of Municipal Accounting Reform

The Second Wave of Municipal Accounting Reform

The Evolution of Municipal Accounting in the United States: 1900–1935

The American city, following a half-century of rapid and choatic growth, was the subject of much attention after 1900. Efforts to reform its political structure and to improve and expand its service facilities demanded improvements in municipal accounting procedures as well. Professor Potts discusses the relative merits of commercial accounting, as applied to cities, and of new philosophies of accounting advanced in the light of the city's unique place in society. He explains how cities have oscillated between the two approaches, and concludes that the problem may be more adaptable to accounting philosophies designed for profit-making enterprises than has been generally supposed.

THE EVOLUTION OF BUDGETARY ACCOUNTING THEORY AND PRACTICE IN MUNICIPAL ACCOUNTING FROM 1870

THE EVOLUTION OF BUDGETARY ACCOUNTING THEORY AND PRACTICE IN MUNICIPAL ACCOUNTING FROM 1870