An exploratory study assessing compliance among municipal controllers and the possible explanations for their degree of compliance

Abstract

Municipal controllers are sometimes confronted with requests from managers that contradict with the legal provisions. This raises the question how municipal controllers deal with these requests and whether this would impact their compliance. This article is a result of an exploratory study assessing compliance among municipal controllers and the possible explanations for their degree of compliance. The study has focused on one specific provision concerning accrual accounting, one of the elements of new public management (NPM), which is prescribed for Dutch municipalities. The study is based on a survey in 22 municipalities. The results show that the majority of municipal controllers who participate in this study deviate from this legal provision. There might be a relation between the orientation of the controllers and the degree of compliance. The position of the controller within the municipality can be a significant factor explaining this orientation. However, the size of the sample is too limited to generalize. The conclusions of this study undermine the idea that municipal controllers should act as business partners to the management. Finally, the study reveals a paradox: while one of the main elements of NPM is to shift more responsibilities to decentralized managers, this shift can lead to an increased principal‐agent problem, leading to a lesser degree of compliance.

Hybrid controller: main competences and skills

“…This competence focuses mostly on economic and financial statement aspects, such as applying principles to evaluate transactions, using International Financial Reporting Standards (IFRS), and preparing and interpreting financial and non-financial reports (IAESB, 2019). This finding follows Anderson et al (2019) discussion about the attention this profile devotes to past information, such as the financial statements.…”

“…Andreassen (2020) emphasizes the professional technical nature of this profile, performing activities involving bookkeeping and measurement processes. Complementarily, Anderson et al (2019) highlight the focus on past information, seeking formal aspects that ensure it conformity. In this way, a bean counter controller is seen as an external agent, an inspector who monitors the work of unit managers, being perceived as a figure close to that of an internal auditor (Anderson et al, 2019).…”

“…This profile of strategic character within organizations is usually referred to as business partners, with its focus on accounting analysis and management (La Paz et al, 2020). Unlike the previous profile, here the focus is on present information and projections for the future, for which the controller acts as a member of management, an internal agent (Anderson et al, 2019). Caicedo et al (2018) highlight the analyst and consultant roles of the business partner controller, which evolve with the business strategy, complement Horton and Wanderley (2018).…”

“…The 1929 crisis and its effects on the controller (Doron et al, 2019) contributed to the formation of what is now understood as the controller's "traditional profile" (Goretzki et al, 2013), a profile that focuses on technical and formal aspects, aiming at information compliance (Anderson, Maks, & Klaassen, 2019). Goretzki et al (2013) and Horton and Wanderley (2018) found that this profile, commonly referred to as bean counter, has been associated in the literature as something negative, as "old", whereas the "contemporary profile" -business partner profile -is seen as the desirable, as "new".…”

CFO characteristics and opportunistic accounting choice in public sector organizations

“…Considering that a CFO runs the risk of becoming the scapegoat if such irregularities are publicly exposed (Leone and Liu 2010;Hazarika et al 2012), it is logical to relate opportunistic accounting choice to the risk propensity of CFOs (Anessi-Pessina and Sicilia 2019). At the same time, internal pressure on accounting staff typically arises in financial reporting (Falkman and Tagesson 2008;Anderson et al 2019) and, for a CFO, there will also be a risk associated with not complying with the will and interest of the governing political parties. Therefore, whether or not CFOs engage in an opportunistic accounting choice may be contingent on the extent to which they have influence over the political process.…”