Pursuing Private or Public Accountability in the Public Sector? Applying IPSASs to Define the Reporting Entity in Municipal Consolidation

Abstract

Private-sector accounting systems have often been heralded as superior to public-sector ones and suggested as solutions to the shortcomings of the latter. Our article aims at contributing to this debate by looking at the adoption of business-like practices where the public and private sectors intersect. Our analysis shows that the adoption of International Public Sector Accounting Standards (IPSASs), strongly inspired by International Financial Reporting Standards (IFRS), might not ensure the expected disclosure. Municipalities adopting IPSASs for preparing consolidated financial statement do not necessarily increase accountability because some relevant public service providers are not included in the reporting entities.

Public-Sector Consolidated Financial Statements: An Analysis of the Comment Letters on IPSASB’s Exposure Draft No. 49

“…Consolidation for subsectors Consolidations for subsectors should precede any whole-of-government consolidation 1 on communities; Grossi & Steccolini, 2014) suggest taking into account both financial and non-financial performance, which in turn are affected by many different activities, functions, and services (Boyne, 2002), because profit should not be assumed as "the" goal of a PSE (Cohen, Doumpos, Neofytou, & Zopounidis, 2012;Guthrie, 1998;Guthrie & Johnson, 1994;Farnham & Horton, 1996, p. 31;Ma & Matthews, 1993).…”

“…In other words, the main problematic issue is the definition of appropriate criteria concerning the consolidation area (Heald & Georgiou, 2000;Robb & Newberry, 2007;Tagesson, 2009;Walker, 2009), whose solution should not be simplistically based on the criteria used in the private sector (Grossi & Steccolini, 2014). In fact, the consolidation area concerning PSEs can be identified in accordance with different criteria, which lead to different approaches (Bergman, 2009).…”

“…The reason for investigating the topic through the responses from this ED is due to the growing relevance in the international scenario of the IPSASB and its standards. In fact, many countries do not have their own standards about the consolidation of PSEs; therefore, they incline toward the adoption of the IPSAS (see, for example, the case of Italy investigated by Grossi & Steccolini, 2014). Furthermore, in the European context, the EU has recognized the importance Downloaded by [University of Birmingham] at 07:11 23 March 2015 of international standards (even if it is planning to adopt its own standards, named European Public Sector Accounting Standards, or EPSASs), stating that: "the IPSAS could therefore serve as a starting point and reference model for the development of harmonised public sector accounting standards in Europe" (http://www.epsas.eu/en/why-do-we-needepsas.html).…”

Financial Reporting Dilemmas for the Maltese Local Government

“…Moreover, the adoption of a set of principles, recognized worldwide, inevitably gives greater credibility in the eyes of other nations. Also, some politicians believe that the adoption of international standards would legitimise the financial reports, but various studies have shown that this is not necessarily true (Grossi & Steccolini, 2014).…”

Reforma contábil do setor público na América Latina e comunidades epistêmicas: uma abordagem institucional

“…Other works found that the lack of homogeneity was higher among European countries (Benito et al, 2007). We could say that some of the reasons for this difference is that continental European countries have a strong legal-code tradition and a long-stand tradition on budgetary and cash accounting (Grossi & Steccolini, 2015). Therefore, difficulties in the implementation of IPSAS and the heterogeneity of the European context led to creation of regional accounting standards (EPSAS); although based on IPSAS (Caperchione, 2015).…”