267-298, (*). 2, pp. Andriani, Y., Kober, R. and Ng, J. Ellwood, S. and Newberry, S. (2016), “New development: the conceptual underpinnings of international public sector accounting”, Public Money & Management, Vol. Contrasted to that, making a minimum level of profit, irrespective of how this profit is accomplished, is the bottom line in the private sector, and budgeting in this sector is primarily an internal matter, i.e. The latter obligation is inspired by the desire to stimulate members of the legislative to compare the performance of their own policy fields with that of colleague-governments (benchmarking), and in doing so, stimulate an active use of the budget by these councilors. 4, pp. One of the first publications indicated the following user groups (Anthony, 1980): governing bodies, investors and creditors, resource providers, oversight bodies and constituents, while user needs pointed to: financial viability, fiscal compliance, management performance and costs of services. In line with Steccolini’s (2019) call for a reflection on uses and users of accounting information (AI) in the public sector, the aim of our paper is to present a review of the recent literature about users of public sector AI, their needs, the perceived usefulness[1] and the actual use of such information. in Anglo-Saxon countries where the democratic legislator mandates accounting bodies for setting up accounting standards. by answering questions such as: what could be done to avoid a budget deficit or a too low solvency? This paper includes a literature review and conceptual reflections. Information will have relevance if it influences the decisions of the users. (2016), “A critical literature review and a challenging research agenda on politicians’ use of accounting information”, Public Money & Management, Vol. It aims to stimulate research on the conditions or contexts that are contributive to the use of AI. The table, for example, shows that the primary interest of politicians goes to the prioritization of policy fields and the achievement of a balanced budget, while employees are primarily interested in job security and labor conditions of the organization, and creditors’ and investors’ interest goes to issues of liquidity and solvency. – survey research on Dutch aldermen’s use of performance information, The role of consultant-researchers in the design and implementation process of a programme budget in a local government organization, Challenging the NPM Ideas about performance management: selectivity and differentiation in outcome-oriented performance budgeting, Struggling with ambiguity: public managers as users of NPM-oriented management instruments, A critical literature review and a challenging research agenda on politicians’ use of accounting information, Cash or accruals for budgeting: why some countries changed their budgeting mode and others not, What matters in legislators’ information use for financial reporting? (1992), “Elements of a theoretical framework for public sector accounting”, Accounting, Auditing and Accountability Journal, Vol. This paper presents promising routes for future research. 1, pp. The paper proceeds as follows. 28 No. 3, pp. Vakkuri, J. Hence, our focus lies on the first and third group, and especially the first group is, due to its lack of accounting expertise, crucial and may also be problematic in assessing its accounting needs. Steccolini, I. This approach copes with the drawback of other approaches that implicitly assume some extent of existing knowledge about AI on the side of its potential users. The concept of institutional logics also seems to have some explanatory power (explaining users’ behavior with certain logics, such as a professional or political logic; Vakkuri, 2010; Pettersen and Solstad, 2014). ; the case of Japan, Implementing Reforms in Public Sector Accounting, https://doi.org/10.1108/JPBAFM-10-2018-0124, www.cigar-network.net/index.php/news/news-latest/125-the-contribution-of-international-research-networks-on-public-sector-accounting-towards-improving-public-sector-financial-management-and-reporting. the exposure draft 63 on social benefits issued in October 2017; www.ipsasb.org/projects/social-benefits). Furthermore, we found that there is a strong need to connect the different variables which were so far mostly studied separately: user groups – user needs – usability of AI – intensity of information use. Other issues are, for instance, future cash flow risks of long-term investments which can be relevant for user groups like politicians, oversight bodies and investors. One is the extent to which preparers and users of AI interact about the needs for AI of these users; this can be labeled as the user-preparer interface (see, for instance, Ouda, 2017). 14 No. 4, pp. Thus financial reporting must meet the general and common information needs of potential external users who cannot demand reports tailored to meet their specific information needs.”. The Conceptual framework lists the primary users of financial statements as: This site uses cookies. This normative view on user needs – what users ought to need – also underplayed that users might want certain kinds of AI for other than rational purposes, for example, for justifying their vested interests. In accordance with the target objective several kinds of audit can be defined in Public Sector. 20 No. 3, pp. Ezzamel, M., Hyndman, N., Johnsen, Å., Lapsley, I. and Pallot, J. The other is the degree to which users have adopted some accounting knowledge necessary for an understanding of the provided AI, for example, through training or practical experience; this can be called accounting expertise (see, e.g., Buylen and Christiaens, 2016). There are various different users of financial statements, each with different information needs. Second, which approaches for measuring user needs or engaging users in the design of accounting documents are opportune for enhancing the usability and use of these documents? 9 No. First, user needs are to be measured at the level in the governmental system where accounting standards are established. Third, a hybrid group in-between the above groups: members of the executive or managers with some accounting expertise are belonging to this group, and probably also some media representatives as intermediaries between the public sector organization and the citizens. Individual governmental organizations are often part of larger governmental systems in which accounting standards, which contain guidelines on various accounting terms, are established at a higher level than that of the individual governmental organization. Guarini, E. (2016), “The day after: newly-elected politicians and the use of accounting information”, Public Money & Management, Vol. E-mail: info@charterededucation.com, What you Need to Know About Inventories for IAS 2, Journal Entries for Financial Assets and Financial Liabilities held at Fair Value Through Profit or Loss (FVTPL) under IFRS 9. The level of perceived usability of AI is depending on several supply factors, e.g. Before proceeding, it is appropriate to define what is meant with AI throughout this paper. Of course, there is also a broader understanding of accounting that includes non-financial information. We emphasized that there are quite different user groups in the public sector with varying needs and interests. To find out more, see our Cookies Policy Second, a mandatory set of ratios, among others about solvency and a balanced budget have to be presented each year by lower level governments. The issues do not only relate to financial reports but also to budgeting documents. The terms “usefulness” and “usability” are often used in a synonymous way. Our paper is a combination of a “literature review” and a “viewpoint.” The literature review aims to give a broad overview of the findings of empirical studies on the usability and use of public sector AI, while the thematic discussion focuses on specific issues that are according to the authors relevant for further exploration. Correspondingly, some of the reviewed articles focus primarily on perceived usability, others on actual use (and a few of them on both issues). The providers of risk capital and their advisers are concerned with the risk inherent in, … Subsequently, these users are asked to reflect on their experiences, and then consider proposals for improving these documents. None of the reviewed papers explicitly makes a distinction between diverging influences of antecedents for usability and the use of AI, whereas we claim that the type of influences is largely different. Opinions and preferences of the accounting profession also count, e.g. 185-209. DOI: 10.1108/jpbafm-10-2018-0124 Corpus ID: 211744569. They have to rely on the financial statements and annual reports, auditor’s report and directors’ report etc. 36 No. Public sector user groups of AI are partly different from those in the private sector. 1, pp. The reviewed literature offers a broad picture of users of AI. (2011), “The role of consultant-researchers in the design and implementation process of a programme budget in a local government organization”, Management Accounting Research, Vol. There may be tensions between the accuracy and unavoidable complexity of financial reports according to the relevant accounting standards on the one side and the understandability, clearness and “digestibility” of such financial information on the other side. The tensions arising from this observation are twofold. 1, pp. However, this is an all too simple picture, as will be clarified below. Jorge, S., Jorge de Jesus, M.A. 5 No. 255-279. 507-514, (*). Figure 2 summarizes the above reasoning about the links between user needs, usability and the use of accounting documents in the public sector, including some important antecedents. On the contrary, the use of AI to support decision making has an ex-ante view and is relevant not only for external stakeholders (e.g. The budget is an expression of these political priorities, and hence, budgeting and ensuring that budgets and related plans are executed according to laws and political priorities is core in the public sector. Here service recipients and local interest groups are holding a prominent position in using AI. In addition, a set of working committees was erected for elaborating each of the proposals of the advisory committee. 1, pp. This theme is relevant because users should have their say about the design of accounting documents and the relevance and understandability of the included information. municipalities and provinces, have been renewed in 2015–2016 (MBZK, 2015), and were subsequently introduced in 2017. From a normative perspective, “the public,” i.e. Based on this, we intend to discuss some challenging themes and to explore future research directions in this domain. and by E. Haustein et al. Pollitt, C. (2006), “Performance information for democracy: the missing link?”, Evaluation, Vol. 22-31. However, the 2018 Conceptual Framework has cut this back to just three key groups. Buylen, B. and Christiaens, J. Other issues or more detailed issues as presented in Table I are thinkable. Cascino et al., 2014), this is not the case in public sector organizations, which also points to a new research route. Performance budgeting – is accrual accounting required? of media, to collect the necessary data (e.g. and Pandey, S.K. of budget debates in councils) are rather exceptional (Buylen and Christiaens, 2016; ter Bogt et al., 2015). We still have to better understand the theoretical interrelations between the elements of the “user needs-usability-use”-model and their various contingencies. Several of the reviewed articles identify a number of antecedents having an impact on user attitudes and on the level of perceived usability and actual use. IPSAS 1, “Presentation of Financial Statements” (IPSAS 1) is set out in paragraphs PUBLIC SECTOR 1−155 and Appendices A−B. Moreover, their use of accounting documents is often obligatory. A position-practice approach, Towards an information fit theory based on accounting information matching between producers and users, paper presented at the 16th CIGAR Conference June 8–9, University of Coimbra, Porto, Elements of a theoretical framework for public sector accounting, Accrual accounting in the public sector: experiences from central government in Sweden, Budget repair or budget spectacle? Theoretical arguments, in general, did not play an important role in the reviewed articles. Based on such item-by-item comparisons, a ranking of all items could be made. between different managerial layers in the company. 47-62, (*). 2, pp. and van der Kolk, B. The main users (stakeholders) of financial statements are commonly grouped as follows: Investors and potential investors are interested in their potential profits and the security of their investment. 31 No. 287-315, (*). Do laymen users, for example, know what full accrual costs are, or what the differences are between capital expenditures and depreciation? Our review of the recent research on users and uses of public sector AI shows, on the one hand, an increasing stream of empirical studies. Figure 1 indicates that, when user needs are fulfilled, this leads to usability, and when usability is in place, this leads to use. 4, pp. 221-252. ter Bogt, H.J. 89-113. Caruana, J. and Farrugia, B. decision making and accountability), are seen as public sector-specific, this also has consequences for the accounting standards (see further Ellwood and Newberry, 2016). 3 No. Several measures can be considered in this respect. 1124-1144, (*). Other user groups are either government specific, such as oversight bodies, inspectorates or auditors, or overlap with user groups of private sector accounting, such as managers, employees, suppliers, creditors and investors (see also Section 2.2). 18 No. to estimate cash flow needs, to assess performance or to calculate the cost of services (Andriani et al., 2010; Kober et al., 2010; Mack and Ryan, 2006). The subsequent conceptual reflections deal with so far less regarded user groups, with options to strengthen the user perspective in budgeting and financial reporting, with approaches for engaging users in the content of accounting documents, with interrelations between user needs, usability and use intensity, including various antecedents of the different variables of the information-use issue. 1-12. ter Bogt, H.J. Reasons to use information. In addition, methods relying on co-creation of adapted budgetary or financial reporting information as well as applications of a learning approach appear promising. special information needs with regard to rendering accountability). The Public Sector Committee of the Institute of Certified Public Accountants of Cyprus initiated the project to identify the needs of the users of public sector financial reports and determine whether these needs are being met. To obtain updated performance reports and decisions of the board of directors, external users can access the websites of companies. Although there is a general opinion that – at least in the past – preparers decide about the content and the understandability of AI (“accounting is what accountants do,” Young, 2006), there is not much research on the role and attitudes of preparers of AI (see Kober et al., 2010 who conducted their survey on perceived usability of AI not only among users but also among preparers of AI; see also Christensen et al., 2018 who analyze the role of public sector accounting practitioners as preparers and users of AI). In some cases, authors do not differentiate clearly between the two aspects. Based on our literature review, we have tried to draw a more diverse and nuanced picture of the different variables in the complex context of the “user needs-usability-use intensity” framework. These users need information to help them make informed or reliable decisions or judgements with regards to the organization. (2005), “Conflict and rationality: accounting in the Northern-Ireland’s devolved assembly”, Financial Accountability and Management, Vol. 483-490, (*). The older conceptual frameworks identified groups such as government and general public as primary users. Second, accounting literacy and familiarity with AI are influential (ACCA, 2015; Andriani et al., 2010; Ezzamel et al., 2005). (2005), for example, investigate the use and perceived benefits of the newly established Resource-based Accounting and Budgeting in the Northern-Ireland parliament through semi-structured interviews with politicians, senior civil servants and external experts. Moreover, the type of AI is partly specific to the governmental level. 231-234. In the same way, small business owners need financial information to determine if the business is profitable and whether to continue, improve or drop it. They have been mentioned as follows: Public. This example shows how users (councilors) and producers (staff members) of budgetary information were involved in the re-design of a program budget, supported by external consultant-researchers. From a formal point of view, a distinction among “recipients” and “users” may be appropriate, where the former are the addressees of certain AI but not necessarily also “using” such information for certain purposes (Mack and Ryan, 2006). the individual decision maker, the organization and the country or society at large. Young (2006) shows that private standard-setting bodies were not interested in the actual needs for AI of various groups of users. 491-498, (*). However, the 2018 Conceptual Framework has cut this back to just three key groups. The users may be classified into Internal and external users. In general, we observe a slow but steady shift of the overall reporting perspective: from a pure “accountants view” toward a more balanced mix of professional and needs-driven perception of financial information. Investors. First, although municipalities and provinces have a large extent of freedom to structure their budget into programs, they additionally have to present a budget according to a pre-defined set of policy fields with prescribed performance indicators. Consultation procedures, which are used in the design of new accounting standards, and thus in the way AI is structured and presented, are also widely applied. Ouda, H. (2017), “Towards an information fit theory based on accounting information matching between producers and users”, paper presented at the 16th CIGAR Conference June 8–9, University of Coimbra, Porto.

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