whereby it promotes greater and improved accountability including performance and public accountability. As Coy & Dixon (2004) stated, the reporting should involve "the reporting of comprehensive information about the condition, performance, activities and progress to all those with social, economic and political interests" (p.8 1 ). This ts consistent with the definition of performance reporting stated by the IF AC ( 1 996):
The communication of quantitative and qualitative information which identifies the results of an enterprise against specified benchmarks ( i .e. pre-determ ined targets). It includes performance information presented in budgets, p lans or reports on performance of individual programmes or activities in addition to information provided in the financial statements. (p.3)
I n a study conducted by the OECD (2002), a variety of approaches taken in the reporting of performance information were identified, including integration of the information into annual external reports. The current research is concerned with the comprehensive view of performance reporti ng - the reporting that covers both aspects of fi nancial and non-financial information, wh ich is integrated into external annual reports.
5.3 PERFORMANCE REPORTING AND T HE DISCHARGE OF ACCOUNTABILITY
Reporting is one stage in the public accountabil ity cycle which begins with the budget process and ends with reporting to parl iament (English & Guthrie, 2000). The reporting function which is concerned with the gathering of data, sorting it into a particular presentation format, and transmitting it leads to issues of what to report, to whom to report, in what form to report in order to discharge the public accountability and whether the reporting meets the expectations of the parties who are entitled to the report. The current research is concerned with these issues.
The reporting of performance information is an important response to public pressure for accountability, as it enables a public sector entity to publicly disclose and be responsible for its actions (OECD, 2004). The d ischarge of accountability requires transparency (Shende & Bennett, 2004) which can be achieved through reporting. As stated by the comptroller and auditor general of the United Kingdom, (OAG of the UK, 2000, p. 1 ), "consistent, c lear reports of performance and pub I ication of results, are important to record progress and exert pressure for i mprovement. Such transparency is essential to help ensure that publ ic bodies are ful ly accountable."
Prior studies have recognised the importance of performance information in the discharge of accountability ( for example, Boyne & Law, 1 99 1 ; Laughl in, 1 990; Lee, 2008; Mayston, 1 98 5 ; OECD, 2004; Rutherford, 2000; Stephen, 1 995). According to B arrett ( 1 997), performance information is crucial as it is documented and reported in an organisation's publications to parliament and other stakeho1ders. Lee (2008) reports that performance reporting is a tool to enhance both internal and external accountabi lity and its significance for accountability is in assisting in the achievement of the obj ectives of an organisation and the reporting of information to stakeholders.
Earlier studies on performance reporting have tended to focus only on the reporting of performance indicators or m easures (see for example Boyne & Law, 1 99 1 ; Pendlebury, Jones & Karbhari, 1 994; M ucciarone & Neilson, 2006; Thompson, 1 995). Boyne and Law ( 1 99 1 ), in evaluating the performance indicators provided to the public in annual reports published by Welsh District Councils, found that annual report information on performance indicators was generally of poor qual ity. Most of the performance indicators contained in the reports referred only to service inputs. The reporting of performance indicators was al so the focus in Pend lebury et al.'s ( 1 994) study. The study identified the disc losure o f financial performance indicators (cost-reduction, profitabil ity and unit cost indicators) and non-financial performance indicators (procedural efficiency and o utput quality indicators) in annual reports of United K ingdom government agencies. In the New Zealand public sector, Thompson ( 1 995) focused on the service performance reporting of a speci fic sample of New Zealand local authority agencies - public a rt galleries - and found that there were problems with reporting service performance indicators. The links between performance indicators and stated obj ectives were either unclear or absent, performance indicators were weak, measures of performance against the stated objectives were incomplete and explanations
of performance indicators were not given. The extent o f disclosure of performance indicators i n the annual reports of Australian federal and state government departments was exam ined by Mucciarone and Neilson (2006). Their study found that most of the departments studied fol lowed a system of reporting output qual ity indicators and there was a lack of d isclosure of efficiency and effectiveness i nd icators.
The focus on performance indicators, as in the above studies, is consistent with the concept that performance reports provide period ic information on organisational performance matched against a set of performance indicators which represent outputs del ivered by the organisation and the outcomes/impacts achieved (Saldanha, 2004). However, for accountabi lity purposes, the reporting on performance indicators seems inadequate. A wide array of performance information should be reported in the discharge o f accountabi lity. This extends the scope of d isclosure traditionally provided in financial statements prepared in accordance with a dec ision usefulness purpose (for example, B oyne & Law, 1 99 1 ; Hooks, Coy & Davey, 2002; IFAC, 1 996; Laughlin, 1 990; Mayston, 1 985; Rutherford, 2000; Stephen, 1 995). In addition to focusing on performance indicators or measures such as inputs, outputs, results, efficiency and effectiveness, Hyndman and Anderson ( 1 995) also foc used on performance info rmation in terms of goals and objectives, future target information and budget information. This is consistent with Barrett ( 1 997) who suggested that performance information has a wide focus that goes beyond performance indicators and includes information regarding objectives, strategies to achieve the objectives, targets and benchmarking. Therefore, this current research argues that the wide array of performance information should not be limited to financial information and performance indicators or measures. The accountabil ity paradigm adopted for the current research is based on the premise that reports for accountability purposes should be more comprehensive and cover both financial and non-financial information to meet the needs of a wider group of stakeholders.
In the discharge of accountabi l ity to a wider group of stakeholders, annual reports are considered a primary reporting mechanism (Barrett, 1 997; Coy et al., 200 I ; M ack & Ryan, 2003). As transparency i s the core element of accountability, annual reports should disclose sufficient information for stakeholders to make informed judgements on an organisation ' s performance ( Barrett, 1 997). Therefore, the reports should provide a w ide range of information, including performance information in financial and non-
fi nancial terms, to a l l stakeholders.
Prior studies that have examined annual reports of local government as an accountability mechanism include Ryan, Stanley and Nelson (2002) and Steccol ini (2004). Ryan et al. (2002b) examined the quality of d isclosure of the Queensland local government's annual reports for the period 1 99 7 to 1 999 in order to establish whether their accountability obl igations were being met. They found that the quality of annual report disclosure increased over the peri od studied, although the overall index score was relatively low. S pecifically they found that the financial disclosure was comp lete but that the disclosure of non-financial i tems including service performance information was weak. Steccolini (2004) found the overall qual ity of annual reports of Italian local governments was poor. She found that information on financial performance and position was very limited and service performance information was not extensive. She consequently expressed concern at the overall degree of accountabil ity of the local governments during the period under study.
Other prior pub l ic sector stud ies that have examined entire annual reports and re lated the level of disc losure of the reports to accountabi lity include the studies of Coy and Dixon (2004 ); Coy et al. (200 1 ) ; Hooks (2000); Hooks et al. (2002b ); Nelson, Banks and Fisher, (2003 ); Nelson, Fisher, Tower and Banks ( 1 997); · Tooley and Guthrie,
(2007); and Wei, Davey and Coy (2008).
By means of a public accountabi l ity index (PAl), Coy and Dixon (2004) exam ined the changes in the qual ity of the annual reports of eight New Zealand universities for the years 1 996 and 2000. Simi lar to Nelson et al. (2003), they found an overall i mprovement in the quality of the annual reports. Also, by means of an accountability index and by focusing on the school sector, Tooley and Guthrie (2007) exam i ned the entire annual reports of New Zealand' s secondary schools and found an overall lack of consistent quantity and quality of performance disclosures which affected the overall quality of the annual reports. In another study, Wei et al. (2008) also developed an accountabil ity index and exam ined the reporting practice of m useums in New Zealand and the Un ited Kingdom. The study found that information regarding internal p rocesses and objectives made up the strongest component of the reports and information on learning and growth constituted the weakest area. These factors impacted on the quality of disclosure in the annual reports.
T hese reviewed studies indicate that the extent and quality of external annual report d isclosure reflect the discharge of accountability, and especial ly publ ic accountabi lity. An improvement in the extent and quality of reporting indicates an improvement m public accountabi l ity rendered through annual report disclosures.
I n promoting public accountability, structures and strategies also need to be considered. Focusing on the Canadian province of Alberta, Robinson (2003) built a contractual accountability model and examined a theoretical perspective to see d i fferences between government accountability as proposed and enacted. She found that the Albertan government had increased the use of the el itism of knowledge in the government by i ntroducing and promoting performance measures which emphasise scientific, scholarly k nowledge. She argued that the use of complex scientific and economic technologies could disconnect people from their governments. Results from this study imply that performance information provided to stakeholders should take into consideration the stakeholders' expectations and needs, not necessarily the performance information that is produced by complex, scientific and econom ic technologies perceived as important by the preparers. As the public accountabil ity parad igm recognises the right of a broad group of stakeholders to be informed about the performance and condition of the reporting entity, "a framework for the external accountabi l ity reporting must take all elements of performance into consideration for potential reporting and report performance elements that stakeholders want to know" (OAG of New Zealand, 2002, p.5, emphasis added). In other words, reporting for accountabil ity purposes should seek to satisfy, as far as possible, the information needs of the stakeholders of the reporting entity.
It is argued in the current research that annual reports, as a key mechanism of performance information reporting and the discharge of public accountabil ity, should contain sufficient and appropriate information as expected by the stakeholders to enable them to assess the performance and condition of the reporting entity. Therefore, the current research is concerned with the expectations of stakeholders in terms of financial and non-financial performance information that is disclosed or shoul d be disclosed in the annual reports of the reporting entities -Malaysian local authorities.
The information expectations of the broad group of stakeholders and their perceptions of the importance of information for disclosure are reconciled and finalised by an expert stakeholder panel in order to develop a disclosure index that is used to evaluate the p ractice of annual performance reporting of local authorities.
5.4 STAKEHOLDERS' INFORMATION REQUIREMENTS FOR