3 MATERIAL E INSTRUMENTAL

The accrual-basis of accounting is often perceived as an essential means to be assured of greater financial transparency and carries a pledge of more effective and more efficient management. This assumption is an idea largely shared in the public sector. Mimetic isomorphism is observed in the perception that the adoption of the same set of standards is a way for public organisations to be as powerful as private ones, while the numerous financial disasters that have happened in the private sector are disregarded (Lande, 2006).

Mimetic isomorphism makes the role of the epistemic community rather ambiguous. Because of its composition (researchers, auditors, consultants, associations of accountants, etc.), the epistemic community influences the process of standardization while being a force in proposing the choice of the standards to be adopted or developed. According to Lande (2006),

65

however, when proposals that are not in conformity with the 'code' or with the standards in force are carried out (Lande and Scheid, 2003) they are not considered very credible by the remainder of the epistemic community because they deviate from 'generally accepted

positions'. Lande (2006) persists that the suggestion of accounting principles or policies

distinct from those of the private sector is regarded as a way of thinking against the dominant current and as a lack of realism or pragmatism. Lande (2006:26) concludes, therefore, that the principle is to adopt the dominant position and not to innovate. In the end, the adopted position must be in conformity with the generally accepted position in order for it to be 'credible' and considered as legitimate. The fact that advice is sought from external experts will ensure such legitimacy.

Figure 9: Isomorphism impact on the reform's steps

66

Accrual accounting is considered as the norm for the reform concept in Lüder's FMR Model (2002) (Lüder and Jones, 2003:54). The whole accounting reform, including the reform concept, is subject to the pressures of contextual, instrumental and behavioural variables. Other mechanisms or pressures are present in association with these contingent variables – coercive, normative and mimetic isomorphism. As illustrated in Figure 9, these three isomorphisms interact among themselves and modify the actors’ expectations, the accounting system and the organization itself. According to Lande (2006), an interacting system is observed, with each organization or institution or corporation interacting according to the perceived social environment and contributing to modify this social environment.

Lande (2006:26) observes that if the forces or pressures that are exerted explain these movements of reform in favour of accrual-basis accounting, then this isomorphism is not perfect, because, there are different definitions of accrual-basis of accounting in various countries. However, 'will we see new accounting standards or even new accounting systems

deviating from the generally accepted models?' (Lande 2006:27 )

From an institutional perspective, accounting is part of the institutionalised and rationalised structure of a society (Miller, 1994:11). In order to be able 'to understand fully how particular

ways of accounting have emerged, and why such significance is accorded to them', Miller

(1994:20) emphasises the importance of moving beyond the boundaries of the organisation and 'examine the social and institutional practice of accounting'.

The urge for legitimacy is an underlying theme in institutional development. As innovation spreads, a threshold is reached where the adoption of particular practices provides legitimacy

67

rather than necessarily improves efficiency or performance (Meyer and Rowan, [1977] 1991). Legitimacy is defined by Suchman (1995:574) as:

a generalised perception or assumption that the actions of an entity are desirable, proper or appropriate within some socially constructed system of norms, values, beliefs and definitions.

Scott (1987) argues that legitimacy can be achieved by conforming to current conventional practice and external pressures. According to Selznick (1957:17), new practices become 'infused with value beyond the technical requirements of the task at hand'. Technical explanations are sometimes used to hide political and cultural factors (Meyer and Rowan, 1991:44).

Although the implementation of new accounting and reporting practices in the public sector have often been viewed as a means of improving productivity and efficiency of public sector organisations, the emphasis has been directed to the symbolic power and legitimation roles of accounting information (Carpenter and Feroz, 1992:613-615). However, it is in the pursuit of enhanced public sector efficiency and accountability, as intended outcomes, that efforts have been made to import private sector management practices in the public sector, such as the use of generally accepted accounting principles (Carpenter and Feroz, 1992:613).

6 SUMMARY

Four main types of public administration theory are identified by Christensen (2003b), depending on the assumed driving force (influences) of the decision-making processes and their effect (refer to Table 1). These four theories can overlap but focus on different levels. They also vary as to how public organisations become established and change.

68

The development of both theory and practice can be looked at through NPM. The ideas of NPM have spread, but not actual practice. Regulation, allocation of public resources and income redistribution are the three functions of the public sector. Public sector activity grew but its effectiveness has been questioned.

The increased involvement of the private sector, and more business-like provision of public services, could have been the underlying pressure leading to private sector approaches being adopted in government financial reporting. Proponents of NPM-based practices believe that the adoption of accrual accounting would improve financial accountability and asset management of government organisations. Advantages are not automatic, however, and accrual-based accounting systems have faced both conceptual and practical criticism.