The role, impact, and interrelation of technical external drivers, namely ESA2010, IPSAS/EPSAS accounting standardization and ERP systems, towards public sector accounting reforms

Abstract

Developments in accounting practices and standards have created the need for harmonized and transparent financial and budget statements among governments at a global level. The suitability of accrual accounting basis for the public sector has long been a controversial issue. Nevertheless, its adoption has gained global acceptance as it facilitates the balance sheets and net income preparation and reporting, not only at the government-entity level but also in the public sector as a whole (Pallot 1992). Bergmann (2012) stated that this method facilitates reliable and available financial information to support decision-making, while Grossi and Soverchia (2011) claimed that such immediate access to financial information fosters fiscal sustainability, transparency, and accountability. Beyond these benefits, Manes-Rossi et al. (2017) highlighted accounting information as a precondition for evaluating governments’ fiscal sustainability and effective resource allocation and planning. International Public Sector Accounting Standards (IPSAS), with accrual basis accounting as their foundation, are the outcome of successive New Public Management (NPM) reforms, which have caused great diversity on their suitability globally (Christiaens et al., 2015). Research on harmonization in European accounting and implementation of the IPSAS-based European Public Sector Accounting Standards (EPSAS) in the European Union (EU) indicated that the European Commission (EC) aims to enhance transparency, comparability, and cost efficiency, provided its member states willingly apply the newly developed standards (Frintrup et al., 2020). Driven by this controversy between accrual and cash basis accounting and the fact that accrual accounting has been promoted by the Public Sector Committee of the International Federation of Accountants (IFAC) as the centerpiece of IPSAS and EPSAS and the financial measurement tool for fostering accountability and decision-making, this thesis investigates the quality of ESA2010 accrual accounting framework from the statistical reporting perspective. Similarly with financial reporting that needs to be conducted on an accurate and reliable accounting basis to fairly reflect the fiscal position of the government sector (Manes-Rossi et al., 2017) statistics need to provide stakeholders with qualitative information. As pointed out, a common framework is needed to cope with the materiality and diversity of accounting bases. Whether the information is intrinsically driven by decision-making or by an external non-technical need for transparency and credibility, has also been a debatable issue regarding the accruals shift (Berger, 2018). Jesus and Jorge (2015) highlighted the importance of reducing discrepancies between government accounts (GA) and national accounts (NA), and the ability of government shifts from cash basis to accrual accounting to support reliable budget reporting. In this context, this thesis highlights the contribution of technical external drivers, namely European System of Accounts (ESA2010) accrual accounting framework, the Information technology (IT) with modernization of Enterprise Recourse Planning (ERP) systems and the IPSAS/EPSAS accounting standardization towards Public Sector Accounting (PSA) reforms and accrual accounting adoption. From a theoretical perspective, this study has strengths. With its results on the high accrual accounting reporting quality, it endorses the role of ESA2010 as a driver to accrual accounting reforms, fosters the interconnectedness efforts of GA with NA through IPSAS and EPSAS accounting standardization, sheds light on the isomorphism in government’s ERP and IT modernization practises towards PSA reforms. Not only it highlights the facilitator role of these external drivers individually but highlights their joint efforts and interplay to accrual accounting adoption. This thesis has also practical implications. It showcases successful ERP reforms, experiences, and challenges faced by EU member states as paradigm cases for governments that wish to embark on accrual accounting reforms at a wider level. It evidences that the accrual accounting adoption entails the interaction of more than one driver. With this study, there are opportunities for accounting academics and practitioners to research the quality of public sector governmental accounting comparative analysis with corresponding statistics, using promoted value relevance tools. Bergmann (2021) underlined that “if financial statements do matter economically, their quality should also matter” and approached this issue from an audit surveillance perspective ensuring their quality. Indeed, improvements in government and national accounts reporting alignment efforts should always strive to improve their reporting quality proactively to facilitate both reporting and audit purposes. For this purpose, this thesis highlights the role, impact, and interaction of drivers toward public sector modernization practices.

Οι εξελίξεις στις λογιστικές πρακτικές και στα λογιστικά πρότυπα έχουν δημιουργήσει την ανάγκη για εναρμονισμένες και διαφανείς οικονομικές και δημοσιονομικές καταστάσεις μεταξύ των κυβερνήσεων σε παγκόσμιο επίπεδο. Παρά το γεγονός ότι η καταλληλότητα της λογιστικής σε δεδουλευμένη βάση για το δημόσιο τομέα είναι ένα αμφιλεγόμενο ζήτημα, η υιοθέτησή της τυγχάνει παγκόσμιας αποδοχής επειδή επιτρέπει την κατάρτιση ισολογισμών και την πληροφόρηση για τα έσοδα και τα έξοδα, όχι μόνο σε επίπεδο κυβέρνησης αλλά και στο δημόσιο τομέα ως σύνολο. Η δεδουλευμένη μέθοδος διευκολύνει στην παρουσίαση αξιόπιστης οικονομικής πληροφόρησης για την υποστήριξη της λήψης αποφάσεων, ενώ θεωρείται ότι η άμεση πρόσβαση σε χρηματοοικονομικές πληροφορίες ενισχύει τη δημοσιονομική βιωσιμότητα, τη διαφάνεια και τη λογοδοσία. Πέρα από αυτά τα οφέλη, οι λογιστικές πληροφορίες αποτελούν προϋπόθεση για την αξιολόγηση της δημοσιονομικής βιωσιμότητας και της αποτελεσματικής κατανομής και προγραμματισμού των πόρων των κυβερνήσεων. Με γνώμονα αυτή τη διαμάχη μεταξύ της λογιστικής σε δεδουλευμένη βάση και της ταμειακής βάσης και του γεγονότος ότι η λογιστική σε δεδουλευμένη βάση έχει προωθηθεί από την Επιτροπή Δημοσίου Τομέα της Διεθνούς Ομοσπονδίας Λογιστών (IFAC) ως το επίκεντρο των Διεθνών Λογιστικών Προτύπων Δημοσίου Τομέα (IPSAS) και των Ευρωπαικών Λογιστικών Προτύπων (EPSAS) και ως εργαλείο χρηματοοικονομικής μέτρησης για την ενίσχυση της λογοδοσίας και της λήψης αποφάσεων, η διατριβή αυτή διερευνά τη συμβολή εξωτερικών τεχνικών παραγόντων προς την υιοθέτηση της λογιστικής σε δεουλευμένη βάση από χώρες μέλη της Ευρωπαικής Ένωσης και το Ηνωμένο Βασίλειο. Σύμφωνα με την πρόσφατη κατηγοριοποίηση (World Bank/ PULSAR, 2021), η διατριβή εστιάζει σε τρεις τεχνικούς εξωτερικούς παράγοντες, όπως του λογιστικού πλαισίου ESA2010 σε δεδουλευμένη βάση, της τεχνολογίας πληροφορικής με τον εκσυγχρονισμό των λογισμικών-πληροφοριακών συστημάτων (ERPs) και της λογιστικής τυποποίησης IPSAS/EPSAS και υπογραμμίζει τη συμβολή τους προς τις μεταρρυθμίσεις της Λογιστικής του Δημοσίου Τομέα (PSA).