By Ileana Steccolini, Professor of Accounting and Finance, Newcastle University London and CIPFA Governments Board Member
The recent decision of the European Commission to develop (accruals-based) European Public Sector Accounting Standards (EPSASs), for adoption by European member states, has attracted significant debate. EPSASs have been advocated as a response to the need to strengthen transparency over public finances, especially in the aftermath of the global financial crisis, but may also become a costly exercise for European member states if the diversity of European countries cultural and administrative contexts is not taken into due consideration.
A view on Italian central government public sector accounting reforms may shed light on the possible critical issues related to the adoption of new reforms inspired by managerial or New Public Management (NPM) principles, such as accruals-based accounting standards, especially in countries with a civil law (neo-Weberian) tradition.
The Italian central-government budgeting, accounting and reporting systems have traditionally been on a cash and commitment basis, with the main purpose to ensure budgetary compliance and control over expenditure, consistently rooted in a 'bureaucratic' model of public administration. In the last three decades, such systems have undergone several rounds of reforms, seemingly inspired by New Public Management principles, with the aim of strengthening managerial accountability, separating more clearly the political and the managerial spheres, adopting forms of cost accounting and accruals reporting, and more recently, harmonising accounting system across public sector entities. The implementation of these processes of 'modernisation', however, appears to have generally fallen short of expectations.
With colleagues, I conducted a textual analysis of parliamentary discussions and laws concerning the Italian central government reforms over the last two decades. Our research (Liguori M, Rota S, Steccolini I., 2017 Studying administrative reforms through textual analysis: the case of Italian central government accounting, International Review of Administrative Sciences, forthcoming) shows that in Italy, managerial discourses and approaches, embodied in tools such as cost accounting or accruals reporting are far from becoming entrenched in the everyday life of public sector entities and do not appear to have left a significant trace in the practice and in the rhetoric of reforms. Indeed, accounting and administrative systems appear to remain still strongly rooted in the 'old' public administration bureaucratic tradition. Thus, in spite of numerous reforms there has been the coexistence, over time, of multiple ideas and values with a lasting and significant predominance of the former, where cash and commitment budgetary accounting still play a central role.
However, our analysis also shows the ways in which accounting systems remained strongly stuck to the traditional bureaucratic ideas and values, by adapting their structures and processes to new contexts and requests, such as those related to managerial and NPM reforms. Indeed, rather than a replacement of the old bureaucratic model, Italian public sector accounting has witnessed an increased hybridisation and sedimentation whereby elements of the old model became blended with elements of NPM, making the former appear more fashionable and aligned with international trends, and the latter more acceptable to politicians and bureaucrats.
This experience indicates that, especially in contexts based on civil-law traditions, the introduction of new (NPM-like) reforms can be slow and difficult and its actual implementation and impact on organisational culture and decisions should not be taken for granted. Accounting reforms are practical translations of general ideas, values and principles to specific circumstances and into specific tools, systems and procedures. Thus, accounting reforms success will not only depend on the design of a 'technically' satisfactory accounting system, but also on how the path of reforms is designed, and how it is affected by a number of social, cultural and political factors.
Our analysis suggests that reforms may be more successful when the discourses surrounding change are aware and respectful of extant administrative ideas and values in a certain context. Policy and decision makers should thus pay greater attention to the underlying administrative models and the arguments used to challenge, support, legitimise and advance reforms, and also be aware of their possible interactions. This should be true also for EPSAS adoption, which is being discussed in Brussels, but may face silent resistance in environments where values and competences are strongly tied to more traditional budgetary accounting systems.
From an organisational and managerial point of view, the Italian experience highlights the importance of reassuring civil servants and politicians on the consistency of the ‘new’ proposed models with the ‘old’ ones they have been accustomed to. In some cases, using the traditional 'bureaucratic' language to explain and introduce new ideas and tools can make change more acceptable. At the same time, our study also warns of the dangers of 'cosmetic' reforms, where the old accounting system undergoes a few stylistic changes, giving the appearance of novelty and adherence to managerialism so as to survive and reproduce itself, remaining strongly rooted in the old tradition and not producing any real impact on people and organisations’ cultures, behaviours and decisions. This is the highest risk which the EPSAS project may face, if focus remains only on the technical issues of design and implementation, and not enough attention is paid to the political and cultural processes that such project will entail.