Adv Mgt Accounting & Control PDF

Adv Mgt Accounting & Control Accounting as control (iii) 2 Learning outcomes At the end of this session, you will be able to:  Discuss the need for control in public sector context;  Discuss New Public Management and the role of accounting as its enabler; and  Critically evaluate the use...

Adv Mgt Accounting & Control Accounting as control (iii) 2 Learning outcomes At the end of this session, you will be able to:  Discuss the need for control in public sector context;  Discuss New Public Management and the role of accounting as its enabler; and  Critically evaluate the use of management (accounting) controls in public sector organisations. Recap    Management accounting is about control as well as decision usefulness. Specifically, it is about guiding the organisation towards achieving its objectives. A conceptual framework (Ahrens & Chapman, 2004):  Coercive controls prescribe how an activity should be done  Enabling controls tell people what to achieve but give them autonomy in deciding how to achieve it The questions we will consider  Why do we keep trying to reform the public sector?  How is accounting typically used in these reforms?  What are different groups trying to achieve by creating new accounting systems?  Are we designing systems to be functional, or politically valuable?  Deep reform vs. ‘visible’ success of reforms The Policing ‘Problem’  On the one hand, crime statistics remain a commonly cited indicator of government policy and action:  Often referred to as an ‘obsession’ with crime statistics  Intense pressure to reduce crime statistics has led to manipulation of the figures  On the other hand, budget cuts will be the new norm for the police in the age of austerity. The Policing ‘Problem’ “Bluntly, our ability to manage the big threats and protect the vulnerable, yet still be the traditional police the public want and need, is becoming ever harder. … We are in danger of pursuing efficiency to the point of ineffectiveness – where we can process the work but we’re not detecting crime as we should be and not meeting public expectations.” (The Guardian, 2018) Police, Vikram Dodd, and crime correspondent. “Policing at ‘tipping Point’ over Budget Cuts, Warns Police Chief.” The Guardian, October 10, 2018, sec. UK news. https://www.theguardian.com/uk-news/2018/oct/10/policing-at-tipping-point-over-budget-cuts-warns-police-chief The Policing ‘Problem’: the response?  Implement crime reduction (numerical) targets  Make the police accountable to communities by enhancing transparency  Bring in management consultants to develop efficiency measures  ‘Police the police’ Can you see ‘accounting’ in action here? https://www.scotland.police.uk/spa-media/uutmvys2/q1-performance-report.pdf Introducing the New Public Management  Emerged in 1980s under Thatcher: emphasizes a management and production engineering approach to public service provision.  Rapid uptake across Western economies in the 1980’s and across Africa and Asia in the 1990s.  Backed by donor agencies such as the World Bank and IMF  Use of private sector ‘best’ practices to govern public sector organisations  Often leads to poor results in less developed economies New Public Management (NPM)  NPM is characterized by:  Target-based management – sounds familiar?  Pay-for-Performance  Professional managers brought into the public sector  Greater emphasis on competition  Standardization of procedures  Typical rhetoric of efficiency and effectiveness:  modelled on private sector’s styles of management New Public Management (NPM)  Accounting has provided much of the ‘infrastructure’ for NPM:  Standard costs of treating a patient for a certain problem  Performance targets that determine whether hospitals and prisons are ‘failing’  Budgets linked to performance  Greater emphasis of auditing for compliance with standard practice plus many more! NPM in Singapore 11 Guo, Y., & Ladner, A. (2016). Public administration in Singapore and Switzerland. Singapore and Switzerland: Secrets to small state success, 1-27. NPM in Singapore “It appears that both reform style and capacity are heavily influenced by different political, economic and social contexts. For instance, availability of top-level political leadership to sponsor NPM reforms is one of the primary ingredients contributing to the success of the reforms. In this context, the NPM initiatives reforms in Singapore and Malaysia are in line with the existing state tradition and political ideology” (p.28) 12 Samaratunge, Ramanie, Quamrul Alam, and Julian Teicher. ‘The New Public Management Reforms in Asia: A Comparison of South and Southeast Asian Countries’. International Review of Administrative Sciences 74, no. 1 (1 March 2008): 25–46. https://doi.org/10.1177/0020852307085732. NPM in Singapore “NPM is typically used to improve existing institutions where the bureaucracy is already conversant with basic public management processes. Singapore, to a great extent, fulfils this condition… Singapore is one of the few countries in Asia that can boast having management fundamentals right. From the very beginning Singapore has focused on meritocracy, solid institutional frameworks, the rule of law, proper control structures, checks and balances and accountability in the public administration system… By the time NPM came to prominence, the public bureaucracy in Singapore had attained sophistication in administration.” (pp. 189-90) “It is worth mentioning here that the complete package of the NPM model has not been experimented with anywhere in the developing world. Some developing countries such as Singapore have always been selective in choosing the items of reform. Singapore’s relative success reveals that it was very cautious in embracing the NPM formula.” (p.197) 13 Sarker, A. E. (2006). New public management in developing countries: An analysis of success and failure with particular reference to Singapore and Bangladesh. International Journal of Public Sector Management. Accounting for the Police   A study of standardising routine policing activities in Ontario, Canada One example – completing Motor Vehicle Accident (MVA) forms:  A relatively routine activity; can you create a standard for it?  You could then ‘benchmark’ actual performance against this standard Edmonds, D., & McCready, D. (1994). Costing and pricing of police services. International Journal of Public Sector Management. Accounting for the Police   Based on reports from 22 police services, completing an MVA took 8 to 33 minutes. Authors’ suggestion: take the average times across reports as the standard.  The average is not provided in the study, but as an example let’s use 17 minutes What can we do with this ‘standard MVA completion time’? How could we use this information to create a control system? 16 Accounting for the Police  Before the reforms, police forces were given more room to make judgments:  Yet the reforms sought to improve efficiency by creating standards for ‘apparently’ routine tasks How do we explain this in terms of ‘enabling’ and ‘coercive’ controls? What should be the balance between ‘enabling’ and ‘coercive’ controls in the context of a police service? This Photo CC BY-SA Coercive vs enabling (recap) Coercive formalization aims to force employee conformity, while enabling formalization makes employees feel facilitated and motivated by the rules and systems in place. Coercive • • • • • Central standards Prohibited actions Prescribed actions Scripts (‘Being professional’?) Enabling • Individual performance targets • Departmental targets o Cost-reduction o Strategic goals • Aspirations • Culture / norms / upbringing • ‘Being professional’ Do we want ‘efficient’ hospitals? The ‘size’ of the UK’s National Health Service (NHS) Friday 28 October 2016 http://news.sky.com/video/how-big-is-the-nhs-hint-very-big-10635118 The global ‘ranking’ of the NHS How much the UK spends per capita https://www.forbes.com/sit es/theapothecary/2013/02/ 22/holtz-eakin-and-roythe-critics-are-wrongabout-the-future-of-freemarket-health-carereform/#248c16456d96 https://www.kingsfund.org.uk/publications/how-nhs-performing-august-2020 NHS in an age of austerity Healthcare in Singapore Healthcare in Singapore Singapore’s healthcare and NPM “The reason why Singapore’s success is uncommon is probably that policy debates get stuck with one side claiming that we should rely on the market, and the other side asserting that the government would do a better job.” “Singapore’s government had the power to tackle the problem head on, by using forced saving and catastrophe insurance to make sure costs were manageable but keeping the power of patient choice at the heart of the system. Governments can replace markets, but they will often do better to try to fix them. They are unlikely to succeed unless they appreciate exactly what the problem is in the first place.” (p.135) Harford, Tim. The Undercover Economist. Hachette UK, 2010. NPM in Healthcare: Scholarship (in case you’re interested)       Arnold, Patricia J., and Leslie S. Oakes. “Hospital in the United States: A Study of the Entity Assumption in Accounting.” Critical Perspectives on Accounting 6, no. 2 (April 1995): 105– 23. doi:10.1006/cpac.1995.1012. Preston, Alistair M., David J. Cooper, and Rod W. Coombs. “Fabricating Budgets: A Study of the Production of Management Budgeting in the National Health Service.” Accounting, Organizations and Society 17, no. 6 (August 1992): 561–93. doi:10.1016/03613682(92)90014-J. Kurunmäki, Liisa. “Making an Accounting Entity: The Case of the Hospital in Finnish Health Care Reforms.” European Accounting Review 8, no. 2 (July 1999): 219–37. doi:10.1080/096381899336005. Kurunmäki, Liisa. “A Hybrid Profession—the Acquisition of Management Accounting Expertise by Medical Professionals.” Accounting, Organizations and Society 29, no. 3–4 (April 2004): 327–47. doi:10.1016/S0361-3682(02)00069-7. Kurunmäki, Liisa, and Peter Miller. “Modernising Government: The Calculating Self, Hybridisation and Performance Measurement.” Financial Accountability & Management 22, no. 1 (February 1, 2006): 87–106. doi:10.1111/j.0267-4424.2006.00394.x. Llewellyn, Sue, and Deryl Northcott. “The Average Hospital.” Accounting, Organizations and Society 30, no. 6 (August 2005): 555–83. doi:10.1016/j.aos.2004.05.005. NPM in Healthcare: Scholarship  In other words, scholars address a wide range of accounting issues in reforming healthcare:  What do we measure and how do we gather the data?  What is a hospital? What is the ‘entity’?  To what extent are systems designed and implemented, and to what extent do they emerge or evolve?  What happens when private sector rationales meet a public sector profession? NPM in Healthcare  Should we import private sector management styles into healthcare, in the name of efficiency?  What balance should there be between ‘coercive’ and ‘enabling’ controls?  Does judgement matter in healthcare?  To what extent would we like doctors and nurses to use their expert judgment?  How might they respond to coercive controls?  And how would this influence the design of a control system (and how we implement it)? Coercive vs enabling (recap) Coercive formalization aims to force employee conformity, while enabling formalization makes employees feel facilitated and motivated by the rules and systems in place. Coercive • • • • • Central standards Prohibited actions Prescribed actions Scripts (‘Being professional’?) Enabling • Individual performance targets • Departmental targets o Cost-reduction o Strategic goals • Aspirations • Culture / norms / upbringing • ‘Being professional’ NPM in Healthcare  To what extent can we use coercive controls to influence the behaviour of highly-trained and qualified professionals?  Will there be resistance?  Starting point: routine activities that can be standardised – but:  Is it always clear which activities are routine?  Is there a grey area between what is routine and what requires expert judgment?  What happens if we ‘over-coerce’? Takeaway points   Calls for public sector reforms prompted the emergence of New Public Management in the 1980’s. NPM-oriented reforms often focus on efficiency and effectiveness – with accounting as a key enabler:  via standardizing, measuring and constantly tracking public sector activities; and  providing less room for judgment  The dilemmas of pursuing efficiency gains within highly-skilled professions, e.g., police and healthcare:  Resistance as an inherent (and constitutive) part of system design – should we ‘coerce’ or ‘enable’ people? Readings  Collier, P. M. (2006). Costing police services: The politicization of accounting. Critical perspectives on accounting, 17(1), 57-86.  Ahrens, T., & Chapman, C. S. (2004). Accounting for flexibility and efficiency: A field study of management control systems in a restaurant chain. Contemporary accounting research, 21(2), 271-301.