How Can Accounting Support the Stewardship of Public Value - Essay Example

How Can Accounting Support the Stewardship of Public Value?

The concept that refers to public value relates to that which is being undertaken and generated by different agencies as a way of utilising public resources that is attributed to the underlying inputs, outputs and, also the end results, for the mere purpose of achieving an overall desired social outcomes (Breton‐Miller & Miller, 2009). The process that relates to recognising and reporting overall public value is indeed a distinctive type of accountability within the government as a whole. It is crucial to note that public value is determined through a contest given that there is always a disagreement about whatever that should considered being of value to the public. In contrast, underlying public value is established by way of reference to an overall desired social outcome that is portrayed through a democratic process (Breton‐Miller & Miller, 2009). In this regard, the final consideration of value that should be subjected to accountability is indeed an imagined public that is more or less properly developed and that can be fairly-articulated by citizens as being the most important to be realised.

Public value happens and is easily measured using across a value chain of a given organisation. It should consist of inputs like staffing personnel levels; outputs as policies and procedures as well as the end outcomes that can include participation in organisation activities. The reason behind measuring public value rests with the truism presumption that; an organisation should always get whatever they report (Bushman & Indjejikian, 1993). Reported information plays a critical role in the ascertaining, which activities would receive attention of decision-makers and those that would not, in any way, receive resourcing altogether. Following this line of reasoning, the overall nature, availability and the quality of data that is utilised for reporting purposes play an important role to accomplish desired level results. Public agencies are called to account for generating value by way of formulating a rather clear and measurable public value account that defines the crucial dimensions of public value that is pursued and depicted in the overall operations of a government agency. The reporting should also be able to enumerate on both the social and financial costs that are incurred in the process.

Public value is developed efficiently by way of conducting an exercise of value-formulating imagination in the course of managing of public resources. Strategic management consists of a process that ascertains a match between a manager’s organisation and the overall external environment for which operations are being conducted (Behn, 2001). It is important that public managers engage in a process of understanding and thereafter, diagnosing the underlying external environment for purposes of aligning their internal environment and, also to fit demands and respond to them in a value-creating manner. This is sole reason for why the process that relates to both flexibility and innovation are considered to be necessities of a public sector as a whole.

To successfully comprehend the creation of public value, it is important that a manager is able to effectively comprehend task and, also authorising environments. Tasks should be fairly articulated by way of utilising a value-creation imagination since the process involving strategic involvement is attributed to a match between a firm and its immediate external environment for which the organisation conducts its operations (Morgan et al, 1993). The underlying public sector environment is deemed to be complex and dynamic creating a major platform for possible failures. The authorising environment is made up of institutions and individual people for whom an agency can be efficiently held accountable. These external stakeholders are the main source of legitimacy of an overall agency’s operations. It is important that an agency’s operations portray most, if not all, components.

A major internationally acclaimed initiative that has been pursued by the International Public Sector Accounting Standards Board relates to the formulation of the International Public Sector Accounting Standards (IPSAS) (Prowle, Harradine, & Latham, 2010). IPSASs are widely used as imminent benchmark for the interpretation of IFRSs within the overall public sector environment. It is crucial to emphasise that IPSASs are currently the second in command for the development and growth of all financial accounting frameworks for most of organisations across the globe; thereby encompassing the government departments as well as their immediate associated agencies and local government. Despite the fact that organisations that is largely encompasses the overall public sector, will possibly differ significantly in both size and functions, for reasons attributed to accounting, they can be deemed to be two-fold (Prowle, Harradine, & Latham, 2010). The first form relates to a supply-funded organisation like government departments like the Labour Department. This type of public sector organisation is characterised by a steady access of funds from the Treasury or Exchequer, is expected to stay within a predetermined resource limit and, also engages in the distribution of funds to Type B organisations. Consequently, the second form relates to trading organisations like the intellectual property office that is characterised by such aspects as solely earning income from numerous sources and is able to sustain a financial viability. It is important to postulate what exactly accounting theory and practices notes in relation to the purpose of statutory financial accounts in general terms and specifically, the public or rather government sector (Morgan et al, 1993). In regards to this sector, there are two main fundamental aspects that have been emphasised over and over again and they include; accountability and stewardship focus and, also the user decision need focus.

In relation to the first concept; accountability and stewardship focus; literature that is associated with accountability fails to provide a standard perspective as to the underlying nature of accountability and definitions. Considering the fact that there are different views on fundamental elements of the notion of accountability, it thus goes without saying that there is a dyadic of accountability so that it encompasses the very person that is deemed accountable and the individuals or people for which to be accounted for (Prowle, Harradine, & Latham, 2010). The person that is deemed to be accountable for numerous activities of a public organisation is perceived to be held to account for their immediate actions. Such notable authors as Behn (2001) expound accountability to such other areas as the political; legal; bureaucratic and overall professional accountability. These notions are majorly adopted in the course of examining the underlying annual reports of organisations within the public sector as a whole. Accountability, in most instances, is greatly involved with two crucial features that include; the underlying need for an agent to render a given account of their dealings with stewardship resources and; consequently, the call to submit to a given examination or rather audit of an account by an individual that is considered to be accountable. It is for this reason that a public body for purposes of availing relevant and reliable financial information needed for satisfying the overall needs and interest of the potential users of accounting information (Dawes, 2010). For most cases, accountability is deemed to be the fundamental cornerstone of financial reporting within the public sector. The accountability is thus focused on the belief that the citizenry enjoys a fundamental right to be on the know and, also a right to be able to access openly declared facts that could result to public debate by citizens and their immediate elected leaders. Thus, it can be said that financial accounting and reporting frameworks plays a significant role in the accomplishment of a government duty to be always accountable within a given democratic platform (Prowle, Harradine, & Latham, 2010). In addition to this, it is argued that the importance of accountability in public sector financing accounting is a crucial exercise since it indicates that there is indeed a superiority feeling of an accountability framework over and above the decision usefulness one and that the absence of the a profit intention or market discipline within the public sector ascertains that accountability can vehemently assume even an enormous role. The concept of stewardship within the overall public service is thus closely linked to the notion of accountability. Financial information is indeed one of the fundamental ways for which accountability is communicated and thus, public service entities have the chance to utilise published financial statements as the main driver for portraying their accountability commitment.

In regards to user decision need focus, the financial reporting practices model is based on the notion that the overall purpose of financial accounts lies in serving the users of accounts in the course of making decisions by way of availing readily-available information that will be helpful with the entire decision process. For public sector organisations, FASB notes that there are four uses of accounting information that extends to the citizens; the legislative branch that also includes staff; senior members of an organisation’s executive branch as well as the executive branch programme managers (Levy, 2010). According to AASB stipulations, these users include the current and potential investors; funders and financial supporters; lenders; the government and their agencies as well as the public. In considering the needs of users of accounting statement, the IASB clearly notes that the primary users of general purpose financial reporting include the existing and potential investors, lenders and other notable creditors that would formally utilise information to formulate decisions that relates to purchasing, selling or even holding equities. Of particular interest to note, it can be safely argued that the information needs of users of public sector accounts is indeed very different and distinct when compared to the users of financial accounts of entities (Levy, 2010). In assessing the underlying information needs of users of public sector, financial accounts postulates that the major needs of information relates to the legality for which public funds have been efficiently utilised; the on-going financial and operational viability of the public sector organisation; conforming whether the public funds have been adopted in accordance with the already laid-out plan as well as ensuring that the public funds have been successfully utilised in an efficient and effective manner (Prowle, Harradine, & Latham, 2010). It can also be emphasised that the aforementioned aspects, whenever taken together, strongly constitutes the overall requirements, which is associated with accountability and stewardship process.

It is common phenomenon within the public sector to analyse the merits of expenditure presumptions through the adoption of utilitarian analysis like the cost-benefit analysis (Levy, 2010). This approach can also be applied to ascertain public sector financial accounting practices given that these are costs that are attributed to the generation of the accounts and overall potential benefits that can be enjoyed from the production and availability of this information. Under this approach, the emphasis is on comprehending that the level of costs and benefits of meeting statutory financial accounting requirements as opposed to possible voluntary disclosures. In this context, benefits would thus mean the overall level of value that is derived from the underlying public sector financial accounts in order to accomplish the overall goal of information needs of users for purposes of decision making. For a clear and successful analysis of stewardship of public value creation, the level of benefits should be at all times insubstantial (Lee & Kwak, 2012). On the contrary, there seems to be little or no information that expounds on the costs of generating statutory financial accounts. However, in the course of preparation of accounts, costs will be attributed to those incurred in the course of accounts generation as well as ones relating to maintenance of accounting systems.

To sum up the discussion above, the paper has successfully argued that there should be some form of financial reporting accounting and practices that should be adopted for purposes of stewardship and accountability. There are a great number of accounting boards that include; FASB and AASB, which have come forth to ascertain and emphasise on the need for having an elaboration on the public value creation as well as the adopting such pertinent models to explain the rationale behind the cost-benefit analysis used in utilitarian analysis of resourcing public sector organisations.