Financial reporting in the public sector: a dialogue that supports a sustainable future in times of crisis
The idea for this special issue originated at the 18th Biennial CIGAR Conference 2021 “Public Sector accounting for a sustainable future”, particularly the parallel session on public sector financial reporting and international standards. However, the proposed theme has been developed to embrace that of the upcoming 19th Biennial CIGAR Conference to be held in Tokyo in 2023, that is, ‘‘Public Accountability and Democracy in Times of Crisis: An Interdisciplinary Dialogue”.
The link between the two themes is the role of dialogue between various actors and stakeholders (Caruana and Dabbicco 2022) in order to minimise the risk of tensions arising due to current developments. This is especially relevant in light of the current focus on Environmental, Social and Governance (ESG) reporting by all forms of institutions, including governments, international and supranational bodies, public and private sector entities, and accounting standard setters (national and international; for the private and public sectors). As the world faces one crisis after another – natural, social and political – the international standard setter for public sector accounting, namely the IPSASB, has embarked on a series of proposals and consultations. In the meantime, the majority of national standard setters are still struggling to get the grips of implementing and using public sector financial reporting, inspired by the international standards (IFRSs and IPSASs) (Polzer et al. 2021; Bekiaris and Paraponti 2022; Polzer et al. 2022).
The style and content of financial reporting proposed by the international accounting standards are deemed to provide information for two main purposes: accountability and decision-making. Also, financial reporting is expected to address the information needs of several users and stakeholders, ranging from citizens and their elected representatives, to financial investors. These purposes and users have determined the content of financial reporting, which comprises information regarding: the financial position, financial performance and cash flows of the entity, the execution of the budget, and public services provision. This primarily consists of historical financial information, but it is complemented by prospective information, descriptions and narrations (IPSASB 2014).
The usefulness of financial information and financial reporting as presented according to this model, has been enhanced within the rationale of the New Public Management (NPM) framework (Liguori et al. 2012). But public sector accounting research has questioned this paradigm with new public governance and public value discourses (Almqvist et al. 2013; Bracci et al. 2019). Several studies have explained that, despite the financial reporting addressing the citizens’ information needs, ‘the public has no needs’ (Pendlebury and Jones 2004). Likewise, politicians, main decision and policy makers in the public sector realm, do not seem to have needs that require the use financial reporting as defined in accounting terms (van Helden et al. 2016; Caruana and Farrugia 2018; Jorge et al. 2016, 2019; Haustein et al. 2019; van Helden and Reichard 2019; Lapsley 2022).
This evidence points to the importance of the objectives of financial reporting to be reconsidered, rethinking about new perspectives of accounting (Carnegie et al. 2021) and who, in fact, the users of public sector financial reporting are (Oulasvirta 2021). Public managers and politicians need to be accountable, but in order for the information to reach citizens, new forms of reporting need to be considered, for example, popular financial reporting (Cohen and Karatzimas 2015; Manes-Rossi 2019; Manes-Rossi et al. 2019). On the other hand, complete and complex financial information is to be provided to decision-makers in financial markets. But public managers, and especially politicians, underline the usefulness of budgetary reporting (Reichard and van Helden 2016; Caruana and Zammit 2019; Gomes et al. 2022) and, especially at central level, also of information from Government Finance Statistics (GFS) (Jorge et al. 2019). Therefore, in order to be useful, it appears that public sector financial reporting needs to change from general purpose to specific purpose; perhaps separating accountability and decision-making, and clearly enlarging its scope.
Recent critical events across the world have raised attention to the fact that a long-term perspective of financial reporting is pivotal too, as entities, governments, and the public sector as a whole, need to consider medium to long term financial sustainability issues (Bessant et al. 2011; Caruana et al. 2019). Moreover, the need to report accounting information for the effects of risks – either financial, environmental, health, social, and political – comes as of utmost importance (Guthrie and Martin-Sardesai, 2020; Cohen 2022).
To summarise, the usefulness of public sector financial reporting in the future seems to depend on enlarging the type of information to be included, and changing the format of the reporting. The importance of non-financial ESG information is more appreciated, pointing to an integrated format, as well as embracing the whole of government (Manes-Rossi et al. 2020). At the same time, simplicity in the presentation and readability of such financial reports would definitely improve their utility and actual use (Jorge et al. 2019). Since this is the underlying common objective of all public sector accounting standard setters, the importance of dialogue and collaboration between the national and international standard setters cannot be overemphasised. Furthermore, academics and the research community overall have opportunity to provide increased input for the standard-setting process (Jensen 2020).
This special issue aims to tackle these issues. Topics that may be addressed, though not exclusively, are the following:
- What would be the appropriate public sector reporting in times of crises?
- Can ‘general purpose’ financial reporting remain useful in the public sector?
- How can public sector reporting promote democracy?
- The expectations from ESG reporting: to what extent are they realistic?
- Accounting as a social, moral and technical practice – What are the requirements for public sector reporting? Is ESG reporting enough? What are the implications for standard setters (national and international)?
- Should national and international standards compete or collaborate? What type of tensions are at risk and how can they be mitigated?
- How can academics and the research community contribute to a new public sector reporting?
- Would ESG reporting be more useful for citizens and public policy decision makers?
- Should an ESG report be an integral part of the financial report? Or should it be a standalone report?
- Would an ESG commentary as part of the financial statements suffice?
- Who are the users of ESG reports? What are the objectives?
- To what extent should ESG reports be harmonised? Are ESG reporting standards required?
- What type of assurance can be provided on an ESG report? Would the existence of ESG reporting standards make a difference on the quality of the audit of an ESG report?
All sorts of methodologies and theoretical frameworks are accepted, but innovative approaches would be favored. Please feel free to discuss your ideas with the guest editors. Submissions will open on 31 August 2023. The last date for submission of papers for consideration for publication in this JBAFM special issue is 31 October 2023. Publication of this issue is planned for the issue 5 of 2024 or issue 1 of 2025.
Susana Jorge - University of Coimbra, [email protected]
Josette Caruana - University of Malta, [email protected]
Suzanne Lowensohn - University of Vermont, [email protected]
Mari Kobayashi - Waseda University, [email protected]
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Bekiaris, M. and Paraponti, T. (2022). Examining the status of IPSAS adoption at the country level: an analysis of the OECD member states, Journal of Accounting and Organizational Change, ahead-of-print. https://doi.org/10.1108/JAOC-02-2021-0023
Bessant, J. C., Emslie, M., and Watts, R. (2011). Accounting for Future Generations:
Intergenerational Equity in Australia. Australian Journal of Public Administration, 70(2),
Bracci, E., Papi, L., Bigoni, M., Deidda Gagliardo, E., and Bruns, H. J. (2019). Public value and public sector accounting research: a structured literature review. Journal of Public Budgeting, Accounting and Financial Management, 31(1), 103–136.
Carnegie, G., Parker, L., and Tsahuridu, E. (2021). It’s 2020: what is accounting today?, Australian Accounting Review, 31(1), 65-73.
Caruana, J., and Dabbicco, G. (2022). New development: The role of the accountancy profession in saving our planet, Public Money and Management, DOI:
Caruana, J., and Farrugia, B. (2018). The Use and non-use of the Government Financial Report by Maltese Members of Parliament. Accounting, Auditing and Accountability Journal. 31(4), pp. 1124-1144.
Caruana, J., and Zammit, K. (2019). Losing Control: the gap in multi-level government reporting. Journal of Public Budgeting, Accounting and Financial Management, 31(2),
Caruana, J., Brusca, I., Caperchione, E., Cohen, S., and Manes Rossi, F. (2019). Exploring the Relevance of Accounting Frameworks in the Pursuit of Financial Sustainability of Public Sector Entities: A Holistic Approach. In: Caruana, J., Brusca, I., Caperchione, E., Cohen, S., Manes Rossi, F. (eds) Financial Sustainability of Public Sector Entities. Public Sector Financial Management. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-06037-4_1
Cohen, S. (2022) Debate: Climate change, environmental challenges, sustainable development goals and the relevance of accounting, Public Money and Management, 42(2), 55-56.
Cohen, S., and Karatzimas, S. (2015), Tracing the future of reporting in the public sector: introducing integrated popular reporting, International Journal of Public Sector
Management, 28(6), 449-460.
Gomes, P., Brusca, I., Fernandes, M. J., and Vilhena, E. (2022). The IPSAS implementation and the use and usefulness of accounting information: a comparative analysis in the Iberian Peninsula, Journal of Public Budgeting, Accounting and Financial Management, aheadof-print. https://doi.org/10.1108/JPBAFM-12-2021-0169
Guthrie, J., and Martin-Sardesai, A. (2020). Contemporary Challenges in Public Sector Reporting. In: Manes-Rossi, F., Levy Orelli, R. (eds) New Trends in Public Sector Reporting. Public Sector Financial Management. Palgrave Macmillan, Cham.
Haustein, E., Lorson, P. C., Caperchione, E., and Brusca, I. (2019). The quest for users’ needs in public sector budgeting and reporting, Journal of Public Budgeting, Accounting and Financial Management, 31(4), 473-477.
IPSASB (2014). The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities. Available at https://www.ipsasb.org/publications/2022-handbookinternational-public-sector-accounting-pronouncements
Jensen, G. (2020). The IPSASB's recent strategies: opportunities for academics and standard-setters, Journal of Public Budgeting, Accounting and Financial Management, 32(3), 315-319.
Jorge, S., Jesus, M. A., and Nogueira, S. (2016). Information brokers and the use of budgetary and financial information by politicians: the case of Portugal, Public Money and Management, 36(7), 515-520.
Jorge, S., Jesus, M. A., and Nogueira, S. (2019). The use of budgetary and financial information by politicians in Parliament: a case study, Journal of Public Budgeting, Accounting and Financial Management, 31(4), 539-557.
Lapsley, I. (2022) Debate: Politicians' use of accounting information—the myth of rationality, Public Money and Management, 42(3), 140-141.
Liguori, M., Sicilia, M., and Steccolini, I. (2012). Some like it non-financial…. Politicians’ and managers’ views on the importance of performance information, Public Management Review, 14(7), 903–922.
Manes-Rossi, F. (2019). New development: Alternative reporting formats: a panacea for accountability dilemmas? Public Money and Management, 39(7), 528-531.
Manes-Rossi, F., Aversano, N., and Tartaglia Polcini, P. (2019). Popular reporting: learning from the US experience, Journal of Public Budgeting, Accounting and Financial Management, 32(1), 92-113.
Manes-Rossi, F., Nicolò, G., and Argento, D. (2020). Non-financial reporting formats in public sector organizations: a structured literature review, Journal of Public Budgeting, Accounting and Financial Management, 32(4), 639-669.
Oulasvirta, L (2021). A consistent bottom-up approach for deriving a conceptual framework for public sector financial accounting, Public Money and Management, 41(6), 436-446.
Polzer, T., Adhikari, P., Nguyen, C.P. and Gårseth-Nesbakk, L. (2021). Adoption of the
International Public Sector Accounting Standards in emerging economies and low-income countries: a structured literature review, Journal of Public Budgeting, Accounting and Financial Management, ahead-of-print. https://doi.org/10.1108/JPBAFM-01-2021-0016
Polzer, T., Grossi, G., and Reichard, C. (2022). Implementation of the international public sector accounting standards in Europe. Variations on a global theme, Accounting Forum, 46(1), 57-82.
Pendlebury, M., and Jones, R. (2004). A Theory of The Published Accounts of Local
Authorities. Financial Accountability and Management. 20(3), 305-325.
Reichard, C., and van Helden, J. (2016). Why Cash-Based Budgeting Still Prevails in an Era of Accrual-Based Reporting in the Public Sector, Accounting, Finance and Governance Review, 23(1), 43-65.
van Helden, J., Argento, D., Caperchione, E., and Caruana, J. (2016). Editorial: Politicians and accounting information – a marriage of convenience?, Public Money and Management, 36(7), 473-475.
van Helden, J., and Reichard, C. (2019). Making sense of the users of public sector accounting information and their needs, Journal of Public Budgeting Accounting and Financial Management, 31(4), 478-495