What Factors Drive Faithful Financial Reporting by Subnational Governments? Insights from Switzerland
Using the context of the 26 Swiss subnational governments, this paper aims to empirically identify factors driving—or not—the use of accounting and reporting standards aimed to increase financial faithfulness. Because the 26 entities had a certain autonomy, as they jointly implemented two major successive accounting reforms over the past forty years, policy outcomes were heterogeneous. Findings suggest that both citizen demand and government supply-side factors contribute to explaining the extent to which each entity’s policy led to a faithful reporting. This paper thus highlights some of the challenges in implementing supranational (e.g., IPSAS, EPSAS) or national accounting standards at lower tiers, when governments have some leeway over the process, while yet facing strong democratic scrutiny.
Anessi-Pessina, E., Nasi, G. & Steccolini, I. (2010) Accounting innovations: A contingent view on Italian local governments, Journal of Public Budgeting, Accounting & Financial Management, 22(2), pp.250-271, https://doi.org/10.1108/JPBAFM-22-02-2010-B005.
Bastida, F., Guillamón, M. D. & Benito, B. (2017) Fiscal transparency and the cost of sovereign debt, International Review of Administrative Sciences, 83(1), pp.106-128, https://doi.org/10.1177/0020852315574999.
Benz, A. (2012) Yardstick competition and policy learning in multi-level systems, Regional & Federal Studies, 22(3), pp. 251-267, http://dx.doi.org/10.1080/13597566.2012.688270.
Brusca, I. & Montesinos, V. (2006) Are citizens significant users of government financial information?, Public Money and Management, 26(4), pp. 205-209, https://doi.org/10.1111/j.1467-9302.2006.00526.x.
Brusca, I., Montesinos, V. & Chow, D. S. (2013) Legitimating international public sector accounting standards (IPSAS): the case of Spain, Public Money & Management, 33(6), pp. 437-444, https://doi.org/10.1080/09540962.2013.836006.
Buchanan, J. M. & Tollison, R. D. (eds.) (1972) Theory of Public Choice (Ann Arbor, MI: University of Michigan Press).
Buchs, A. & Soguel, N. (2022) Fiscal performance and the re-election of finance ministers–evidence from the Swiss cantons, Public Choice, 191, pp. 31-49, https://doi.org/10.1007/s11127-021-00949-z.
Caruana, J. & Zammit, K. (2019) Losing control: the gap in multi-level government reporting, Journal of Public Budgeting, Accounting & Financial Management, 31(2), pp. 264-284, https://doi.org/10.1108/JPBAFM-10-2018-0110.
Carvalho, J. B. D. C., Camões, P. J., Jorge, S. M. & Fernandes, M. J. (2007) Conformity and diversity of accounting and financial reporting practices in Portuguese local government, Canadian Journal of Administrative Sciences [Revue Canadienne des Sciences de l'Administration], 24(1), pp. 2-14, https://doi.org/10.1002/cjas.1.
CFM (Conference of Cantonal Finance Ministers) (1981) Government accounting manual [Handbuch des Rechnungswesens der öffentlichen Haushalte] [HAM1], Vol. 1-2 (Bern: Verlag Paul Haupt).
CFM (Conference of Cantonal Finance Ministers) (2008) Manual - Harmonized accounting model for cantons and municipalities [Handbuch – Harmonisiertes Rechnungsmodell für die Kantone und Gemeinden] [HAM2] (Bern: CFM).
Chan, J. L. (2003) Government accounting: an assessment of theory, purposes and standards, Public Money & Management, 23(1), pp.13-20, https://doi.org/10.1111/1467-9302.00336.
Christiaens, J. (1999) Financial accounting reform in Flemish municipalities: an empirical investigation, Financial Accountability & Management, 15(1), pp. 21-40, https://doi.org/10.1111/1468-0408.00072.
Christiaens, J., Vanhee, C., Manes-Rossi, F., Aversano, N. & Van Cauwenberge, P. (2015) The effect of IPSAS on reforming governmental financial reporting: An international comparison, International Review of Administrative Sciences, 81(1), pp. 158-177, https://doi.org/10.1177/0020852314546580.
Clémenceau, M. & Soguel, N. (2018) How does depreciations management affect subsequent fiscal performance? The case of the Swiss cantons, Swiss Journal of Economics and Statistics, 154(7), pp.1-15, https://doi.org/10.1186/s41937-017-0017-4.
Cohen, S. & Karatzimas, S. (2015) Tracing the future of reporting in the public sector: introducing integrated popular reporting, International Journal of Public Sector Management, 28(6), pp. 449-460, https://doi.org/10.1108/IJPSM-11-2014-0140.
Cohen, S., Bisogno, M. & Malkogianni, I. (2019) Earnings management in local governments: the role of political factors, Journal of Applied Accounting Research, 20(3), pp. 331-348, https://doi.org/10.1108/JAAR-10-2018-0162.
Cohen, S., Mamakou, X. J. & Karatzimas, S. (2017) IT-enhanced popular reports: Analyzing citizen preferences, Government Information Quarterly, 34(2), pp. 283-295, https://doi.org/10.1016/j.giq.2017.04.003.
Cusack, T. (1997) Partisan politics and public finance: Changes in public spending in the industrialized democracies, 1955–1989, Public Choice, 91(3-4), pp. 375–395, https://doi.org/10.1023/A:1004995814758.
Frey, B. S. & Stutzer, A. (2000) Happiness, economy and institutions, The Economic Journal, 110(466), pp. 918-938, https://doi.org/10.1111/1468-0297.00570.
Fuchs, S., Bergmann, A. & Brusca, I. (2017) Using financial reporting for decision making as a measure towards resilient government finances: The case of Switzerland, Lex Localis – Journal of Local Self-Government, 15(1), pp. 133-153, https://doi.org/10.4335/15.1.133-153(2017).
Fung, A. (2015) Putting the public back into governance: The challenges of citizen participation and its future, Public Administration Review, 75(4), pp. 513-522, https://doi.org/10.1111/puar.12361.
Guarini, E. (2016) The day after: newly-elected politicians and the use of accounting information, Public Money & Management, 36(7), pp. 499-506, https://doi.org/10.1080/09540962.2016.1237135.
Guillamón, M. D., Bastida, F. & Benito, B. (2011) The determinants of local government's financial transparency, Local Government Studies, 37(4), pp. 391-406, https://doi.org/10.1080/03003930.2011.588704.
Haustein, E. & C. Lorson, P. (2022) Transparency of local government financial statements: Analyzing citizens’ perceptions, Financial Accountability & Management, https://doi.org/10.1111/faam.12353.
IPSASB (International Public Sector Accounting Standards Board) (2022) Handbook of International Public Sector Accounting Pronouncements (New-York, NY: IFAC).
Jorge, S., Brusca, I. & Nogueira, S. P. (2019) Translating IPSAS into national standards: An illustrative comparison between Spain and Portugal, Journal of Comparative Policy Analysis: Research and Practice, 21(5), pp. 445-462, https://doi.org/10.1080/13876988.2019.1579976.
Lipset, S. M. & Rokkan, S. (eds.) (1967) Party Systems and Voter Alignments: Cross-National Perspectives (New-York, NY: Free Press).
Manes-Rossi, F., Cohen, S., Caperchione, E. & Brusca, I. (2016) Harmonizing public sector accounting in Europe: thinking out of the box, Public Money & Management, 36(3), pp. 189-196, https://doi.org/10.1080/09540962.2016.1133976.
Pérez, C. C., Rodríguez-Bolívar, M. P. & López-Hernández, A. M. (2014) The determinants of government financial reports online, Transylvanian Review of Administrative Sciences, 10(42), pp. 5-31.
Pina, V., Torres, L. & Yetano, A. (2009) Accrual accounting in EU local governments: One method, several approaches, European Accounting Review, 18(4), pp. 765-807, https://doi.org/10.1080/09638180903118694.
Piotrowski, S. J. & Van Ryzin, G. G. (2007) Citizen attitudes toward transparency in local government, The American Review of Public Administration, 37(3), pp. 306-323, https://doi.org/10.1177/0275074006296777.
Pujol, F. & Weber, L. (2003) Are preferences for fiscal discipline endogenous, Public Choice, 114(3), pp. 421-444, https://doi.org/10.1023/A:1022633632079.
Soguel, N. & Luta, N. (2021) On the road towards IPSAS with a maturity model: a Swiss case study, International Journal of Public Sector Management, 34(4), pp. 425-440, https://doi.org/10.1108/IJPSM-09-2020-0235.
Sol, D. A. (2013) The institutional, economic and social determinants of local government transparency, Journal of Economic Policy Reform, 16(1), pp. 90-107, https://doi.org/10.1080/17487870.2012.759422.
van Helden, J. & Reichard, C. (2019) Making sense of the users of public sector accounting information and their needs, Journal of Public Budgeting, Accounting & Financial Management, 31(4), pp. 478-495, https://doi.org/10.1108/jpbafm-10-2018-0124.
It is a condition that the authors assign copyright or license the publication rights in their articles, including abstracts, to Institute for Local Self-Government Maribor. This enables us to ensure full copyright protection and to disseminate the article, and of course Journal, to the widest possible readership in print and electronic formats as appropriate. Authors retain many rights under the Institutes' right policies, which can be found at journal.lex-localis.press. Authors are themselves responsible for obtaining permission to reproduce copyright material from other sources.