Exposure Draft, February 1981

Editor's Note: In February 1981 the Governmental Accounting Standards Board Organization Committee (GASBOC) recommended the establishment of a governmental accounting standards board. Its exposure draft will be the subject of intense examination in the coming months. Shortly after the draft was issued, the Financial Accounting Foundation, which is involved in accounting standards for private organizations, called for a single group to set standards for both public and private entities. Much more is involved than the jurisdictional issue of whether a single or a dual structure should be established for accounting standards. Once in operation, these standards will shape governmental accounting and reporting practices, much in the way that standards now dictate the accounting procedures of private firms. Many state and local governments will have to revamp their accounting structures in order to satisfy the new standards. At issue also is the question of whether standards should primarily satisfy the needs and interests of external users or those of the governmental unit. Should governments be accountable principally through the political process or through externally enforced rules? This question goes to the heart of American democracy. The way it is answered will not only influence financial management, but also the conduct and quality of government. In order to encourage informed debate, excerpts from berth the GASBOC exposure draft and the FAF statement are published here. In addition, a selected bibliography by James Chan should help readers work their way through the maze of accounting standards.     

When Governments Regulate Governments

This article advances a political theory of regulation that accounts for the choices of regulators and regulated entities when both are governments. Leading theories of regulation assume that governments regulate profit‐maximizing firms: Governments set rules, to which firms respond rationally in ways that constrain their behavior. But often the entities that governments regulate are other governments. We argue that government agencies and private firms often face different compliance costs, and that agencies have greater incentives than firms to appeal regulations through political channels. Simultaneously, the typical enforcement instruments that regulators use to influence firm behavior may be less effective against governments. Our empirical subjects are public and private entities’ compliance with the U.S. Clean Air Act and Safe Drinking Water Act. We find that, compared with private firms, governments violate these laws significantly more frequently and are less likely to be penalized for violations.     

Nonprofits and Civic Engagement

There are approximately 800,000 501(c)(3) nonprofits large enough to register with the federal government. Add churches, foundations, and nonprofits too small to register, and the number is far higher than that. The potential for nonprofits to engage their clients and members in community affairs and public policy making is, in theory, enormous. Yet, perversely, nonprofits are regulated by the federal government in such a way that discourages the involvement of their followers in the public policymaking process. This is a problem, not simply because we social scientists believe civic engagement is a good thing, but because these regulatory standards sharply skew public participation. Although middle- and upper-class individuals have many organizations that engage and mobilize them, nonprofits usually are the only organizations that work on behalf of the poor, those without health insurance, immigrants, the disabled, and most other marginalized constituencies. Put bluntly, federal law works against the participation of the most disadvantaged in society.     

Pedagogy of regulation: Strategies and instruments to supervise learning from adverse events

Diverse scholars have argued that standards and performance measurements are “instruments of control” that have a profound influence on the day‐to‐day lives of individuals and organizations, causing constitutive effects. Regulatory bodies increasingly use standards to oversee and monitor the regulated. This paper discusses the Dutch Health and Youth Care Inspectorate's use of both standards and a performance measurement system introduced to monitor how Dutch hospitals investigate and learn from serious adverse events. Rather than focusing on how standards affect regulated practices and organizations, our study examines how the use of these instruments affects the standard maker, that is, the Inspectorate. We explore how the Inspectorate's work practices, standards, and coupled performance measurement system influence its regulatory pedagogy, reviewing practices, and decisionmaking. We conclude that standards and performance measurement systems are not by definition “instruments of control” as their constitutive effects are (under)determined by the relationships in which they are enacted.     

The Macroeconomic Effects of 2017 Through 2025 Federal Fuel Economy and Greenhouse Gas Emissions Standards

In the absence of a national carbon price, the federal Corporate Average Fuel Economy standards and the related greenhouse gas emissions (GHG) standards are the primary mechanisms through which the U.S. reduces transportation GHG emissions. In 2012, these standards were set to rise for light‐duty vehicles between 2017 and 2025, eventually achieving a target of 54.5 miles per gallon in 2025. Since 2012, conditions have changed: forecasts of future gasoline prices have dropped dramatically, consumers have demanded larger vehicles, and the cost of compliance appears to be larger than previously thought. In this article, we analyze the possible macroeconomic effects of the standards with both 2012 inputs and updated inputs to reflect these new market developments. The results reveal that the short‐term effects of the federal standards will be negative, but the long‐term effects will be positive, using both 2012 and updated inputs. The transition from annual negative employment impacts to positive impacts occurs between 2023 and 2026, depending on which set of assumptions are used. Possible revisions to the standards that freeze them at 2020 levels or decrease their stringency reduce short‐term negative impacts but also reduce long‐term positive impacts. We conclude with a discussion of policy implications as they relate to the current energy and climate policy conditions.     

Cyber insurance and private governance: The enforcement power of markets

In the last half decade, cyber insurance has emerged as a multi-billion-dollar industry with the authority to set and enforce standards of security behavior. Although cybersecurity has become a concern of national policymakers, insurers appear to have supplanted the state to play an influential role in governing some aspects of client behavior. This paper explores private governance by cyber insurance firms and evaluates two competing explanations for its emergence – either that the private sector advanced to set and enforce cybersecurity standards for financial gain, or that the state retreated from its responsibility to regulate and private sector actors filled the gap only as necessary. To find an answer between these explanations, this article develops a single outcome case study of the American cyber insurance industry. Following a theoretical introduction to private governance and its manifestation through insurance, the article examines the insurance process and its application in cybersecurity, the key role of standards, and the mechanism of enforcing those standards. The article concludes by identifying key elements of this market-based enforcement and discussing implications for crafting effective private governance in other domains and public policy.     

Contending regionalisms: hubs and challengers in the Americas and the Asia-Pacific

As regions become more institutionalized, they are characterized by two competing trends. First, key regional institutions can become hub institutions that act as transmitters of a comprehensive set of norms. Second, as regional institutions increase in number, regions themselves are liable to become more fragmented. How these trends have played out is explored in two key regions, the Americas and the Asia-Pacific. It is concluded that regions are not static entities but are ever-changing structural arrangements. Hub institutions can be challenged and the consequences can be significant as regions gain in importance on the international stage.     

Elections with partially ordered preferences

Suppose an organization has a committee with multiple seats, and the committee members are to be elected by a group of voters. For the organization, the possible alternatives are the possible sets of individuals who could serve together. A common approach is to choose from among these alternatives by having each voter cast separate votes on the candidates for each seat. When this type of ballot is used, important characteristics of the set of individuals on the committee (such as what percentage of the members will be female) might not be explicitly considered by the voters. Another approach that has been used is to have each voter cast a ballot which ranks all possible sets of members. However, this approach can require the voters to weigh a relatively large number of alternatives. This paper considers group decisions where it is desirable to: (1) explicitly consider characteristics of alternatives and (2) have a relatively small number of options upon which a voter has to express his preferences. The approach that we propose has two steps: First voters vote directly on pertinent characteristics of alternatives; Then these votes are used to indirectly specify preferences on alternatives. The indirectly specified preferences are ones that are naturally modeled using partially ordered sets. We identify some specific methods that could be applied in the second step. In addition, by replacing the indirectly specified preferences in a suitable way, we suggest a technique that can use any positional, pairwise, or other voting method that accepts totally (or “completely”) ordered inputs to tally ballots. We also describe another way to potentially compute pairwise rankings from partially ordered alternatives and discuss some practical and theoretical difficulties associated with our approach.     

Space Debris Mitigation and Prevention: How to Build a Stronger International Regime

The international regime of space activities could be significantly strengthened by a universal adoption of space debris mitigation guidelines and by a legal recognition of the existence of space debris. The distinction between spacecraft of value and debris of no value is highly important. Also the practice of registering space objects with the United Nations should be strengthened by making the register complete and up to date. If a correlation is established between space objects, registered by the UN, space radio stations, and the International Telecommunication Union, then the problem of so called paper satellites would be better understood and possibly alleviated.     

The harmonization of automobile environmental standards between Japan,the United States and Europe: the ‘depoliticizing strategy’ by industry and the dynamics between firms and governments in a transnational context

Abstract

When initial automobile environmental standards were introduced during the 1970s and 1980s there was a large difference in the level and timing of the introduction of these initial emission standards in the United States, Japan and Europe. Trade in automobiles was the target of fierce trade disputes in the 1980s between, for example, the United States and Japan. The governments of Japan, the United States and Europe were involved in trade negotiations as agents of the automobile industry of each country, often focusing on environmental standards as sources of non-tariff barriers. But since the mid-1990s, because of the globalization of the automobile industry, automobile firms have had common interests in collaborating in relation to voluntary harmonized standards. They also have common interests in relation to other sectors such as the petroleum industry in that the burden for emission reductions needs to be shared equitably among sectors. In that sense, it can be said that a ‘depoliticizing strategy’ has been used, which is the strategy used by the automobile industry not to rely on government intervention and trade conflicts at an intergovernmental level to deal with the difference in standards. There is a tendency for high-level convergence concerning environmental emission standards for NO_x etc. in Japan, the United States and Europe and related sulfur content standards for complying with them. In addition, the automobile industry has been consciously seeking international harmonization through the Trans Atlantic Business Dialogue (TABD) and the TrilateralWorking Group. Harmonization has also been attempted at the intergovernmental level to gain legitimacy at the arena of the United Nations Economic Commission for Europe (UNECE) through the signing of the 1995 Agreement (the revision of 1958 Agreement) and the establishment of the 1998 Global Agreement. In the process, governments have been requested by automobile firms to adopt harmonized standards; but governments also have their own incentives to set up an intergovernmental mechanism to establish harmonized standards.     

Social Innovation and Crisis in the Third Sector in Spain. Results,Challenges and Limitations of ‘Civic Crowdfunding’

Based on the evolution and institutional transformation of the Welfare State and its relationship with the Third Sector of Social Action, the present article describes and analyzes the aspects of the financial crisis and resources that the sector is currently suffering. In regards of these structural transformations the evolution, characteristics, limitations and opportunities offered by ‘civic crowdfunding’ in Spain between the years 2011 and 2015 as an innovative social practice for the increase of the own funding between the entities of the Third Sector of Social Action and the changes that must be experienced by the sector in order to optimize and improve its self-funding ratios through this mechanism are examined. The high index of success of financing social projects (96.5%) through this tool, and the annual growth during the analyzed period shows the potential of civic crowdfuding. On the other hand, the small size of the bankable projects (95.2% less than 10,000 euros), as well as the low total amount collected (2,665,384 euros) indicates that civic crowdfunding is still an insufficient mechanism to mitigate the severe public resource cuts suffered by the entities of the Third Sector of Social Action and also to bring these entities closer to the objective of self-financing. Finally, we formulated a series of recommendations aimed at improving the self-financing ratios of the Third Sector of Social Action, including a more efficient and cooperative use of civic crowdfunding.     

Curriculum Reform in The Common Core Era: Evaluating Elementary Math Textbooks Across Six U.S. States

Can a school or district improve student achievement simply by switching to a higher-quality textbook or curriculum? We conducted the first multi-textbook, multi-state effort to estimate textbook efficacy following widespread adoption of the Common Core State Standards (CCSS) and associated changes in the textbook market. Pooling textbook adoption and student test score data across six geographically and demographically diverse U.S. states, we found little evidence of differences in average achievement gains for schools using different math textbooks. We found some evidence of greater variation in achievement gains among schools using pre-CCSS editions, which may have been more varied in their content than post-CCSS editions because they were written for a broader set of standards. We also found greater variation among schools that had more exposure to a given text. However, these differences were small. Despite considerable interest and attention to textbooks as a low-cost, “silver bullet” intervention for improving student outcomes, we conclude that the adoption of a new textbook or set of curriculum materials, on its own, is unlikely to achieve this goal.     

Social Norms and the Paradox of Elections’ Turnout

People vote although their marginal gain from voting is zero.We contribute to the resolution of this paradox by presentinga model for equilibrium configuration of attitudes regardingthe decision to vote. Each individual is seen as an element ofa social network, within which pairs of individuals expressideas and attitudes, exerting mutual influence. We model therole of such networks in propagating the mutual influenceacross pairs of individuals. We show that it may suffice thata small set of individuals have a strong feeling about showingup to vote to generate a significant turnout in elections.     

Unitary regulatory supervision or multi-entity supervision? A computational approach to a numbers problem in financial regulation

Policymakers globally have debated (and often implemented) the idea of consolidating numerous financial regulatory supervisory entities into one unitary entity. This article uses a computational model to explore the effect such a decision would have on supervisory performance. Using insights from organizational scholarship on consensus-making among individuals within organizations, the simulation suggests that under most conditions a unitary supervisory entity yields lower performance than smaller, numerous entities with unique mandates, keeping the number of regulatory inspectors constant. This result arises from the heterogeneity of perspectives being shared within the entity and the influence of precedent actions. The results also show a decreasing utility to disaggregation: performance decreases when too few inspectors share among themselves in building consensus. When insufficient heterogeneity within supervisors exists, unitary frameworks outperform multi-entity frameworks. These findings have implications on the design of supervisory frameworks and contribute to research on consensus-building, heterogeneous group membership, and computational modeling.     

Explaining Japan's Tortured Course to Surveillance Satellites

On December 25, 1998 the Japanese government reinterpreted a long‐standing policy prohibiting the use of outer space for military purposes by announcing its intention to develop a network of domestically produced and deployed “information‐gathering” satellites to be utilized primarily by the Japan Defense Agency (JDA) and other national security institutions. This decision is important in its own right—for one, Japan is a major player in the space technology arena—but also because of the precedent it sets for other areas of technology and military policy in Japan today. As many observers have noted, Japan appears to be undergoing a broad reexamination both of its view of the appropriate level of interaction between government bureaucracy and industry and of its military security strategy in the first decade of the twenty‐first century. The case of surveillance satellites links these two areas together, offering broader lessons for the course of Japanese policy in numerous areas in the future.     

Satellites and the Security Dilemma

ABSTRACT

The paper examines the linkage between satellites and the security dilemma. There are currently over 2000 satellites in Earth orbit with various applications ranging from observations, remote sensing, telecommunications, to navigation, among other uses. This multitude of possible usages cause uncertainty concerning intentions and fear in the international system, which leads to security build-ups. This paper first looks at the dual-use nature of satellites and by giving examples, explains what exactly is meant by this. Second, it delves into the theories behind the security dilemma, especially analyzing the differences in theory between offensive and defensive weapons. And third, it builds on the theory concerning the security dilemma to examine how exactly satellites and their dual-use applications affect the dilemma.     

ACCRUAL ACCOUNTING VALUATIONS AND ACCOUNTABILITY IN GOVERNMENT: A POTENTIALLY PERNICIOUS UNION

Abstract: With the movement towards decentralisation of control over governmental trading activities much attention has been placed by politicians and economists on a loosely attached rate of return control philosophy. Independent boards are appointed to government business entities, generally comprising business managers and private sector directors who are experienced in profit generation and micro- economic planning. This thrust has now been facilitated by accounting standards with a private sector orientation. These favour accrual valuations with their associated resource allocations and guidelines for funds distribution. However, the extent of the subjectivity introduced by such measures has now placed many parliamentary conventions at risk. Such subjectivity also contributes to the lack of goal congruence and financial control in government which in turn can counteract macroeconomic planning and control as this is at present practised and understood. This paper examines normatively some of the theoretical defects and conventional heresies associated with these new allocative and distributional arrangements.     

Emission Standards,Public Transit,and Infant Health

Transit buses are an integral part of urban life. They reduce externalities generated from private vehicles and increase geographic mobility. However, unlike most private vehicles in the United States, they use diesel fuel and emit higher amounts of toxic pollutants. The U.S. Environmental Protection Agency set emission standards for transit buses starting in 1988 that have been continually updated, but their public health and economic impacts are unclear due to scarce emissions data. I construct a novel panel dataset for the New York City (NYC) Transit bus fleet between 1990 and 2009 and examine the impact of bus pollution on infant health by using bus vintage as a proxy for emissions. I exploit the variation in vintage as older buses are retired and replaced with newer, lower‐emitting buses forced to adhere to stricter emission standards. I then assign maternal exposure to bus vintage at the census block level. Findings suggest that maternal exposure to the oldest, unregulated buses is associated with modest reductions in birth weight and gestational age relative to newer buses that abide by emissions policies. I then conduct a back‐of‐the‐envelope cost‐benefit calculation and find net economic benefits of $53.3 million resulting from improved emission standards for the 2009 birth cohort in NYC. Since the treatment in this study clearly maps to federal emissions policies, these results are the first to provide credible evidence that transit bus emission standards had a positive effect on infant health.     

Public Sector Corporate Governance Disclosures: An Examination of Annual Reporting Practices in Queensland

In the public sector, corporate governance is an expression that is yet to be explicitly defined. This paper examines the existing public sector literature in order to derive a set of broad principles of corporate governance in the public sector. These principles are then applied through a content analysis of corporate governance disclosures in a group of government‐owned corporations, state government departments, local governments and statutory bodies. The results indicate the set of principles derived is generally applicable to various forms of public entities. However, due to a lack of an established public sector corporate governance framework, the disclosure of corporate governance is piecemeal. Government‐owned corporations achieved better disclosure practices in most principles than other public sector bodies. The paper aims to stimulate debate on public sector corporate governance and provides a basis for a more extensive survey on corporate governance disclosures.