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.     

Covering the private parts: the (re-)nationalisation of housing finance

Abstract

Is state power or control over financial markets really withering? Most narratives/analyses of financialisation see a growing penetration of private capital into everyday life that runs parallel to the increasing power of private financial capital over state policy. Yet housing finance – mortgages – sits at the centre of banking, and banking sits at the centre of the financial system. Large-scale mortgage markets only function where the state wraps around the banking system to remove maturity risks and to limit excessive credit creation. Partial deregulation in the 1990s and 2000s created a crisis that states resolved by re-nationalising much of mortgage finance. This renewed and overwhelming state presence suggests that financialisation is a state-driven story, and that private financial power, stability and instruments require state support above and beyond contract enforcement and prudential regulation.     

民间金融：自由与规制

民间金融具有存在的客观必然性,我国法律应对民间金融采取消极自由和利益平衡的价值取向。对具有较大影响的全国性民间金融组织予以立法规制,达到民间金融秩序法制化。民间金融本质是财产自由和金融民主,应引导民间金融良性发展,强化民间金融监管,防范金融风险,培育民间金融市场。     

State of Change: Global Turmoil and Government Reinvention

The current global credit crisis is unfolding in a context in which new dynamics in the engagement of the public sector and the market are taking shape. This article explores some of these dynamics, especially the reemergence of (re)nationalization initiatives, as well as the growing use of private methodologies for asset management on the part of some governments, which behave as both financial market players and domestic economic stabilizers. Hence, the article discusses the return of the state as a traditional "public leviathan" involved in financial regulation, as well as the work of sovereign wealth funds. The author concludes that at the heart of capitalism's endurance lies this diversity of public responses, which ultimately reveal governments' adaptable agendas and heterogeneous tasks.

I think that capitalism, wisely managed, can probably be made more efficient for attaining economic ends than any alternative system yet in sight, but that in itself it is in many ways extremely objectionable. Our problem is to work out a social organisation which shall be as efficient as possible without offending our notions of a satisfactory way of life.
—John Maynard Keynes, The End of Laissez-Faire , 1926
The all-powerful market which is always right is finished.…We have to have a new balance between the state and the market.
—French president Nicolas Sarkozy, 2008

     

The Rise of Public–Private Partnerships in China: An Effective Financing Approach for Infrastructure Investment?

The rise of public‐private partnerships (PPPs) in China has spurred heated debates about their purpose and effectiveness. This article traces the fluctuation of China's PPPs over several decades and finds that PPPs have played a supplementary role in China's infrastructure investment, as a response to the pressures of fiscal shortfalls and government debts. The resurgence of PPPs in recent years aims to bridge the infrastructure gap and alleviate ballooning local debts. These expectations, however, are hard to realize. China's PPPs mainly involve state‐owned enterprises and place increasing financial burdens on the government. The central government has taken measures to attract private sector investment to mitigate the financial risk, but the prospects for PPPs remain unclear.     

Public–Private Partnerships in Urban Infrastructures: Reconciling Private Sector Participation and Sustainability

The speed and scale of urbanization provide serious challenges for governments all over the world with regard to the realization, maintenance, and operation of public urban infrastructures. These infrastructures are needed to keep up with living standards and to create conditions for sustainable development. The lack of public funds and the inefficiencies of public service provision have given rise to initiatives to stimulate private parties to invest their resources in public urban infrastructures. However, private sector participation creates a whole range of new challenges. The potential benefits are countered by concerns about the compatibility of the private sector's focus on short-term return on investment with the long-term perspective needed to realize sustainability targets. On the basis of a review of literature on experiences with private sector participation in urban infrastructure projects, this article identifies governance practices that help or hinder the reconciliation of private sector participation in urban infrastructure projects with the objective to increase the sustainability of the urban environment.     

The shadow economy and sustainable development: The role of financial development

This paper provides fresh evidence concerning the threshold relationship between the shadow economy and financial development. Shadow economy is quoted as an obstacle to sustainable development and therefore the role of financial development is examined in this paper to tackle the issue of shadow economy. It is based on panel data of 29 developed and developing countries over the period of 1975–2015 and use of panel threshold model. Three proxies for financial development—liquid liabilities, private credit to deposit money banks, and stock market capitalisation—were utilised to obtain the threshold value of US$33,600 Gross Domestic Product (GDP) per capita. This threshold helps to determine the impact of financial development on the size of the shadow economy. Empirical results suggest that above this threshold, financial development significantly contributes to the reduction in size of the shadow economy while it has no impact for countries that have per capita income below this threshold. This implies that, countries with lower per capita income (below $33,600) should implement policies to improve accessibility to finance and credit market which leads to a sufficiently higher per capita income that in turn allows for a reduction in the size of the shadow economy.     

The challenges of fractionalized property rights in public‐private hybrid organizations: The good,the bad,and the ugly

Policy designers seeking to harness profit‐driven efficiency for public purposes are increasingly creating organizations with fractionalized property rights that distribute “ownership” among public and private actors. The resulting hybrids are quite diverse, including mixed enterprises, public‐private partnerships, social entrepreneurship organizations, government‐sponsored enterprises, and various other hybrid forms. Marrying public purposes to private sector efficiency and strategic flexibility provides a tempting rationale for mixing public and private owners in hybrid organizations. Because public‐private hybrids involve fractionalized property rights, however, they exhibit tension among owners over both strategy and, more importantly, goals. To understand public‐private hybrids, we assess them in terms of six dimensions of property rights: fragmentation of ownership, clarity of allocation, cost of alienation, security from trespass, credibility of persistence, and autonomy (of both owners and managers). The unclear allocation of fractionalized ownership rights facilitates the appropriation of financial residuals and asset ownership opportunistically. Other weaknesses in the property rights configurations of public‐private hybrids create managerial dissonance or opportunistic behavior that typically leads to a narrowing of goals, but sometimes also to organizational failure.     

Russian lobbying in the United States: stages of evolution

The article examines Russian lobbying in the US. The endogenous and exogenous factors of Russian lobbying are analyzed as well as its qualitative and quantitative characteristics. The article depicts stages of Russian lobbying development: (i) from government to private entities; (ii) nongovernmental lobbying; and (iii) a return to government. Additionally, occasional attempts by Russian entities to secure funding from the US budget are mentioned. Two case studies are studied to show the nature of current Russian lobbying in the US: lobbying campaigns by Techsnabexport, state‐owned corporation, and GML, a private business concern. The article concludes that Russian lobbying in the US is weak. At the beginning, it was mostly about investment consulting, and with the rise in oil prices and the decrease in political freedom, the need for and availability of lobbying diminished. Some private corporations were nationalized under President Putin and, as a result, lost control over their international expansion strategies, with the remaining private corporations being afraid of independent lobbying campaigns abroad. Copyright © 2012 John Wiley & Sons, Ltd.     

Reforms for Improved Efficiency in Public Budgeting and Finance: Improvements,Disappointments, and Work‐in‐Progress

The past half‐century has brought heightened expectations for what systems of budgeting and finance may be expected to deliver for the public. From systems to provide a first defense against theft and gross misappropriation, they have become systems to help lawmakers direct public resources where they can give the best public return, to help managers efficiently utilize resources under their control, and to communicate plans and results to the public. Government fiscal systems have developed more useful expenditure classification, established new measures for identifying public performance, brought nontraditional spending into control systems, and made finances considerably more transparent. Systems should, in combination with robust democratic institutions, make the public sector perform in the best interests of the citizenry. But in the face of great fiscal system improvements, governments struggle with staying fiscally sustainable, with meeting financial obligations to vulnerable populations, and even with avoiding default, receivership, or bankruptcy. Even as systems improve, government finances decline amid considerable private sector prosperity. Research over the past decade has done little to aid or explain the sweeping expectation and limited success of budget systems to transform essential elements of governance. It is the purpose of this paper to review progress in the development of robust fiscal systems, identify the major obstacles and failures, and link this evidence to the record of recent governmental financial distress, paying particular attention to the struggles of American governments. The broader questions needing to be addressed are the same questions at the forefront of public sector finance 100 years ago; however, the present focus has not been on these broader implications.     

THE FINANCIAL ACCOUNTABILITY FRAMEWORK OF AUSTRALIAN PUBLIC ENTERPRISE

Abstract: This paper is concerned with the complexities of accountability for Australian public enterprise and analyses some of the conceptual issues which need to be addressed in developing a framework for reform. The analysis suggests that the matrix of financial accountability relationships is quite complex in terms of its objectives, its concern for both public interest and commercial viability issues and the number of participants. Furthermore, it operates in an intricate environment of political, administrative and control structures. Although the general financial reporting objectives for public and private enterprises may be similar from a conceptual viewpoint, the assumptions underlying the private sector agency model (a simple one-to-one shareholder-manager relationship based on profit maximisation and individual self-interest) may not allow a realistic or suitable modelling of the intricacies of this process at an operational level at least.
The analysis identifies some of the difficulties encountered when modelling the financial accountability processes for public enterprises. It then suggests a framework which takes into account the multi-layered nature of performance objectives and the unique operational environment of public enterprises. The model encompasses performance responsibilities at both the macro- and micro-economic levels, and operates through a linked chain of participants, each with distinct financial accountability obligations and information needs. It identifies several tiers of participants together with the appropriate accountability responsibilities at each level.     

The Balancing Act: Using Private Money for Public Projects

As public resources become scarcer, private donations for capital projects and public services may become increasingly important. Modern donors, using the new philanthropy philosophy common now in the nonprofit sector, may desire more control over the use of their funding than in the past. This research examines the effects of private donations on capital decision making, and explores the balancing act required by public officials between best practices and private norms in this process. The study uses the city of Omaha, Nebraska case, where corporate and individual donors have made significant financial contributions for the construction of a convention center/arena and a baseball stadium. Findings include both costs and benefits of this approach, and may be beneficial for theory‐building related to this relatively unexplored topic, as well as for practitioners faced with similar needs and demands.     

'Habitation vs. Improvement' and a Polanyian Perspective on Bank Bail-outs

The bank bail-outs enacted by the Brown government in the wake of the 2007 credit crunch have had a distinctive political character. Despite the government's pronouncements on the merits of swift and decisive interventions, I argue that this does not amount to a return to the interventionist regulatory form associated with post-war British welfare capitalism. The Polanyian distinction between 'habitation' and 'improvement' is used to show that the bail-outs were designed by contrast to defend the underlying deregulatory logic of the existing financial regime. The only real change of note was to uncover forcibly the often hidden influence of the state in the making and regulation of an ostensibly market-led neoliberalism and the creation instead of a much more overt state-led neoliberalism. Habitation strategies were incorporated into a structure of financial deregulation, making it more rather than less difficult to rejuvenate state capacities consistent with enhancing societal welfare. The bank bail-outs offered short-term salvation for distressed firms within the financial sector without providing the state with socialised control over the conduct of banking business in order to promote forms of social policy consistent with post-war British welfare capitalism.     

Risky business? Evaluating market risk of equity investment proposals to reform social security

A number of options have been proposed to address the expected financing shortfall of Social Security in the next century. Most basic aspects of the various reform proposals are captured by the three options offered by the Advisory Council on Social Security in 1996. Common to all three options is that they would permit either public or private equity investment. This article discusses the economic risks involved in public and private equity investments as a funding solution for Social Security. To quantify the risks involved in equity investment, stochastic simulations are based on the economic assumptions of the 1998 Trustees Report of Old Age and Survivors Insurance and Disability Insurance in combination with different assumptions about the rates of return on bonds and stocks. For public equity investment, financial market risk remains significant for at least 40 years. For individual accounts, I find that the chance of doing worse than with Social Security or of falling into poverty in retirement is generally high, yet varies with income level, gender, family status, and employment history. In general, women, married workers with dependent spouses, or workers with incomplete work histories fare worse than men, single workers, or workers with complete work histories when compared either to the current system or to the poverty line. © 2000 by the Association for Public Policy and Management.     

Return of the Governors: Citizenship and the New Governance of Neighbourhood Disorder in the UK

Liberal processes of urban governance are based around a concept of the citizen as both governor and governed. This duality suggests a dynamic relationship between the individual citizen, fellow citizens and the state in which responsibility for the governance of public life will oscillate between actors. This paper argues that increasingly the rhetoric and policy of neighbourhood governance in the UK represents a return of the direct role of the state as an 'official' presence in the governance of neighbourhood disorder. Such a return is a consequence of the failure of previous appeals to both 'active citizens' and 'communities' to exert informal social control over their local public spheres. This paper provides a critique of such appeals as a response to the continuing crisis of urban citizenship and 'community' in liberal democracies. The paper analyses the implications for urban citizenship theory of two recent UK policy developments, child safety initiatives (commonly referred to as curfews) and neighbourhood warden schemes and places these initiatives in the context of an increasing role for official housing agencies and private interests in neighbourhood governance. The paper suggests a need for urban policy to reflect the diversity of urban identities and to re-establish the links between civil, political and social rights of citizenship.     

Non-Voluntary Return? The Politics of Return to Afghanistan

The forced removal of 35 Afghan nationals from the UK in April 2003 calls into question the viability of the government's voluntary repatriation schemes and undermines the voluntary nature of return programmes. This article draws on the results of research conducted in 2002 to explore the views of the Afghan community about return. We evaluate three motivations for promoting return programmes: justice-based arguments, where return is the 'end of the refugee cycle'; human capital explanations, which focus on individual decisions to reverse the effects of brain-drain; and burden-relieving explanations, where return is an alternative to repatriation. Our findings suggest that domestic interest based arguments, rather than those founded on the protection of human rights, are driving the policy-making agenda. Returns are portrayed as a means of relieving the burden on welfare services, and placating an increasingly anti-immigrant public opinion. As well as individuals forcibly removed from Britain, other Afghans are being urged to return by means of financial inducements, and sometimes under the threat of repatriation. In this context, we can discern a new category of 'non-voluntary' returns where individual choice has little real meaning.     

Understanding political risk in investment planning

In 1982, the Congress authorized $11 billion to modernize the nation's air traffic control system—one of the largest infrastructure investments since the building of the interstate highway system. Although this investment appears to offer a large and robust return, the economic results depend strongly on productivity gains through system consolidation. It is uncertain what balance the Congress will strike between the long-term, widely shared benefits of greater productivity and the immediate job losses from system consolidation. This risk can be included in the calculus of expected return through Monte Carlo analysis. When this is done, the expected return drops very close to the 10% hurdle rate that the government often uses for such projects. This method of integrating political risk can be applied to any investment, public or private, for which political action joins the customary economic and technical uncertainties in affecting the outcome.     

Accountability in Accounting? The Politics of Private Rule‐Making in the Public Interest

Over recent decades governments have increasingly delegated domestic and international regulatory functions to private-sector agents. This article examines the reasons for such delegation and how private agents differ from public ones, and then analyzes the politics of regulation post delegation. It argues that the key difference between delegation to a public agent and delegation to a private one is that in the latter case a multiple-principals problem emerges that is qualitatively different from the one usually considered in the literature. An agent's action will be determined by the relative tightness of competing principal–agent relationships. This tightness is a function of the relative importance of each principal for the agent's financial and operational viability as well as its effectiveness in rule making. Further, the article posits that exogenous changes in the macro-political climate can deeply affect the nature of principal–agent relationships. The authors test their hypotheses about the politics of regulation in the postdelegation period through the study of accounting standards setting in the United States, a case of delegation of regulatory authority to a private agent that goes back to the New Deal era and has received renewed public attention in the wake of recent corporate financial scandals.     

Registered Traveler Program: The Financial Value of Registering the Good Guys

We discuss how the Registered Traveler (RT) program can enhance simultaneously aviation security and passenger convenience. We point out some of the potential weaknesses in the program from both a security and civil liberty perspective. The RT program is a public–private partnership between the Transportation Security Agency (TSA) and the private sector. As in any partnership between private enterprises and the public sector, there are tensions that must be monitored, managed, and resolved. We note that financial distress of a RT service provider will place increased pressure on TSA resources. We review the resources allocated by the public and private sectors and the natural tensions that exist between companies investing capital with the expectation of earning a market rate of return and an agency of the Department of Homeland Security, the TSA, with one of its responsibilities being to assure the safety and security of air travel.     

The risky business of public–private partnerships

Public–private partnerships (PPPs) are now a common strand of third way government policy, with better efficiency promised from the private funding of public infrastructure through the transfer of risks to private parties. This paper aims to investigate, on an empirical basis, the realities of risk transfers in PPPs and compare this experience against both the rhetoric of project proponents and the formal contract conditions. The paper outlines some conceptual frameworks underpinning PPPs and establishes the notions of risk shifting and risk sharing. The range of typical risks encountered in infrastructure projects is specially considered, and differences to traditional project delivery arrangements are articulated. Some empirical experience on the transfer of risks under PPPs is then outlined through a case study. This analysis shows the extent to which risks were shifted to the private parties as planned, or whether risks remained with government. It is argued that while commercial risks were largely well managed, governance risks were not. It is critical to understand better the nature of risk transfers in PPPs in view of the large financial implications of these deals along with long contract terms.