Which fiscal deficit? : a question of measuring government’s performance

Abstract

Purpose - This study deals with National Accounting, through an analysis of the technical and institutional interactions behind the EDP Table 2A exercise. Given the Maltese government’s intention to move from cameral accounting to IPSAS, the possible implications of this reform on EDP Table 2A were also identified. Finally, an overview of the accountancy profession’s understanding of different measures of government deficit and their sentiment regarding IPSAS were gauged. Design - The first part of the study follows a qualitative approach for which 8 interviews with government officials were carried out. The second part of the study adopted a parallel convergent design for which 11 interviews with accountants and selected Members of Parliament were undertaken, while a questionnaire was distributed to Certified Public Accountants. Findings –The EDP Table 2A exercise creates a web of interactions necessitating strong institutional interactions, which are and shall remain necessary even after IPSAS implementation. However, the implications of IPSAS reform on EDP Table 2A is ambiguous depending on whether cameral accounting retains its dominance or whether the IPSAS measure becomes the most widely used definition of the deficit. The accountancy profession is in favour of accrual accounting reform in Budgetary Central Government; however, these views are shrouded in an aura of oblivion regarding public sector peculiarities and the different deficit measures. Conclusion –Expectedly, National Accounting is the assessment yardstick for Malta as an EU member. Irrespective of IPSAS reform, the European System of Accounts (ESA) deficit reported to Eurostat shall remain unchanged. Thus, in light of the Treasury’s intention to adopt IPSAS for Financial Management purposes, a natural question emerges: are institutional pressures in the form of coercive, mimetic and normative isomorphic undercurrents creating a cosmetic reform? Value - Accounting research in the Public Sector tends to overlook National Accounting; this study seeks to increase awareness of this macro-measure and its link to Government Accounting. The findings shed light on aspects of IPSAS that need to be revised prior to implementation. Recommendations are also suggested to improve the profession’s perception of public sector accounting.