Accounting changes and beyond budgeting principles (BBP) in the public sector. Institutional isomorphism

• DOI: https://doi.org/10.1108/IJPSM-10-2018-0217
• Published date: 07 August 2019
• Pages: 165-189
• Date: 07 August 2019
• Author: Nizar Mohammad Alsharari
• Subject Matter: Public policy & environmental management

Accounting changes and

beyond budgeting principles

(BBP) in the public sector

Institutional isomorphism

Nizar Mohammad Alsharari

Department of Business, Higher Colleges of Technology,

Abu Dhabi, United Arab Emirates

Abstract

Purpose –The purpose of this paper is to explain the process of accounting changes and beyond budgeting

principles (BBP) in the public sector as influenced by the institutional framework. It also looks beyond the

outcomes of implementing budgeting changes to take into account the complexities of the factors that drive

and shape the cumulative processes of accounting change.

Design/methodology/approach –The study presents the results of an interpretive case study in the

Jordan Customs (JC) as good evidence from developing countries. It uses the triangulation of data collection

methods including interviews, observations, and documents and archival records.

Findings –The paperfound that JC changes to their accountingsystems were influencedby the BBP, with the

new budgetingsystems implemented basedon reconsideration and re-enacting of theoretical accountingbases

and procedures. As a result, the accounting changes were managed by modifying the laws and regulations.

Among the accounting changes included in the Beyond Budgeting (B B) approach in JC was relative performance

evaluation,as an alternative to fixedbudget targets. Rollingforecasts were preparedthe BB and were employed

in JC’s revenuessection and the technicalaspects of preparingthose relied on E-views software.Most BBP were

successfully implemented as values, controls, teams, goals, rewards, resources, coordination and governance.

Other BBP have facedsome resistance in areas of transparency, trust andaccountability.

Research limitations/implications –The paper uses the case study approach that yielded insightful

lessons. It reveals the organizational interaction with the external environment and how BBP is influenced

and shaped by isomorphic pressures. It also shows the successful and unsuccessful BBP with-(out) resistance

in the public sector. This paper has important implications for change dynamics that can emerge from a BBP

approach at the institutional level. It also explains the interaction between the “external”origins and

“internal”accounts, which identified that accounting is both shaped by and shaping socio-economic and

political processes. This broad sensitivity to the nature of accounting has important implications for how

accounting change along with BBP is studied.

Originality/value –The paper is one of the few case studies in the accounting literature on organizations

that change budgeting practice by adopting BBP. The study provides a detailed explanation of the dynamics

of accounting changes through BBP in the public sector. It also provides pieces of evidence about the IPSAS

and public accounting reforms in developing countries.

Keywords Public sector, Institutional theory, Budgeting, Accounting changes, Beyond budgeting

Paper type Research paper

1. Introduction

The BeyondBudgeting principle (BBP) is oneof the more prominent managementinnovations

of the twenty-first century.At the same time, it encountersresistance, among a range of other

barriers that other management concepts such as ABC or Balanced Scorecard, have

successfully overcome internationally. Many studies have investigated Beyond Budgeting’s

(BB) rate of adoption and applicability in different cult uralc ontexts (Libby and Lindsay, 2010;

Hope and Fraser,2013). There has been insufficient research on the relationship betweenBB’s

principles and accounting changes. Accounting and budgeting changes in public financial

managementover the last decade were centralto the rise of these principlesand the associated

ideas of results-based management (RBM) and public accountability, of whichaccounting and

budgeting is an essential element (Alsharari et al., 2015; Alsharari, 2016a,b ; Alsharari, 2017;

Received 7 October 2018

Revised 28 January 2019

22 February 2019

22 April 2019

9 June 2019

Accepted 30 June 2019

The current issue and full text archive of this journal is available on Emerald Insight at:

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Accounting

changes and

BBP

InternationalJournalof Public

SectorManagement

Vol.33 No. 2/3,2020

pp.165-189

©EmeraldPublishingLimited

0951-3558

DOI10.1108/IJPSM-10-2018-0217

165

Alsharari and Abougamos, 2017; Alsharari and You ssef, 2017; Lasyoud and Alsharari, 2017;

Alsharari, 2018b; Alsharari, N.M., 2019a; Alsharari, N., 2019b).

Some argue that over the past decade traditional budgeting has lost relevance in the

modern business environment and no longer meets the needs of managers (Rickards, 2006;

Goode and Malik, 2011). Accordingly, researchers and practitioners have developed

alternative budgeting methods that better suit the needs of the modern business world. BB,

better budgeting, rolling forecasts, activity-based budgeting, and results-based budgeting

(RBB) are the main alternatives developed over the last few years (Cardoşet al., 2014). An

RBB system is an integral part of the RBM approach, whereby the budgeting system

provides the financial resources to implement the strategic plan and permit the setting of

priorities. The relative key performance indicators (KPIs) within the strategic plan are both

the basis for and the driver of annual budget demands. KPIs, which are derived directly

from strategic objectives, connect the strategic plan with the budget management process

(Poister and Streib, 2005).

BB emerged as an alternative paradigm to traditional budgeting management (Libby

and Lindsay, 2010; Hope and Fraser, 2013), yet many questions remain unaddressed. For

instance, why do traditional budgets continue to be widely used if they are unsuited to

today’s business environment? The significance of relative performance targets in the BB

literature may also affect the universal applicability of the model. Many organizations lack

adequate relative performance data (Hope and Fraser, 2013). This paper fills this research

gap with a new research question, concerning the accounting change process in a specific

organization: Are the BBPs adaptable, or do certain factors hinder the implementation of its

core techniques?

The best methodology to answer this question is a case study approach as recommended

by many authors (Alsharari, 2015, 2016a, 2017, 2018b; Alsharari, N.M., 2019a; Alsharari, N.,

2019b; Alsharari and Al-Shboul,2019). Thecase study in this research, Jordan Customs ( JC),

an entity under the Ministry of Finance, was chosen because they have implemented

numerous changes in extra- and intra-organizational systems for budgetary and accounting

management. These transformations occur amid the pressures of institutional reform and

political and economic relationships. For example, Jordan has ongoing commitments to the

World Bank and the International Monetary Fund (IMF) to reduce state debt and manage its

financial resources more effectively. The Jordanian government has changed its public

sector budgeting systems over three stages: introduction of RBB; implementation of BBP

and implementation of a new accounting system, imposed regularly and intentionally on

public organizations, including JC (Alsharari, 2013, 2016a, 2017, 2018b; Alsharari, N.M.,

2019a; Alsharari, N., 2019b; Alsharari and Al-Shboul, 2019). This paper uses an institutional

isomorphism framework to theorize the legitimating processes behind BBP and accounting

changes in JC. Institutional isomorphism has emerged as a method to highlight social and

political pressures that drive institutional change in the adoption of BBP. The case studies

approach has been recommended by different authors such as Yin (1994) and Ahrens and

Chapman (2006). As they argued that case studies are relevant for studying knowledge

utilization because the topic covers a phenomenon that seems to be inseparable from its

context. By showing the relationship between qualitative case study observations, area of

scholarly debate and theory, the observation and analysis of organizational process can be

structured in ways that can produce theoretically significant contributions to the literature.

This paper looks beyond the outcomes of budgeting change implementation by taking

into account the complexities of the accounting change. Case studies of BB are rare in the

academic accounting literature (Cardoşet al., 2014). This paper responds to Sandalgaard and

Nikolaj Bukh’s (2014, p. 421) assertion that “further research is needed to identify how the

BB package will be configured under different circumstances,”to understand better how

budgeting systems of an organization adapt to the contemporary business environment.

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