The reform of the public sector has been a continuing challenge for many governments around the world. In recent years, this reform has become dominated by such terms as ‘new public management’, ‘managerialism’, ‘marketisation’, ‘privatisation’ and ‘commercialisation’. These terms reflect a broadly-based commercial direction that governments started taking in response to reform’s pressures resulting from a perceived crisis of legitimacy, responsiveness, efficiency and accountability in public sectors,( A Rkein, 2008).
This is an investigation with focuses on the financial reporting within the public sector which aims to provide a probable view on the adoption of the accrual accounting concept which accepts that there may be substantial rewards but not overlooking the risks, costs as well as disadvantages. Aspects of what a good financial report should consist of are part of the issues to be tackled in the research inclusive of their use and importance. Financial reporting in the public sector has largely consisted of providing a report comparing the actual payments and receipts with those which were provisioned for by Parliament through the budget. This practice is still dominant almost in all governments across the world as it provides assurance through the audit of such accounts that government spending has been in line with the agreed budget and that fraud and other irregularities have been minimised.
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The cash basis which is currently being used will be looked at drawing its positives and shortfalls thereby providing adequate information why the adoption of the accruals concept would provision for better financial reporting. The research seeks not to put emphasis on the weaknesses of the cash basis but rather seeks to find further contribution to financial reporting to within a the secondary education system.
For several decades now, government accounting principles have shifted between these two poles, moving from the cash basis to a modified cash basis and, more recently, to full-accrual accounting. Traditionally, governments have opted for the modified cash basis of accounting, which entailed travelling a considerable distance toward an accrual basis of accounting. Under the modified cash basis, a government must record income whenever the latter is on hand and measurable – i.e., when it is practically certain that the cash or financial asset has been received. Likewise, a government must register its expenditures whenever it receives a liability or has been billed for a service (Glick, 1990).
For several governments, the preferred vehicle of modernization efforts has consisted in the transition to accrual accounting (Olson, Humphrey and Guthrie, 2007), an approach that until lately was the preserve of private enterprise. Other observers note, however, that governments are fundamentally different from business enterprises and wonder how private sector standards will be able to meet the accountability requirements specific to governments (Christie, 2009).
From the perspective of governments, accrual accounting is more of a reflection of the moment when a manager has committed to performing a transaction (e.g., authorizing severance pay) than of the moment when this transaction is actually concluded. In addition, this approach provides a basis for recognizing the value of physical assets, such as land, buildings, facilities, operating systems, etc., in a government's financial statements (Aubry, 2004).
1.2 Background to the study
Currently secondary education institutions are using the cash basis which has been modified to suit set government standards yet the same institutions are found to be deteriorating in terms of infrastructure, failure to account for assets, instances of fraud stretching over years being unveiled as well as the failure by institutions to meet their current bills for basics such as water and electricity. Ultimately transparency and accountability are limited elements hence the resultant issues.
Education institutions in the private sector which are mostly run by churches do not have issues of transparency and accountability as problems in comparison to public sector schools since most have deployed the accrual accounting method. Within government education institutions it takes a long time for irregularities to be observed and actioned upon. Comparing an education institution in the public and private sector one will notice that the fees paid which forms the greater part of income are generally higher at public sector schools yet private sector institutions with lower income function better. Resultantly it would suggest that the accounting technique being used does not provide adequate information for reviews and decision making for sustainability of the organisation.
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Institutions evolve and present day education institutions therefore should be able to sustain themselves from their income and be able to generate reports that are valuable to all stakeholders and not government only. Office bearers should be accountable in good time for their action in the use of such funds and this must be done by means of a system which is an accounting technique. Reports and analysis need not be shallow and limited to the flow of cash but sustainability and the going concern of the organisation.
Information is vital in all decision making processes yet an approach which limits such information is being used to make decisions. Ultimately it will reflect on the quality of the decision that would be made, the nature of report as well as the level of transparency. Would it be adequate for an institution to report on cash movements and let everything else alone and still expect to survive in a changing and demanding environment?
1.3 Statement of the problem
Is the accounting technique used at Mucheke High school (a public sector school) adequate enough to address issues of transparency and accountability as a going concern?
1.3.1 Research Questions
What accounting technique is being used?
What information is provided by the technique?
To what extend is the information provided valuable?
Does the provided information reflect transparency and accountability?
1.3.2 Research Objectives
To explain the use of the cash basis in the public sector
To show how relevant the cash basis is in the public sector defined
To examine if another technique may be used alternatively
1.3.3 Statement of Hypothesis
The accounting technique used in the generation of reports provides adequate information to address transparency and accountability issues of the institution as a going concern.
1.4 Justification of the research
Research on the deployment of the cash basis on service provision is limited such that this study will provide information on a service sector in the public sector which has not been scrutinised adequately.
The information generated will contribute to the wealth of knowledge required for developing the required accounting systems and technique which embrace elements of transparency and accountability.
The public sector requires an accounting technique which is relevant to its socio-economic growth and demand for limited resources and an ever changing economic environment.
The aim of the study is describe and explore the accounting technique used by the institution under study via constructivism ontology.
1.5.1Preliminary literature review
Constructivism is a theory of knowledge, the generic definitions of which are centred on the active participation of the subject in construing reality, rather than on reflecting or representing it. Constructivist ontology thus assumes a social construction of reality that is reinforced by humans through action and interaction. The epistemology of this paradigm is that findings are subjective based on the ideologies and values at a particular place and time. Given the concern with understanding member’s meanings, constructivist researchers have often preferred meaning as opposed to measurement oriented methods. The primary analytic method used in this paradigm is grounded theory and data gathered is thus sample specific and non-statistical and is of limited generalization.
1.5.2 Research methodology
According to Sekaran (2003), qualitative data refers to information gathered in narrative form, through interviews and observation. Qualitative research focus on the collection and analysis of full and rich information about a phenomenon.
1.5.3Data collection and analysis
Data collection will be done by means of interviews, observations as well as the use of working experience at the institution. Both primary and secondary sources of data will be used and for the purposes of data analysis Microsoft excel (computer package) will be used.
1.6 Assumptions of the study
All financial records used in the study for information provision are true and correct.
Information provided by means of interviews is true and correct.
All transactions conducted contributing to the generation of reports used in the study was conducted as per government set standards.
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All persons dealing with financial issues as well as decision making are qualified to do so have been appointed on such grounds.
1.7 Delimitations of the study
The studies focuses on one school within the ministry of Primary and secondary education in Masvingo City, Masvingo Province in Zimbabwe.
The study is limited to the functions
1.8 Limitations of the study
Information obtained is limited to what can be provided by office bearers at the institution.
Time for the purposes of obtaining such information required is limited to that provided by officials at the institution.
The aspect of time and financial resources restricted the researcher to one educational institution.
The sample size is limited to administrators at the institution.
1.9 Definition of terms
Activities which aim at developing the knowledge, moral values and understanding required in walks of life.
Work placement for college students to obtain on the job knowledge as well as skills.
A group of interest clearly defined to the researcher to which results of the study are generalise
A system by which transactions are done and reports generated thereof
1.10 Thesis/report outline
( Abolhalaje, M., M. Ramezanian and P. Bastani, 2012.)
Accrual Accounting Accomplishments in Iranian Universities of Medical Sciences: a Mixed Method Study.
Middle-East Journal of Scientific Research, 12: 294-300.)
Glick, P. E. (1990). A Public Manager's Guide to Government Accounting and Financial Reporting, Chicago, Government Finance Officers Association.
Olson, O., C. Humphrey and J. Guthrie (2007). Into the Shadows: A Reflection on International Developments in Public Sector Accounting, 30th Annual Congress of the European Accounting Association, 25-27 April, Lisbon, Portugal.
Christie, T. (2009). Accrual Budgeting by Canadian Federal, Provincial and Territorial Governments, Toronto, The Canadian Institute of Chartered Accountants.
Aubry, J.-P. (2004). Progrès dans la comptabilité de nos gouvernements, Association des économistes québécois, Comité des politiques publiques, Document CPP 2004-02.