Consequences and costs of financial reporting compliance for local government

Abstract

Local governments are continuously being subjected to changing legislation in regard to reporting requirements. Results of this research indicate that the amount of time allocated to complying with external reporting requirements was often considered excessive and not always relevant – detracting from the ‘doing’. It was also revealed that the bottom line is perceived to be the most important indicator of a council’s performance by stakeholders. From this, several implications emerge – including the potential for manipulation of accounting figures to achieve a target operating result. Another includes councils losing their original identity as service providers to the community. Hence, financial, political and social costs appear to be associated with continually changing financial reporting requirements imposed on local government. Future research proposes to take the derived questionnaire used here to other countries in order to determine whether data prepared using financial accounting standards (like the International Financial Reporting Standards) distort the information used by the various council decision makers.