A TWO-COUNTRY COMPARISON OF PUBLIC SECTOR ...

J. OF PUBLIC BUDGETING, ACCOUNTING & FINANCIAL MANAGEMENT, 22 (4), 449-486

WINTER 2010

A TWO-COUNTRY COMPARISON OF PUBLIC SECTOR ACCOUNTING REFORMS: SAME IDEAS, DIFFERENT PATHS? Konstantin Timoshenko and Pawan Adhikari* ABSTRACT. A number of governments have already moved or intend to move from cash to accrual accounting. This has resulted in a growing body of comparative research in public sector accounting. Little work, however, has been devoted so far to investigating government accounting in developing and transitioning countries. This empirical paper seeks to contribute to this literature by conducting a seemingly unique two-country comparison of public sector accounting reforms in one developing nation and one in transition, namely Nepal and Russia. The study suggests that, although more or less the same rhetoric is used in the two settings, reforms have been framed rather differently due to the potency of various institutional pressures. INTRODUCTION

In the last few decades there have been substantial efforts to reinvent the state worldwide. This reinvention is what has come to be widely known in the relevant literature as New Public Management (NPM) (e.g. Connolly & Hyndman, 2006; Hood, 1995). Having become increasingly known as a more or less global trend (Sahlin-Andersson, 2001), NPM has envisaged the manifestation of a paradigmatic shift, i.e. a change from the traditional bureaucratic model invented by Max Weber towards the management model. While the idea under the former was the efficient execution of legal authority and power, the idea of NPM has been enunciated to be the efficient management of -------------------------------------* Konstantin Timoshenko, Ph.D., Associate Professor, and Pawan Adhikari, Ph.D., Associate Professor are with Bodø Graduate School of Business, University of Nordland, Norway. Their research interests include public sector reforms in general, and changes in public sector accounting in particular.

Copyright © 2010 by PrAcademics Press

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public resources in a more business-like way as a result of a new economically defined role of state operations and functions (e.g. Budäus & Buchholtz, 1996; Naschold, 1995). Although controversial, NPM is still, at the beginning of the 21st century, viewed by many as a means of revitalizing the public sector by the efficient and effective use of public resources, augmented accountability, greater focus on outputs, and better performance (Hood, 1995, 2000; Boston et al., 1996; Mellett, 2002). A number of governments, motivated by reforms which were initiated under the umbrella of NPM, have already moved or intend to move from cash to accrual accounting. Such strides towards accruals are claimed to be essential in order to engender the propagated benefits of NPM arrangements (Guthrie, 1998; Chan, 2003). In response, the body of literature covering public sector reforms in general and accounting changes in particular has emerged. An examination of the countries included in the comparative international government accounting research (CIGAR¹) framework shows that a wide range of different accounting systems still are used around the world. This variety goes from pure cash accounting to full accrual accounting, with a series of modified variations in between, depending upon the dominant aspects called either modified cash or modified accrual. What deserves attention is that research in this area is becoming more and more comparative. Researchers are now increasingly engaged in wide-ranging discussions of how and why the government accounting systems of various nations contrast or resemble each other. Comparative studies seem to have become a means of achieving a better understanding of how and to what extent accounting has been applied in different contexts in order to accomplish the goals of improving accountability, efficiency, and management of the public sector (Bourmistrov & Mellemvik, 2005). Moreover, the demand for comparative studies has been elevated, as such studies would allow both a transfer of good accounting practice and prevent mistakes being repeated elsewhere (Broadbent & Guthrie, 2008). Several articles that have recently come to light examine the phenomenon of “comparative public sector accounting” (e.g. Chan & Jianfa, 2005; Perez & Hernandez, 2005; Bourmistrov & Mellemvik, 2005; Guthrie et al., 1998; Ellwood & Newberry, 2007; Ouda, 2001; Pina & Torres, 2003).

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Notably, a great many comparative studies in public sector accounting are now more focused on covering ongoing reforms in OECD nations, particularly in Anglo-Saxon countries (e.g. Benito et al., 2005; Lüder & Jones, 2003). To illustrate this, in their study of eleven developed nations Guthrie et al. (1999) have concluded that different types of reforms have been promoted at different levels of government, by parties at varying ends of the political spectrum, and in different economic and social contexts. In some countries, most developments have been at the local government level, whereas in other countries, reforms have been implemented at a very centralistic level by national governments (Lüder & Jones, 2003). In turn, SahlinAndersson (2001) has treated the evolution of NPM ideas nationally as well as internationally and transnationally by juxtaposing four countries – Australia, New Zealand, Norway, and Sweden. She has pointed out to the importance of the observers and mediators regarding NPM reforms, especially international organizations, to explain a great deal of commonalities and differences revealed between the countries. Little work, however, has so far been devoted to investigating government accounting and budgeting reforms in less developed countries (e.g. Chan, 2000; World Development Report, 2000; Bourmistrov & Mellemvik, 2005). These nations are likely to provide a completely different setting from that of most of the OECD literature. With some kinds of NPM-like arrangements declared there, developing economies and those in transition still remain to a large extent outside the coverage of mainstream research (Alawattage et al., 2007). Given the paucity of consistent research efforts on the topic in Western English language literature, this paper aims at contributing to the growing body of the comparative research by presenting a seemingly unique two-country comparison of public sector accounting reforms in one developing nation (Nepal) and one in transition (Russia). Due to the scarcity of comparative research in less-developed countries, we have decided to focus on the two nations we know the most about from our interest and professional expertise. Located between the two fastest growing economies in the world (i.e. India and China), Nepal covers a total area of 147,181 square kilometers with some 26.4 million inhabitants. In contrast, Russia is the world’s largest country with land that stretches almost halfway around the

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planet and constitutes more than one-ninth of the earth’s land area. Russia’s population at the end of 2007 was about 141.1 million. Nepal is classified as one of the least developed and poorest nations on the earth with an annual per capita income of USD 300 (World Bank, 2008) at the end of 2007. In turn, Russia represents a transitional middle income economy with GDP per capita growing at a rapid velocity during 1999-2007 to almost USD 10,000 in 2007. Both nations are also worth exploring because they are deemed unique politically. The state of Nepal has encountered dramatic political uncertainties and turbulence on its way towards establishing a republic in 2008. Unlike Nepal, Russia has enjoyed a more stable political system during the last decade, a stability which has been driven by a strong state ideology. While being rather heterogeneous nations, however, Nepal and Russia appear to share at least one common trait, i.e. some degree of isolation. Indeed, lacking financial resources to influence others, Nepal has been greatly dependent on international assistance for survival over many years. Russia has been inaccessible to the outside world and may, to a lesser extent, be even yet, due to the role it has been playing in the international arena. Hence, the selection of settings here has been designed in a way to conduct comparisons between one of the poorest and most isolated nations on earth and one of the world’s growing superpowers. These two countries have both invested much in public sector reforms over the last two decades. The first endeavors towards reconstructing the public sector and its accounting system occurred in both nations at the beginning of the 1990s. Then, the reform efforts were further intensified at the outset of the new millennium, heralding a new era in the Nepalese and Russian public sectors. Aimed at augmenting the efficiency, effectiveness, and accountability of public monies, these initiatives seem to have been much driven by NPM-like arrangements around the globe. We assume that the reform paths, while sharing more or less the same rhetoric and timing of the planned changes, have been varied and that varying forces have guided this reincarnation of the public sector and its accounting in these two countries. As a result, the case studies of Nepal and Russia are expected to provide contrasts and commonalities that may be useful for a better understanding of public sector reforms generally. Where have the ideas to reconstruct public sector accounting in


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relatively isolated Nepal and Russia come from? Have they, implying that the countries’ inherent characteristics have been essentially taken into account, stemmed from within the national governments? Or perhaps from international consultants, mediators, “gurus”, and experts as the carriers of knowledge who have dispensed recommendations on how to improve Nepal’s and Russia’s public financial management? With its exclusive focus on the central government level, this paper covers ongoing public sector accounting reforms in Nepal and Russia by using ideas derived from the domain of institutional theory. The latter seems to provide a suitable theoretical apparatus in this research as it deals with the questions of how organizations adapt to the rules in the environments in which they are embedded (Bergevärn et al., 1995). This empirical study relies upon a collection of official documents, incorporating accounting laws, regulations, and other types of accounting guidance pertinent to each country. Moreover, the studies and recommendations issued by international organizations such as the World Bank (WB), the International Monetary Fund (IMF), Transparency International, and the Asian Development Bank (ADB) have also been widely collected and assessed throughout the research. These studies include, but are not limited to, the WB’s Country Financial Accountability Assessment of Nepal and Russia, the Transparency International's Corruption Perceptions Index, the ADB’s Nepal Public Financial Management Assessment, and the IMF’s Report on the Observance of Standards and Codes in Russia. The remainder of this paper proceeds as follows. The next section introduces the theoretical lens through which one may study the public sector accounting changes in Nepal and Russia. The section thereafter tracks the record of the major financial sector and accounting events embarked on by government officials in both nations, commencing from the beginning of the 1990s and continuing until recently. The two cases of reconstructing the public sector and its accounting are then analyzed with the aim of identifying the most visible commonalities and differences. Some concluding remarks unveil the need for further research to complement our understanding of accounting change in the public sector.

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STUDYING ACCOUNTING IN ITS CONTEXT: A FRAME OF REFERENCE

Carnegie and Napier (2002) stated that contemporary accounting in any country is a blend of innovations that have taken place across centuries in different contexts. The underlying idea is that the study of accounting innovations within a single country is not enough to grasp a comprehensive insight into the development of accounting. In fact, accounting change is thought to be the outcome of the diffusion of accounting concepts, techniques and innovations through both space and time. In order to give an understanding of the accounting changes, two issues are therefore deemed crucial, namely the adoption of a comparative framework, and the acknowledgement of a social context in which accounting functions. A growing body of literature in recent years has put strong emphasis on endeavours to study the organizational and social roles of accounting rather than to project accounting as merely a technical craft (e.g. Hopwood, 1983; Burchell et al., 1985; Napier, 1989; Miller, 1994; Carnegie & Napier, 1996, 2002). This literature has certainly contributed to strengthening a view of accounting as socially constituted or socially constructed (e.g. Garrod & McLeay, 1996; Laughlin, 1988; Dillard, 1991), meaning that the computational practices and techniques of accounting are “intrinsically and irredeemably social” (Miller, 1994, p. 4). In this vein, the literature has come to treat the phenomenon of accounting as a symbol of legitimacy. A number of studies are at present available on the use of accounting practices in order to maintain the appearances of legitimacy, as well as the importance of the institutional environment on the practice of accounting (e.g. Mellemvik et al., 1988; Bergevärn et al., 1995; Mellemvik & Olson, 1996; Carpenter & Feroz, 2001; Covaleski & Dirsmith, 1988; DiMaggio & Powell, 1983; Dillard, et al., 2004; Meyer & Rowan, 1977; Scapens & Siti-Nabiha, 2005). Having acknowledged the strong interrelationship between accounting and its environment, our paper seeks to give an understanding of Nepalese and Russian government accounting developments by using the ideas derived from the field of institutional theory. Indeed, this field covers many partly different and, to some extent, overlapping approaches, ranging from traditional versions to more recent approaches. The former, which were mainly propagated by Philip Selznick (1957) and Berger and Luckman (1967), are devoted to the organizational structure and the axiomatic character


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of institutional rules, myths, and beliefs as shared social reality. In turn, the more recent approaches, which are primarily presented by Scandinavian researchers (Czarniawska & Sevón, 1996), see institutions mostly as an organizational fad. The present research tends to be situated within the domain of a so-called “new institutionalism”, which deals with the issues of how organizations adapt to the prescribed myths in their attempts to demonstrate rationality and modernity in a wider environment (Meyer & Rowan, 1977). The idea under the new institutionalism is that organizations interact with their environment in ways perceived as acceptable to their various constituents in that environment. Such interactions with the environment, whether they actually facilitate the desired outcome or not, garner organizations more legitimacy (Dillard et al., 2004). Central to the current research is DiMaggio and Powell’s (1983) idea of how organizations attempt to create institutions. It is suggested that this may occur through coercive, mimetic, and normative mechanisms. Many researchers have applied these mechanisms in order to give an understanding of how accounting changes are endeavoured to be institutionalized (e.g. Carmona & Macias, 2001; Carmona & Donoso, 2004; Adhikari & Mellemvik, 2009). To begin with, the coercive pressures are linked to the source of power that forces entities to comply. Moreover, fiscal stress and the resource dependence situation are seen as other factors exerting the coercive pressures (Carpenter & Feroz, 2001). In fact, organizations encountering resource scarcities are likely to adopt the rules and practices that have been made mandatory by the institutions on which they are dependent (Fein & Mizuchi, 1999). Organizations can be categorized as “powerful” or “weak” institutions based on the extent to which others rely upon them for resources (Pfeffer & Salancik, 1978). Some organizations are considered as more important and powerful than others since they possess resources that others need. At the same time, some organizations are treated as weak and less important if they lack such resources. Next, the mimetic pressures lead entities to adapt the rules or practices that are followed by other similar organizations in the field, especially those rules or practices that are implied by the so-called “successful or legitimate organizations” (Oliver, 1991). In fact, mimicking is also an endeavor to learn from other’s experience in order to yield a desirable solution with little effort, as well as a

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reasonable way to face uncertainty (DiMaggio & Powell, 1983). Finally, changes can often not be undertaken without the professional consultants and experts who define the norms and guidelines for a particular discipline within their autonomy. For instance, the IASB, the IFAC, and the IMF could all be considered the professional actors in the accounting discipline. These professional consultants and experts strive to legitimize their principles and guidelines by ideological influence and strong rhetoric. This process does not recognize any territorial boundaries, implying that the ideas of the professions can easily travel beyond national borders. This is what constitutes the normative pressures for change. In recent years, a significant number of studies have underlined the importance of applying the institutional perspectives in order to give an understanding of the processes that affect accounting choice in organizations (e.g. Carpenter & Feroz, 2001; Scapens & SitiNabiha, 2005; Dambrin et al, 2007; Timoshenko & Adhikari, 2009). This study, covering public sector accounting reforms in Nepal and Russia since the beginning of the 1990s, intends to contribute to this literature. More precisely, using these perspectives and processes, we generate insight into the role of the internal and external factors influencing Nepalese and Russian central government accounting reforms. TRACING PUBLIC SECTOR ACCOUNTING CHANGES IN NEPAL AND RUSSIA

This section attempts to cover the core reasons for initiating public sector reforms and the correspondent accounting changes in Nepal and Russia. In doing so, the current section depicts what types of reforms have been proposed, and how they have been put forward in these two countries. Since Nepal and Russia seemingly represent two rather heterogeneous contexts, with different economic advancements, public sector accounting reforms in these two countries are assumed to vary significantly, to be led by unlike motives, to adhere to diverse paths, and to engender different results and outcomes. The present section commences with the description of the Nepalese case, and is then followed by discussion of the Russian case.


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The Case of Nepal Beginning of Public Sector Reforms: Continuity of Accounting In 1990, a system of parliamentary democracy replaced three decades of active monarchy in Nepal. This political change led to the emergence of new ideas in the management of both private and public organizations. The private sector witnessed policies anchored on “economic liberalization”, “market competition”, and “privatization”, amongst others. In the public sector, a major concern was to improve the results, performance, and transparency of public expenditures and service delivery. This led the government to pay much attention to budget implementation and the capacity building of oversight institutions. To illustrate this, the annual budget started to incorporate both the financial plans and targets for a year and the goals achieved from previous spending. Similarly, the major oversight institutions - the Auditor General Office and the Public Account Committee of the Parliament - were empowered and provided with additional authority in order to foster public accountability. In addition to this, a Commission for the Investigation of Abuse of Authority (CIAA) was created to fight against the widespread culture of corruption and abuse of office (World Bank, 2002a). Despite the aforementioned efforts, ongoing public sector reforms strangled in the latter half of the 1990s. A key reason for this was the resultant political instability due to a fragmentation in the major political parties and the subsequent elections. Moreover, the escalating Maoist insurgency provided a hindrance in revenue collection, while, at the same time, elevated security costs, signalling a severe financial crisis. According to the Asian Development Bank (2005), both Nepal’s reliance on overseas loans and grants for financing its ongoing development activities and its budget deficits reached a record high level, i.e. from about 56 per cent to nearly 70 per cent in the first few years of the new millennium. The financial crisis further deepened as the government failed to obtain the expected financial aid and grants from its development partners (World Bank, 2002a). Notably, there was a growing dissatisfaction among donors and international organizations about the way the government managed its public expenditures. Along with this, the weakening capacity of anticorruption institutions, particularly the Commission for the Investigation of Abuse of Authority (CIAA), to curb corruption raised concerns about the effectiveness of international

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aid and loans (Asian Development Bank, 2007). In fact, more than 95 per cent of the corruption cases filed by the CIAA at the court of law were unsuccessful (World Bank, 2002a). Among the key lending requirements of international organizations were the improvements in the expenditure management system and public accountability. Nepal’s commitment to public sector reforms resulted in the creation of a high-level public expenditure committee in late 2000. The committee was tasked with sketching a long-term reform strategy in collaboration with international organizations and donors. In fact, public sector reforms embarked on in Nepal at the beginning of the new century could be characterized as a collective endeavour, incorporating the efforts of both the government and international organizations and donors. International organizations rendered a significant role in the search for and the dissemination of reform ideas within the country by facilitating a series of studies on the Nepalese public sector, including the Country Financial Accountability Assessment and Country Procurement Administration Review, just to name a few. In 2003, as recommended by these studies, Nepal introduced a long-term rolling budget, namely the medium term expenditure framework (herewith, MTEF). Implemented as part of improvements in planning, budgeting and reporting, the MTEF was envisaged as a bridge between the country’s five-year planning and annual budget. The introduction of the MTEF provided the country with a means to estimate resources over the medium term, at least for the next three years, and allocate these resources to the prioritized sectors (NPC, 2002, 2003). In order to help implement the long-term budgeting, the new budget classification, corresponding to the IMF’s 1986 Government Finance Statistics Manual (GFSM), was introduced. To illustrate this, the budget expenditures were then presented under the headings of recurrent expenditures and capital and principal repayment expenditures. Prior to this new classification, the budget expenditures consisted of two different headings - regular expenditures and development expenditures. While the regular expenditures included operating costs, repayment of accrued loans, and security costs, the development expenditures were meant to incorporate the expenditures of programs and projects. This categorization of budget expenditures into regular and development expenditures had been inadequate to implement the long-term budgeting on at least two of


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the fundamental bases. First, the separation of the capital and recurrent expenditures was ambiguous. Next, it led to the accounting of expenditures twice; at the time of incurring development expenditures funded by loans, and at the time of repaying the same loans (World Bank, 2002a). In addition to the budgetary reforms, the operation of the long-term budgeting also marked the beginning of performance-oriented reporting in the government of Nepal. Each program and project incorporated in the MTEF was mandated to prepare a progress report on a trimester basis in order to be eligible for the extension of funding. In fact, a new trend was set up, allowing the release of the budgets to development projects and programs only if the progress achieved in such projects and programs amounted to at least 50 per cent of the intended targets. The initial stage of Nepalese public sector reforms shows that much attention was devoted to transforming the traditional approaches to budgeting, reporting, and selecting projects and programs. Notably, many studies conducted jointly by the Nepalese government and international organizations had presented accounting standards and accrual accounting as a means of improving the Nepalese government accounting system. To illustrate this, the World Bank (2002a, p. 21), had recommended accounting change in the following way: “His Majesty’s Government of Nepal (HMGN) should develop a roadmap for the medium to long-term introduction of accrual accounting based on a carefully-phased plan and a realistic timetable and set up an Accounting Standards Board (ASB) and a Board of Auditing Standards (BAS) to formulate appropriate accounting standards for the use of the public sector, the private sector, local bodies, and nongovernmental”. Despite the concern about accounting, the accounting change could not take place and lagged behind the other budgetary and reporting reforms. One reason for this could be that the recommendations for accounting reforms were rather vague. It was suggested that the country use accrual accounting and accounting standards without specifying which standards to adhere to and how to proceed towards the accrual basis of accounting. As a result, the prevailing accounting norms and practices, which were designed to foster budgetary compliance, remained intact.

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Towards a New Version of Accounting in the Government of Nepal The Financial Accountability Assessment Report, published jointly by the government, the World Bank, and the Department for International Development (DFID) in 2005, could actually be credited with initiating a focus on accounting reforms (HMGN, 2005a). The report emphasized the urgent need of improved government accounting information reflecting the results, outputs, and outcomes that were supposed to be attained through public expenditures. In fact, without improvements in accounting, it was arguably difficult to ensure the intended results of the medium-term budgeting and other newly adopted financial measures (HMGN, 2005a; ADB, 2005). This increasing focus on accounting reforms led the government to formulate an accounting reform committee under the chairman of the Accounting Standards Board. The committee, which mainly consisted of professional accountants and government representatives, was charged with seeking out alternatives to improve the existing public expenditure management and accounting system. In late 2005, the committee presented a draft report to the government, recommending a shift away from the cash to the accrual basis of accounting. A five-year transition strategy to accruals was developed in order to arrange the required resources and technical competence. Interestingly, the committee members envisaged the importance of accrual accounting not only to overcome the inherited drawbacks of Nepalese cash accounting, including its failure to disclose information on assets, liabilities, obligations, commitments and so forth, but also to be part of the ongoing international trends towards accrual accounting. The committee recommended the following: …considering the additional disclosures embedded in the cash basis International Public Sector Accounting Standard (IPSAS), and the IMF’s revised version of GFSM 2001… time has approached that the government of Nepal should work on transforming its accounting from cash to accrual… (HMGN, 2005b). However, the issuance of the committee’s report sparked a debate within the Nepalese central government over the relevancy of accrual accounting in the short run. While the professional accountants favored an immediate shift away from the cash to the accrual basis of accrual accounting, the government and international organizations seemed to be hesitant in accepting


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accrual accounting as an alternative to cash accounting, at least in the short run. Despite the fact that there were no arguments regarding the benefits of accrual accounting, the government officials and international organizations were in favor of improvements in the existing accounting system prior to a move towards accruals (Adhikari & Mellemvik, 2008). In fact, the Financial Accountability Assessment Report along with the Asian Development Bank’s public finance management assessment report had reflected this view of the government and international organizations on the proposed transition towards the accrual basis of accounting (ADB, 2005; HMGN, 2005a). Given the poor infrastructure along with inadequate resources and expertise, both reports had underscored the need for improving the cash system by adhering to IPSASs and GAAP practices in the short-term. More precisely, these two reports had conveyed an analogous message, emphasizing that a transition towards accrual accounting should be a longer term approach to reforming Nepalese central government accounting. The Asian Development Bank (2005, p. 34) clarified this in the following way: Nepal is not ready yet to switch over to an accrual accounting system. This may be too ambitious a task, given the present capacity level. However, there is a plan to study the best accounting system for government transactions on the basis of IPSASs and GAAPs practices. Ongoing discussions on accounting reforms ensued as there was a lack of clarity on how to advance accounting reforms and what would be the best alternative for Nepal, i.e. improvements on cash accounting or an immediate transition towards the accrual basis of accounting. The World Bank’s Assessment Report on Nepalese public sector accounting and auditing standards, as compared to international standards issued in 2007, played a crucial role in providing clarity in Nepalese government accounting reforms. Conducted as part of a project to help South Asian countries implement more effective public financial management, the assessment report recommended that the government consider the immediate implementation of the cash basis IPSAS as part of a longer-term program to adopt accrual accounting (World Bank, 2007). The assessment report demonstrated a number of shortfalls of Nepalese cash accounting, for instance, treating advance payments and inventories as expenditures, the absence of accounting policies,

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assumptions and explanatory notes, and the omission of direct payments and commodity grants just to a name a few, that could be easily ratified by the use of the cash basis IPSAS (World Bank, 2007). More interestingly, the report elucidated the fact that even the implementation of the cash basis of IPSAS would be an assiduous task in Nepal without some fundamental preparations such as the amendment of laws and regulations to make the use of IPSAS compulsory, education and training attuned to international standards for public accountants, and the participation of professional accountants, let alone accrual accounting. By pointing out the aforementioned weaknesses and preconditions, the World Bank was able to develop a general agreement among the government officials, professional accountants, and international organizations on the cash basis IPSAS. In fact, the cash basis IPSAS was envisaged as a means of elevating the country’s capacity to practice accruals in the future. In 2007, the government authorized the Accounting Standards Board, an autonomous body to pronounce accounting standards for enterprises, to initiate the process of developing Nepal public sector accounting standards in line with the cash basis IPSAS (Adhikari & Mellemvik, 2008). An assessment report on Nepalese Public Financial Management using PEFA guidelines, issued by the Financial Comptroller General Office in May, 2008, further reiterated the government’s commitment to implementing Nepal public sector accounting standards (Government of Nepal, 2008). This means that the importance of improved accounting information in the effective operation of long-term planning and performance-oriented reporting has now been acknowledged in the government of Nepal. Moreover, improved accounting information has also been deemed crucial in the fight against corruption. According to one indicator – Transparency International's 2008 Corruption Perceptions Index, which measures perceived corruption around the world based on polls and surveys – Nepal has been perceived to be the 121st most corrupt country among the 180 nations with a score of 2.7². Government accounting reform has therefore also been important for curbing corruption and improving governance (Guragain, 2008). The previous research, however, shows that the reform priorities in developing countries tended to alter depending upon the intensity of the economic and financial crisis (Batley, 1999). The ongoing


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global financial recession has therefore raised questions as to whether the intended accounting reform in Nepal would be implemented and whether there would be any alteration in the reform path, promoting measures other than the development and implementation of cash basis accounting standards. As the Central Bank of Nepal (2009) claimed, the Nepalese economy has already started witnessing the adverse impacts of the global financial crisis. Nepal is expected to experience a substantial decline in remittance flows, tourism, foreign direct investments, and foreign aid in 2009, which are the major components of its GDP. A sharp rise in unemployment and fiscal deficit along with the reduction in capital flows has already increased the country’s reliance upon international organizations for mitigating the negative impact of the crisis and financing the deficit. Indeed, this has elevated the role of these organizations in the ongoing Nepalese public sector reforms. The Nepalese public sector reform direction, including the adoption of accounting standards and a transition towards accruals, is therefore likely to depend upon the influence of international organizations in the country’s policy-making sphere as well as their lending conditionality in the coming days. The Case of Russia The First Wave of Russian Public Sector Reforms: Accounting Continuity After the demise of the USSR in 1991, Russia emerged as a nation lacking the basic pillars of market economy and democracy. This made it imperative to restore the elementary institutions, as well as to create new rules of the game, without which no democratic country can function properly. The state of Russia clearly prioritized structural economic reforms during that time, whereas the modernization of the Russian public sector was not on top of the agenda. As a result, only minor and very basic alterations in Russian fiscal management occurred in order to adapt the budget process to the discontinuation of Soviet practices. Among these was the establishment of a treasury system for budget execution with the creation of the Federal Treasury department under the Ministry of Finance in 1992. The named body was empowered by the legislation to render the role of a government accountant and a cashier for all federal budget disposers and receivers. In addition to the treasury

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system, the Accounts Chamber was established as the Russian Supreme Audit Institution in 1995. This eventually marked a significant stride in institutionalizing the accountability of the executive to the legislature in the country which had no tradition of an independent, ex-post, external audit function for public financial management (World Bank, 2003). Despite the creation of the Federal Treasury and the Accounts Chamber, both the budget institutions and the processes of fiscal management remained to a large extent reminiscent of the Soviet era, lagging far behind the developments in the private sector. The Russian state experienced deteriorating budget performance, galloping inflation, and augmented levels of domestic and foreign debts, all of which culminated with the economic crisis of August 1998. The 1998 fiscal stress witnessed elevated concerns about Russian public finance and intensified change efforts. Engendered by rapidly rising oil prices and massive capital inflows into the country, the post-crisis era was a period of economic recovery and growth in Russia. This allowed the federal government to start solving some strategic tasks. Together with international financial organizations such as the IMF and the World Bank, the Russian central government endorsed a series of fiscal austerity measures with the aim of enhancing macroeconomic stability. A number of institutional reforms were also declared, entailing the adoption of the Russian Budget Code in July 1998, which came into force in 2000, shortly after the crisis. Its adoption was, in fact, recognized by many international observers as a significant step towards streamlining the Russian public sector (Diamond, 2002, 2005). Moreover, the new Budget Code was reinforced by the launch of a federal treasury accounting and financial reporting system allowing management of the budget execution process. In the new millennium a federal execution balance sheet was produced for the country as a whole. Also in 2000, interim reports depicting budget flows and net financial position were issued for the first time by the Ministry of Finance and circulated within the government to supplement the annual report on budget execution. Furthermore, monthly reports on the federal budget execution, comprising revenues, expenditures, and financing data, had begun to be provided on a regular basis (World Bank, 2003). Continuing the reforms, a system of commitment recording was introduced in 2001


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by Cabinet Resolution # 806, dated July 15, 1999, to track utilityrelated expenditures such as heating, natural gas, fuel, electric power, and water supply (Diamond, 2000). Referring to the IMF’s Report on the Observance of Standards and Codes on Fiscal Transparency, the latter proved to be effective in tracking and avoiding arrears (IMF, 2004). A crucial step in the development of the treasury system was undertaken with the endorsement of a Federal Treasury Development Program by Cabinet Resolution # 677, dated June 23rd, 1999. The implementation of a uniform accounting and reporting system based on a single accounting and budget classification was declared as one of the key objectives of this program. The overall development of this program has been supported under the Ministry of Finance’s Treasury Development Project, with World Bank loan funding. Among other things, a $ 231 million project was put forward with a goal of providing a transparent system of accounting that would demonstrate the utilization of financial resources of the government, and would enable management and audit of these resources (World Bank, 2002b). This project, which started in June 2002 has a maturity of 17 years including a 5-year grace period. The government expressed its deep commitment to the project due to its vital importance for strengthening fiscal management in the country (World Bank, 2003). With some progress achieved in financial management, Russian public sector accounting still aimed, however, solely at ensuring control and compliance with the provisions and rules endorsed in the budget. The 1999 Chart of Accounts on Budget Execution (effective from January 1, 2000) explicitly specified the objectives of government accounting reporting, which were as follows (the authors’ translation): - To provide comprehensive and reliable information on the federal budget execution; - To secure control for the rightful use of resources from the federal budget; - To provide the accounting reports necessary for the executive (i.e., the Russian Cabinet of Ministers) and the legislature (i.e., the Federal Assembly);

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- To furnish useful information for other internal and external users. As the text of the instruction manifests, the primary objective of accounting was confined to generating financial reports on budget execution at required time intervals (quarterly and annually) and assessing budget accomplishments. Russian central government accounting was designed for the recording of data and possessed as such the compliance orientation, whose main task was to measure and communicate actual spending versus authorizations, and not to provide information for fiscal management. Government accounting was operated on a modified cash basis to record the varying economic transactions, tracking the record of receipts and disbursements in relation to the budget. This means that the operational objective of accounting was much focused on securing the legislative approval of the final accounts, so that the former could annually discharge its fiscal accountability. Accounting was seemingly considered solely a matter for government officials who were reckoned to be the only users of accounting information. A New Wave of Russian Public Sector Reforms: Accounting Renaissance? Demands for greater efficiency, effectiveness, and transparency in Russian public administration began to be widely echoed, enunciating a new era of accounting transition after 2003. A series of nascent financial initiatives were embarked on in the country, signalizing a clear-cut shift in the ideology of Russian public administration (Timoshenko, 2008). The importance of these efforts could hardly be emphasized enough as they were set down in the Concept of the Budget Process Reform for 2004 – 2006, endorsed by Cabinet Resolution # 249 on May 22, 2004 (hereafter, the Concept). The reform, nicknamed by some Russian mass media as “A Reform for the People,” “A Real Breakthrough in Boosting the Efficiency,” or “A Budgetary Revolution” (Finansovye Izvestia, 2004; Kommersant, 2004), was declared a step of vital social significance as it was aimed at ensuring transparency in government expenditures to each Russian citizen. The objective of the modernization process, as stated in the concept, was “to lay down preconditions and prerequisites for the most effective allocation and management of government finances by appropriate prioritization of various


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government activities critical to a country’s development” (“the Concept”, p. 2). The reform process was meant to move away from the costs and inputs towards goals and outputs by “strengthening the accountability and widening the managerial autonomy within a medium-term financial planning framework” (“the Concept”, p. 2). What is worth mentioning is that the need for converting the accounting system from cash to accruals was first explicitly specified in the 2003 Budget Message of the Russian President to the Federal Assembly. This message elevated the accounting change to a political task of the highest priority (Charkov & Choroshev, 2005). Consequently, streamlining public accounting was reckoned as the first element of the reform package enunciated in the “Budget Process Reform” paper for 2004-2006. A common purpose behind this step was to establish a system of accounting and financial reporting in the Russian public sector that could track not just the flow of budgetary resources, but also assess their effective use. Indeed, the concept strongly favored a stride away from traditional cash accounting towards business-like accrual accounting with a view to boosting accountability and transparency of government transactions. This shift was also expected to engender and present comprehensive information for decision-making by entrenching the scope of accounting. This was clearly evidenced in the text of the concept in the following way: Unlike cash accounting, which merely enables flows of financial resources to be tracked and does not yield a complete picture of those assets and liabilities belonging to the state bodies, accrual accounting makes it possible to assess the outcomes of programs, as well as to match the costs of services provided by the government against those costs of obtaining the same services in the market (Charkov & Choroshev, 2005, p. 6, the authors’ translation). While developing an implementation plan for accrual accounting, a transition period of nine months was prescribed. A parallel running of the old and the emerging accounting system was intended during the transition period, providing the accounting staff across the country with an opportunity to get accustomed to the latter and enabling the experts to test the functioning of software products. The top-level executive of the Ministry of Finance under the chairmanship

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of the Deputy Prime Minister was assigned the task of steering the proclaimed reform process. Notably, rising concerns on Russian public sector accounting could be seen as part of a dramatic change in the Russian budget process – a change that involved performance-oriented budgeting, managers’ responsibility and accountability, program basis, and a medium-term financial framework. Without the corresponding changes in the accounting system, achieving all these goals would be difficult, if not impossible. Therefore, transforming government accounting became “a necessary and indispensable precondition in modernizing a country’s budget process”, or “the paramount constituent part of the Budget Process Reform” (Charkov & Choroshev, 2005, p. 9). Even more substantially, the need for streamlining the budget process and the accounting system became also extremely significant, especially if viewed within the context of the ongoing Administrative Reform. As the OECD (2006) has pointed out, public bureaucracies in Russia have not been very client-oriented and suffered from endemic corruption over many years. To illustrate this, Transparency International's Corruption Perceptions Index showed that corruption in Russia has remained rather stable during the last decade. For 2008, the Berlin-based corruption watchdog gave Russia a score of 2.1 (compared with 2.4 in each of the final two years of the Yeltsin era, 1998 and 1999) and put it in 147th place of 180 nations – a spot shared together with Syria, Bangladesh, and Kenya. This is why the current and previous President of Russia have declared combating corruption as a priority for the Russian Cabinet of Ministers, to eventually bring anticorruption into a separate element of the Administrative Reform Concept for 2006-2008. Furthermore, what deserves attention here is that the accounting change in the Russian public sector appears to have been substantially affected by overseas forces in the shape of large international organizations such as the IMF and the World Bank. The IMF’s 2004 Report on Fiscal Transparency Practices in Russia prescribed that “the new Chart of Accounts should be based on a GFS-consistent budget classification system, reflect international accounting standards in the public sector (IPSASs), and facilitate a gradual transition to accrual accounting” (p. 28). It is not therefore surprising that the Russian state has been making a great effort to adopt these practices and definitions in accordance with the IMF


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Code of Good Practices on Fiscal Transparency, the 1986 edition of A Manual on Government Finance Statistics and its revised version, Government Finance Statistics Manual 2001. Moreover, the Ministry of Finance officials are deemed reasonably well aware of the International Public Sector Accounting Standards Board’s (IPSASB) activities and its accrual-based International Public Sector Accounting Standards (IPSASs). While it would be a long journey for newly endorsed Russian government accounting norms to be compatible with IPSASs, their adoption was said to be absolutely inevitable in the future (Zelenskyi, 2004; Artuchin, 2003; FBK, 2005). What is more, the Concept of Accounting and Financial Reporting in Russia for the Medium-Range Outlook was strongly in favour of their implementation, stating that “the paramount instrument of reforming accounting and financial reporting in the budgetary sphere should be IPSASs.” The application of IPSASs was thought to help streamline the system of government accounting standard-setting in Russia, meaning that their adoption would assist in avoiding an endless stream of instructions, orders, and decrees, which have all proved to be rather contradictory in the past (Charkov & Choroshev, 2005). As of September 2008, the state of Russia has made significant progress towards the implementation of the accruals basis IPSASs (IPSASB, 2008). Finally, as is the case in Nepal, the Russian Federation has been hard hit by the ongoing global financial recession. The impact of the crisis on the nation has been accentuated by its heavy dependence on the oil and gas sector in recent years. With the low oil price outlook for 2009-2010, the Russian economy is likely to contract further in terms of all major macroeconomic indicators. To address the consequences of this crisis, the federal government announced a broad set of priorities on March 19, 2009. This included, but was not limited to, ensuring social protection for vulnerable people, stimulating domestic demand, strengthening the financial sector and maintaining a sound macroeconomic environment. Thanks to its large fiscal reserves, the state of Russia is anticipated to be able to finance its fiscal deficit. However, there is still uncertainty at present as to whether and how Russia will continue to strengthen its public administration, fight corruption, and enhance governance and transparency, just to mention a couple of factors. Will this time during the crisis be spent on advancing public sector accounting change in

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Russia? Or, will the reform of accounting practices of public sector organizations will remain an elusive goal? CASE-STUDY COMPARISON AND CONCLUSION

The two case studies of public sector accounting reforms presented above reflect some interesting points of comparison in both their commonalities and differences. To begin with, Nepal and Russia have intensified the changes at approximately the same period of time, namely at the beginning of the new century (see Appendix for a summary of public sector accounting reforms in both countries). What is more, nascent reform ideas in both countries seem to have been much influenced by international organizations, meaning that a policy toolkit is no longer solely the product mix of the national governments. A factor we consider striking is that both states have been persuaded by the propagated benefits of accrual accounting. The studies favoring accruals in the public sector have emphasized the superiority of accrual accounting over cash on account of its ability to enhance transparency, augment performance, and engender comprehensive information on the full costs of operations (Carlin, 2005; Näsi & Vinnari, 2008; Budding & Groot, 2008). International organizations and professional bodies such as the IFAC, IMF, WB and OECD have stood behind this, directly and/or indirectly supporting a move towards accrual accounting (Paulsson, 2006). Developing countries are being encouraged to adopt the cash basis IPSAS as an initial step towards implementing the accrual basis of accounting in the longer-term. In this regard, the present study can be seen as an extension of the existing literature on the role of international organizations in disseminating public sector reform ideas in developing countries and those in transition, underscoring a clear-cut link between accounting and its operating institutional environment (e.g. Timoshenko & Adhikari, 2009; Alawattage et al., 2007; Ellwood & Newberry, 2007; Mimba et al., 2007; Chan, 2005; Annisette, 2004; Uddin & Hopper, 2001, 2003). Perhaps the differences between Nepalese and Russian public sector accounting reforms are more enlightening than the similarities. Indeed, one striking contrast between the two countries is the way public sector reforms have been framed and advanced. Nepal has adhered to a more or less gradual approach, with budgeting and reporting changes taking precedence above alterations in the


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accounting system. Putting it differently, the implementation of the budgetary and reporting reforms in Nepal made changes in its accounting inevitable. Debate within the government of Nepal and with international organizations has helped the country reach a consensus in favour of the cash basis IPSAS as an immediate remedy to Nepalese public finance, leaving out the introduction of accrual accounting for the future (Adhikari & Mellemvik, 2008). On the contrary, Russia has endorsed a comprehensive policy package, covering all the elements of public management at the same time. An interesting aspect of this package has been its direct emphasis on the accrual basis of accounting. The adoption of accrual accounting has been on top of the priority list in order to advance changes in the budgetary process. What is indeed contrasting between Nepal and Russia is the way accounting has been perceived. While accounting in Nepal has been a necessary tool for enduring the newly adopted budgetary measures, accounting change in Russia is intended to serve as the fundamental infrastructure for the alterations in the budgetary system. Let us now analyze the institutional pressures, which help comprehend the similarities and differences in approaching the above accounting changes. In the Russian case, the traditional pattern of transforming central government accounting has its roots in the Soviet period. In fact, being a rather reclusive state, the Soviet Union had been the sole designer of all accounting rules and techniques throughout the country (Bourmistrov, 2001). The trend continued even after the USSR ceased to exist in 1990. This, to a large extent, predetermined a relative stability in the content of central government accounting norms until recently. More likely than that, Russian policy makers felt little or no pressure to alter the accounting system inherited from the old times (Martinez-Vazquez & Boex, 2001). This led to a new detailed pattern of central government accounting and budgetary provisions largely reminiscent of its predecessor. The state of Russia appeared to be the only institutional pressure steering all changes in the content of accounting norms during the 1990s (Timoshenko, 2008). The pattern of institutionalizing public sector accounting, however, was quite contrasting in Nepal in the 1990s. Being a weak nation in terms of necessary financial resources, Nepal was exposed to the ideas and practices propagated by international organizations.

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Accounting and budgetary norms enacted during that period were intended to reflect the internationally prescribed notions of efficiency, effectiveness, and transparency in public expenditure management. In that way, the country could assure the donors and international organizations of the effective use of resources and ensure continued developmental aid and grants. Since the beginning of the new millennium, the state of Russia has been distancing itself from the legacy of the Soviet budgeting and accounting systems. As in the Nepalese case, Russia has been seeking to adopt the ideas and practices advocated by international organizations. Consequently, the public sector reform process has no longer remained an internal practice within the government, as was the case before. Indeed, rather than being circumscribed to learning from their own experience, the Russian policy makers have chosen a more adaptive attitude and welcomed the experience of others (Timoshenko, 2006, 2008). The evidence presented in this study suggests that accrual accounting along with other up-to-date budgeting techniques was dispatched as a symbol of sound fiscal management practices to Russian government officials. This is to say that the state of Russia has been apparently subjected to normative isomorphic pressures from the institutional environment of the accounting system. This normative type of pressure also seems to have been prominent in driving the Nepalese public finance reforms. The government’s failure to ensure the performance of budget at the outset of the new millennium has resulted in emergence of a number of recommendations on how to streamline its public finance. These studies, mostly conducted by the World Bank and the Asian Development Bank, helped the country become familiar with new financial measures such as MTEF and performance-oriented reporting. That is why we argue that the inclusion of new accounting and budgeting techniques in the political rhetoric, calling for better governance, accountability, efficiency, and effectiveness may be classified as a symbol of legitimacy in both countries. In so doing, Russia has endeavoured to bolster its image as a more progressive and modern state in the international arena, while Nepal has expressed its deep commitment to improve the financial management system in the eyes of its donors.


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Although with varying degree of potency between the countries, coercive pressures for change appear to have acted in concert with the normative ones. A Treasury Development Project in Russia, with World Bank loan funding ($ 231 million), serves as a good example of this. The economic crisis of the late 1990s made the state of Russia reliant upon international donor organizations. Arguably a result of the pressures from these organizations, new budgeting and accounting technologies gradually penetrated down to the central government at the outset of the 2000s. Providing its augmented ability to pay debts back, coercive pressures are deemed less potent today in comparison to the late 1990s. By way of illustration, the state of Russia has not sought to borrow from the IMF since 2001 (Odling-Smee, 2004). Even though the fiscal position has worsened considerably in the wake of the ongoing financial crisis, the large fiscal reserves would enable the federal government to finance its deficit, without additional assistance from the outside. Unlike in Russia, the state of Nepal was exposed to a much higher degree of coercive pressures at the beginning of the new century. As evidence presented in the paper shows, the up-to-date budgeting and accounting initiatives in Nepal resulted from fiscal crisis and growing international criticism. Indeed, a country’s unprecedented reliance upon overseas aid and loans indicates that reform ideas presented by international organizations have appeared as a precondition necessary to ensure continued financial resources for the government. That is why the reform ideas, which were presented as normative, indeed were perceived as coercive. The ongoing financial crisis has made the country even more dependent on international organizations for resources. This is likely to result in more severe preconditions for international borrowing, implying the enhanced potency of coercive pressures. DiMaggio and Powell (1983) stated that it may not always be possible to distinguish between the three forms of institutional pressure. In fact, two or more of these institutional pressures may be operating simultaneously, which makes it difficult to determine which form of pressure is more potent in a given time. The evidence presented in our study leads us to argue that the institutionalization of public sector accounting rules in both Nepal and Russia has been predominantly subject to normative and coercive mechanisms rather than to mimetic pressures. However, the introduction of IPSAS in the

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Nepalese central government could be a sign of mimicking. Subramanian (2007) stated that all South Asian countries have been marching towards the IPSAS system. Indeed, the ideas of IPSAS could be seen as the result of either normative or coercive pressures (or both). It could also be argued that the government’s reiterated commitment towards the IPSAS system would have been affected by the decision of its neighbors to move in the same direction. As far as the Russian state is concerned, mimetic isomorphic pressures may have acted along with normative and coercive ones. As Timoshenko (2008) pointed out, this may stem from a plethora of international agencies and departments worldwide (the EU, DFID, USAID, the Swedish Ministry of Finance, etc.), which all have been somehow embedded in the transformation process. Nevertheless, no compelling evidence has been unraveled in this paper revealing whether or not this type of isomorphic force does indeed prevail in the Russian public sector today. Our study suggests that, although to varying extents and due to various reasons, Nepal and Russia are no longer alien to NPM-like ideas at the macroeconomic level. Indeed, these ideas are on today’s agenda worldwide, and it has become difficult, if not impossible for national policy makers to defy these arrangements, at least in their official rhetoric. As Sahlin-Andersson (2001) argued, the label of NPM itself “motivates actors to reform or at least it is used to argue for the need to reform further” (p. 15). However, while policy packages look encouraging in terms of the intended consequences, the question arises whether the Nepalese and Russian central government will actually succeed in promoting the desired outcome by penetrating and altering operating processes currently in place at different levels of government and in particular public sector organizations. As Latour (1987) argued, it is rather naïve to believe that the desired or officially intended outcome of reforms will be achieved in the way indicated by the leadership. In fact, reform ideas promoted by the leadership are often unlikely to be materialized in actual practice (Czarniawska & Joerges, 1996). For example, empirical evidence from Australia, New Zealand and the UK has manifested that the actual implementation of accrual accounting has taken much longer than originally anticipated (Carlin, 2005). Furthermore, as the IPSASB’s study # 14, along with other published research (e.g. Wynne, 2007; Hepworth, 2003; Ellwood &


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Wynne, 2005), showed, a series of preconditions are deemed essential for the successful implementation of accrual accounting. These studies have argued that accrual accounting reforms initiated without recognizing the significance of these conditions are likely to create more problems than actual improvements in financial control and management. Indeed, enormous investments are required to tackle these preconditions, which may on many occasions even exceed the benefits of using accruals (Wynne, 2007; Ellwood & Wynne, 2005). The ongoing financial crisis, however, has raised doubts as to whether Nepal and Russia would be able to meet the possible costs of the transition towards the accrual basis of accounting. What will happen if the momentum for reform at the central government level suddenly fades due to more pressing issues triggered by the financial crisis? Perhaps more importantly, corruption has been seen as a major factor playing a decisive role in the success of accrual accounting change. Previous research demonstrates that corruption undermines governance and weakens the institutional capacity of implementing reforms (e.g. Alawattage et al., 2007; Mimba et al., 2007). Given the high level of corruption in both countries, this study raises a concern as to whether and to what extent the prevailing culture would allow the implementation of the accrual accounting change and the realization of its propagated benefits. Moreover, the ongoing financial crisis has impacted capital flows in both countries, calling for stricter regulations and capital controls. While the Russian economy has been adversely impacted by declining oil prices, the Nepalese economy has witnessed a sharp downturn in remittance flows, tourism, and international grants and aid. A number of studies have shown that capital controls may breed corruption (e.g. Edwards, 1999; Bai & Wei, 2001; Dreher & Siemers, 2009). From this perspective, our study also raises a doubt as to whether the financial crisis would lead to a rise in corruption in both countries, thus undermining their efforts to adopt accrual accounting. This is what further studies in Nepalese and Russian central government accounting reforms can in principle deal with. ACKNOWLEDGMENTS

The authors would like to thank Donald R. Deis and two anonymous referees for their many helpful comments and suggestions on earlier versions of this paper.

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NOTES

1. CIGAR stands for the Comparative International Government Accounting Research. CIGAR is a network of scholars interested in cross-national aspects of public sector budgeting, accounting, and financial reporting and auditing. The network was established in 1987 to promote cooperation between scholars of different countries working in the same field. 2. On a scale in which a score of 10 means no corruption and a score of 0 means total corruption. REFERENCES

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APPENDIX

A Summary of Public Sector Accounting Reforms in Nepal and Russia

A new wave of public sector reforms (from 2000s until recently)

The first wave of public sector reforms (1990s – 2000s)

PERIOD

NEPAL - A new norm for budget release enacted during the first part of the 1990s; - The Auditor General’s Office and the Public Account Committee empowered; - The Commission for the Investigation of Abuse of Authority established; - The political and financial crisis at the end of the 1990s.

- A high-level public expenditure committee set up for developing a long-term public sector reform strategy in 2001; - Accounting standards and accrual accounting initially recommended in 2002; - The medium-term expenditure framework introduced in 2003; - A shift away from the cash to the accrual basis of accounting recommended by the accounting reform committee of 2005; - A general consensus on a move towards the cash-basis IPSAS in 2007.

RUSSIA - The Federal Treasury under the Ministry of Finance created in 1992; - The Accounts Chamber established in 1995 as the Russian Supreme Audit Institution; - The 1998 financial crisis; - The 1999 Chart of Accounts on Budget Execution; - The launch of a Federal Treasury Development Program in 1999; - The 2000 Budget Code; - A federal execution balance sheet produced for the country as a whole in 2000. - The 2003 Budget Message of the Russian President to the Federal Assembly; - The Budget Process Reform Paper for 2004-2006; - The Concept of the Administrative Reform for 2006-2008; - A march towards the accrualbasis IPSASs and GFSM.