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Inconsistent Depreciation Practice and Public Policymaking: Local Government Reform in New South Wales

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  • Joseph Drew
  • Brian Dollery

Abstract

type="main"> Public policy based on numerical indicators – a form of ‘public management by numbers’ – has become commonplace across the world. Whereas a good deal is known about the deleterious effects of this type of policymaking – including ratcheting, output distortion and ‘gaming’ – unfortunately little attention has focused on the adverse local government policy consequences of inconsistent depreciation accruals by local authorities. This paper seeks to address this gap in the empirical literature on local government performance. After examining the use of accounting data by local government policymakers, the paper reviews available empirical evidence of inconsistent depreciation practice both in Australia and abroad. We then consider the recent New South Wales (NSW) Independent Local Government Review Panel's use of accounting ratios as supporting evidence for boundary change in local government as a case study of the adverse impact of inconsistent depreciation practice. The NSW experience clearly demonstrates the distortionary effects of empirical evidence resulting from significant variation in depreciation accruals by individual local councils. The paper concludes with an assessment of the options available to local government policymakers wishing to obtain more accurate accounting accrual data for policy formulation purposes.

Suggested Citation

  • Joseph Drew & Brian Dollery, 2015. "Inconsistent Depreciation Practice and Public Policymaking: Local Government Reform in New South Wales," Australian Accounting Review, CPA Australia, vol. 25(1), pages 28-37, March.
    • Handle: RePEc:bla:ausact:v:25:y:2015:i:1:p:28-37
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    File URL: http://hdl.handle.net/10.1111/auar.12072
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    References listed on IDEAS

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    Cited by:

    1. Joseph Drew & Brian Dollery, 2016. "A Factor Analytic Assessment of Financial Sustainability: The Case of New South Wales Local Government," Australian Accounting Review, CPA Australia, vol. 26(2), pages 132-140, June.
    2. Joseph Drew & Brian Dollery & Michael A. Kortt, 2016. "Peas in a Pod: Are Efficient Municipalities also Financially Sustainable?," Australian Accounting Review, CPA Australia, vol. 26(2), pages 122-131, June.
    3. Makoto Kuroki, 2022. "Impact of Depreciation Information on Capital Budgeting among Local Governments: A Survey Experiment," Australian Accounting Review, CPA Australia, vol. 32(2), pages 201-213, June.
    4. Igor Ivannikov & Brian Dollery, 2020. "Accounting Problems in Infrastructure Asset Valuation and Depreciation in New South Wales Local Government," Australian Accounting Review, CPA Australia, vol. 30(2), pages 105-115, June.
    5. Joseph Drew, 2018. "Playing for keeps: local government distortion of depreciation accruals in response to high-stakes public policy-making," Public Money & Management, Taylor & Francis Journals, vol. 38(1), pages 57-64, January.
    6. Stewart Jones & Nurul Alam, 2019. "A machine learning analysis of citation impact among selected Pacific Basin journals," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 59(4), pages 2509-2552, December.

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