Financial accountability discharged from local government financial statements: an institutional theory approach to accounting change

Purpose - By focusing on the perspective of politicians, this paper aims to question the change brought about by local government financial statements for accountability. It applies the Burns and Scapens’ (2000) framework of accounting change to explore politicians’ routines when using the accrual accounting information and which type of change was induced by financial statements on financial accountability to politicians and citizens. Design/methodology/approach - Considering that accounting reforms take time to unfold their effects, this paper studies two countries that have 11 years of difference in the reform implementation and thus a different accounting maturity. A qualitative research approach was used based on 55 semistructured interviews in five Finnish and six German municipalities with 25 councilors from Finland and 30 from Germany. Findings - Councilors with a longer period of time to adjust to the accounting reforms seem to have developed more routines in using financial statements to assess the financial situation and performance. The change induced in accountability to politicians is partly formal and more evolutionary than revolutionary. The complexity of financial statements can lead to regressive change, especially in financially distressed local governments. As for accountability to citizens, a real change is not observed, reflecting a regressive type of change. Originality/value - The study contributes to the empirical studies on financial accountability in the public sector context by analyzing the use of financial statements in two-way accountability relations from the perspective of politicians. Thereby, the paper adopts a transnational comparative approach and draws on old institutional economics.