Legitimacy and Parliamentary Oversight in Australia: The Rise and Fall of Two Public Accounts Committees
Legitimacy and Parliamentary Oversight in Australia: The Rise and Fall of Two Public Accounts Committees
Legitimacy and Parliamentary Oversight in Australia: The Rise and Fall of Two Public Accounts Committees
www.emeraldinsight.com/0951-3574.htm
Legitimacy and
Legitimacy and parliamentary oversight in
oversight in Australia Australia
The rise and fall of two public accounts
committees 13
Kerry Jacobs and Kate Jones
Australian National University, Canberra, Australia
Abstract
Purpose – The purpose of this paper is to address the question of whether two early Australian
public accounts committees were established for the purpose of legitimating governments of the time.
Design/methodology/approach – The paper addressed these issues through a study of the
establishment, early work and abolition in the 1930s of the Victorian Committee of Public Accounts
(VCPA) and the Joint Committee of Public Accounts (JCPA).
Findings – Clear evidence is found that the Joint Committee of Public Accounts (JCPA) had been
copied from the VCPA and that the VCPA had been copied from the UK House of Commons Committee
of Public Accounts, which was established in 1861. This would indicate that the primary objective in
the establishment of both these committees was legitimation rather than control. It was found that the
subsequent work of both the VCPA and the JCPA showed a drift away from an accounting focus
towards a policy focus. This is similar to the JCPA experience described by Degeling et al. in relation to
the JCPA, which also supports the legitimation argument. It was also found that both committees
could be disestablished with relative ease because their legitimating purpose was no longer strong
enough to demand their continuation and that, in fact, their abolition became the factor that served a
legitimating purpose for governments.
Originality/value – The paper suggests that the ideas of legitimation and mimetic isomorphism
provide a more convincing explanation for the nature and work of these two public accounts
committees than the idea of accounting colonisation.
Keywords Public sector accounting, Australia, Regulation, Modern history
Paper type Research paper
Introduction
Power (1997) claimed that institutions of oversight and audit have come to play an
increasingly important role in the creation of legitimacy and social stability in modern
society. He highlighted changes within the public sector and drew a link between
processes of audit, trust and risk within structures of governance and regulation. Hood
et al. (2001) also highlighted these issues of governance and regulation within a process
of the evolution of a risk society described by Ulrich Beck. However, these institutions
have long histories and interesting origins.
The research question addressed in this paper is whether the ideas of isomorphism
and policy transfer provide an explanation for the establishment and early work of the
Victorian and the federal Australian Public Accounts Committees (PAC). The PAC is a Accounting, Auditing &
key example of an institution of audit, governance and regulation within the Accountability Journal
Vol. 22 No. 1, 2009
pp. 13-34
q Emerald Group Publishing Limited
The authors wish to acknowledge the contribution of seminar participants at University of 0951-3574
Technology Sydney and the contribution of the two anonymous reviewers. DOI 10.1108/09513570910922999
AAAJ Westminster parliamentary system. Although it might not be considered a classical
22,1 example of accounting practice, it has been required to exercise an accounting role
through the control and oversight of parliamentary spending. Therefore, the PAC has
become a central element of the process of parliamentary and democratic
accountability. Our focus on this committee can be understood as part of the
institutional turn to public administration, politics and accounting. Hopwood (1984)
14 argued that accounting language and practices have become intertwined in issues of
public policy, both reflecting and influencing the public debate through the creation of
selective patterns of economic visibility and disciplining performance so that
accountability can be demanded, policed and enforced. It is these patterns and
practices, which make up the structures or institutions of accountability and oversight.
The paradox of any institutional analysis is that the institutions being studied are
the product of events and influences from the past and yet function and interact with
contemporary settings. Therefore, in order to adequately grasp the nature and
operation of these processes of oversight, governance and accountability that Power
(1997) claims characterise modern society, we must consider the origins and early
operations of these social institutions and practices.
Within the accounting literature, Degeling et al. (1996) provide one of the few studies
of the work of a parliamentary audit and oversight committee – the Australian federal
Joint Committee of Public Accounts (JCPA). Degeling et al. (1996) proposed that
accounting and economics tend to colonise broader concerns regarding equality, access
and quality within the work of the committee. However, they found that was not the case
and that the initial “accounting” focus of the reports produced by the JCPA was replaced
by a policy and political focus over time. The limitation of this work is that while
Degeling et al. (1996) provided a valuable description of the changing accountability
focus of the work of the JCPA, they failed to fully explore the origin and establishment of
this committee. They also did not consider that the JCPA was suspended in 1932 and not
re-established until 1952. These gaps provide the motivation and focus for our paper. We
note the direct links between the establishment of the JCPA and the earlier work of the
Victorian Committee of Public Accounts (VCPA). It can be established from
parliamentary debates and the legislation that the JCPA was copied from the VCPA,
which predated the JCPA by nearly 20 years. The JCPA and the VCPA were also
abolished at a similar time. Therefore, these institutions need to be understood as a pair
in both their establishment and their disestablishment. We pay particular attention to the
establishment of the Victorian committee (VCPA) because it predated the JCPA.
We found evidence that the JCPA had been copied from the VCPA and that the
VCPA had been copied from the Westminster Committee of Public Accounts, which
was established in 1861, in the UK House of Commons. This indicates that the primary
objective for the establishment of both these committees was legitimation rather than
control, which would be assumed if accounting served a functional role. Within the
institutional framework, this process of copying can be described as mimetic
isomorphism (Powell and DiMaggio, 1991; Scott, 2001). The concepts of mimetic,
coercive and normative isomorphism assume that institutional practices serve to create
legitimacy rather than fulfil a functional role. We explore this possibility further by
contrasting the work of the VCPA with the analysis presented by Degeling et al. (1996).
If the role of the VCPA were a functional one, it would be reasonable to expect that the
VCPA would achieve the objectives and purpose established at its foundation.
We addressed these issues through a study of the establishment and work of the Legitimacy and
VCPA between 1895 and 1931. We found evidence for the case of legitimation because oversight in
the subsequent work of the VCPA drifted from an accounting to a policy focus in a
manner similar to that of the JCPA, as described by Degeling et al. (1996). However, we Australia
suggest that the ideas of isomorphism and policy transfer provide a more convincing
explanation for the nature and work of these two committees.
15
Public accounts committees and legitimacy
McGee (2002, p. 9), in a review of the work of PACs and Auditors-General across the
Commonwealth, argued that democracy entails accountability for the exercise of power
and that the PAC is one organisational form in which Parliament ensures the
accountability of government, particularly the process of public financial
accountability. Normanton (1971, p. 312) suggested that public accountability was
the chief hallmark of western democracy, which called for “openly declared facts and
open debate of them by laymen and their elected representatives”. This perspective
adopts a strongly functionalist approach towards these social institutions, presenting a
regulative and possibly a normative argument for the nature and function of these
institutions. In that sense, the PAC can be seen as a vital pillar to the legitimacy of
political institutions, as argued by Jurgen Habermas (1976). Offe (1996) followed the
same argument with the idea that the elements of legislative representative bodies such
as parliamentary committees play an important role in securing public legitimacy for
the political systems.
Within the Westminster model of parliamentary systems, elements of accounting
oversight were introduced as early as 1861. The first PAC was established in the UK
Westminster parliament in 1861 by the then Chancellor of the Exchequer, William
Gladstone (McGee, 2002; Jacobs et al., 2007). The responsibility and role of the
Westminster PAC was to examine the accounts showing the appropriation of sums
granted by Parliament to meet the public expenditure. While the members nominated
were selected to give satisfaction to “both sides of the house”, they were primarily
intended to bring as much talent, knowledge and experience as possible to the
examination of accounts (Hansard, Vol. 162, 19 April 1861, col. 773). Gladstone claimed
that it was the members who were best qualified (in the examination of public
accounts) that were selected for a duty which was seen as being “of a dry and repulsive
kind” (Hansard, Vol. 162, 19 April 1861, col. 774; Stent, 2004). PACs were established as
guardians of the public finances, with a responsibility for holding the Government to
account for its use of public money and resources (McGee, 2002). Within this system,
accounting was presented, if not understood, as being an objective, neutral and
apolitical technology. Gladstone himself took the view that “Economy is the first and
great article (economy as I understand it) in my financial creed” (Morley, 1903, p. 62).
However his passion for thrift was combined with a desire to establish a regulated and
orderly system of financial control dominated not by politics but by the legal and
constitutional provisions. He was not alone in this. Chubb (1952) described the attitude
of members of parliament towards public spending in the following terms:
. . . they approached it rather as financial and constitutional experts than as politicians, and
the system they designed was intended primarily to deal with the facts and the law. The facts,
recorded in the accounts, were clear; the law, embodied in the Appropriation Acts and
Treasury regulations, was also clear. It remained for the Accounts Committee to give a
AAAJ decision. Thus the experts combined the predilections of the age with the knowledge that
came of investigation and study, and their conclusions were not only welcome, but
22,1 incontestable (Chubb, 1952, p. 35).
However, the link between legitimacy, democracy and accountability as embodied by
the PAC is complex. In general, the argument is that contemporary implementations of
NPM/NPFM reform have altered accountability; there is an increasing emphasis on
16 managerial and managerialist forms of accountability and correspondingly less on
political, parliamentary and public accountability (Hughes, 1998; Jacobs, 1998; Jacobs
et al., 2007). This point was clearly made by Gray and Jenkins (1993) in their review of
the place of accountability within the UK public sector. Pusey (1991) and Guthrie and
Parker (1998) have made a similar argument in the context of Australia.
Degeling et al. (1996) analysed the work of the Australian federal Joint Committee of
Public Accounts (JCPA) and compared the foundational statements about the
committee’s claimed accountability function with the performance of accountability as
contained in its reports. Degeling et al.’s (1996) thesis was that the JCPA would adhere
to its foundational focus on matters of financial accountability and possibly narrow its
sphere of interests, abstaining from any matters with a non-financial element. From a
functionalist perspective, it would be reasonable to assume that the JCPA would follow
its foundational mandate in the work conducted. However, from a legitimacy
perspective this is not a valid assumption as the committee itself would have either
been copied or imposed to improve the perceived legitimacy of the Commonwealth
Government. Degeling et al. (1996) found that the JCPA did not function as a colonising
influence and that while the early work of the JCPA reflected its financial
accountability mandate, this was not true in the later years, when it was concerned
with effectiveness and policy advice instead.
Degeling et al.’s (1996) conclusion that the financial accountability mandate was
colonised by the political is understandable as they focused on the early work of the
JCPA which predates NPM. What is not clear from Degeling et al. (1996) is the place
accounting played in the formation of these institutions. We will look in more detail at
the establishment of these committees, to consider both the JCPA and the Victorian
Committee of Public Accounts (VCPA) and provide an alternative explanation,
drawing from an institutional theoretical understanding. Because the VCPA predated
the JCPA by nearly 20 years (Davey, 1960, p. 3) and the structures mandate and
practices of the JCPA were copied from the VCPA it would be reasonable to describe
the initial structure of the JCPA as an example of isomorphism or policy transfer and
argue that the primary function and role of the JCPA was legitimacy. If this was true
then the JCPA’s abandonment of its financial accountability focus would be
unsurprising. Therefore it is necessary to study the earlier VCPA and determine the
nature and origin of its mandate within that jurisdiction and to understand what
influenced its establishment. This also raises the possibility that aspects of
accountability attributed to NPM reform may have a longer history as they may be
reflected in the institutional structures developed in the 1860s and 1870s.
New institutional theory (see, Powell and DiMaggio, 1991; Meyer and Rowan, 1977)
has been extensively used within the accounting literature to describe change over time
(e.g. Fogarty, 1996; Carpenter and Feroz, 2001; Fogarty and Rogers, 2005). The
argument is that institutions need legitimacy in order to function and to be perceived
as rational. Scott (2001, p. 58) provides a brief definition of legitimacy with the
statement that “. . . in addition to material resources and technical information Legitimacy and
organisations require social acceptability and credibility in order to survive and thrive oversight in
in their social environments”. Scott turns to the work of Suchman (1995, p. 574) to
provide a fuller definition of legitimacy as “. . . a generalised perception or assumption Australia
that the actions of an entity are desirable, proper, or appropriate within a socially
constructed system of norms, values, beliefs and definitions”. The argument is that
institutions comply with these social norms and value and tend to adopt similar 17
structures or practices in order to secure that legitimacy.
The way that organisations adopt similar structures or practices is described by
Meyer and Rowan (1977, p. 352) as institutional isomorphism. Powell and DiMaggio
(1991, p. 67) provided a three-part typology of the social rules and pressures, which
lead to institutional isomorphism: coercive isomorphism, mimetic isomorphism and
normative isomorphism. Powell and DiMaggio (1991, p. 67) identified the common
legal environment and state regulation as examples of coercive isomorphism. They
also stated that expectations and persuasion experienced as force constitute this kind
of isomorphism and that these pressures can take the form of budget standardisation,
performance measures, reporting systems or even the effects of monopolistic service
infrastructures such as transport and telecommunications. However, where
organisational technologies are poorly understood and goals are ambiguous,
uncertainty provides a powerful force that encourages imitation. Powell and
DiMaggio (1991, p. 69) described this as mimetic isomorphism. This process is also
described in the politics literature as policy transfer or policy learning (Dolowitz and
Marsh, 1996; Jacobs and Barnett, 2000). Powell and DiMaggio (1991, p. 71) suggested
that normative isomorphism stems primarily from professionalisation and the
expression of a set of values and expectations associated with university education and
cross-organisational professional networks. It is the commonality of values associated
with professional orientation and the selective recruitment of staff from certain
educational institutions (Powell and DiMaggio, 1991, p. 72) or certain social and
economic settings, which leads to similarity in organisational structures and practices
(Jacobs, 2003). Scott (2001, p. 56) further developed the idea of normative isomorphism
by arguing that common values also include rules, routines and procedures. Scott
(2001, p. 57) went so far as to include cultural and cognitive values as examples of
normative isomorphism – in effect, the shared conceptions associated with how actors
attribute meaning to social experience and construct social reality.
Isomorphism would explain the objective for the establishment of the early VCPA in
Victoria as strengthening the legitimacy of the colonial parliament. It could reflect a
coercive pressure from the UK to adopt structures and practices similar to those of the
Westminster parliament. It could also reflect institutional or policy transfer and
copying; the Westminster parliament was seen as an example of good government and
democracy, so it became desirable that the Victorian model copy it in every way. The
next part of this paper explores the establishment of the VCPA. We also briefly revisit
the establishment of the federal JCPA described by Degeling et al. (1996) to explore the
legitimacy aspects.
The introduction clause (a) of these standing orders covered the entire UK House of
Commons standing order while adding the additional duties of examining the receipts
(in addition to the expenditures) and reporting back to the Legislative Assembly
(parliament). Although the obligation to report any desirable change to the accounts
and accounting system (b) was beyond the formal UK mandate, this role was
performed in practice. The wide-ranging power reflected in clause (c) to inquire into
and report on any question connected with the public accounts was not reflected in UK
mandate, although Jones (2006, p. 205) claimed that the UK PAC may have taken this
power on itself. The focus (d) on the funds of the commissioner of savings banks was
peculiar to the Victorian committee and reflected a concern at the time with the
activities of the Victorian savings banks (Jones, 2006, p. 205). Therefore, this specific
focus can be seen as a reflection of the fact that the Government had been investigating
the structure and lending policies of Victorian savings banks (Jones, 2006, p. 205). This
banking focus was not retained in the mandate transferred to the federal JCPA in 1914.
Finally, clause (e) indicated that the VCPA was authorised to deal with any specific
reference from the Legislative Assembly. This role also reflected the actual work and
role of the UK PAC. The Victorian VCPA had taken 25 years to establish, and the
stated objective was to provide a neutral, objective and apolitical form of accounting
AAAJ control and measurement. While early initiatives had failed, they succeeded with an
22,1 “exact copy” of the UK committee.
There is an obvious question of why it took so long to establish the VCPA. We
would argue that there are a number of reasons for that. Jones (2006, p. 205) claimed
that the mandate of the VCPA indicates that it was not simply a copy of the mandate of
the UK PAC at its inception. However, the extended mandate of the VCPA reflected the
20 powers that had been granted to, or claimed by, the UK PAC by 1895. The concern with
the oversight of the commissioners of savings banks was the only acceptable deviation
from the UK model and, therefore, the only response to local Australian conditions. On
the whole, the process of the establishment of the VCPA would provide a strong
argument for mimetic isomorphism. It was important for legitimacy reasons that the
VCPA was seen as being an exact copy of the current practices of the UK PAC. Any
attempt to introduce ideas from the French was quickly rejected.
Scott (2001) indicates that the three institutional types of isomorphism are rarely
separate but often function together in the generation of legitimacy. Therefore, in
addition to the mimetic driver were there also elements of normative or coercive
isomorphism? While a strong normative element to these changes is unlikely, Jones
(2006, p. 208) does note that many of the key protagonists in the attempts to implement
a Victorian PAC had visited England and would have been influenced by the
parliamentary practices and systems they observed there. While there was strong
evidence of the desire to copy the UK model and therefore mimetic isomorphism, there
may still have been some of the ongoing cultural norms described by Scott (2001) and
therefore also be elements of normative isomorphism.
Writers on Australian politics have generally rejected a coercive argument in the
formation of the Government institutions. Jones (2006, p. 194) quotes the work of AF
Madden (1979), who suggested that at the time responsible government was being
established in Australia and New Zealand, there was little interest in exporting the
British model of Westminster to these colonies. Although most states had a period of
direct government from the UK, they were granted the power of self-government in the
1850s (Weller and Flemming, 2003 p. 14). New South Wales developed its own
constitution from 1850 (Smith, 2003, p. 44) and was quite independent before that time
given that the governor was generally appointed from within the colony rather than
from London. Therefore while the institutions and practices may have been modelled
on Westminster they were seen as not being imposed by Westminster. This also seems
to have been the case with the other states and clearly the case with the establishment
of the Commonwealth in 1901. Carroll (2006) indicated that until the 1850s there was a
measure of voluntary policy and institutional transfer from Britain to its colonies.
Between the 1850s and 1901 there was increasing local innovation and a growing
transfer within Australia after 1901. If there was clear coercive pressure from the UK it
is likely to have been more evident in the establishment of the institutions in the state
of Victoria in the mid 1800s than in the Commonwealth institutions in the 1900s. There
was no evidence of direct coercion in this case.
It is possible that the arguments against UK influence may have oversimplified the
situation. One explanation for the successful establishment of the VCPA in 1895 was the
crises of public confidence in the then Victorian government. The 1880s had been
prosperous years for the Victorian economy, with high prices being paid for wheat and
wool, high levels of British investment and a land boom fuelled by speculation. By 1894,
however, the economy had collapsed, unemployment had risen, government revenue had Legitimacy and
fallen and a number of banks had collapsed. Some colonial politicians, including Munro, oversight in
had been involved in scandals associated with land speculation and railways. Chua and
Poullaos note that of the 48 members of the Victorian parliament in the late 1880s and Australia
early 1890s, 30 were land speculators (Chua and Poullaos, 1998, p. 172).
In 1890-1891, for the first time, government expenditure exceeded revenue and
economy in government became a major concern. It was necessary to quickly and 21
clearly restore public confidence and legitimacy. The establishment of a public
accounts committee modelled on the Westminster model was an obvious and timely
solution. While not exactly coercive it should be noted that during the 1890s that
Victoria was heavily dependent on British capital (Chua and Poullaos, 1993, p. 699;
Chua and Poullaos, 1998, p. 162). Therefore economic collapse, political scandals and
the debts of the Victorian government meant that considerable pressure was applied to
restore the legitimacy of both the market and the parliament (Chua and Poullaos, 1998,
p. 173). The establishment of the VCPA in 1895 can be seen as a direct response to that
desperate need to restore legitimacy.
In their discussion of the federal JCPA, Degeling et al. (1996, p. 34) highlight a similar
need to strengthen public legitimacy and confidence. The Fisher Labor government had
lost the 1913 election amidst criticism of its financial and economic policies and following
the loss of a referendum to increase the powers of the Commonwealth. The Liberal Cook
government that succeeded it established the JCPA with a stated responsibility to
scrutinise and control public expenditure. Degeling at al.’s (1996) finding that the work of
the JCPA drifted from its initial mandate seems consistent with our understanding that
the establishment of the JCPA was an attempt to garner legitimacy of part of the
Government. When the Treasurer (Sir John Forrest) introduced the bill for the JCPA, he
made it clear that while the establishment of the committee was desirable, the duties and
roles of the committee would be left for the parliament to define (APD (Australian
Parliamentary Debates), 1913, p. 3277). It is clear from Forrest’s introduction that the
existence of the committee was deemed to be important rather than its having a
particular mandate or function. This would challenge Degeling et al.’s (1996) focus on the
mandate and the functionalist assumption that the committee was established to provide
financial oversight while lending some support to a legitimacy argument.
In discussing the JCPA bill, Forrest also cited the standing order that had
established the Victorian committee and set out its powers and duties together with
similar orders from Westminster as a guide to be followed by the Commonwealth (APD
(Australian Parliamentary Debates), 1913, p. 3278). The fact that the JCPA was a joint
upper and lower house committee was a substantial structural change from both the
Victorian and the British precedents. Nonetheless, in 1915, the committee requested
from the Victorian committee “copies of State records to assist and [sic]
Commonwealth Committee’s operations” (NAA: A12840, 2004/1). This is not
surprising. The Committee of Public Accounts Act that was finally passed specified
responsibilities for the JCPA almost identical to those of Victoria’s VCPA. From
Forrest’s statement, the evidence for the use of the Victorian standing order as a model
and the similarity between the Victorian standing order and the Commonwealth
legislation, it seems unquestionable that the JCPA proposal was copied from the VCPA
practice. Within the institutional theory framework, this is consistent with mimetic
isomorphism.
AAAJ The establishment of the JCPA as a joint committee of both the upper house (Senate)
22,1 and the lower house (House of Representatives) in an anomaly for an argument of
isomorphism. In this case the structure and practices were not a copy from the
Victorian model or from Westminster practice. However, it is clear that genuine
innovations are both practical and desirable. In that sense the establishment of the
JCPA as a joint committee can be argued as a functional response to the concern of both
22 houses to exercise financial oversight. In essence the joint approach prevented the
wasteful duplication of resources and the confusing duplication of role. However, it is
also possible to present a legitimacy argument. While the seats in the House of
Representatives are allocated to reflect the population and are therefore dominated by
the largest states (Victoria and New South Wales), the positions in the Senate are
structured to reflect the concern that the interests of the smaller states would be
protected and therefore the Senate is sometimes described as the “states house”. It was
this very concern that almost resulted in some of the smaller states not joining the
federation. Therefore the inclusion of representatives from both the Senate and the
House in the process of financial oversight can be seen as a savvy political move, which
provided further legitimacy to the actions of the JCPA.
We argue that the establishment of both the VCPA and the subsequent JCPA was
driven by the need for legitimacy. However, although an institution may be established
as a tool of legitimation under the influence of mimetic isomorphism, it has the
potential to change and evolve to better meet local needs and conditions as reflected in
the joint JCPA (Carroll, 2006). This provides a powerful institutional explanation for
the drift away from the initial JCPA mandate observed by Degeling et al. (1996). In the
next part of this paper, we explore whether a similar drift or evolution is also evident in
the work of the VCPA.
Conclusion
In this paper we have adopted an institutional approach to the study of parliamentary
oversight and governance. While authors have highlighted the need to adopt an
institutional approach to the understanding of audit, regulation and governance, little
work has been done that takes seriously the concept that these institutions are
established for legitimacy rather than functionalist purposes. Both Hood (1991, 1995)
and Power (1997) have argued that these institutions of oversight and audit have come
to play an increasingly powerful role in contemporary society. We have argued that in
order to understand this role, we need to more fully understand the driver for their
establishment.
We adopted the work of Degeling et al. (1996) as a starting point for our own study.
Degeling et al. (1996) studied the work of the Australian federal parliamentary public
accounts committee (JCPA) from its establishment in 1913 until its suspension in 1932.
Degeling et al. (1996) argued that it was likely that the financial focus of this committee
would colonise other aspects but found that, although the initial mandate was focused
on financial accountability, the work of the committee shifted to a focus on issues of
policy and politics. Instead of Degeling et al.’s (1996) focus on accountability and
colonising, we adopted an institutional theoretical focus more consistent with the
activities and changing nature of these committees. In particular, we believe that this
enables us to more fully explain the establishment of the JCPA and the changing nature
of its work. By way of contrast, we discussed the Victorian Committee of Public
Accounts (VCPA), which pre-existed the JCPA by nearly 20 years and was openly
acknowledged in parliamentary documents as the template and example for the JCPA Legitimacy and
mandate and structure. oversight in
By more fully exploring the establishment of the earlier VCPA and the subsequent
JCPA, we found that the primary objective for the establishment of both these Australia
committees was legitimation. Therefore, the early functional mandate was not of
critical importance and the subsequent deviation from it to focus on broader issues of
policy and politics is more understandable. The central element of the legitimating 29
power was that both these institutions were seen as an accurate copy of existing
British practice as reflected in the Westminster parliament. However, from records and
documents it seems clear that the Victorian practice, as reflected in the VCPA,
presented a more proximate mimetic source for the establishment of the JCPA.
The work of both these committees diverged over time from the mandates given to
them in their founding documents as they drifted from a focus on accounting to a focus
on policy. Degeling et al. (1996) have argued that this represents a colonisation of
accounting by politics. Implicit in their analysis is the belief that the establishment of
the JCPA was driven by a concern for the function of the committee – that is, the
content of its reports and the recommendations within them. We have argued that the
purpose of both the JCPA and the VCPA was to provide legitimacy for the
Governments at the time of their establishment. The VCPA was established in 1895 at
a period of policy transfer from Britain to its colonies and the JCPA in 1913 when policy
transfer was beginning to occur within Australia (Carroll, 2006).
Following from Degeling et al.’s (1996) methodology, we analysed the work of the
VCPA between 1895 and 1931 and established that it had followed a similar path, with
a transition from a focus on financial matters to a focus on politics and policy. We also
established that the content of the reports appeared to have little impact on the
existence or status of the committees. In other words, the Governments that had
facilitated the establishment of the committees appeared not to care that they were
ignoring their designed purpose. To further follow up this phenomenon, we analysed
the events surrounding the demise of the two committees, including the last reports
they produced. We found that the VCPA was openly critical of government and was
actively involved in policy formation. The JCPA was also directly involved in policy
formation, although this was in cooperation with the Government rather than in
criticism of it. However, the JCPA also faced two other major challenges. Its members
were accused of taking bribes and it was publicly criticised for profligacy. In addition,
it was directed by the Prime Minister to undertake major economic inquiries which
were both beyond its expertise and inappropriate in terms of its mandate.
In the political crisis that emerged from the Depression, both the VCPA and the
JCPA became perceived as unnecessary extravagances. Political capital and
corresponding public legitimacy could be generated by abolishing them. In both
cases, they were abolished by conservative governments that replaced Labor
governments that had failed to control the financial crisis and that had been torn apart
by internal dissension. In the abolition of the VCPA and the JCPA the new
governments could be seen to exercise the same economies that they proposed for the
public. Therefore in 1932, the acquisition of legitimacy for the Governments (and to
some extent the parliaments) lay in the abolition of the VCPA and the JCPA, just as in
earlier years it had resided in their creation.
AAAJ Degeling et al. (1996) conclude that the work of the JCPA shows little evidence of
22,1 instrumental purpose or violation. But rather than such organisations and structures
are inevitably a product of social and political processes. While we agree with this
conclusion we would argue that the idea of social and political legitimacy provide a
powerful way to explain and understand these particular social and political processes.
the case of the VCPA and JCPA provides an important insight into processes of
30 institutional change and legitimacy. While the establishment of these committees
delivered a level of public legitimacy, particularly due to the fact that they were visibly
copied from the UK model, the disestablishment of the same committees also delivered
legitimacy. The absence of an established functional role did not seem to be
particularly problematic. It is important to recognise that while mimetic and other
forms of isomorphism can deliver a level of legitimacy when an institution is
established, this legitimacy is not necessarily sustained over time. In this case, the
broader social focus on austerity associated with the Depression and the urgency to
cut, and be seen to cut, expenditure meant that the disestablishment of these
committees generated legitimacy rather than their ongoing existence or work.
We suggest that these insights provide a radically different perspective on the
contemporary process of financial oversight, governance and the audit society. It is
important to separate the functional perspective on these institutions from an
institutional/legitimacy one. We cannot take for granted, as has been in much of the
NPM literature, that institutions such as public accountants committees play a
functional role. Clearly the advocates for a public accounts committee in Victoria
understood that the function of the VCPA was to provide conventional financial
oversight. Indeed, these ideals are still expressed by those who describe how these
committees should operate now (McGee, 2002). While these norms are clearly desirable,
it is also evident that over time the nature of the work of the VCPA (and the JCPA) more
clearly reflected political aims and influences. It showed that in practice it was not
possible to isolate the practice of financial oversight and accounting measurement from
the intensely political environment in which it functioned and the need to generate
legitimacy in that setting. In that sense, Hopwood’s (1984) point that accounting
language and practices have become intertwined in substantive issues of policy may
have been true for a much longer time than suggested by Hopwood’s (1984) analysis
and that drawing a neat distinction between politics and accounting within this setting
becomes meaningless. While it is not necessary for accounting to dominate politics, it is
interesting that the perception of an accounting focus provided such an important
source of legitimacy. It may prove that the growth of practices of governmentality and
oversight described by Power (1997) are not principally associated with functional
activities but are primarily driven by the need to create and sustain the legitimacy of
broader institutions and structures, such as parliament and democracy and that this
may have been happening for a far longer time than authors such as Power (1997) and
Hopwood (1984) have previously indicated.
From a contemporary perspective, this narrative provides an important insight into
the power of mimetic isomorphism and the legitimacy power of the British
Westminster models and practices. It also seems clear that once a PAC has been
institutionalised, it will rarely be challenged to justify its current actions and functions.
Recent reviews of the Australian PACs illustrate that considerable diversity is evident
in practice (KPMG, 2006; Jones and Jacobs, 2006). After all, these institutions
functioned for 26 and 18 years respectively. It is important to note that these Legitimacy and
committees were subsequently re-established in the 1950s after calls for their oversight in
re-establishment from both inside and outside parliament.
Australia
Note
1. An inquiry represented a major investigation or study conducted by the VCPA and therefore
is a good measure of substantial work done while the reports only summarised activities 31
such as the meetings or visits conducted and therefore represented the basic requirement to
report to parliament on committee activity.
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VPD (Victorian Parliamentary Debates) (1894-1895), Debates, Vols 74-80.
Corresponding author
Kerry Jacobs can be contacted at: [email protected]