In 2015, Spanish local governments began to apply a new accounting standard. The success achieved in its implementation is related with stimuli from outside the organization and with the institutional capacity – administrative and political – developed by it. Through an electronic questionnaire and several interviews carried out with municipal chief financial officers it has been shown that few actions to build the necessary institutional capacity were undertaken in the period prior to its implementation. The results show that the LGs did not attain the necessary institutional capacity and will have to continue allocating resources and time to improve it.
The adopting in 2010 of a new public accounting standard (hereafter, PAS), applicable to Spanish state public sector bodies, gave rise to a substantial modifying of the accounting model which reflected the legislative change that had already taken place in the Spanish private sector in 2007. An example of this is the supplying of management and financial information which enables administrators to make appropriate decisions and informs citizens of the result of the government teams’ management. This grants citizens the role of being one stakeholder more (Christianses & Van Peteghem, 2007). This reform means a step forward in the modernization process of the Spanish public administration which began in 1981.
A successful PAS implementation is crucial to attain other aims linked to new public management. This implementation is directly related to both the external stimuli which are brought to bear on the organization and the institutional capacity developed by it. This, in turn, is determined by the organization’s capacity to interpret, understand and apply the principles and requirements included in the reform, the staff training and the availability of technical means (Covaleski & Dirsmith, 1988; Harun & Kamase, 2012; Powell & DiMaggio, 1991; Pozzoli & Ranucci, 2013). Anessi-Pessina, Nasi, and Steccolini (2008) show that in the case of Italian local governments, rational factors such as the size of the Local Government (hereafter, LG), dependence on the money market and the degree of complexity of the measures undertaken do not determine the applying of a new accruals-based accounting standard. However, they confirm that institutional factors, such as the CFOs’ perceptions and the geographical location, do condition this application. This is, moreover, consistent with the importance that those in charge give to enforcing the law. Likewise, they point out that it would be interesting to analyze the impact of other variables, such as competencies, skills, perceptions and managers’ and politicians’ resistance to change.
The reform process ofthe accounting system ofthe Spanish public sector’s local authorities has been analyzed. The adoption of new accounting standard require resources -investments in information technology systems and training- and political support (PwC, 2014). These factors determine the institutional capacity in both its administrative and political aspects (Oslak, 2004).
This study’s aim is to determine if the LGs have managed to develop the institutional capacity required to successfully implement the new AI before January 1st, 2015.
The findings may provide a basis for other countries, in general, and for the countries of the European Union particular, in the process of public sector accounting reform, to attempt to override the negative effects and enhance the positive factors identified in the study. Moreover, this work has verified the influence of the variables analyzed in the literature in the achievement of institutional capacity in Spanish LGs. The model proposed, having been tested and validated, may serve as a reference for further research.