Public sector management reforms were shaped by the principles of ¿corporatisation¿, accountability and quality service.

May, 17 2004   |   Manila Marcuccio


Since the beginnings of the 80s, Italian LGs [Local Governments] have undergone a profound reform process (Borgonovi, 1996, Mussari, 1997; Marcon, 1999). The concepts of: managing by results; ¿letting the managers manage¿; the separation between elected roles and administrative ones; introducing a ¿managerial culture¿; and a ¿managerial model¿ (as opposed to the traditional and prevailing ¿bureaucratic model¿) have all been prompted by various legislative initiatives and are the subject of debate among professionals.

The reform process in Italy has been inspired by international reform trends (New Public Management - Osborne and Gaebler, 1992; Hood, 1998; Public Governance - Bekkle, Kickert and Kooiman, 1995; Minogue, Polidano and Hulme, 1998; Rhodes, 1996  and Network Management - Kickert, Klijn and Koppenjan, 1997) generally advocating managerialism and marketisation principles. It covers both the institutional form of the public sector and the management principles applied to public organisations.

Institutional reforms were shaped by the principles of privatisation, subsidiarity and devolution. As a result, Italian LGs are now responsible for new functions. While the role of regional and municipal governments has been strengthened by reforms inspired by ¿federalist¿ principles, provinces remain ¿squeezed¿ between the other two levels of governments, and are still struggling to affirm their importance and role.

Moreover, LGs have been encouraged to spin off their activities to (a) separate entities without legal autonomy, (b) separate legal entities with budgetary autonomy, (c) LG consortia, or (d) joint-stock corporations with private and public stockholders. Public ¿ private network have also been created to provide social and community services.

Public sector management reforms were shaped by the principles of ¿corporatisation¿, accountability and quality service.

In the first period (1990-2000), accounting systems were considered as playing a central and constitutive role in public management reforms (new public financial management as the ¿technical lifeblood¿ of the reform process¿ Olson et al. 2001). As a result, a decree reforming LG accounting was introduced in 1995. In Italy, there is no professional public-sector standard-setting body. The requirements for government accounting, reporting and auditing are established by national legislation. LGs are encouraged to maintain accrual accounting together with the traditional cash- and obligation-based accounting and to publish an accrual-based financial statement consisting of a balance sheet and an operating statement.

Moreover, in 1999 a new decree were introduced to make LGs adopt new management control and reporting systems to measure and control inputs, outputs and outcomes of public service provision and governance.

The result of the reform process to date are still disappointing (Anessi and Caccia, 2000):

 

§  Changes in most cases were solely of a formal nature and the new procedures had not yielded any real improvement in either service quality or management systems;

§  Programming, control and reporting systems imposed by law did not appear to be effective in ensuring greater transparency and accountability in LG activities;

§  Failure to observe the reform principles created distrust and demotivated public officials.

 

In addition, over the last years (2000-2004) - and mirroring growing international trends and demands for sustainability development, etc. - citizens, public opinion, academics, professionals and government in Italy started to push for greater accountability, transparency in the use of public resources, greater responsibility for quantitatively and qualitatively satisfactory services, more responsiveness to stakeholders and greater public involvement and consultation in public organisations¿ decision-making processes.

 

Consequently, cabinet members and public managers began to feel under greater pressure to deliver performance improvement and service accountability at both higher government and external party levels. (Marcuccio and Steccolini, 2003). As a consequence, in the last 2-3 years some pioneering LGs have experimented with voluntary public management practices, which inspired both private organisational initiatives (social and environmental reporting, social, environmental and quality certification, balances scorecard) and emulation of international best practices (Triple Bottom line reporting, participatory budgeting, etc.).  Innovative practices are disseminated through professional networks, conferences, the specialised press or government-promoted ¿innovation and quality¿ awards (e.g. ¿one hundred projects for improving public administration¿- ¿cento progetti per il miglioramento della pubblica amministrazione¿- (for example  promoted by the Department for Public Administration- Dipartimento della funzione pubblica-). They assume different forms but are inspired by recurrent principles such as accountability, responsibility and participation.

Public professionals and researchers observe, study and follow best practices.

Public opinion is confused. While voters want a clearer definition of the emerging principles of public governance, they fear rigid standardisation of management and reporting practices (at least, this was how things stood in 1995 and in 1999).

The ongoing problem with the public sector reform process is thus of a twin nature. On the one hand, a conceptual model of accountability needs to be defined for the (Italian) public sector, on the other hand, managerial tools are required (performance indicators, reporting standard, etc.) to address accountability needs.

The conceptual model has to consider the new configuration of public service governance with reference to internal responsibilities (political vs managerial responsibility), network responsibility (monitoring and control public service provision through external public and private organisations) and external ¿or democratic- responsibility (towards citizens and society in assuring local welfare and citizens¿ empowerment) (see Figure 1).

Management systems must consider the external and internal conditions affecting implementation of the conceptual model. It should be borne in mind that implementation time scales are affected by the legislative framework. Accounting management and systems are legislated for by central government. This fact,  together with a ¿legalistic¿ public service culture on the one hand, and a relatively new management culture and lack of professional resources on the other, make successful implementation of such radical changes very difficult in the short term.  Figure 2 shows management systems and the results of the Italian local government reform process so far  with regard to the three levels of accountability (internal, network and democratic).

Figure 2: The state of the art in applying accountability in Italian LGs

 

 

LEGISLATION

PRACTICES

GAPS & OPEN ISSUES

Internal accountability

1995. LGs are encouraged to maintain Accrual accounting together with the traditional cash- and obligation-based accounting and to publish an accrual-based financial statement consisting of a balance sheet and an operating statement.

 

1999.  Introduction of compulsory managerial control systems covering 4 dimensions:

§          Legal & procedural

§          Professional managerial responsibility ¿ reward systems

§          Service efforts and Accomplishment

§          Strategy and policies

Accrual accounting complements traditional cash- and obligation-based accounting. Public debate on the role of accrual accounting in the public sector and on the application of international accounting standards

 

Institutional managerial control systems are inadequate and unclear, above all regarding innovative-managerial dimensions (performance measurement and strategic control). Problems in integrating the 4 dimensions in a comprehensive managerial information system.

Some LGs pioneer an innovative approach (imported from the private sector) such as BSC, TBL, sustainability reporting.

Inadequate managerial informational system and professionalism to support multi-dimensional (non-financial) performance measurement and control.

 

Problems in dealing with managerial needs and legal requirements (budget contents and balance sheet table imposed by law)

 

Lack of feed-back feed-forward processes. Control perceived as a single step activity.

 

Lack of national standard and best practices. Poor comparison with international best practices

 

Network accountability

1990-2004.

Schizophrenic legislation.

LGs are encouraged to contract in and contract out public services and create public-private partnerships.

Introduction of new organisational and institutional forms operating in accordance with private sector legislation.

Central government annual financial law (legge finanziaria) reforms contracting-out contracts every one or two years

Legislation focuses on the ex-ante contracting-out step.

 

Service quality is regulated by special contracts (contratto di servizio) against which performance can be measured.

 

Some pioneering attempts to introduce performance measures of all government functions and existing services.

 

LGs have used contracting-out a great deal, loosening control of the activity and institutional configuration of the local network (Chinese-box phenomenon).

LGs lack  any power to control the organisations in which they participate and to  impose standards.

 

LGs lack competencies in defining and controlling performance in the local network.

Democratic accountability

1990. LGs are encouraged to define and publish a term strategy plan and to report against it at the end of the mandate.

 

 

 

 

1994. Service quality statement and compulsory Citizens¿ charter for organisation providing public services.

1995. Creation of compulsory Customer service structure within each organisation (Ufficio Relazioni con il Pubblico) whose function it to monitor quality service and citizens¿ demands

Term based strategy is susceptible to political manipulation, especially during elections.. End of term statements tend ¿ unsurprisingly ¿ to stress the ¿excellent¿ results achieved by the administration in office. Lack of objectivity and real evaluation.

Very few LG have a citizens¿ charter. Evaluation processes still lack this feature (the Charter often merely takes the form of an information brochure)

URP is a call-centre. Creation of complaint systems

 

Some LGs are experimenting with participatory initiatives (participatory budgeting, citizens¿ fora, social reporting)

Political representatives refuse to shoulder real responsibility for reaching strategic goals. Strategy is somewhat vague. Difficulty in defining mission, goals and objectives.

 

Lack of standards and models for citizen empowerment and external reporting.

 

 

 

In response to the crisis of the traditional (legislatively-imposed) reform process,  a new practice ¿social reporting ¿ is being widely disseminated among and adopted by LGs: (Marcuccio and Steccolini, 2003).

The ¿Social Balance Report¿ (¿Bilancio Sociale¿) - commonly used by local governments to communicate their missions and strategic objectives, activities and results to stakeholders - mirrors the social reporting practices adopted by companies over the last few years.

In some cases, such reports are discussed by stakeholder representatives in order to modify programmes for forthcoming years.

In this respect, the ¿Social Balance Report¿ would seem to be the long-awaited solution to LGs¿ problem of accountability. Such reports render the LG  more ¿accountable¿ for its results not only in traditional financial and output terms, but also in non-financial, more understandable outcome terms.

The strong and weak points of this approach can be summarised as follows.

Italian LGs¿ experiments with social reporting practices have proven a positive experience and led to enhanced performance measurement and management support systems. Indeed, local governments have had to  enrich their information systems to cover and measure the social dimension. . This process has enabled LGs to overcome a period in which they suffered from a crisis of legitimisation and identity. Moreover, the publishing of social reports generally raised citizens¿ involvement in local governance and welfare issues.

On the other hand, not all social reports contains the kind of information that fosters true accountability.

In some cases, just part of the accountability needs are addressed in the social report (for example, those concerning internal and social dimensions). It seems particularly difficult to measure and report measures concerning network and sustainability accountability. In fact, it takes at least 2-3 years to develop a reasonably complete informative system. Accordingly, some ¿Social Balance Report¿ documents contain very few indicators or that are mere lists of LG services and activities.

It is still very hard to separate political from managerial arguments in public governance.- The effectiveness of Social Balance Reports as communication documents means they are often used for political ends during elections.

Even so, social reporting in Italian LGs has proven an effective management and reporting (accountability) tool. Having said that, there is still a need for academic and professional monitoring of this developing phenomenon.

 

References

ANESSI PESSINA, E. e CACCIA, L. (2000), ¿Il disallineamento tra documenti contabili, struttura organizzativa e sistemi di gestione, in CAPERCHIONE E. e PEZZANI F. (a cura di) (2000), Responsabilità e trasparenza nella gestione dell¿ente locale, Milano, EGEA

BEKKE, H.J.G.M., KICKERT, W.J.M. e KOIMAN, J. (1995), ¿Public Management and Governance¿, in  KICKERT W.J.M. e VAN VUGHT F. (1995), Public Policy and Administrative Sciences in the Netherlands, London: Prentice Hall

BORGONOVI, E. (1996), Principi e sistemi aziendali per le amministrazioni pubbliche, EGEA, Milano.

GUARINI, E. (2003), ¿Un modello di riferimento per la progettazione dei meccanismi di accountability delle aziende pubbliche¿, in PEZZANI F. (a cura di) (2003), L¿accountability delle amministrazioni pubbliche, Milano, EGEA

HOOD C. (1998), The Art of the State: culture, Rhetoric and Public Management, Clarendon Press, Oxford

KICKERT W.J.M., KLIJN E.H., KOPPENJAN J.F.M. (1997) Managing Complex Networks Strategies for the Public Sector, Sage, London

MARCON G. (1999) ¿The state of Public Management and Public Management in Italy: lessons for research methodology¿, IPMN Workshop Siena

MARCUCCIO, M., STECCOLINI, I. ¿Social and Environmental Reporting in Local Government: a new Italian Fashion?¿,  SDA Bocconi Working Paper N. 105/03,  December 2003

MINOGUE M., POLIDANO C. e HULME D. (1998), Beyond the New Public Management, Narthampton, MA: Edward Elgar

MUSSARI R. (1996), L¿azienda del comune tra autonomia e responsabilità, Padova, CEDAM

OLSON O., HUMPHREY C. e GUTHRIE J.(2001), ¿Caught in an evaluation trap: a dilemma for public service under NPFM¿, The European Accounting Review, vol.10, n. 3, pp. 505-522

OSBORNE D., GAEBLER T. (1992), Reinventing Government, Reading, MA: Addison-Weasly

RHODES R. A. W. (1996), ¿The new governance: Governing without Government¿, Political Studies, Vol. XLIV, pp. 652-667

 


Manila Marcuccio is Visiting Professor at ESADE from Università Bocconi.
 

 


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