Stakeholders
7.5 D ISCUSSION
The results obtained from the questionnaire survey indicate that a standard definition of accountability has not yet emerged and that there is diversity in respect of ' for what' and ' to whom ' accountabil ity should be rendered. Overa l l, accountabi lity was recognised as an essential component of power (defined, impl ied, and delegated) and a responsibi lity i mposed by the local authorities' abil ity to collect and use public money. However, it is apparent that the need to give an account and the emphasis that has been placed on performance is recognised by the stakeholders. This shows that the performance of Malaysian local authorities is of increased interest, significance and value to their stakeholders and implies that the local authorities need to reflect a results-oriented environment in order to meet their stakeholders' expectations. The individual reasons for this motivation reflect general areas of commonality with aspects of NPM as encapsulated by the managerial code of accountability, and extended by a public accountability whereby the accountability of local authorities is seen to promote greater organisational focus on the achievement of output/outcome-related goals (Kluvers, 2003).
In relation to the direction of accountabil ity, the results show that for the majority of stakeholders, the cal l-to-account is no longer underpinned by past tendenc ies of a bureaucratic, hierarchical approach to publ ic adm inistration and accountabil ity. Instead,
and while the concern for financial accountability remains high (for example, responsibility for tax/ratepayer monies and financial control), stakeholders identify a strong motivation for the accountabil ity o f local authorities on the basis of a relat ionship between the local authorities and their customers/public. In addition, the results also indicated that stakeholders identified other accountabil ity relationships. This is consistent with the context of NPM in that ' accountability to whom ' has been widened to include accountabil ity to a broader group of stakeholders with different values and interests (Mulgan, 2004; Parker & Guthrie, 1 993).
It is observed from the results that the identified accountability relationships consist of a range of relationships that Stewart ( 1 984) would classify as being in the form of either a 'bond of accountabi l ity' or a 'link of accountability', as discussed in Chapter Four's theoretical framework of accountabi l ity. Combined with a consideration of the nature and function and the statutory basis avai lable and applicable to Malaysian local authorities (as discussed in Chapter Two), the results suggest that the Stewart' s ( 1 984) accountability framework can be extended to the local authority environment. It is suggested that a bond of accountabil ity e xists between the local authorities (comprising the president/mayor and council lors) and the state government. Such office-holders are nominated3 1 by the state government and arguably are therefore directly accountable to the state government. As provided in the Malaysian Local Government Act 1 976 (Act 1 7 1 , section 9), the state government has direct control over the affairs of local authorities. In this context, accountabi l ity becomes part of the power relationship between the state government and the appointed office holder.
It is also suggested that a bond of accountabi l ity may exist between the local authorities and creditors as the responsibility of one party to another in respect of resources supplied/consumed is stated in a contractual agreement between the parties. Simi larly, and in accordance with the doctrines of NPM, contracts relating to conditions of employment create responsibilities and expectations for both employer and employee wh ich would also give rise to a bond of accountability.
Stakeholders identified an accountabil ity relationship between a local authority and its auditor. Although an auditor does not have power of sanctions over the conduct of the
3 1
Malaysia has a nominative representation system that operates at the local authority level. That is, the mayor/president and council members are not elected omcials but are appointed by the respective
organisations being audited, arguably this identified relationship may reflect a stakeholder v iew of the ' responsiveness' of local authorities to any concerns raised by the auditor. I f so, then tentatively a l ink of accountabi l ity may be seen to exist.
Although there is little opportunity for the public (both as tax/ratepayer and consumer) to hold key office holders to account by way of, for example, direct sanctions (for example, via election), there are a number of provisions that al low the pub lic to gain access to information regarding the performance of local authorities and to provide feedback. For example, section 23 of Act 1 7 1 requires that meetings of local authorities be open to the public and representatives of local media; section 27 provides for the minutes of the proceedings of the local authority to be available for inspection by any tax/rate payer; and section 60(4) requires that audited fi nancial accounts be publ ished in the government gazette. In addition, section 1 42 of Act 1 7 1 provides that "citizens who are dissatisfied with the authorities' performance have a right to make objections in writing and are allowed an opportunity of being heard at the consequent enquiry". There are a number of avenues currently available to the public to submit their obj ect ions. They can make a direct submission to the local authority concerned, to the Publ ic Complaint Bureau of the Prime M i nister Department, or they can make public objections/complaints via the media. The bureau may then review the case and if necessary bring its findings to the attention of the relevant state government to take further action. Within this regime, the broader public have no opportunity to hold local authorities to account; rather, any sanctions are imposed through a higher authority such as the state government.
In the absence of the capacity for power, the accountab i l ity relationship between local authorities and the broader public is therefore suggested to be only in the form of a link of accountabil ity, which recogn ises an informal "recognition of responsiveness" by local authorities (Stewart, 1 984, p.25). However, as the results show, the stakeholders clearly perceive that local authorities should be held accountable because they have a responsibil ity to provide services which are funded by tax/ratepayers and a responsibil ity to provide information on how that money has been spent. Therefore the relationsh ip w ith tax/ratepayers, although something less than a bond of accountability, is somewhat more than j ust a link, because of its connection to responsi bility requirements.
Overall, as an accountabi l ity relationship between the local authorities and the broad group of stakeholders exists, it is suggested that regardless of whether there are bonds or l inks of accountabi lity, local authorities are obliged to present an account of, and to answer for their performance to a l l the stakeholders. The involvement of the broad stakeholder groups in the accountability relationship and the wide scope of accountabi l ity would require d i fferent types of information to be reported in the annual
reports (Patton, 1 992). The diversity of information items expected and considered necessary for assessing and monitoring the performance of local authorit ies are e videnced from the results.
General ly therefore, the resu lts are consistent with the findings from the studies of Hay and Antonio ( 1 990), Jones et al. ( 1 985) and Wallace ( l 988b) who identified diversity amongst stakeholder or user groups as to the information they require. Further, the wide scope of information that was thought necessary and important by the stakeholders for d isclosure in the annual reports of local authorities is consistent with the public accountabil ity paradigm which requires the reporting of comprehensive information about the condition, performance, activities and progress of the entity (Coy & Dixon, 2004).
I n particular, the results suggest that stakeholders showed strong interest not only in the information pertaining to financial performance and position of local authorities but more importantly information not traditionally d isc losed in the financial statements, for e xample non-financial performance and future-re lated information. This is consistent w ith other studies that found that although financial statements are useful (Gray, 1 984), performance information located outside financial statements attracts m ore attention (Clark, 2003). Specifical ly, the resu lts support the l iterature as to the high importance of budget compared to actual i n formation (Boyne et al., 2002; Mack & Ryan, 2004), outcome and output measures (Ciarl<, 2003) and operating results and e fficiency and e ffectiveness indicators (Hay & Antonio, 1 990; Jones et al., 1 985). Stakeholders as a whole rated information about 'future plans ' and 'future performance targets ' as being of the most importance. Information related to the future is necessarily s peculatory and opin ions differ on the relevance of disclosing thi s information. It is contended that information about probable future development that is based on well-founded expectations is a significant component of an accountability regime ( Farneti & Bestebreur, 2004 ).
I n relation to information in financial statements, the results indicate that stakeholders had a strong preference for information items commonly found within the statement of revenue and expenditure. This is consistent with the findings from Tayib et al. ( 1 999) that this statement is of particular importance at the local level in Malaysia. The high ' level of importance' rating allocated by the stakeholders for the disclosure of financial performance measures, such as revenue according to source and revenue according to activities/services rendered, and expenditure according to function and to services provided, emphasises a stakeholder concern over the adequacy of funding to sustain the level of expenditure required to deliver sufficient and quality services.
Overall, in terms of the importance of information to be disclosed in the annual reports o f local authorities, the results indicate inconsistency amongst the stakeholder groups. The stakeholders differ significantly in their perception of the disc losure importance of forty-two of the seventy-one items (59 percent) - all eighteen items of the 'balance sheet ' and four items of the 'cash flow statement '; seven out of nine items of 'financial information outside financial statements '; twel ve o ut of fifteen items of 'overview and operational '; and one out of eight items of ' statement of revenue and expenditure '. The d iversity of the stakeholders' information and disc losure requirements would lead to d i fficulties in prioritising and reconciling the m ultiple requirements ( Edwards & Hu lme, 1 99 5 ; Likierman, 1 992). However, if the information and disclosure expectations of the broad stakeholder groups are to be met, either a broad information set relating to the reporting of performance should be provided or a consensus formed amongst key 'expert' stakeholders for a minimum level o f disclosure. In this research, 'expert' stakeholders' opinions and agreement on the info rmation necessary for assessing and monitoring the performance of local authorities and the importance of such item for d isclosure were considered through an expert opinion-seeking Delphi exercise that was c arried out following the survey of the broad group of stakeholders.
7.6 CHAPTER SUMMARY
This chapter has reported the results obtained from a questionnaire survey. The results provided insights into the perceptions of Malaysian local authorities' stake holders of the accountabil ity of the local authorities and the stakeholders' informational and disclosure e xpectations.
The results reported in this chapter have answered the first three research questions as outlined in the introductory section. In respect of the first research question, it is found that generally, the stakeholders of Malaysian local authorities consider that accountabi lity involves rendering an account to all stakeholders in respect of financial and managerial accountability. In respect of the second research question, the stakeholders indicate an expectation for a broad set of information for assessing and monitoring the performance of local authorities. The broad set covers all the information identified based on the findings of previous studies, professional recommendations, statutory provisions and practitioners' and experts' opin ions and as listed in the questionnaire. The stakeholders' expectations included not only financial information but also non-financial information. Final ly, in respect of the third research question, differences in the level of importance of categories and specific information items were identified. The differences were found to be signi ficant for the majority of the items.
While the results obtained from the questionnaire survey indicate that the local authorities should provide a wide scope of information to a broad group of stakeholders, there is a diversity of opinion on information and disclosure expectations. The diversity in the expectations was reconciled through the Delphi exercise that involved a panel of expert stakeholders. A l l items in the original questionnaire index and the importance of each item for disclosure as identified by the broad stakeholder groups were incorporated
into the process o f reaching the expert consensus. The results obtained from the exercise are reported in the following chapter.
CHAPTER EIGHT
RESULTS AND DISCUSSION:
EXPERTS AGRE EMENT ON THE DISCLOSURE OF PERFORMANC E INFORMATION AND FINALISATION O F D ISCLOSURE INDEX
8 . 1 I NTRODUCTION
The previous chapter reported the results obtained from a questionnaire survey that involved a broad group of stakeholders of Malaysian local authorities. Following the questionnaire survey, a Delphi exercise was conducted . The purpose of the Delphi exercise is to reconcile the information and disclosure requirements of the broad group of stakeholders identified in the questionnaire survey as reported in Chapter Seven and final ise the information items necessary for assessing and mon itoring the performance of local authorities and the importance of those items for d isc losure in the annual reports of local authorities. This is addressed by research questions four and five:
Research Question 4
What type of information items do expert stakeholders agree is necessary for assessing and monitoring the performance of local authorities and what i s the importance of such items for disclosure?
Research Question 5
How can the information and i mportance for disclosure, as agreed by the experts, be organised into a disclosure index for assessing the extent and quality of information d isclosure?
Following the introductory section, Section 8.2 presents a review of the Delphi exercise. The results of the Delphi exercise w h ich are related to research question four are reported and discussed in Section 8 . 3 . Section 8.4 provides the answer to research question five which describes the finalisation of the disc losure index. Section 8.5 summarises the chapter. Figure 8. 1 shows the position of this chapter in relation to the thesis.
Figure 8. 1 : Thesis Structu re: the Position of Chapter Eight I ntroduction
Aims
Objectives
Context
NPM
Chapter I Research ContextMalaysian
Local
Authorities
Chapter 2Accountability
Chapter 4 Research PersMiddle-Range-Thinking
Chapter 3 -Performance
Reporting and Disclosure
Chapter 5 Research Methods Chapter 6