Popular Financial Reporting: A New Information Tool for Local Public Groups

1. Introduction

The approach to New Public Management and New Public Governance (Klijn, 2008; Osborne, 2010; Osborne et al., 2013) has placed emphasis on the relationship between the reference stakeholders and public administration with the introduction of new tools and new levers (Biancone et al., 2018). It becomes urgent to understand and identify the priority stakeholders (Clarkson, 1995; Donaldson & Preston, 1995; Carroll, 1996) defining the main ones in terms of power, legitimacy and urgency (Mitchel et al., 1997). Investors and citizens are the two main stakeholders of interest to public groups. It is emphasized how the reports and disclosures normally realized for a few providers including investors (Jones, 1992) supply information that is often too technical and complex to be available and accessible to the citizens (Jones et al., 1985; IPSASB, 2013). From this perspective, the growing need for accountability towards stakeholders (Sternberg, 1997; Belal, 2002; Bäckstrand, 2006; Collier, 2008; Caperchione, 2003) is a particular feature of the environment of local bodies; as is the evolution of the concept of citizenship, from customer and user of services to active stakeholder and co-producer (Doh & Guay, 2006; Chess & Purcell, 1999; Bovaird, 2006) with a say in how business is conducted. In recent years the significant step in the public sector has been to provide more understandable and easy information to a greater number of users (Christiaens et al., 2010). The creation of accessible and transparent financial documents is a starting point for the involvement of citizens, popular financial reporting has gained increasing attention from both scholars, managers and politicians. several finance professional associations including the Government Finance Officers Association (GFOA), the finance professional association have been promoted the Popular Reporting as a reporting tool. Both the Governmental Accounting Standards Board (GASB) and the Association for Governmental Accountants (AGA) promote the diffusion of popular reporting differently with their own guidelines, also proposing prizes (Harris, McKenzie, & Rentfro, 2008). Popular Reporting is a communication tool that is placed at the highest level of the “Pyramid of Accountability” prepared by the Association of Government Accountants (AGA), as it is able to provide aggregated data that meet the needs of public administrations. to account for the use of public resources (AGA, 2010). According to GASB the Popular Financial Reporting could be subjected to a comprehensive and easy-going availability of other potential users such as politicians, public sector employees, the media, community groups, etc. (GASB, 1992). Popular Financial Reportings (PFRs) are defined as financial reports targeted at public stakeholders (e.g. citizens, businesses and community group) who lack a background in public finance but who need or desire a less detailed overview of the government’s financial activities (Yusuf & Jordan, 2012). The Popular Financial Reporting purpose is to facilitate public stakeholders understanding of their government’s financial activities (Clay, 2008). The Government Finance Officers Association (GFOA) too offers a different approach to the financial statement in generally accepted accounting principles (GAAP). The GAAP are a common set of accounting principles, standards and procedures used by companies to compile their financial statement. GAAP are a combination of authoritative standards (set by policy board) and simply the commonly accepted ways of recording and reporting accounting information. While the Conceptual Framework for General Purpose Financial Report (GPFR) by Public Sector Entities (2008), The International Public Sector Accounting Standards Board (IPSASB) identifies three major groups of potential users: recipients of services or their representatives, providers of resources or their representatives, other parties, including special interest groups and their representatives. The IPSASB particularly emphasizes that the legislature, which acts in the interests of members of the community, is a major user of Popular Financial Report. Thus, since 2010, according the Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities, the IPSAS identified citizens as primary users of Popular Financial Report. This paper analyses what types of information the citizen wants and how, and what communication tools and forms the citizen wants to receive information. The questions answer to the research perspectives highlighted in previous research activities on the popular financial reporting (Yusuf et al., 2013). The analysis conducted analyses the theoretical approach underlying the implementation of popular financial reporting, the legislation and standards in which the model is developed. In the literature review, the characteristics of the Popular Financial Reporting are briefly analysed in afford to the others social reporting tools. The presentation of the first case carried out in a European context makes it possible to identify the model and characteristics of the new instrument linked to transparency and accountability.