The institutionalization of a new accrual-based public sector accounting system: the case of Cape Verde

Full Terms & Conditions of access and use can be found at https://www.tandfonline.com/action/journalInformation?journalCode=lpad20 International Journal of Public Administration ISSN: (Print) (Online) Journal homepage: https://www.tandfonline.com/loi/lpad20 The Institutionalization of a New Accrual-based Public Sector Accounting System: The Case of Cape Verde* Jaqueline Rosa Brito & Susana Jorge To cite this article: Jaqueline Rosa Brito & Susana Jorge (2021) The Institutionalization of a New Accrual-based Public Sector Accounting System: The Case of Cape Verde*, International Journal of Public Administration, 44:5, 372-389, DOI: 10.1080/01900692.2020.1728312 To link to this article: https://doi.org/10.1080/01900692.2020.1728312 Published online: 02 Mar 2020. Submit your article to this journal Article views: 300 View related articles View Crossmark data Citing articles: 2 View citing articles The Institutionalization of a New Accrual-based Public Sector Accounting System: The Case of Cape Verde * Jaqueline Rosa Brito a and Susana Jorge b a Economics and Business School, Research Centre in Political Science, University of Minho, Braga, Portugal; b Faculty of Economics, University of Coimbra and Research Centre in Political Science, Portugal ABSTRACT This paper analyses the process of institutionalization of a new public sector accounting system. Taking the Cape Verdean Central Government as setting, it seeks to understand what have been the main factors interfering in the reform, how such action has led to the institutionalization of the system currently in force, and how it may determine future reforms. From the theoretical perspective of contingency, several stimuli drive the reform of public sector accounting in emerging countries. In Cape Verde, they have been: changes in the political regime, the dominating doctrine of business accounting, financial pressures, and requirement of a wider public sector reform. In the light of institutional perspectives, behaviors of seeking for legitimacy and presence of mimetic and coercive forces in the reforms, have been evident. This study makes other countries with similar contexts and under public sector accounting reforms, aware of how to promote and manage these processes successfully. KEYWORDS Governmental accounting; reform process; contingency Model; Neo-Institutional Theory; emerging countries Introduction Recently, many countries around the world, including in emerging countries as Cape Verde, have undergone reform processes of their public financial management and accounting systems, in order to address new information needs within the scope of the New Public Management, but also for the purpose of keeping up with the process of international harmonization. These reforms have brought the accrual-basis regime to public sector accounting systems, in an approximation to business accounting, and the adaptation of public sector accounting international standards. CONTACT Susana Jorge [email protected] Faculty of Economics, University of Coimbra, Av. Dias da Silva, 165 3004-512, Portugal. *Cape Verde is an archipelago formed by ten volcanic islands in the central region of the Atlantic Ocean. At about 570 kilometers off the coast of West Africa, the islands cover a total area of just over 4,000 square kilometers, currently with a total of 549,333 inhabitants. The capital city is Praia, located in the island of Santiago. The Cape Verdean economy focuses mainly on growing tourism and foreign investments, which benefit from the warm climate all year round (annual average temperature between 20°C-25°C), the diverse landscape and cultural wealth, especially in music. The country’s political and social stability, welcoming and dynamic atmospheres, and strategic location in the Atlantic, allow it to be inserted in several markets, offering great business opportunities, in several sectors. Since its discovery in 1460, Cape Verde was colonized by the Portuguese, becoming an independent country in 1975. The official language is Portuguese, but the national language is criolo. Cape Verde has a semi-presidential republican political regime, with representative democracy. In 1991, political opening took place and multiparty elections were for the first time held. According to the Economist Intelligence Unit Democracy Index, it is currently one of the most democratic nations in The world. The country follows a so-called ‘non-alignment’policy in terms of international relations, through which developing nations aim at creating an independent route, not becoming involved in conflicts between the largest nations; it maintains cooperation relationship with all countries. Angola, Brazil, China, Cuba, France, Germany, Portugal, Spain, Senegal, Russia, Luxembourg and the United States, maintain embassies in city of Praia. The country is actively interested in foreign affairs, especially in Africa. The Cape Verdean government maintains close bilateral relations with some Portuguese-speaking countries and maintains participation in international organizations. It also participates in international conferences on political and economic issues. Since 2007, Cape Verde has had a special partnership status with the EU, within the scope of the Cotonou Agreement, and may come to request special membership, not least because the Cape Verdean Escudo is indexed to the Euro. (Sources: https://pt.wikipedia.org/wiki/Cabo_Verde and https://www.governo.cv/) Several reforms have been contributing to these conditions. Since the 1990s, considerable improvements have been made, including in public administration, and public sector accounting and financial management overall. Some of these reforms are explained in these paper (section 3). Because it was a frontrunner country in advancing with these type of reforms in Portuguese speaking African countries, Cape Verde is interesting to study on these matters. Important lessons can be learned to other emerging countries, namely African, with political, social and administrative contexts comparable to this country, and embarking or intending to embark in public financial management and accounting reform processes. One can realize the importance of coercive forces, both internal and external to the country, to stimulate the reforms, as well as of certain political and administrative conditions, which can be managed more or less favorably to conduct these changes successful. Overall, this study is useful for governing authorities (initiators of reforms), as well as for public managers, audit institutions, public finance management officials, consulting firms, and academics, as they are generally the main actors in the reform process in most contexts. INTERNATIONAL JOURNAL OF PUBLIC ADMINISTRATION 2021, VOL. 44, NO. 5, 372–389 https://doi.org/10.1080/01900692.2020.1728312 © 2020 Taylor & Francis Group, LLC The topic of reform processes of public sector accounting systems is relevant since, in addition to its role of financial information reporting for decision making and accountability, public sector accounting is considered an instrument to promote financial transparency, supporting the prevention and the fight against fraud and waste in public sector entities and governments overall. The information obtained from the public sector accounting systems must be reliable in order to allow understanding how public monies have been spent and where they have been applied. Public sector accounting and financial reporting have the ultimate purpose of protecting and managing public monies and allow for accountability (Chan, 2003). In emerging countries, the importance of public sector accounting systems and their reforms is pivotal, considering these countries have week democratic and economic systems, low transparency levels, and are highly dependent of external funds, namely from donors and international organizations. These conditions push financiers to demand for accountability of the funds provided, for which developed accounting and reporting systems are central. Accordingly, it comes important to understand how governmental accounting and reporting systems can and are being reformed, and work in these contexts. Particularly in the African countries setting, studies are almost nonexistent, so this paper intends to make here a contribution. In Cape Verde, the Decree-Law no. 29/2001 of 19 November, which defined the principles and standards for the financial regime of public sector accounting, aimed at reforming the system, which should be built on the basic principles of rigor, transparency, good management and financial discipline, effectiveness of the financial system, and the overall view of the financial situation of the Administrative Public Sector (Article 1). The National Plan of Public Sector Accounting (NPPSA/PNCP –Plano Nacional da Contabilidade Pública), approved by Decree-Law no. 10/2006 of 30 January, emerged in the wake of a series of procedures that were underway to reform the State’s financial administration. This Plan foresees changes in the public sector accounting system, including the transition from a cash to an accrual regime. The accounting transactions must be recorded using the double entry method. However, as will be explained bellow, its implementation is presently still in a very incipient state. According to the preamble of Decree-Law 10/2006 of 30 January, despite some changes, there was still lack of information and transparency in the accounts of public sector entities in Cape Verde. Within the Central Administration, the Government did not possess information on the value of its assets (money, receivables, consumables, buildings and land, vehicles, equipment, etc.), payables, and of its economic activity in general. There was no up-to-date inventory of all patrimonial assets (private of each entity) nor of the State’spublicdomainassetsaffectedtotheiractivities. This situation continues to this day, despite some improvements. As a consequence, financial statements, in particular the Balance Sheet and the Income Statement, have not yet been prepared in most Central Government bodies. In this context, this study aims at analyzing the current situation of the Cape Verdean accounting system referring to the Central Government, in order to understand how the various factors involved in the reform process (determinants, actors involved, etc.) have proceeded, how this procedure has led to the institutionalization of the system currently in practice, and how it might define other future reforms. Specifically, it seeks to answer the following research questions in the context of the Cape Verdean Central Government: (1) What are the contextual factors and the main actors that have affected the reform of the public sector accounting system in Cape Verde? (2) How the contextual factors and the actors have been interacting in public sector accounting reforms to this date? (3) How have the main changes in the public sector accounting system in Cape Verde been institutionalized? (4) How are the current contextual factors and key actors constituting a more or less favorable scenario for further reforms? The analysis is based on interviews with several individuals who held key positions in the reform process. The small size of the country and some political changes towards more transparency, made it easier to gather the information, and to better understand the reform process and its institutionalization. The study has as one of its theoretical references the Lüder’s(1994,2002) reform process model of public sector financial management and accounting, based on a contingency approach, which will also allow to infer on the probability of new reforms come to occur. Additionally, it resorts to neo-institutionalist approaches to understand the process of institutionalization of the public sector accounting system in the Cape Verdean Central Government. INTERNATIONAL JOURNAL OF PUBLIC ADMINISTRATION 373 It makes an interesting addition to the literature, namely in the combination of the two theoretical approaches, and also to the better knowledge of the practices of reform in the realities of emerging countries – it is an unprecedented study within the Portuguesespeaking African countries. Knowledge on the reform process is important for understanding the why of the system that was or will be adopted, and how it has been institutionalized and translated into practice. The case of Cape Verde contributes by making other countries with a similar context and under public sector accounting reforms (e.g., other Portuguese-speaking African countries), aware of what affects these processes, to better understand how to promote and conduct them successfully. Lüder’s Contingency Model and the neo-institutional theory, with the factors that allowed evidence in the Cape Verdean context, may also be used to explain public sector accounting reforms that may come to happen in those countries. Hereafter, the paper is organized in five sections. Section 2 presents the theoretical framework. Section 3 describes the recent reform of the public sector accounting system in Cape Verde. The methodology is explained in section 4. The results are presented and discussed in section 5, and section 6 summarizes the main conclusions. Theoretical framework and literature review The financial management reform process model The contingency model is used in this study as areference to analyze the factors and actors that influence the reform of public sector accounting, applying it to the case of the latest reforms in the context of the Cape Verdean Central Government. The most recent version of the model (Figure 1)–designated Public Financial Management Reform Process (FMR) Model –while continuing to give great importance to the contextual variables, it corrects, in comparison to the previous versions, the emphasis on the reform context over the behavior of the reform actors. In addition, it links the actors’behaviors and attitudes during the reform process with the results of the reform, allowing the model to be applied in the various stages of the process, i.e., before the reforms occur, but also afterwards (Jorge, 2003). The Contingency Model, in its initial version, clearly distinguished users from producers/preparers of the accounting information, presenting them in separate clusters (Jaruga & Nowak, 1996; Lüder, 1994). In the FMR Model this dichotomy between the users and the preparers of financial information was surpassed. Thus, the FMR Model relates two clusters of contextual variables (stimuli and institutional arrangements), three clusters of behavioral variables (reform drivers, political reform promoters and stakeholders) and two clusters of instrumental variables (reform concept and implementation strategy). These clusters of variables are related to each other by lines of influence, impact and feedback (Lüder, 2002). The different clusters of variables of the FMR Model can be briefly characterized as follows (Jorge & Mattei, 2017; Lüder, 2002): ●Stimuli (contextual variables) –usually the stimuli remain unchanged over a relatively long period of time. However, in the FMR Model, the fiscal crisis as a stimulus for the reforms, considered in previous versions of the model, was replaced by an economic-financial crisis, in which the fiscal factor is usually implicit. The information requirements derived from an administrative reform were added to clarify that the public sector accounting reform can be included in a broader administrative reform process. The stimuli are considered only as having a direct impact on the politicians responsible for the initiation/promotion of the reform. ●Institutional arrangements (contextual variables) – include the contextual and structural variables that, in the previous version of the model, were considered social and political factors, and barriers to implementation. They have a direct impact on the reform concept and on the implementation strategy, and are directly influenced by political promoters and indirectly influenced by reform drivers and stakeholders. Despite the various categories of variables within this cluster remain quite broad, Lüder (2002) presents some additional explanations, inter alia: ○Legal systems –in general terms, these may be classified in civil law and common law systems; different legal systems may be associated with different types of governance. The legal system also involves the electoral system and the flexibility of the budget law. ○State structure –referring to aspects such as unitary/federal structure, one chamber/two chamber parliament and division of powers between electorate and executive. ○Administrative structure –alludes to organizational and management characteristics and the division of powers between organizational units, namely centralized/decentralized, and 374 J. R. BRITO AND S. JORGE concentration/fragmentation of the financial management functions. ○Civil service –refers particularly to the qualification of those who deal directly with accounting, but also of other civil servants, and may affect the cost of reforms and the speed of their implementation. ●Reform Drivers (behavioral variables) –correspond to professionals and institutions that hold some recognition and promote the reform through oral or written publications. They attempt to make the reform a political issue, thereby influencing the political decisions associated with it. They reflect on problems that may be the reasons for politicians to move forward with reforms, thereby seeking to shape them by influencing the political reform promoters. This influence can be enhanced when organized in epistemic communities. ●Political Reform Promoters (behavioral variables) – all reforms need promoters or initiators (e.g., politicians who initiate the reform and have the power to make it effective). ●Stakeholders (behavioral variables) –institutions or individuals that influence the reforms positively STIMULI •Financial/Economic Crisis •Financial Scandal •Dominating Doctrine •Requirement of Public Sector Reform OUTCOME OF THE REFORM OR A REFORM STAGE Lines of Influence Lines of Impact Feed Back Loops • IMPLEMENTATION STRATEGY •Authoritarian/ Participative •Central Guidance •One / Multi-Step • INSTITUCIONAL ARRANGEMENTS •Legal System •State Structure •Administrative Structure •Civil Service •Culture • REFORM CONCEPT REFORM DRIVERS •Government Commissions •Professional Associations •Audit Institutions • Standard Setting Bodies • Consulting Firms •Scholars Networks •Epistemic Communities • STAKEHOLDERS •General Public •Parliament •Line Offices / Departments •Statistical Offices • • • • • POLITICAL REFORM PROMOTERS •Members of Government •Members of Parliament Figure 1. Financial management reform process model (FMR model). INTERNATIONAL JOURNAL OF PUBLIC ADMINISTRATION 375 or negatively (but are not reform drivers or political promoters), and are also affected by it, such as the general public, parliament, government departments and agencies, and statistical offices. ●Reform concept (instrumental variables) –corresponds to the innovations that allow the public sector accounting system to provide useful information, in order to assure financial accountability and the adequate public management and decision-making; corresponds to conceptual changes and not only to changes in procedures. It has a direct impact on the implementation strategy. ●Implementation strategy (instrumental variables) – influences the success or failure of the reform, as well as the deviations between the concept of the reform and the outcome obtained. Jorge (2003) summarizes that FMR Model, by Professor K. Lüder, is a tool that essentially clarifies the relationship between contextual and behavioral variables, and the conduciveness to reforms in a public sector accounting system of a given country, in order to make it more informative. Many studies have explored public management reforms in a variety of contexts, and it has often been argued that the public sector accounting (also designated as government accounting) plays a central role in reform trends that have occurred in the public sector over the last three decades (Hood, 1995; Lapsley, Mussari, & Paulsson, 2009). Some authors have used the Contingency Model (from its initial version to the FMR Model), to describe the contextual situation and/or explain the reform(s) of public sector accounting in several countries. In the context of emerging countries, for example, Godfrey, Delvin, and Merrouche (1996) applied the model at the Central Government level in East African countries (Kenya, Tanzania and Uganda). More recently, Upping and Oliver (2011) applied the model in Thai public universities. The following paragraphs synthesize the approaches and conclusions of these authors. Godfrey et al. (1996)–East Africa The study by Godfrey et al. (1996) was the first attempt to apply the Contingency Model to less developed countries, in particular to Kenya, Tanzania and Uganda. This application resulted in suggestions for some modifications to the initial model, which the authors summarized as follows: ●The authors recognized that financial pressures, together with the pursue for more public participation in political life (more democracy), are stimuli for reforms in public sector accounting; these stimuli directly influence the expectations of the general public (although not as users of information, as admitted in more developed countries) and the behavior of the government; public administrators and managers’behavior may be indirectly influenced. ●“Regional culture”was considered a component of the social structure –the level of political, economic, social and regional development, particularly in neighboring countries, was considered to be favorable or, conversely, to have adverse implications on the governments of underdeveloped nations. ●The country’s“international reputation”was included in the social variables –it corresponds to its international position and can influence its external evaluation, particularly by those who provide external resources, a critical condition for supporting the developing economies of these countries. ●The process of democratization, leading to the decentralization of the government structure, price liberalization, privatization, and Local Government restructuring, results in the pursuit for a more extensive disclosure of the financial situation of governmental organizations and public sector entities in general, not by the general public, as may occur in developed countries, but by international organizations and donor agencies. The authors consider that international organizations and donor agencies, which play an instrumental role while providing assistance in thepursuitandchangeoffundingfornations, benefit from the public sector accounting system and therefore seek to shape it to their financial information needs. The great contribution of this study, relevant for the situation in Cape Verde, is that the authors have been able to show that the Contingency Model, although drafted from the reality of developed countries, can also be applied in economically less developed or emerging countries, with great external financial dependence and with less democratic political regimes. Upping and Oliver (2011)–Thailand Upping and Oliver (2011)used the model developed by Lüder (1992) adapted having other studies as reference (e.g., Christensen (2002) and Saleh and Pendlebury (2006)), to explain the public sector accounting reform in Thailand, in particular in Thai universities. This 376 J. R. BRITO AND S. JORGE combination provided an integrated framework, conceptualizing the internal and external factors influencing accounting reforms and those that may constitute barriers or enable change in developing countries. The proposed model, which continues to rely on the contingency theory, has, thus, four components: internal and external pressures for change, barriers to change, and promotors of change. Drawing on the concepts of other models it has inspired from, including those from the private sector, the “Adapted Accounting Change Model”seeks to understand the causes, impellors and barriers to change in public sector accounting in the context of public organizations in emerging countries (Upping & Oliver, 2011). The motivators, the facilitators (Innes & Mitchell, 1990) and the stimuli (Lüder, 1992) are occurrences that arise at the initial phase of change. Producers and users of information (Christensen, 2002; Lüder, 1992) and reform managers (Cobb, Helliar, & Innes, 1995) assist in the steering of the process. Internal and external pressures may impel the reform of the accounting system, but the success of such process depends on facilitating conditions, i.e., on factors that provide for change, and on those that constitute barriers to change (Cobb et al., 1995; Innes & Mitchell, 1990; Lüder,1992). The contribution of this model lies in the combination of private sector and public sector approaches to analyze changes in the public sector accounting system, particularly focusing on an organizational perspective. This study is important for Cape Verde precisely because it demonstrates that, in the context of developing countries, there are concepts in the models used to explain private sector reforms that may be useful in explaining public sector accounting reforms. Institutional theory The institutional theory, particularly the neoinstitutionalism perspective, is used in this study to analyze how actors institutionalized the reform. Thus, it is researched whether there was any type of isomorphism, or legitimation of the reform, specifically before international organizations. Accounting practices are no longer created and introduced solely by rational logic and imbued solely with economic orientation, but also immersed in symbolic systems, processes of legitimation, power relations, habits and routines and other aspects of a cultural nature. This observation, which goes beyond the economic dimension, has been especially supported by sociological studies based on organizational institutionalism (Lawrence, 2008; Powell & DiMaggio, 1991; Thornton & Ocasio, 2008). In this context, one verifies that the Cape Verdean case fits into the new institutionalism, i.e., the organizational institutionalism. In the literature, several institutional theory perspectives have been developed, such as the Old Institutional Economics or the Economics Institutionalism, and the New Institutional Sociology, also known as Organizational Institutionalism (Major & Vieira, 2009). This last trend has the designation of “new” because it appeared at the end of the 1970s (Powell & DiMaggio, 1991). From the old to the new institutionalism, much has been added and modified regarding the conceptual framework of the institutional theory. Despite the more recent and relevant contributions, much of the new institutionalism incorporates from the old institutionalism (Selznick, 1996). Common in the new and old institutionalism is the importance attributed to the relationship between the organization and the environment, both understood as cultural entities, and the limiting character they attribute to instrumental rational approaches (Powell & DiMaggio, 1991). One highlights, therefore, the pertinence of institutions and behavior patterns of norms and values, of beliefs and assumptions, in short, of the culture, for individuals, groups and organizations. There are certain concepts that are considered crucial by the neo-institutionalists. The following are highlighted, for their importance in the present study: institutions and institutionalization, legitimacy and isomorphism. There is a very close relationship between institutions and power. Institutions exist insofar as they are powerful and influence behaviors, beliefs and opportunities of individuals, groups, organizations and societies. Institutions are stable patterns of social practice, but they are more than that: institutions are patterns of practice for which deviations from the pattern are neutralized in a regulated manner, through socially constructed controls, by some reward or sanction (Jepperson, 1991). Organizations need more than material resources and technical information to survive and thrive in their social environment. They also need social acceptability and credibility, i.e., they require legitimacy (Scott, 1992). In the organizational context, legitimacy can be defined as the generalized perception or assumption that an entity’s actions are intended, suitable or appropriate within a socially formed system of norms, values, beliefs and definitions (Suchman, 1995). Thus, organizational structures and practices tend to approach socially correct standards (Scott, 1991), in order to guarantee contextual support and social validity. INTERNATIONAL JOURNAL OF PUBLIC ADMINISTRATION 377 In search of social legitimacy, organizations try to adapt their structures and practices to environmental values. The pursuit for compliance arises because it appears to increase the organizations’chances of survival to a greater degree than effectiveness or immediate performance of the strategies and procedures adopted (Meyer & Rowan, 1977). Legitimacy is the fundamental concept in organizational institutionalism, given that organizations, in addition to relying on efficiency based on the concepts of rational systems, their survival also depends on the adoption of legitimate and socially accepted forces (Meyer & Scott, 1992). This means that organizational actors adopt and implement innovations because of legitimacy and efficiency. Reforms sometimes occur because entities legitimize their behavior towards other entities. The entities adapt their activities based on norms and impositions in order to obtain legitimacy by the social environment. Compliance with environmental characteristics or isomorphism results from the influence of coercive, mimetic and normative mechanisms (DiMaggio & Powel, 1983). These institutional isomorphic mechanisms relate both to the maintenance and to the changing of cultural values and practices. The situation of change is shaped by the incorporation of new values and practices in the institutional context, based on different origins and possibilities, namely: influence of new conceptions originating in a wider institutional context; structural transformations in power relations between social entities; conflicts of interest between social groups; technological innovations, among others (DiMaggio & Powel, 1983). The coercive isomorphism results from formal and informal pressures exerted on organizations by other organizations of which they are dependent, or by the cultural expectations of society. Mimetic isomorphism occurs when one organization imitates the other’s practices in order to confront environmental uncertainties, corresponding to a process of reproduction or imitation of policies, structures, technologies, strategies, production systems, services, and administrative practices in general. The normative isomorphism derives from the establishment of standards by a determined professional community, with the purpose of cognitively substantiating and giving legitimacy to the activity developed by itself (DiMaggio & Powel, 1983). Institutional isomorphism is well suited to the study presented in this paper, as governments in developing countries often accept change to gain legitimacy (to secure external support on a continuous basis), as they rely heavily on external donors. Since they finance many of the country’s public administration activities, donors require innovations based on the best international practices. In summary, considering that the reform of public sector accounting in Cape Verde is a crucial issue for the country’s continued development and for securing its sources of financing, it is expected that funders will have explainable behavior in the framework of institutionalism. The institutional theory has been applied in various fields and types of organizations –public sector, nonprofit organizations and financial entities. Among several studies that have applied this theory in the public sector accounting, the following are some examples regarding emerging countries. Adhikari, Kuruppu, and Matilal (2013) developed a comparative study on the dissemination and institutionalization of public sector accounting reform in the Central Government of Nepal and Sri Lanka, where they applied institutional isomorphism. In the case of Sri Lanka, normative and mimetic factors such as professionalism, education and awareness of international trends were observed. These factors were derived from seminars and experiences where some of the ideas of public sector accounting reform were conceived, such as the introduction of accrual accounting and program and performance budgets. At the same time, this study demonstrated the presence of resistance in the implementation of reforms, particularly reforms to the introduction of accrual accounting, by lower-level employees in both countries (Adhikari et al., 2013). Goddard, Assad, Issa, Malagila, and Mkasiwa (2016) analyzed public sector accounting practices in Tanzania at the levels of central and local government and nongovernmental organizations. They used the institutional theory to interpret the different forms of demand for legitimacy behavior in response to the pressures exerted by international donor organizations in relation to the principles of New Public Management. Empirically, they studied activities of legitimation pursuit taken by the stakeholders involved, concluding that legitimacy, interaction between the systems and isomorphism, occur in all three levels of the public sector. These studies are particularly interesting for the present research, since they apply the institutional theory in accounting reforms in emerging countries. Being Cape Verde also a middle-income country, making part of the emerging economies, the conclusions of these studies are important to the Cape Verdean context. Recent reforms in the public sector accounting system in Cape Verde Cape Verde gained independence from Portugal in 1975 (Cardoso, 1993). Prior to the year 2000, public sector accounting in Cape Verde was essentially cash-based budgetary accounting, by colonial heritage. However, in the last 378 J. R. BRITO AND S. JORGE decades, a significant reform has begun, since the approval of Decree-Law no. 29/2001, 19 November. The aim of this diploma was to reform public sector accounting, which came to be based on principles of rigor, transparency, good management and financial discipline, effectiveness of the financial system, the overall view of the financial situation of the Administrative Public Sector, and modernization of the State and public management, mainly through the use of new information technologies (Preamble of Decree-Law no. 29/2001, 19 November). From 2001 onwards, accounting transactions started to be recorded using the double-entry bookkeeping method, and in 2006 public sector accounting changed from a cash-based only regime to also include an accrual basis regime, by the diploma that approved the NPPSA (DecreeLaw No. 10/2006, 30 January). These reforms, as referred to in Decree-Law no. 29/ 2001, generally seek to improve the financial management practices of the Government and of public administration entities at large, ultimately seeking some benefit in the public services themselves. The NPPSA was introduced with the aim of bringing the accounting system applied in private business companies, to the State, having its inspiration in the National Business Accounting Plan in force, and in the best practices of several countries. The NPPSA, when fully implemented, will provide budgetary, financial and patrimonial information to Cape Verde’s public sector accounting, which assists public managers in the decision-making. The new accounting system based on the NPPSA will preserve and improve the monitoring practice of the budget execution, by the State. The State is the owner of a vast property (money, receivables, inventories, land and buildings, vehicles, equipment, etc.) which is in constant change and has a great spatial dispersion. The implementation of the NPPSA will also allow the State to know the value of this property. In addition, the NPPSA brings a proximity to business accounting, intending to apply the accrual regime and financial accounting. As a management tool, the NPPSA enables greater accuracy in the State’s accounts, timely information and effective control (internal control, fixed assets control, debt control, etc.) (Decree-Law no. 10/2006, 30 January). As shown in the respective legal regulation, the NPPSA comprises four dimensions: dimension 1 (financial accrual-based accounting), Accounts Classes 1to7–in these classes are included the cash on hand and deposits, receivables and payables, inventories, non-current assets, net worth, public debt, and revenue and gains; dimension 2 (budgetary accounting), Accounts Class 8 –this class incorporates essentially records associated with the budget execution process; dimension 3 (management accounting), Accounts Class 9–this category for management accounting is of free development, adapted to each entity, and can be used for costs by functions, activities or processes of the entity; and dimension 4 (off-balance sheet accounting), Accounts Class 0 –this class registers contingent or future liabilities. Thus, the public sector accounting system in Cape Verde based on the NPPSA, once implemented, will cover three subsystems (Table 1): budgetary accounting, financial accounting and, according to the needs and specificities of each public entity, management/cost accounting. It also includes auxiliary accounting modules, namely for inventories, receivables and payables, non-current assets, human resources and contingencies (Decree-Law no. 29/2001, 19 November, Article 92). The implementation of the NPPSA has been slow, in particular with regard to the introduction of financial and management accounting in an accrual basis. Nevertheless, according to one of the stakeholders interviewed for this work, currently “(…) some public sector business entities began preparing management accounting, e.g., in the case of hospitals and of water resources management and renewable energies”[translation by the authors]. Methodology As mentioned, this research aims to study public sector accounting in the Central Government of Cape Verde, especially the reforms that have occurred recently and what has affected them (determinant factors, actors involved, detected behaviors, etc.). The Central Government of Cape Verde can be seen as a case study, because it corresponds to a social unit, and a phenomenon (the accounting reform process) that happens in one place is being studied. According Table 1. Cape Verdean system of public sector accounting. Subsystems Budgetary accounting Financial accounting Management accounting Purpose Description, monitoring and control of revenue and expenditure. Provides accounting information on the economic, financial, patrimonial situation and of contingencies, of public entities. Allows collecting information about costs by functions, activities or services. Recording Method Single entry Double entry Single or double entry Accounting regime Cash basis Accrual basis Accrual basis INTERNATIONAL JOURNAL OF PUBLIC ADMINISTRATION 379 explained, it “(…) initiated with the implementation of the ISBFM [technological integrated system] and later it will integrate the accrual regime. In the Department of Patrimony, they are finalizing the evaluation and inventory of the assets. The implementation of accrual accounting has already begun, we are testing the system; when fully validated, we will put it into practice as a whole, that is, the implementation of the NPPSA will be extended to all central government”[translation by the authors]. The strategy adopted for the implementation of the reform has been essentially authoritarian because the reforms were decided, imposed and initiated by the central government. However, several fronts/areas of reform were defined, with several working groups to carry out the actions. In order to carry out the reforms, priorities/targets have been defined annually. For example, for 2009/2010 the following objectives were outlined (Ministério das Finanças, 2009): consolidate the devolution to the sectors or services that hold each of the ISBFM modules, to support budgetary management; endow the country with a National System for Planning, Monitoring and Evaluation of Programs and Projects; update the functional classifier. For the year 2010 (Ministério das Finanças, 2009): consolidate the implementation of new public accounting (with the financial scheme and NPPSA implemented). In 2011 the objective was mainly the Banking of the Treasury, aiming at simplifying the processes of collecting revenue. The main objective in 2015 was to improve property management, starting with georeferenced inventorying (Ministério das Finanças e do Planeamento de Cabo Verde, 2015). Thus, it has been observed that the reform has been multi-stage. Future prospects for reform According to Lüder (1992, 2002), the environment of the financial management and public sector accounting reform (considering the contextual, behavioral and instrumental factors that influence changes), directs the process more or less favorably. Table 8 summarizes, considering the analysis of the previous sections, the intervention of the various factors involved in the process of public sector accounting recent reform in the Central Government of Cape Verde. It was observed, therefore, that there was a generally favorable climate in Cape Verde for reforms to begin and to continue. In fact, it should be highlighted: ●The stimuli (contextual variables), e.g., the pressures of the external financiers (+), led favorably (+) to the reforms. There was a change of paradigm, since the international partners, to the detriment of financing concrete projects, began to finance the State Budget. Thus, the Cape Verdean State was able to borrow to invest, modernizing the public sector accounting and financial management system, as recommended by the international partners. ●In the institutional arrangements (contextual variables), the civil service has sometimes been unfavorable (+ -), since employees lack training and have shown resistance to change. ●Regarding behavioral variables, the political promoters were the initiators of the reform, so they contributed considerably and positively to its implementation (+). The main reform drivers were the commissions that accompanied the reform (namely the RCU) (+), given that professional associations are recent in the country, not having participated until the present time, but in future reforms they may be invited to participate (= /+). Among the stakeholders, the various Departments-General played an active role (+) in the implementation of the reforms. ●Regarding the instrumental variables, the center of the reform concept was the elaboration and implementation of the NPPSA, which, although not yet fully implemented, has contributed to innovations (+), providing the State with a global picture of its assets and accounts generally more informative and transparent. The implementation strategy (authoritarian, where the orientations come from the central government and the reforms are carried out in phases) seems to also have a positive (+) impact on the implementation of the changes. Considering: the progress that continues to be made in the implementation of the NPPSA; the most recent conditions of the political, economic and social context of the country, which benefits from social peace; improvements in the country’seconomic condition in international terms; increasing importance of accounting standard-setting bodies and professional associations in the area; and some increase in the academic community and university degrees related to public management –it can be anticipated that the Cape Verdean context will continue to favor future public sector accounting reforms, with a view to greater efficiency and effectiveness in the public sector, namely moving forward to the adoption of the international standards, since this has been the trend also in business accounting in the country. 386 J. R. BRITO AND S. JORGE Conclusion This paper combines the theoretical approaches of the Lüder’s Contingency Model (FMR Model) with the NeoInstitutional Theory (in the perspectives of legitimacy and isomorphism) to analyze the institutionalization of the public sector accounting system in an emerging country, specifically in Cape Verde. The empirical study showed that several stimuli impelled the public sector accounting reform in that country, namely: changes in the political regime, the dominating doctrine of business accounting, financial pressures, and the requirement of a wider public sector reform. Several actors participated in this reform, namely: Members of the Government –Minister of Finance and the Secretary of State for Finance; all departments of the Ministry of Finance; and a specific team/commission created for the management of the reform project, called “NPPSA implementation project”(“Projeto de implementação do PNCP”). With regard to the Neo-Institutional Theory perspectives, legitimacy-seeking behaviors and the presence of mimetic forces were observed, given that international partners served as a reference for good practices for the reform. In addition, coercive isomorphism was also observed, as external partners began to make more demands to the financial management and public sector accounting system, since Cape Verde became a mediumincome country. Regarding the application of the FMR Model, in general, the contextual factors (stimuli and institutional arrangements), as well as the actors (political promoters, reform drivers and stakeholders), have contributed positively to the reforms and continue to be positively combined to encourage future reforms. As contributions to be highlighted, this study allows other countries with identical contexts to Cape Verde, namely other African countries for which there are no studies, to know about innovations, and to better Table 8. FMR model in Cape Verde: contextual conditions for innovations/reforms in public sector accounting. Criteria Conduciveness to Innovations Stimuli ✓(External) Financial Pressures + ✓Dominating doctrine (business accounting) + ✓Requirements of a wider public sector reform + ✓Changes in the political regime + Institutional arrangements ✓Legal System + – ✓State/Administrative Structure + ✓Civil Service + – ✓Culture + Reform drivers ✓Government Commissions + ✓Professional Associations =/+ ✓Standard Setting Bodies =/+ ✓Scholars Networks =/+ Political Reform Promoters ✓Members of Government + ✓Members of Parliament + Stakeholders ✓Parliament + ✓Line Offices/Departments + ✓Audit Institutions + ✓Statistical Offices +=/+ ✓General Public Reform Concept ✓National Public Sector Accounting Plan: + ●Switching from a cash basis to an accrual basis ●Double-entry ●Financial accrual accounting ●Procedure-based innovations ●Budgetary accounting ●Increased transparency and accountability ✓Program and performance-based budget + Implementation Strategy ✓Authoritarian + ✓Central Guidance + ✓Multi-Step + OVERALL ASSESSMENT Favorable Key: + Favorable; + –Sometimes unfavorable; –/+ Moving towards favorable; +/ = Moving towards not important; = /+ Moving towards important. Source: Adapted from Godfrey et al. (1996); and Jorge (2003). INTERNATIONAL JOURNAL OF PUBLIC ADMINISTRATION 387 understand what affects the processes of public financial management and accounting reform. This will permit them to realize how to impel and drive those processes successfully. Lüder’Model and the Neo-Institutional Theory in the perspectives applied in this study, may be used to explain the processes of public sector accounting reforms eventually happening in those countries too. Context similarities –namely countries considerably financially dependent of others or of international organizations, make them susceptible of being pressured for requirements of reforming the public financial management and accounting systems. Therefore, the present study is useful for governing authorities (initiators of reforms),aswellasforpublic managers, audit institutions, public finance management officials, consulting firms, and academics, as they are generallythemainactorsinthereformprocessinmost contexts. Overall, it contributes to the development of research in Administrative Sciences and to communicate the reality of Cape Verde in terms of governmental accounting reforms. Finally, the “Gioia method”and the summative content analysis applied make an important contribution to the literature, especially about African countries, regarding which research is still incipient. Indeed, the use of this methodology to analyze and structure the data from the interviews, which implied clearly limiting the themes (categories) and subcategories, and aggregating the dimensions through a directed content analysis, as well as summative content analysis, is still very little used in studies outside the Anglo-Saxon countries, so this study makes here also a significant addition. As main limitations of the research, the categorization of interview elements must be highlighted, which created some difficulties, requiring input from the researcher, which may have led to some subjectivity in the analysis. For future research it is proposed to carry out a comparative study to analyze the accounting systems of other African countries and what has affected them. For example, there are African countries (e.g. South Africa) that have already adopted IPSAS and others that are moving towards these standards (e.g. Ghana, Nigeria). In this context, it would be interesting to analyze what motivated these countries to adopt the IPSAS and compare them with others, using another perspective of the Institutional Theory, the competitive isomorphism (Meyer, 1979) to analyze the reforms. Notes 1. The RCU coordinates the implementation of the various projects, ensuring the integration, control of the execution, as well as the follow-up and evaluation and consolidation of the reports to be submitted to the Steering Committee. In addition, it provides technical support whenever it proves necessary. It may be comprised of a Coordinator, a Program Manager Consultant for revenues and receipts, a Program Manager Consultant for expenditures and payments, and a Project Assistant, if so required (Ministério das Finanças, 2009). 2. 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