Motivation for accounting system development has interested researchers for some time. Motivation for management accounting system development within the United States government is particularly important at this time. Arguably, the largest and most complex organization in history, the federal government is in something of a management crisis. The Chief Financial Officers Act, the Government Performance and Results Act, the Government Management Reform Act, the National Performance Review, the Federal Quality Institute, the Joint Financial Management Improvement Program, and the Federal Accounting Standards Advisory Board represent recent actions to improve federal management practice. That management accounting is destined to fill an important role in better management is explained in the first paragraph of the recent proposed federal cost accounting standards (FASAB, 1994, p 1):
Today, federal program managers lack the means to understand and control the full cost of programs they administer. This is because existing financial and budgetary systems do not deliver enough useful information for daily management and for improving program operations. Most of the information available to managers is more appropriate for external reporting.
The fact that a few federal organizations already claim working cost accounting systems presents an interesting research opportunity to explore the motivating contingencies that led these few organizations to adopt cost accounting while the vast majority had not. Thus, while much of the empirical work with contingency theory seeks to explain variations among accounting systems, the organizations studied here are selected on the basis of a lack of variation: they all have a cost accounting system. In this study, contingency theory provides a framework or lens to guide the search for patterns among five federal adopters of cost accounting systems.
The Gordon and Miller (1976) contingency theory model suggested three major categories of variables that influence accounting information system development: environment, organization and management style (see Figure 1). (Figure 1 omitted) Empirical studies have researched the importance of various factors on accounting system design. Some have concentrated on environmental dimensions (Govindarajan, 1984), while others have considered the influence of production process and competition (Karmarkar, Lederer, and Zimmerman, 1990). Merchant studied the impact of both size (1981) and technology (1984). Waterhouse and Tiessen (1978) investigated the variables affecting frequency of systems generated reporting. Bruns and Waterhouse (1975) looked at aspects of the budget process.
This research does not seek to test contingency theory, which has been criticized by some for lack of empirical validation (Drazin and Van de Ven, 1985). Indeed, there is no variation in the dependent variable: the existence of a cost accounting system. Contingency theory, specifically the Gordon and Miller model, is used here as a framework to construct the variables and explore the interactions that may have been important in motivating the cost accounting systems' development. In doing so, this study hopes to characterize the fundamental forces associated with cost system development in the federal government.
Research conducted by the U.S. General Accounting Office (GAO) provides a point of departure for this study. Since the lack of reliable cost data necessary to evaluate performance, anticipate problems and plan future operations topped the Comptroller General's list of problems in federal management, (GAO/AFMD-85-A) the GAO sought to better understand existing cost accounting practice within the federal government. This effort (GAO/AFMD-90-17) hoped to learn the state of existing systems and to encourage development of improved systems.
GAO selected five federal agencies thought likely to have cost accounting systems: the General Services Administration and the Departments of Agriculture, Defense, Health and Human Services and Interior. …