Book Reviews: The History of the Financial Control Function of Local Government Accounting in the United Kingdom
Hay, Leon, The Accounting Historians Journal
The author, Rowan Jones, notes that this book is a "slightly modified version of the author's Ph.D. thesis, submitted to the University of Lancaster in 1986" [p. 3]. In the "Preface to the Original Thesis" Jones wrote:
We do not know what local government accounting is, or was: what has been written during its long history has the abiding characteristic of being a theoretical and a historical. It remains essentially a practice, borne out of past practice [p. 5].
Jones' thesis, of course, relates to local government accounting in the United Kingdom, but a similar comment could have been made in relation to state and local governmental accounting in the United States until the late 1970s.
The main purpose of the book, according to the "Preface to the Original Thesis," is to answer the following questions:
Why do local authorities account the way they do? Why is this accounting, in crucial respects, so different from commercial accounting (fund accounting, capital accounting, budgetary accounting)? Why in other aspects is it so like it (double entry, accruals)? Why did these differences and similarities emerge [p. 7]?
Jones' research led him to conclude that the answers to the above questions lie in the past; "indeed, they lie pre-1914" [p.7]. Evidence that the book is derived from Jones' Ph.D. thesis is given by the title of Chapter One: "What is Local Government Accounting? A review of the literature." The stated purpose of the chapter "is to discover what is already known about local government accounting and to explain why we need to know more" [p. 9] Readers who are familiar with the structure of local government in the U.K., and the accounting model used by those local governments, may feel that the chapter accomplishes its stated purpose. Other readers are advised to skip Chapter One and read Chapters Two, Three, and Four, which present Jones' synthesis of local government accounting from the Middle Ages through the first decade of the twentieth century. Chapter Five, "Local Government Accounting as Statutory Financial Control," follows logically after the three historical chapters. These four chapters provide the reader with the background needed to appreciate Chapter Six, "Implications for Theory and Policy Making."
In Chapter Six, Jones discusses the following implications for accounting theory as it relates to local government accounting in the United Kingdom: (1) budgeting and finance are inextricably bound up with local government accounting--therefore; the matching concept is irrelevant; (2) statistics of annual net expenditure drawn from the "revenue accounts" [revenue accounts in Great Britain are apparently equivalent to governmental fund types in the United States] are not costs, so cannot be used as measures of economy or efficiency and are not useful for comparative financial analysis; (3) the present accounting model ignores holding gains and, also, ignores cost savings on debt outstanding resulting from liabilities being fixed in monetary terms; (4) the recording of depreciation expense is irrelevant, and it would be inappropriate because it would affect the (tax) rates collected; and (5) fund accounting is important in distinguishing non-rate funds from rate funds (non-rate funds appear to be equivalent to proprietary fund types in the United States, and rate funds seem to be what Jones called revenue accounts in earlier pages and what are called governmental fund types in the United States). …