From go to woe : how a not-for-profit managed the change to accrual accounting

Abstract

Purpose – The aim of this paper is to examine the process of change in an Australian not-for-profit
organization, from a cash-based to an accrual-based accounting system. Its particular focus is the
relationship between the image portrayed by accrual accounting adoption and the technical realities of
the new system.
Design/methodology/approach – Data were gathered from interviews, documents and meetings,
and were contextualized and interpreted using institutional theory.
Findings – The decision to change to accrual accounting was made at the top of the organizational
hierarchy in response to institutional pressure to present a corporate image. The implementation of the
new system was poorly conceived, inadequately resourced, and hampered by an authoritarian
structure that effectively ignored the technical incompetence and training needs of many accounting
staff. This resulted in an accounting system half way between cash and accrual, and very different
from the system as it had been promoted. The process caused conflict at all levels of the organizational
hierarchy.
Research limitations/implications – Accounting in not-for-profit organizations is an
under-researched area offering potential for fruitful research in a changing institutional landscape.
This institutional approach, while offering just one interpretation of the qualitative data gathered in
this project, provides valuable insights about the process of change.
Practical implications – Not-for-profit organizations play a vital economic and social role, and
need carefully to assess their responses to ongoing institutional pressures. In implementing change,
they face the challenge of balancing the promotion of an institutionally acceptable image and the need
for technical efficiencies.
Originality/value – The examination of change in an organization provides a rich context for the
exploration of the dynamic, problematic process by which a new accounting practice is embedded and
institutionalized.
Keywords Institutional theory, Not-for-profit organizations, Accrual accounting, Change process,
Qualitative research, Change management, Decision making, Training needs, Australia
Paper type Research paper