Budgetary Governance and Accountability in Public Sector Organisations

Critical Perspectives on Accounting 24 (2013) 518531
Contents lists available at ScienceDirect
Critical Perspectives on Accounting

journal homepage: www.elsevier.com/locate/cpa
Budgetary governance and accountability in public sector

organisations: An institutional and critical realism approach
Jean Claude Mutiganda *
School of Business and Economics, Abo Akademi University, Henriksgatan 7, 20500 Abo, Finland
A R T I C L E I N F O
A B S T R A C T
Article history:
Received 9 January 2012
Received in revised form 20 April 2012
Accepted 20 August 2012
Available online 20 August 2013
This paper analyses the impact of the institutionalisation of governance and budgetary
policies on the accountability of organisational actors from an institutional and critical
realism perspective. The study extends the framework by Burns and Scapens (2000) to
critical realism. Findings from eld studies conducted in two public hospital districts in
Finland show two institutions of budgetary governance: the political and the technical.
Accountability practices depend on how the institutionalised policies have reduced or
increased the gaps between the real, the actual and the empirical domains of reality of the
organisational actors involved and the governance policy that prevails at a given domain of
reality. The use of budgetary information as a tool of governance and accountability in the
empirical eld of the study cannot be taken for granted.
2013 Elsevier Ltd. All rights reserved.
Mots cles:
Redevabilite
Gouvernance
Realisme critique
Changement institutionnel
Budgetisation
Palabras clave:
Rendicion de cuentas
Gobernancia
Realismo crtico
Cambio Institucional
Presupuesto
Keywords:
Accountability
Governance
Critical realism
Institutional change
Budgeting
Public sector
1. Introduction
The ongoing nancial crisis has made topical the role of governance and budgetary policies in the accountability of private
and public sector organisations (Brennan and Solomon, 2008; Shaoul et al., 2012). Budgets are tools of governance that can
be used to convey organisational goals to organisational actors (Abernethy and Brownell, 1999; Covaleski et al., 2003;
Goddard, 2004). Governance involves setting goals and monitoring their implementation (Bevir and Rhodes, 2003).
Accountability involves giving and asking for accounts of reasons for action or conduct (Roberts and Scapens, 1985). In public
sector organisations, however, budgets can be used to institutionalise political policies that are not necessarily linked to the
* Tel.: +358 505475549.

E-mail address: jmutigan@abo..
1045-2354/$ see front matter 2013 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.cpa.2013.08.003
J.C. Mutiganda / Critical Perspectives on Accounting 24 (2013) 518531
519
ways in which organisational actors in the eld think and act (Fallan et al., 2010; Lapsley et al., 2011). In this setting, the links
between institutionalisation of governance and budgetary policies, and the accountability of budgetary actors, become
complex realities, and needs further conceptualisation (Gibbon, 2012; Greiling and Spraul, 2010).
In this special issue of Critical Perspectives on Accounting (CPA) authors analyse governance and accountability in public
sector organisations from different perspectives showing: the complex relationships between the use of accounting
information as a tool of governance in public universities (Habersam et al., 2013); the relevance of performance information
for political decision makers and public managers in the governance of public services (Saliterer and Korac, 2013); the
nancial and technical competence of political decision makers in the governance of municipal water utility (Vinnari and
Nasi, 2013); the governance roles of internal controllers assisting top managers in public sector organisations (Roussy,
2013); and the impact of independent inspectorate during implementation of governance, performance and accountability
reforms in private prisons (English, 2013). This study contributes a critical realism approach to the CPA special issue by
analysing the relationships between institutionalisation of governance and budgetary policies and the accountability of
budgetary actors in public sector organisations.
Burns and Scapens (2000) proposed a conceptual framework to analyse the process of institutionalisation of
management accounting rules and routines that take place between the institutional realm and the realm of action
(Burns and Scapens, 2000). The Burns and Scapens (2000) framework is based on so-called old institutional economics
theory (OIE) (Veblen, 1898, 1919), as opposed to neo-institutional economics and new institutional sociology (Scapens
and Varoutsa, 2010), and has received international application in the management accounting and control literature
(Busco et al., 2006; Lukka, 2007; Ribeiro and Scapens, 2006), including the public sector (Hyvonen and Jarvinen, 2006;
Macinati, 2010; Nyland et al., 2009). The Burns and Scapens (2000) framework, however, assumes that institutionalised
rules and routines are taken for granted by institutional actors and start to shape their ways of thinking and doing
regardless of the resistance to change encountered during the institutionalisation process (Burns and Scapens, 2000).
Previous studies that applied the Burns and Scapens (2000) framework showed that institutionalisation of management
accounting policies and routines leads to divergent patterns of action in the realm of action (Hyvonen and Jarvinen, 2006;
Lukka, 2007; Siti-Nabiha and Scapens, 2005). These studies, however, did not question the extent to which the
institutionalised change can be taken for granted to shape the ways institutional actors in their interactions with other
stakeholders think and act.
Therefore, the Burns and Scapens (2000) framework needs further theorisation (Ribeiro and Scapens, 2006; Scapens,
2006), especially when used to analyse the impact of governance and budgetary policies on the ways institutional actors
think and act in their accountability relationships.
This study lls this gap by using critical realism (Bhaskar, 1975; Sayer, 1992, 2000), the ontology of which argues that the
world (social and natural) has three stratication levels of reality: the real, the actual and the empirical, and exists
independently of our knowledge of it. The empirical domain is the domain of experience; the actual domain is the domain of
experience and events; and the real domain is the domain of mechanisms, events and experience (Bhaskar, 1975; Sayer,
2000). The Burns and Scapens (2000) framework focuses on one domain of analysis the empirical and overlooks the
effects of the real and the actual domains of reality on the ways institutional actors think and act in their the empirical
domain of reality. In critical realism, the world includes objects (i.e., anything that can be subject to study), events and
structures that have particular causal powers and particular causal liabilities. The objects and their structures can be
inuenced by different mechanisms located in the real domain of reality, causing other, different events to occur in the actual
domain of reality (Bhaskar, 1975). Hence, the occurrence of an event is not dependent on institutionalisation of the rules and
routines underlying it, but on the activation of a mechanism in the real domain of reality which is a necessary condition for
that event to occur (Sayer, 1992, 2000).
The aim of this study is to extend the Burns and Scapens (2000) framework by analysing how institutionalised
governance and budgetary policies affect the ways in which institutional actors in accountability relationships think and act.
Extending the Burns and Scapens (2000) framework provides stronger conceptual tools to analyse how institutional actors in
complex hierarchies react on accountability in the actual domain of reality when their ways of thinking and doing in the
empirical domain of reality are inuenced by different governance and budgetary policies that are institutionalised in the
realm of action (Bhaskar, 1975; Sayer, 1992, 2000).
The research question posed in this paper is: how does the institutionalisation of governance and budgetary policies
affect the accountability of organisational actors when analysed from the perspective of critical realism?
A potential contribution of the study is to show limits of the taken-for-granted assumption in the Burns and Scapens
(2000) framework about the effects of institutionalised policies on the ways institutional actors think and act when the intrainstitutional change process has taken place in a complex setting of budgetary governance and accountability.
Drawing on critical realism methodology (Layder, 1993; Sayer, 1992, 2000) two intensive eld studies were conducted in
two hospital districts in Finland from 2009 to 2012. Since the 1990s hospital districts in Finland have experienced major
institutional changes at macro and micro levels (Hakkinen and Lehto, 2005; Hyvonen and Jarvinen, 2006; Kurunmaki,
1999a,b), and so offer an appropriate eld from which to collect data of relevance for the study. Intensive eld studies are
recommended in critical realism because they allow the researcher the possibility to understand how interactions between
actors and their mechanisms lead to events that take place in the actual domain of reality, and the effects of those events on
the experiences of actors in the empirical domain of reality, which lead to different events in the continuous process of
change (Sayer, 1992).
520
The study used data based on document analysis, interviews and observation of actors in their elds in order to
understand: the process of institutionalisation of budgetary governance and accountability; the actors involved and their
roles; how institutionalised change affects accountability relationships between actors; and how, when, where and why
different units had different accountability practices. Interpretation of data applied double hermeneutic methodology
(aiming to understand how actors perceive the meaning of their actions), followed by retroduction, that is, a reconstruction
of basic conditions under which things are or are not (Danermark et al., 1997). The study also applied judgemental rationality
to explain alternative ndings (Easton, 2010; Sayer, 1992, 2000).
The study shows that institutionalisation of governance and budgetary policies results in two institutions of budgetary
governance: the political and the technical. The political institution has the political power to set governance and budgetary
policies and to monitor their implementation. The technical institution has the professional power to inuence budgetary
setting and implementation. Accountability practices between the political and technical institutions, and within the
technical institution, depend on how institutionalised policies have reduced or increased the gaps between the real, the
actual, and the empirical domains of reality of organisational actors, and governance policy that prevails in the empirical
domain. Therefore, the use of budgetary information as a tool of governance and accountability cannot be taken for granted.
This study adds a critical realism perspective to the Burns and Scapens (2000) institutional framework by extending it to a
public sector governance, budgeting and accountability setting.
The remainder of this paper is structured as follows: Section 2 develops the theoretical framework of the study. Section 3
presents the eld research, Section 4 the eld ndings, and Section 5 concludes the paper.
2. Theoretical framework
2.1. Accountability in complex organisations
Roberts and Scapens (1985, p. 447) dened accountability as involving a relationship between the giving and demanding
of reasons for conduct in any organisation. However, accountability is a broad concept and can be used in different contexts
to mean different things (Joannides, 2012; Sinclair, 1995). Therefore, this study limits its analysis to accountability between
budgetary actors. The relational aspect of accountability implies a hierarchical relationship between the giver of accounts,
that is, the accountee, and the receiver of those accounts, or the accountor (Munro, 1996). Mechanisms of relational
accountability dwell in the power or the right of accountors to request and enforce accounts from accountees, and the
willingness of accountees to comply with accountability requirements deemed appropriate by them or imposed on them
(Messner, 2009; Roberts, 1991, 2009).
Accountability remains an individual issue in relation to the accountee, however, when the accountee is requested to give
accounts or reasons for conduct to the accountor (McKernan, 2012; Roberts, 2001). Roberts (1991) referred to the
individualised aspect of accountability as identity accountability. At an organisational level, identity accountability is
closely related to the mission and goals of the organisation and shapes the content of accountability narratives given to
stakeholders (Roberts, 1996; Unerman and ODwyer, 2006; Willmott, 1996). At an individual level, identity accountability is
reected in the accountees view of what is appropriate to include in accountability narratives, given the accountees own
perceptions of his/her responsibilities, career motives, personal and professional ethics, etc. (Cooper and Owen, 2007;
Messner, 2009; Roberts, 2009). Identity accountability remains deeply rooted in the needs and experiences of accountees in
their empirical elds and can lead them to resist governance and budgetary policies that do not mirror empirical realities
(Joannides, 2012; McKernan, 2012). By examining the relational and identity aspects of accountability, critical realism
analyses how governance and budgetary policies affect accountees taken-for-granted ways of thinking and doing during
intra-institutional change.
2.2. Governance policies and their effects on accountability
Governance is the work of governing or steering an organisation (Bevir and Rhodes, 2003; Hyndman and McDonnell,
2009). Governance involves setting goals and using power to monitor their implementation (Bevir and Rhodes, 2003). This
study focuses on three policies of governance: coercive governance, governance for performance and governance for
mission. Coercive governance is normative and punitive (English, 2013) and applies disclosure of information as a
mechanism to monitor how accountees have complied with the rules and norms issued by their hierarchy (Forbes et al.,
2007). By contrast, governance for performance is output focused (Saliterer and Korac, 2013), and relies on monitoring
accountability through the use of quantitative and non-quantitative data (Ebrahim, 2009; Forbes et al., 2007; Habersam
et al., 2013). Governance for mission is often applied in public and not-for-prot organisations, which aim to full their ideal
mission without making a prot (Ebrahim, 2009; English, 2013; Forbes et al., 2007). For example, one of the major missions
of a public hospital is to maintain public health and well being. As a result, the accountability of managers at a public hospital
clinic tends to include the mission aspect of the hospital as a whole (Kurunmaki, 1999a), and can lead to resistance against
the institutionalisation of coercive and performance budgetary policies in the governance of clinics (Comerford and
Abernethy, 1999; Lapsley, 2001; Pettersen, 1995). Governance for mission is adaptive between coercive and performance
policies in monitoring budgetary accountability (Ebrahim, 2009). Therefore, the role of governance in the institutionalisation
of budgetary policies has an impact on accountability practices (Goddard, 2004).
521
2.3. Conceptual framework

The Burns and Scapens (2000) framework is based on the assumption that institutionalised rules and routines
become an institution, that is, a way of thought or action of some prevalence and permanence, which is embedded in
the habits of a group or the customs of a people (Hamilton, 1932, p. 84). Institutions, through the process of
institutionalisation, impose coherent behaviour on human activity (Burns and Scapens, 2000; Scapens, 2006). Contrary
to habits that tend to replicate previously acquired or adapted forms of action at an individual level (Hodgson, 1993),
routines deal with thoughts or actions adopted by groups of people and applied at individual level (Burns and Scapens,
2000). Rules are formal prescriptions about how things should be done in an organisation (Burns and Scapens, 2000).
Hence, a body of rules and routines cannot form an institution as applied by Burns and Scapens (2000), unless
assumptions about how things are done in an organisation have become taken for granted by institutional actors
regardless of their historical background of resistance to change encountered in the institutionalisation process (Burns
and Scapens, 2000). To explain the outcome of the institutionalisation process, Burns and Scapens (2000) used
institutional dichotomies such as ceremonial and instrumental change, among others. A ceremonial institutional
accounting change occurs when institutionalised rules or routines do not change already established power
relationships, in which case accounting information continues to be used to help the self even at the expense of the
community (Dugger, 1990, p. 426).
In the contrary scenario, that is, when accounting information is used to help the community at the expense of the self
(Dugger, 1990, p. 426), institutional change is instrumental (Burns and Scapens, 2000; Bush, 1987).
Previous management accounting and control studies that applied the Burns and Scapens (2000) framework did not
question how institutionalised accounting rules and routines affect the accountability of institutional actors in organisations
that have complex hierarchies (Hyvonen and Jarvinen, 2006; Macinati, 2010; Nyland et al., 2009). Moreover, although the
study by Lukka (2007) found that institutionalised management accounting policies remain loosely coupled with old
management accounting routines, that study did not question the taken-for-granted assumption in the Burns and Scapens
(2000) framework that institutionalised rules shape the ways organisational actors think and act. The critical realism
question, therefore, is how a budgetary governance institution leads to taken-for-granted ways accountees in their
interactions with accountors think and act.
Critical realism is not a substantial social theory but a philosophy that focuses on analysing the nature of
reality in context (Bhaskar, 1975, 2011; Easton, 2010; Sayer, 1992). Critical realism is also different from other critical
theories on ontological grounds. For example, OIE focuses on one aspect of the world (the social) and on one domain
of reality (the empirical). Critical realism, however, is compatible with institutional theory (Fleetwood, 2004;
Modell, 2009; Sayer, 1992, 2000). The compatibility of critical realism with other theories depends on whether
the research focus is on substantive causes of a given phenomenon, or on the nature and mechanisms underlying
such a phenomenon. Critical realism provides conceptual tools to analyse the latter approach (Fleetwood, 2005; Sayer,
1992).
The world in critical realism is constituted by objects and structures, which have particular powers and liabilities to
produce events. Powers and liabilities of an object refer to what the object can do and what it can suffer, that is, its
weaknesses. The relationship between objects can be internal or external. An internal relationship exists when the
relationship is necessary for the existence of the objects involved. For example, there is an internal relationship between
accountor and accountee because reference to an accountee implies the necessary existence of an accountor. An external
relationship refers to a relationship that is not necessary for the existence of the objects involved. For example, the
relationship between a hospital executive committee and a physician working in that hospital is external. Internally
related objects form a structure that has its own powers and liabilities capable of leading to different events
independently. A mechanism is the particular way of doing by objects and their structures. Whether causal powers and
liabilities of objects and their structures can lead to an event, however, depends on the activation of a necessary condition.
A condition refers to an external mechanism which is necessary for the occurrence of an event (Bhaskar, 1975; Sayer,
1992). For example, the relationship between a car and a driver is external. A car needs a driver, however, in order to be
driven. In this example, the driver is the necessary condition for the car to be driven. Mechanical mechanisms that make a
car t for driving are in the real domain of reality. The event of driving is in the actual domain of reality. The experience of
driving and being driven is in the empirical domain of reality. The event of driving, therefore, does not depend on whether
the driver has a taken-for-granted knowledge of the engineering mechanisms of a car. The driver uses his/her experience
to drive and not his/her car engineering knowledge, if any exists. Moreover, every driver drives differently. Therefore, the
occurrence of an event in the actual domain of reality does not depend on institutionalisation of rules and routines of
mechanisms leading to that event from the real domain of reality, but on the activation of a condition that is necessary for
the event to occur.
An event can be experienced differently by different actors in the empirical domain of reality; this can cause
other, different events or lead to different effects (Bhaskar, 1975; Sayer, 1992, 2000). Critical realisms approach
to how objects, structures and mechanisms in the real domain of reality produce events in the actual domain of
reality assists in the critical analysis of the extent to which budgetary accountees institutionalised ways of thinking
and doing can be taken-for-granted in their interactions with accountors, when facing different governance
policies.
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2.4. Operationalisation of the conceptual framework

The conceptual framework of this paper includes three levels of analysis: the real, the actual and the empirical.
Institutionalised governance and budgetary policies become institutions (Burns and Scapens, 2000). These institutions have
particular powers and liabilities that shape the ways institutional actors think and act in a particular way. It is therefore
appropriate to argue that institutions are located in the real domain of reality of the institutional actors involved.
Institutional actors operating in the empirical domain of reality face different challenges and acquire different
experiences from events that take place in the actual domain of reality. Because intra-institutional change does not take
place in a closed system, such as a laboratory, institutional actors retain their self-interested motives when giving relational
accountability narratives to their accountors.
When institutionalised budgetary governance policies are compatible with identity aspects of the accountability of
accountees, narratives of accountability in the actual domain of reality are likely to be instrumental. In the contrary scenario,
accountees retain their institutionalised ways of budgeting but issue ceremonial accountability narratives to their
accountors.
The study argues, therefore, that budgetary governance policy in organisations with complex hierarchies is a necessary
condition that affects accountability narratives in the actual domain of reality of institutional actors, depending on how
institutionalised policies are compatible with the identity aspects of accountability whose roots are in the empirical domain
of reality. As a consequence, the relationship between the identity aspects of accountability and institutionalised budgetary
governance policies reveal the limits of the taken-for-granted assumption in the Burns and Scapens (2000) framework
regarding the ways institutional actors think and act. The next section explains how the study used critical realism
methodology in collecting, interpreting and analysing data during eld research.
3. Field research
3.1. Methodological approach
Layder (1993) suggested a step-by-step approach for designing and conducting a eld study that aims to contribute to
theory. The Layder (1993) approach focuses on human action and the surrounding inuences that shape or are shaped by
that action. The human is the self. The self includes his/her biographical experiences in social involvements. In analysing the
self one has to focus rst on how an actor is affected by and responds to social interactions. During social interactions, the self
inuences and is inuenced by other selves (i.e., other actors). The second step is to ascertain the nature of social
involvements that shape and are shaped by social interactions. The third step is to analyse the setting in which social
interactions take place such as organisations, the power and authority of organisational actors, and organisational structure.
A fourth step is to include macro social contexts in analysing the settings and their effects on interactions between the selves.
Although there is no rule in the Layder (1993) approach about the order in which the research steps should be carried out, it is
advisable to include all steps in collecting and analysing data (Layder, 1993).
Sayer (1992) recommends applying intensive research methodology in conducting critical realism eld studies. Intensive
research requires active and continuous interactions between the researcher and actors in their elds in order to ascertain how
the process of interaction between actors in their settings leads to an event or patterns of events, and how the experiences of
actors affect or do not affect other event(s). This involves using counter-factual thinking in planning and conducting interviews
(Sayer, 2000). Counter-factual thinking leads to interview questions that enquire into how a process works in a particular
setting, what produces event(s), and what actors do in their interaction(s) before or after the event has occurred. Hence, data
collection should seek to understand relations and connections between individuals or groups of individuals in their settings in
order to understand how different mechanisms interconnect in the production of an event (Sayer, 1992).
Another feature of intensive eld research in critical realism is that interpretation of data must apply double hermeneutic
methodology (Sayer, 2000). The rationale behind this is that data do not in themselves explain the meaning behind the actions
of actors. Yet, the meaning of the data is not reducible to the researchers interpretation of them either (Sayer, 2000). Therefore,
double hermeneutic methodology requires the researcher to enter the cycle of actors in their settings in order to understand
how actors perceive the meaning of their actions (Sayer, 2000). Access to the eld, combining formal and informal interviews
with multiple actors, document analysis and observation of actors help achieve this (Dul and Hak, 2008; Yin, 2008).
Mechanisms that lead to an event may not be directly apparent in the eld. Therefore, the next step in analysing data is to apply
retroduction, a thinking process that involves reconstructions of basic conditions under which things are or are not (Danermark
et al., 1997). In retroduction, the focus is on why, how, when and where some event happens while another does not under
similar conditions (Sayer, 1992). This leads to a deeper understanding of the nature of relationships and interactions between
actors under study (Sayer, 2000). In order to make sense of the ndings, the researcher needs to apply judgemental rationality
and use theoretical reasoning to compare alternative explanations (Easton, 2010; Sayer, 2000).
3.2. Institutional change context
Macro institutional changes that have taken place in public hospitals in Finland since the 1990s can be subdivided into
four groups: change of nancing structure; introduction of accrual accounting principles and revision of municipal law;
523
institutionalisation of management-by-result; and empowerment of medical professionals in management accounting for

their clinics (Hakkinen and Lehto, 2005; Hyvonen and Jarvinen, 2006; Kurunmaki, 1999a,b, 2004).
Traditionally, healthcare in Finland has been provided substantially by the public sector and nanced by public funds.
There are 20 hospital districts including ve university hospitals. Each hospital district is owned by a federation of
surrounding municipalities and provides speciality healthcare services (Speciality Health Care Act, 1989). Healthcare centres
provide primary care. Until the end of 1992, the central government had a centralised planning system through which it
steered and controlled the development of healthcare services and their delivery. The centralised planning system used a
rolling ve-year national plan binding upon municipalities, public hospitals and healthcare centres; and a centralised
subsidy system tied to the state budget (Hakkinen and Lehto, 2005). The aim was to ensure regional equality in the
distribution of public health-related resources. State subsidies were allocated directly to public hospitals and nanced
substantial hospital investments approved by the central government, and an average of around 40% of recurring costs such
as material and personnel costs (Kurunmaki, 1999b; Linnakko and Back, 1994).
In the 1980s, however, criticism from municipalities against this nancing structure began to surface. Not only could
central government ofcers refuse to nance the investment plans of municipalities, but they could also suspend nancing of
investment projects that they had approved previously if a municipality did not comply strictly with national guidelines.
Moreover, although the ve-year national plan was based on national policy, municipalities continued to nance the
remaining part of public hospital costs over which they had no effective control. On the other hand, public hospitals had
incentives to keep planning new investments, and to increase their costs as a way of attracting more state subsidies, instead
of striving for effectiveness and efciency in their activities (Kurunmaki, 1999b; Linnakko and Back, 1994). As in other
countries, there was increasing criticism about the nancial accountability of healthcare professionals as key decision
makers in using public healthcare resources (Lapsley, 2001; Nyland and Pettersen, 2004; Pettersen, 2001); and the
centralised nancing system was accused of being wasteful (Kurunmaki, 1999b; Linnakko and Back, 1994). Since 1993,
however, a revised State Subsidy Act (1992) came into force. The State Subsidy Act (1992) abolished the allocation of state
subsidies to public hospitals, and replaced it with a new system that allocates all state subsidies directly to municipalities on
a per-capita basis with adjustments based on the incidence of diseases per municipality (Linnakko and Back, 1994). Hospital
districts are now nanced by their owner municipalities except when they sell their services to other municipalities
(Hyvonen and Jarvinen, 2006). The 1992 Act transferred nancial control of public hospital expenditure and investment from
the central government to the municipalities, and the voice of the municipalities with regard to the management of public
hospitals started to be heard (Hakkinen and Lehto, 2005). Moreover, municipalities became free to purchase speciality
healthcare services from any provider of their choice (Hakkinen and Lehto, 2005; Hyvonen and Jarvinen, 2006; Linnakko and
Back, 1994).
In 1995, a revised Municipal Act was adopted effective 1 July 1995; provisions regarding budgeting, accounting, nancial
management and auditing of municipalities became effective on 1 January 1997 (Section 101 of the Municipal Act, 1995). In
1995, municipal accounting was still based on cash accounting principles (Nasi, 1999). With the revised Accounting Act
(1997), however, accrual accounting principles were adopted in municipalities in the same manner as in any other
organisation (Vinnari and Nasi, 2008). The municipality section of the national accounting board in Finland provides further
specic accounting regulations applicable to municipalities and municipal organisations (Vinnari and Nasi, 2008). The 1995
Act requires municipal budgets to be in balance and emphasises the autonomy of municipalities in setting priorities to
provide social, educational and recreational services to its population (Hakkinen and Lehto, 2005). Hospital districts are
obligated to comply with the Municipal Act (1995) and the revised Accounting Act (1997). These legal reforms made hospital
districts independent accounting entities that have a legal obligation to apply national accounting regulations in making
their budgets and nancial reports (Kurunmaki, 1999a).
The ability for municipalities to purchase speciality healthcare services from any provider of their choice introduced
competition among hospital districts (Kurunmaki, 1999b). This led to the institutionalisation of a managed care system in
which hospital districts act as sellers of speciality healthcare services to municipalities, that is, buyers (Hyvonen and
Jarvinen, 2006). In practice, however, municipalities that are members of a hospital district use budgetary policies to set
limits on the budget of that hospital district every year, so that the planned costs of that hospital district are not bigger than
the municipalities own budgeted costs for speciality healthcare (Hyvonen and Jarvinen, 2006). A leading municipal
politician conrmed this (the author translated all quotes not made in English):
Our municipality owns more than 50% of this hospital district . . . Its budget proposal is discussed in the executive
board of the hospital district, which sees to it that it is within budget limits that can be acceptable in our municipal
executive board . . . Otherwise, it has to be reviewed.
In order to adapt to these macro institutional changes, the management control systems of hospital districts had to be
reviewed and updated (Jarvinen, 2006; Lehtonen, 2007). Moreover, a management-by-result system, which was aimed at
increasing the accountability of medical professionals in managing their clinics became institutionalised (Kurunmaki,
1999b). One nance director of a hospital district conrmed this:
Management by result was introduced in the mid-1990s so that physicians could have active managerial roles in their
clinics and accountability for result . . . The aim was that hospital districts have to be competitive from within, and be
able to compete with other hospital districts . . .
524
As a consequence, medical professionals voluntarily received additional training, allowing them to have managerial roles
and accountability (including price setting and budgetary management) in their clinics (Jacobs, 2005; Kurunmaki, 2004). A
head physician from a clinical group of internal medicine in a hospital district summarised these institutional changes:
In the late 1980s, when I graduated from my physician training, it was like an insult to ask a physician any question
related to hospital budgets or costs. That was not an issue for us to care about . . . Some other bureaucrats had to do it
. . . Gradually, however, hospital districts started to organise voluntary training programs for physicians where they
lectured how to calculate costs, set prices, plan and interpret a budget . . . so that one can be able to communicate with
nance people and understand one another . . . I attended those courses . . . Currently, I can handle economic issues
related to our clinical group with ease . . . and I want to do it.
3.3. Field studies
Field studies were conducted in two hospital districts: Silta and Omega. First, the role of governance policies in budgetary
management, and in accountability relationships between hierarchical governing members, was analysed. In critical realism
(Bhaskar, 1975; Sayer, 1992, 2000), any analysis of relationships must identify objects, positions, structures and power
relationships that inuence their actions. Power relationships, however, do not predict outcomes of relationships. Therefore,
actors in budgetary governance and accountability under power-struggle relationships may decide to cooperate in a given
context depending on an actors (or objects) self-interested motives or resources. In other words, a change in an accountees
power (or other resources) may affect accountability relationships between accountees and their accountors. The study
analysed different types of actors involved in budgetary governance (analysis of the self) and their interactions in different
settings and at different hierarchical levels (analyses of social interactions and involvements of the self(s) in an organisational
setting) (Layder, 1993). This was followed with an analysis of how, when, where and why social interactions between various
actors lead to different accountability events (or non-events) in the eld (Sayer, 1992).
Data collection started with document analysis including analysis of information posted on the hospitals websites,
newspapers, printed information, ofcial nancial reports, board and council meeting minutes. This was followed by
interviews with key personnel (hospital directors, hospital nancial managers), selected heads of clinical groups (Silta
Hospital), the chief planning ofcer (Silta Hospital), the chief internal auditor (Omega Hospital), the nance director and
nancial manager of a regional city in which Silta Hospital is located, the chairperson of the executive board (Omega
Hospital), the chief auditor (Omega Hospital) and the chairperson of the audit board of the regional city in which Omega
Hospital is located. Formal interviews lasted 22 h, and were followed by informal interactions and observations of the actors
in the eld.
Four additional formal interviews were made in 2010 and 2011 with nancial managers and auditors of a university
hospital and a hospital district not included in this study to provide validity. In order to increase validity further, an
additional round of formal interviews was conducted in early 2012 with selected key medical professionals having
managerial duties in clinical groups, and a nance director of another university hospital. They included the heads of the
psychiatry, surgery and internal medicine clinical groups (Silta Hospital), the administrative head nurse (Silta Hospital), the
medical director (Silta Hospital), the head nurse of the internal medicine clinical group (Silta Hospital), the medical director
(Omega Hospital), the head of the surgery clinical group (Omega Hospital), the head of the internal medicine clinical group
(Omega Hospital), the head nurse of the psychiatry clinical group (Omega Hospital), the head nurse of the surgery clinical
group (Omega Hospital) and vice-chairperson of the council of Silta Hospital who is also member of the executive board and
on the council of Silta city. These additional interviews lasted 16 h. The aim of these extended contacts with the eld was to
obtain more information from different actors, allowing the study to make well-informed double hermeneutic, retroduction
and judgemental rationality in interpreting and analysing the ndings (Sayer, 1992).
Some of the interviewees requested and received a list of questions to be discussed during the interview three to four days
before the interview. Those questions could be answered by interviewees prior to the interview or be directly discussed with
them during the interview. Formal interviews were recorded electronically. Written summaries of the interview were
discussed with the interviewees afterwards. Interviewees expressed themselves either in Finnish, Swedish or English,
depending on their choice. Interview summaries, however, were written in English. Information gathered in this process
through formal and informal means were cross-checked to establish validity.
Each hospital district has a council, an executive board and an audit committee. They are political bodies composed
of local politicians, delegates of owner municipalities, who are elected democratically in municipal elections for a fouryear term. The council is the highest decision-making body, it sets governance and budgetary policies for the hospital
district, approves its operative goals, budget and annual nancial reports. In principle, the council meets twice a year.
The role of the executive board is to monitor the execution of decisions made by the council. In practice, the executive
board is the most active political body leading a hospital district. It meets every month with the leading committee of
the hospital district (i.e., hospital executives), led by the hospital district director. The nance director of Omega
Hospital stated:
We meet with the executive board at least once a month . . . Our budget proposals and nancial reports are discussed
extensively in board meetings. The council comes in to approve what the executive board has done at length with us.
525
The role of the audit committee is to monitor how operative goals of the hospital district have been implemented in
practice. This is achieved by holding meetings with selected members of the leading committee of the hospital district at
different hierarchical levels. The audit committee makes an annual evaluation report, which it submits to the council.
Autonomous and certied auditors, however, audit ofcial nancial reports of the hospital district. Omega Hospitals medical
director conrmed this:
The auditors work with the nance department and the hospital director . . . The audit committee invites leading
physicians and head nurses from clinics regularly to listen to them . . . An audit committee that would be interested in
accounting numbers only, wouldnt be good . . .
In Silta and Omega Hospitals, medical professionals have active roles in the budgetary management of their clinics at
various hierarchical levels. Each hospital is divided into four clinical groups that are led by physicians or head nurses, and
each has a general administration department. Clinical groups are essentially independent and have an obligation to manage
by results. Each of the clinical groups (i.e., surgery, psychiatry, internal medicine, and medical research including radiology,
pharmacy and health support services) is divided into clinics led by managers (physicians or head nurses). Each clinic is
divided into many units that are also run by physicians or head nurses.
Physicians are the medical experts, but they seldom have management training. As a result, there is separation between
clinical decisions based on medical expertise and clinical managerial decisions made by clinic managers, heads of clinical
groups or hospital executives. Silta and Omega Hospitals have difculty recruiting senior physicians willing to take on
managerial roles.
4. Field ndings
4.1. Institutions of budgetary governance in the real domain of reality
The study found that institutionalisation of governance and budgetary policies resulted in two institutions of
budgetary governance: the political and the technical. Elected municipal representatives who are members of the
hospital districts council, executive board and audit committee comprise the political institution and act as accountors.
The hospital districts directors, nance directors and leading medical professionals comprise the technical institution
and act as accountees. The director of Silta Hospital explained his/her budgetary accountability towards the political
institution as follows:
I am responsible and accountable for the implementation of the hospital budget and its operative goals to the board
and the council . . . We have board meetings every month in which I present and explain to board members how we
have implemented our budget and our operative goals . . . The board gives us a feedback . . .
The director of Omega Hospital made a similar statement and added:
. . . by law, a hospital district is owned by its surrounding municipalities. We therefore have to comply with the
Municipal Act, and all other regulations applicable to municipal organisations in Finland. I am responsible for the
operative and nancial goals of the hospital district and accountable to the board and the council.
The nance director of Omega Hospital conrmed the application of the Municipal Act (1995) and the Accounting Act
(1997) in the budgeting and nancial accounting of the hospital and added:
Beside the provisions of the Accounting Act and the Municipal Act, we also must comply with recommendations
issued by the municipality section of the national accounting board in Finland . . .
The nance director of Silta Hospital and the chief external auditor of Omega Hospital made similar statements. All
members of the technical institution interviewed showed no sign of resistance against the political institutions role in
budgetary governance of the hospital districts analysed. Institutionalisation of governance and budgetary policies
comes from the institutional realm and, as suggested by Burns and Scapens (2000), is implemented in the realm of
action.
From a critical realism perspective, the political and technical institutions form two structures that have different
mechanisms but are internally related. Members of each institution can be conceptualised as objects. Members of political
institutions are internally related to that institution. In fact, reference to a political institution implies the necessary
existence of its constituents. Likewise, managerial medical professionals and other leading ofcers of the technical
institution are internally related to the technical institution. Mechanisms of the political institution are based on its legal
and political power to issue governance and budgetary policies to the technical institution and to monitor their
implementation.
The director of Silta Hospital explained the role of the political institution in budgetary governance:
The council gives us its budgetary policies in June . . . We have to plan our budget within the limits included in those
policies . . . This involves multiple negotiations with members of the executive board before the council can approve
our nal budget in November . . .
526
The same approach is applied in Omega Hospital. Mechanisms of the technical institution are based on medical
professionals power to make clinical decisions independently and on their ability to inuence budgetary implementation in
their clinics. The head of the internal medicine clinical group at Silta Hospital stated:
Physicians have freedom to make their clinical decisions independently . . . They can sometimes inform us of expensive
treatments before making them . . . But we cannot, in principle, interfere when they make those decisions . . . It is
afterwards that they explain what has gone on in writing or orally . . . Here is one of such reports . . . on my table . . .
The director of Omega Hospital made a similar statement but in different terms:
. . . Medical professionals are the most appropriate to make clinical decisions . . . And each medical speciality wants to
do it its way . . . An orthopaedist cannot go into a psychiatric clinical group to tell them how to run their clinics . . . It just
does not work this way . . .
The relationship between the political and technical institutions is one of necessary dependence: the technical institution
(as accountee) depends on the political institution (as accountor). This internal relationship, however, does not mean that
members of each institution think and act in similar institutionalised ways with regard to budgetary governance. The
administrative head nurse of Silta Hospital remarked:
Our member municipalities . . . want us to produce high-quality speciality health care to the patients and as fast as
possible, but at zero costs . . . They issue arbitrary budget policies and budget limits without knowing how this hospital
really works . . . However, the hospital budget cannot be concluded if the council does not approve it . . . We have to do
as they want.
Although this statement refers to a coercive budgetary policy institutionalised by the accountor to the accountee, it also
implies willingness on the part of the accountee to act as the accountor expects. In contrast, a head nurse in the surgery
clinical group at Omega Hospital conrmed institutionalisation of coercive budgetary policy in her/his real domain of reality
as accountee but with a more critical approach:
I have worked here for years . . . Every year we hear the same story that our member municipalities have not enough
money to nance hospital costs . . . They therefore issue tight budgetary policies every year, which hospital executives
implement in clinical groups . . . I think that they should tell them that this way of budgeting is contrary to how a
hospital really works . . .
Therefore, although the political and technical institutions are internally related in the real domain of reality of budgetary
governance, this study found that accountability actors institutionalised ways of thinking and doing are less similar in the
realm of action.
This nding extends the Burns and Scapens (2000) framework to the real domain of reality from a critical realism
perspective. The next section discusses how institutionalised ways of thinking and doing in the realm of action, and
governance policies from the real domain of reality, affect events of relational accountability in the actual domain of reality.
4.2. Relational accountability in the actual domain of reality: different patterns
Political and technical institutions share an actual domain of reality in which political and technical actors at hospital
level interact during budgetary negotiation and accountability events.
Budgetary policies issued by the political institution to hospital executives affect how medical professionals plan their
budgets and how they explain their relational accountability. The head nurse of a psychiatric clinical group at Omega
Hospital stated:
Last year, our nance department made a big cut of our budget and asked us to decide which items to reduce or to
exclude from our budget plan . . . It was really hard to nd what to do . . . So, we nally decided to reduce the amount of
pharmaceutical purchases, knowing very well that in any case we cannot stop buying the medicines that our patients
need . . . and our amended bad budget was approved (emphasis added).
Discussion with the nance director of Omega Hospital revealed that the rationale behind the application of tight
budgetary policy in hospital budgeting is to match budgetary limits issued by the hospital council. During budgetary
implementation, therefore, hospital executives do not strictly enforce accountability of medical professionals in clinical
groups. The director of Omega Hospital stated:
The budgetary situation of clinics is monitored in budgetary reports of clinical groups when information from all the
clinics is included. So, we enforce strict accountability of clinic managers exceptionally, when they have exceeded
their spending too much or decreased their income from sales dramatically.
The nance director of Omega Hospital conrmed this approach to relational accountability with an additional comment:
No budgetary accountability meetings are held at clinic levels in this hospital . . . We have not put enough pressure on
them to do it either . . .
527
The reason for not putting enough pressure on heads of clinical groups to monitor accountability of clinic managers is
explained by the policy of governance for mission that is applied between the political and technical institutions in Omega
Hospital. The director of Omega Hospital assessed the accountability of clinic managers as follows:
Clinics are led by senior physicians and/or head nurses. Their main duty is to care for the patients in the rst place. I
mean, if you give strict economic responsibility to a physician, no patient will obtain proper medication in clinics . . .
They have to keep within their budgets. However, they have no economic accountability for that.
The nance director of Omega Hospital explained further how the policy of governance for mission affects the relational
accountability of the technical institution towards the political institution:
. . . Once the hospital budget is in balance at the end of the nancial year, the council considers it acceptable and does
not enquire into internal accountability issues of medical professionals involved in budgetary management of the
clinics . . .
What is not mentioned in this statement, however, is that there is a substantial difference between the hospital budget
approved by the council and the actual costs of the hospital at the end of the nancial year because each hospital has the right
to bill municipalities on the basis of medical services purchased. Therefore, the hospital budget can hardly be in decit at the
end of the nancial year.
This study found that governance policy plays the role of a necessary condition whose activation affects the way
institutional actors think and act in their relational accountability in the actual domain of reality. For example,
institutionalisation of tight budgetary policies and governance for mission in monitoring accountability of medical
professionals have led to ceremonial budgeting and ceremonial accountability of medical professionals between the political
and technical institutions in Omega Hospital.
In Silta Hospital, the study found that the political institution applies a policy of governance for performance in issuing
coercive budgetary policies to hospital executives, and monitors accountability of medical professionals attentively in the
actual domain of reality. The administrative head nurse of Silta Hospital explained:
Senior physicians and head nurses who lead clinics have economic responsibility for their clinics . . . They have to keep
within their budgets and they have a budgetary implementation plan approved by the executive board of the hospital
which they must comply with or give reason for variance to the head of their clinical group.
The head of the internal medicine clinical group in Silta Hospital explained how institutionalisation of coercive and
performance governance policies affect their relational accountability towards the political institution:
We know how much it costs to produce our services . . . And as you can read from this accounting report, we made
more money than we spent last year . . . In other words, we made a prot . . . However, our municipal politicians keep
pointing on these items here . . . and there . . . where we have overspent our budgeted expenditures . . . I mean, it is
sometimes hard to understand why they keep doing this as far as we make a prot. Therefore each clinic manager has
written a report explaining why he or she has overspent some sections of his/her budget . . . Some use numbers, others
explain their processes or both . . .
The head of the surgery clinical group at Silta Hospital conrmed this and added:
Budgetary policies in the hospital are tighter and tighter every year . . . However, it is my responsibility and
accountability to run this clinical group within the budget allocated to us . . . For example, I made a proposal to the
executive board of the hospital last year that we have to close down two of our surgery theatres and four wards during
the up-coming summer vacation season . . . We will make saving in personnel costs . . . After summer vacations, we will
have to work hard.
Further discussion with the head nurse of the surgery clinical group at Silta Hospital revealed that the decision to close
down some surgery theatres and wards temporarily during summer vacations was difcult, but he/she supported the
courage of his/her colleague in making this instrumental change. Interviews with the chief planning ofcer, the medical
director and the director of Silta Hospital backed up this nding.
Therefore, when institutionalisation of coercive budgetary policy from the institutional realm is accompanied by
implementation of governance for performance in the realm of action, relational budgetary accountability in the actual
domain of reality is likely to be instrumental. Previous intra-institutional accounting change studies that applied the Burns
and Scapens (2000) framework seem to have taken for granted that institutionalisation of accounting change per se can
shape the ways institutional actors think and act, leading to ceremonial or instrumental use of accounting information in the
realm of action (Burns and Baldvinsdotti, 2005; Hyvonen and Jarvinen, 2006; Lukka, 2007; Siti-Nabiha and Scapens, 2005).
This study found that the taken-for-granted assumption should have reservations, because other institutional mechanisms
located in the real domain of reality of institutional actors, such as governance policies, affect how institutional actors behave
in relational accountability events in which institutionalised accounting information is used. This nding extends the Burns
and Scapens (2000) framework to the actual domain of reality of institutional actors in a budgetary governance and
accountability setting.
528
4.3. Interactions in the empirical domain of reality: identity accountability

In the empirical domain of reality of the technical institutions, hospital executives are accountors and medical
professionals who have managerial roles in clinical groups and clinical units are accountees. Budgetary policies that are
implemented in the empirical domain of reality affect the identity accountability of medical professionals in various ways,
depending on how institutionalised governance policies in the realm of action ll the gap between managerial and medical
identity aspects of accountability in clinics. For example, in Silta Hospital, hospital executives institutionalised a policy of
governance for performance that the nance director supervises during budgetary planning and implementation:
I monitor budgeting activities of each clinic and I am involved in their budgetary negotiation every year . . . I also
participate in budgetary implementation meetings of each clinical group. Meanwhile, each clinic holds its own
budgetary implementation meeting every month which is led by the clinic manager.
The intervention of the nance director in the clinic managers empirical domain of reality allows clinic managers, as
accountees, the possibility to explain their empirical realities to their accountors, and to reect them in budgetary goals. The
administrative head nurse of Silta Hospital conrmed this:
Our nance director discusses with each clinic manager her/his budget proposal before the budget of the clinical group
is compiled . . . This gives them, at least, the possibility to be heard . . .
When budgetary goals incorporate identity aspects of accountability based on accountees empirical domains of reality it
becomes possible for accountors to implement relational accountability without facing strong resistance based on identity
accountability. The head of a psychiatry clinical group at Silta Hospital stated:
I often refer to a leading expert in the eld of health economics who says, Inefciency kills. I explain that the better
we use the resources we have, the more the patients will benet. And only if we have used our resources most
efciently we have done our ethical responsibility. Thus, efciency is not something cheap or low standard, but
the opposite well ethically based . . . In our clinics executive board the budget is reported monthly.
The head of the clinical group at Silta Hospital conrmed the use of the governance for performance policy as a tool for
increasing awareness of the budgetary accountability of clinic managers in giving accounts of their empirical domain of
reality:
. . . As you can read in this report, this clinic manager has overspent his/her budget on prostheses . . . and electronic
wheel chairs . . . They are very expensive . . . However, when we planned this budget with the nance department . . .
we did not expect to have so many patients needing them . . . So, it is understandable why this overspending happened
...
In contrast, executives at Omega Hospital have institutionalised coercive budgetary policy in the realm of action of
medical professionals; and the nance director (or his/her personnel) does not interact actively with clinic managers
during budgetary planning and implementation. The head of the internal medicine clinical group at Omega hospital
stated:
Budget discipline plays a crucial role in managing our clinics . . . Clinic managers express their budgetary needs by
using medical terms . . . I have asked the nance department to send some of its staff here . . . to hear directly from us
why our budget proposals are as they are . . . However, this has not yet been accepted.
The non-intervention of the nance department into the empirical domain of reality of medical professionals during
budgetary planning gives room for medical professionals to use their identity accountability as a reason for ceremonial
budgeting. The nance director at Omega Hospital referred to this as follows:
Budget proposals coming from clinics always exceed budgetary limits issued by the council . . . As these proposals are
not acceptable, we hold budgetary negotiation meetings with the executive committee of each clinical group in order
to reshape their budgets . . . Actually, we sometimes decide which parts of the budget they have to cut down . . .
In this setting, the gap between managerial identity accountability (i.e., to comply with governance policies issued by the
political institution in the real domain of reality) and the identity accountability of medical professionals in their empirical
domain of reality leads to accountability tensions. The nance director at Omega Hospital stated:
The usual comment we hear from our physicians and head nurse colleagues is that they take care of the patients and
not of economy . . . However, economy is also part of their duties as heads or managers of clinics.
The medical director at Omega Hospital conrmed this with an additional comment:
A typical physician does not want to understand anybody other than another physician in a public hospital. If a nonphysician says this should be done like this, or how did this happen? . . . the physician can simply reply that you do not
understand how the hospital works . . . They cannot say that to me . . . because I have great esteem and recognition as
senior physician in our physician association . . . I also have managerial achievements.
529
During the budgetary year, therefore, hospital executives use informal meetings with medical professionals as a way of
monitoring their identity accountability. In these informal meetings, however, the use of institutionalised budgetary
information, as a tool of governance and accountability, cannot be taken for granted. The head of the surgery clinical group at
Omega Hospital explained:
A couple of times a week, I have informal talks with my clinic managers over a cup of coffee. No formal protocols are
made in these meetings and we discuss openly as physicians about the situation of our clinics . . . I am there as a
colleague and not as the boss, actually.
This was conrmed by the medical director at Omega Hospital:
Actually, we physicians talk to each other openly in our informal meetings . . . I use this to monitor what is going on
behind the curtains.
Common to both organisations is that budgetary management has been institutionalised in the realm of action of the
technical institutions. This study shows, however, that the ways in which institutional actors think and act in their empirical
domains of reality continue to reect on their identity accountability, unless a governance policy that is institutionalised in
the realm of action (Burns and Scapens, 2000) decreases the gap between the identity aspects of accountability of accountors
and accountees in their empirical domains of reality. Therefore, from a critical realism perspective, this study argues that the
prevalence of identity accountability in the empirical domain of reality of accountees affects the extent to which the
accountees use of institutionalised accounting information in their interactions with accountors can be taken for granted.
This nding adds a critical realist reservation to the taken-for-granted assumption in the Burns and Scapens (2000)
conceptual framework by showing how the identity accountability of institutional actors in their empirical domains of
reality continues to affect their ways of thinking and doing in their realm of action when the institutionalisation process has
been completed.
5. Conclusion
The aim of this study was to extend the Burns and Scapens (2000) framework to critical realism by analysing how
institutionalised governance and budgetary policies affect the ways in which institutional actors think and act in
accountability relationships. The research questioned how institutionalisation of governance and budgetary policies affects
the accountability of organisational actors when analysed from a critical realism perspective.
Burns and Scapens (2000) argued that institutionalisation of management accounting rules and routines takes place
between the institutional realm and the realm of action and leads to taken-for-granted ways of thinking and doing on the
part of institutional actors, regardless of the historical background of resistance to change that occurred during the
institutionalisation process. Drawing on critical realism ontology of the world and its stratication into three levels of reality
the real, the actual and the empirical (Bhaskar, 1975) the study analysed how the ways in which institutional actors think
and act can be taken for granted to shape their relational and identity accountability with regard to governance and
budgetary policies that are institutionalised in their realm of action.
On the basis of intensive eld studies conducted in two hospital districts in Finland from 2009 to 2012, the study
found that institutionalisation of governance and budgetary policies resulted into two institutions of budgetary
governance: the political and the technical. The political institution acts as accountor to the technical institution (the
accountee). The technical institution has many hierarchical levels in which intra-institutional relationships between
accountors and accountees exist. Each institution has its own power and liability that make it work in a particular way
in the process of budgetary governance and accountability. Institutionalised policies become part of the real domain of
reality in each institution. Interaction between these policies form mechanisms, whose activation leads to relational
accountability events between accountors and accountees in the actual domain of reality. The ways in which
institutional actors think and act, however, remain in the empirical domain of reality. Hence, the extent to which
institutional actors use institutionalised budgetary information in their accountability relationships depends on how
governance policies that prevail in the empirical domain of reality are compatible with the identity accountability of
accountees.
The study found that institutional actors had different patterns of thinking and doing at different organisational levels in
both hospital districts, and different accountability perspectives in the actual and empirical domains of reality. These
differences are caused by how governance policies from the real domain of reality interact with accountees ways of thinking
and doing in the empirical and actual domains of reality. Hence, contrary to Burns and Scapens (2000)s assumption about
the taken-for-granted ways institutional actors think and act, this study showed that mere institutionalisation of
management accounting rules, such as budgetary policies, does not per se lead to taken-for-granted ways in which
institutional actors think and act in the realm of action when their accountability is shaped by other mechanisms of the real
domain of reality such as governance policies.
The main contribution of this study is to extend the Burns and Scapens (2000) conceptual framework by showing that the
intra-institutional change process does not lead to taken-for-granted ways of thinking and doing on the part of institutional
actors when they act in a world of realities in which institutionalised policies of governance and budgeting lead to different
patterns of accountability.
530
As with other eld studies, the ndings of this study cannot be generalised to other organisations. Its theoretical
framework can, however, be validly applied in other studies. Further research efforts on how experiences of institutional
actors in their empirical domains of reality can be used to enhance institutionalisation of governance and budgetary policies
in organisations dominated by identity aspects of accountability in the realm of action are recommended.
Acknowledgements
An earlier version of this paper was presented to the 7th International Critical Management Conference, Naples, Italy, 11
13 July 2011. The author wishes to thank Professor Grossi Giuseppe and participants in that conference, two anonymous
reviewers and the editor of CPA, for their valuable comments to improve this paper. The author also wishes to thank
Professor Lars Hassel, Professor Gary Gunningham, Professor Janne Jarvinen and Associate Professor Arne Fagerstrom for
proofreading and commenting on earlier versions of this paper. The author is grateful for nancial support for this study
granted by the foundation of Abo Akademi University and the School of Business and Economics of Abo Akademi University,
Finland. This study would not have been accomplished without the frank collaboration of all persons and organisations that
participated in the empirical part of this research. They are recognised gratefully.
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Critical Perspectives on Accounting 24 (2013) 518531

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Critical Perspectives on Accounting

Budgetary governance and accountability in public sector

* Tel.: +358 505475549.

J.C. Mutiganda / Critical Perspectives on Accounting 24 (2013) 518531

J.C. Mutiganda / Critical Perspectives on Accounting 24 (2013) 518531

J.C. Mutiganda / Critical Perspectives on Accounting 24 (2013) 518531

2.3. Conceptual framework

J.C. Mutiganda / Critical Perspectives on Accounting 24 (2013) 518531

2.4. Operationalisation of the conceptual framework

J.C. Mutiganda / Critical Perspectives on Accounting 24 (2013) 518531

institutionalisation of management-by-result; and empowerment of medical professionals in management accounting for

J.C. Mutiganda / Critical Perspectives on Accounting 24 (2013) 518531

J.C. Mutiganda / Critical Perspectives on Accounting 24 (2013) 518531

J.C. Mutiganda / Critical Perspectives on Accounting 24 (2013) 518531

J.C. Mutiganda / Critical Perspectives on Accounting 24 (2013) 518531

J.C. Mutiganda / Critical Perspectives on Accounting 24 (2013) 518531

4.3. Interactions in the empirical domain of reality: identity accountability

J.C. Mutiganda / Critical Perspectives on Accounting 24 (2013) 518531

J.C. Mutiganda / Critical Perspectives on Accounting 24 (2013) 518531

J.C. Mutiganda / Critical Perspectives on Accounting 24 (2013) 518531

Nasi S. Kunnan kirjanpitouudistus.Municipal accounting reform Helsinki: Kunnallisalan kehittamissaatio; 1999.

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