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Who's Counting?: an Institutional Analysis Of University of Wollongong Research Online University of Wollongong Thesis Collection University of Wollongong Thesis Collections 1999 Who's counting?: an institutional analysis of expectations of accounting in a nonprofit elir gious/ charitable organization within a changing environment Helen Irvine University of Wollongong Recommended Citation Irvine, Helen, Who's counting?: an institutional analysis of expectations of accounting in a nonprofit er ligious/charitable organization within a changing environment, Doctor of Philosophy thesis, Department of Accounting and Finance, University of Wollongong, 1999. http://ro.uow.edu.au/theses/1034 Research Online is the open access institutional repository for the University of Wollongong. For further information contact Manager Repository Services: [email protected]. Who's counting? An institutional analysis of expectations of accounting in a nonprofit religious/charitable organization within a changing environment. A Thesis submitted in fulfilment of the requirements for the award of the degree DOCTOR OF PHILOSOPHY from the UNIVERSITY OF WOLLONGONG by Helen Irvine B.Com, M.Com. Department of Accounting and Finance 1999 Volume 1 Certificate I, Helen Joy Irvine, certify that this thesis has not been submitted previously as part of the requirements of another degree and that it is the product of my own independent research. 4/.$- JklMLVnJL 1999 Abstract In recent years the nonprofit sector has been increasingly influenced by commercial practices, following the lead given by the public sector, which has instituted a series of reforms. The greater emphasis on a business-like culture which has resulted has included the adoption of accounting practices in the nonprofit sector which have previously been used only by organizations which exist for profit-making purposes. Institutional theory recognizes the influence on organizations of powerful expectations and pressures which require organizations to behave in certain defined ways. These expectations are deeply embedded in society and organizations. The adoption of business-oriented accounting practices is one such requirement. Organizations situated within the nonprofit sector, such as religious/charitable organizations, are highly dependent on governments and the public for funding, and therefore particularly vulnerable to these expectations. If fulfilled, they are capable of providing a legitimacy which enables organizations to receive the funding they need in order to continue their operations. Changes in societal expectations in recent years, particularly in accounting practices, have placed great pressures on such organizations which, by their very nature, have been unaccustomed to performing in a manner once reserved for the for- profit sector. This thesis provides a study of the introduction of several of these accounting practices in one religious/charitable organization. Since accounting systems do not exist as self- contained independent entities, the backdrop to the study, the organization's own unique history and culture on the one hand and societal expectations on the other, has been carefully developed. Against this backdrop organizational accounting practices and changes to those practices have been documented. These are the adoption of accrual accounting, the publication of corporate style financial statements, the change to a global budgeting system, the use of accounting information in decision making, the reliance on advice provided by external consultants and the introduction of benchmarking and business- oriented accounting practices. These accounting techniques have not been adopted lightly. As the profile of accounting has been raised, increasing pressure has been placed on existing organization members and greater reliance has been placed on accounting professionals. The task for the organization has been to fulfil societal expectations and maintain its reputation as a worthy recipient of public funds, while at the same time developing expertise as an entrepreneurial provider of funds generated by means of business operations. As this task has been undertaken, the challenge for the organization has been to balance the application of commercialized accounting and business practices against the imperatives of its mission. While the particular dynamics of these changing practices may be unique to this organization, it is to be expected that other organizations involved in this sector will be experiencing similar challenges. These changing institutional arrangements have the potential to alter dramatically the provision of services by charitable welfare organizations. Dedication for Rod "Your love is more delightful than wine" (Song of Songs, 1:2) Acknowledgments I wish to thank my family for their support in this endeavour, particularly my husband Rod and my children, Tom, David, Carolyn, Stephen and Richard. They have been unfailingly patient and understanding over the last few years. Thanks are due to my supervisor, Professor Michael Gaffikin, for his willingness to allow me the freedom to think and explore. His support and advice have been a great help and his belief that I could do this has been a great encouragement. I also wish to thank Professor Warwick Funnell for his kind interest and wise advice, other members of the Accounting & Finance Department for their wisdom and encouragement and my fellow students, for sharing with me the joys and struggles of the research process. Fieldwork is not possible without people, and I wish to thank all those people whom I interviewed and observed. I greatly appreciated their openness and honesty and their willingness to spend time with me. Note Throughout this thesis frequent reference is made to the comments of people I interviewed. A list (using pseudonyms) of these people is found in Appendix 2.8. Within the organization it was common to use abbreviations when speaking of various positions held in the hierarchical structure, meetings and locations. Where possible, I have tried to limit the use of abbreviations to two, THQ (Territorial Headquarters) and DHQ (Divisional Headquarters) in order to avoid the confusion which could otherwise occur. Table of Contents Volume 1: Certificate ii Abstract Hi Dedication v Acknowledgments vi Note vii CHAPTER 1. The programme: profiling accounting in a religious/charitable organization. 1 The setting. 2 Society as the overall setting. 2 The third sector as the wider setting. 3 The Salvation Army as the specific setting. 7 The story. 9 A theoretical lens. 9 The sacred and the secular. 12 If all the world's a stage ... 19 The programme. 21 CHAPTER 2. Backstage: researching behind the scenes. 24 Why qualitative research? 25 Case studies in accounting. 28 The unique contribution of ethnography. 30 Choosing a research site. 33 Practical issues. 35 Gaining access. 35 Negotiating access. 38 The access agreement. 40 Preparing myself. 42 Fulfilling all the requirements. 42 Signing off. 43 Data gathering. 44 Interviews. 45 Observation and conversation. 51 Fieldnotes. 54 Documents. 55 How theory fits in. 57 Data analysis. 60 Constructing a reliable and interesting ethnographic text 65 CHAPTER 3. The story: interpreting institutional elements. 69 Institutional theory. 70 The origins of institutional theory. 72 Elements of institutions. 75 The coercive pillar. 76 The mimetic pillar. 77 The normative pillar. 78 Identifying institutional elements. 79 Issues considered by institutional theory. 81 Institutional isomorphism. 81 Decoupling. 82 Organizational success. 84 The growth of bureaucracies. 85 How institutionalization happens. 86 The significance of the founding of an organization. 87 Nonprofit organizations as a special case. 88 Deficiencies and controversies of institutional theory. 90 The assumption of passive organizational response. 90 The neglect of the "micro" perspective. 94 The failure to consider how decisions are actually made in organizations. 96 The neglect of explanations of institutions. 97 Insufficient attention to identifying power holders. 102 Decoupling as a problematic concept. 106 Incorporating other perspectives. 107 Some other studies. 108 Resource dependence theory. 109 Combining viewpoints. 11' Some themes to be explored. 115 CHAPTER 4. The background: describing historical context. 121 Historical influences. 123 The early Salvation Army. 129 Birth of the Army. 129 An Army model. 131 Mission. 133 Fundraising. 136 Early financial credentials. 141 Pressures from outside the Army. 143 Politics and Persecution. 144 Issues of financial accountability. 147 Rumours about the Darkest England scheme. 147 Early financial practices. 149 The Army as a business. 150 Some specific criticisms. 151 Army response to criticisms. 155 Pressures from inside the Army. 155 A family matter. 155 The founder's influence. 159 A world-wide movement. 163 A dramatic expansion. 163 Legal structure. 164 Advisory boards and Army friends. 165 An international reputation. 167 Changing methods, unchanging mission. 168 Army accounting and accountability. 170 Moving forward. 172 CHAPTER 5. The company of players: organizational members andfunding._ 174 Players from history: early days of The Salvation Army in Australia. 176 A beginning. 177 Reaching out. 178 Attracting funds. 180 Financial reputation. 184 Prosecution and persecution. 186 Making friends. 188 Coming of age. 189 Players from the organization: the Australia Eastern Territory. 191 Salvation Army organizational structure. 192 Officers and employees. 194 Territorial Headquarters. 196 The Territorial
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