Scandals in the housing sector in the Netherlands; the role of the management accountant

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Scandals in the housing sector in the Netherlands;

the role of the management accountant

by

Niels van der Heide

Supervisor: mw. dr. E.G. van de Mortel

Co-assessor: dhr. dr. B. Crom

February 2016

University of Groningen

MSc BA Organizational and Management Control

Student number: 1917803

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Abstract

The role of the management accountant is a well-researched subject. Overall, literature recognises a duality in the role: the scorekeeper and the business partner. By the use of the theoretical lenses of management control, agency theory and New Public Management, the role of the management accountant in the housing sector in the Netherlands is investigated. In particular, the influence of recent scandals on the role of the management accountant within seven housing cooperatives is illustrated. Results show that scandals have had, indirectly, a significant effect on the functioning of the management accounting function. The impact of new legislation resulting from the incidents is substantially, and the scorekeeper role as well as business partner role have become more important. In addition, the required quality of the management accountant has increased. This reveals the fact that management accountants play an important role in forming the core of the sector.

Key words

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1. Introduction

The role of management accountants1_{, or controllers as they are sometimes called, has been studied a lot,}

beginning with authors like Simon et al. (1954), Hopper (1980), and Mouritsen (1996) (Järvenpää, 2007, p. 103). Overall, literature suggests the changing role of the management accounting function from being only a producer of financial information, a scorekeeper and watchdog (the scorekeeper role) to being more actively involved in business decisions, with a focus on a broader set of information (the business partner role) (Hopper, 1980; Byrne and Pierce, 2007; Järvenpää, 2007; Paulsson, 2012; Lambert and Sponem, 2012). In fact, management accountants have been struggling with their role recently. In various sectors, the role of the management accountant is debated (Financieel Management). This topic is particularly lively in the housing sector. Management accountants in this sector have to figure out whether their tasks involve controlling, advising, or embracing a more hands-on mentality. The question really is whether they should be in a controlling position, or in a position more involved in the business (Cmweb.nl).

Scandals in the housing sector

Housing cooperatives have a varying relation with government and other stakeholders. There are times when they have a lot of freedom; there are also times when they barely have any freedom at all. In times of high shortages, for instance as created by the First and Second World War, government played an important role in the building of new houses. However, every time the biggest problems are solved, the sector is discussed again (Jong, 2013).

In the Netherlands, deregulation, privatisation and influences from the market have become more important since the 1990’s (Jong, 2013, p. 14). As a result, since the early 2000’s (2003-2008) housing cooperatives have obtained more freedom. The government lead by Balkenende, which started in 2002, introduced a new policy regarding the relationship between government and housing cooperatives (Tweede Kamer der Staten-Generaal, p. 66). Central to this policy was less regulation and more freedom for citizens and organisations, to enable and encourage them to do the right thing. With the introduction of management techniques from the private sector, the housing sector began to show signs of New Public Management (NPM). Since then, forces from the market have become more important in the housing sector (Goodijk, 2012). This includes the trend of scaling up (Aedes, 1; see figure 1, p. 9), professionalisation and financial independence of housing cooperatives (Breeman and Helderman, 2004, p. 78).

However, in past years several scandals occurred. In total, there have been fifteen to twenty important incidents that attracted a lot of attention (see table 1). Some examples of recent scandals are WSG, Woonbron

1_{The International Federation of Accountants (IFAC) presents a list of titles carrying out management accounting}

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and Rochdale (NRC Q; Nu.nl). The incidents can be divided into three categories: mismanagement of projects, financial mismanagement and speculation, and fraud and self-enrichment (Jong, 2013, p. 8). Since the 90’s, more and more cases of mismanagement and fraud have become apparent (Jong, 2013).

One of the biggest scandals by the Rotterdam-based housing cooperative Vestia caused the Committee of Inquiry to start an investigation. This investigation concluded with a recommendation of the Committee. The recommendation was for housing cooperatives to have no more commercial activities, but rather focus on the so-called DAEB-activities (Tweede Kamer; Finance Ideas; Aedes, 2). DAEB-activities are the activities related to social housing, as opposed to commercial activities (Vannimwegen). Furthermore, there has been an increase in legislation, indirectly resulting from the incidents.

The incidents and problems happen too often to the housing cooperatives, and the housing sector most often reacts too late, or simply with not enough decisiveness. This means the housing sector is not able to correct its own mistakes (Hoekstra et al., 2012). The housing sector is, also due to the size of investments that have to be made, relatively sensitive to problems (Jong, 2013, p. 9). This raises the question whether the use of private market techniques is advisable for the housing sector.

Table 1. The most important incidents

Mismanagement of projects/too high risks taken

2009 Woonbron Rotterdam Loss on investment SS Rotterdam

2009 Rentree Deventer Speculative purchase of land, huge losses on investments

2010 Servatius Maastricht Loss on Campusproject 2010 SGBB Hoofddorp Project portfolio too big 2010 De Key Amsterdam Doubtful transactions of land 2012 Laurentius Breda Project portfolio too big 2012 WSG Geertruidenberg Project portfolio too big

Financial mismanagement and speculation

1994 Onze Woning Nieuwegein Options 1994 Eigen Haard Enschede Investments

1994 K77 Utrecht Options

1999 Woonzorg Nederland Amstelveen Investments 2012 WoonInvest Leidschendam Derivatives

2012 Vestia Rotterdam Derivatives

Fraud and self-enrichment

2002 SWZ Zwolle 2004 SWH Den Bosch 2004 Trias Lisse 2005 PWS Rotterdam/WoonInvest Voorburg 2008 Woningstichting Dinxperlo 2009 Rochdale Amsterdam 2010 SGBB Hoofddorp 2012 Laurentius Breda 2012 Vitaal Wonen Limbricht Source: Jong, 2013, p. 8-9

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Scandals are supposed to have an influence on the role of the management accountant. Burns and Baldvinsdottir (2007 in Paulsson, 2012, p. 379) name various factors which cause the role of the management accountant to be more like a business partner, one being accounting scandals. Other factors include globalisation, shift in technology, accounting scandals, and corporate trends. Another argument would be that these scandals provoke the desire for a shift to a more watchdog-like role, for a logical reaction to scandals seems a call for a more conservative role of the management accountant (Cmweb.nl). In this situation, the management accountant has to act like a ‘watchdog’ in order to make sure these scandals will never happen again. This represents the scorekeeper role.

Because of these contradictory expectations, and regarding the implementation of the new housing law, it would be interesting to figure out the real effect of scandals and investigate if, and how, the role of the management accountant has changed in the housing sector in the Netherlands.

Furthermore, the new housing law dictates that all corporations larger than 2.500 units are obligated to have the position of management accountant fulfilled by the end of 2016. Some housing cooperatives do not have this already, and regulators will monitor the way in which housing cooperatives fill this role carefully. Important is that the management accountant is a capable person, and in the right position to have a critical attitude towards the entire organisation.

Interplay role management accountant and supervisory structure

Supervision is a very important topic in the housing sector, because the sector is relatively sensitive to problems. When considering management control, supervision is also an important topic. The role a management accountant has in an organisation is very much dependent on the supervisory structure. On the one hand, the supervisory board wants the management accountant to be autonomous and capable, and partly base its decisions on his ‘objective’ information. On the other hand, it wants the controller to criticise and advise management.

Generally, regulators often look for strong leaders. However, after the many incidents, they have come to desire strong controllers, in order to keep management in control (Project Control Online).This means the controller has a place somewhere between supervising and managing. In addition, this suggests the role of the management accountant influences, in some way, the way of supervising. For instance, does the shift to business partner role cause the supervisory board to play a more important role? Moreover, if the management accountant has a more scorekeeper-like role, does the supervisory board base its decisions on his opinions?

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concern, the position of the management accountant in the organisational structure, and the use of private market techniques have had their influence on the role of the management accountant.

Research question

How has the role of the management accountant changed since recent scandals in the housing sector in the Netherlands?

Sub questions

The role of the management accountant

What is the expected influence of recent scandals on the role of the management accountant? How is the role of the management accountant exercised in practice?

How has the role of the management accountant changed?

Key factors influencing the role of the management accountant

What is the influence of private market techniques in the housing sector?

How is the role of the management accountant linked to the organisational structure? How is control achieved?

These questions are researched by the use of the theoretical lenses of management control, agency theory and NPM. Important in researching the role of the management accountant is the influence of recent scandals. These recent scandals are specified as the scandals that happened from 2002-2012. In this period, most of the biggest scandals occurred (table 1, p. 5-6). These issues are investigated by the use of qualitative interviews. These theories are used to assist in interpreting the dynamics of the role of the management accountant (Burns and Baldvinsdottir, 2005, p. 727; Baarda et al., 2005).

Practical relevance

In past years several scandals occurred. Consequently, new laws and rules have been introduced. Next to this, the role of the management accountant seems to have changed. During recent years, the role of the management accountant has been a widely debated subject. In the housing sector particularly, multiple forces are influencing this role, making it an interesting sector to investigate. This is mostly because supervision is an important topic in the housing sector. In relation to recent scandals, supervision has become more and more important. A deeper understanding of the connection between the role of the management accountant and past scandals could be very important, for management accountants have a central role in the running of organisations.

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Furthermore, the role of the management accountant is important in both the organisation and running of management accountant-functions, from a practical point of view (Paulsson, 2012, p. 379).

Scientific relevance

In past decades, there has been a lot of research on the role of the controller. This has been done, however, with little overall coherence (Verstegen et al., 2007). The role of the management accountant is influenced by many factors, for instance by the introduction of ICT-applications (Friedman and Lyne, 1997; Caglio, 2003). In addition, new working conditions are supposed to have their influence (Russel et al., 1999), just like technological developments (Kendall and Sheridan, 1991 in Verstegen et al., 2007). Most research on the role of the management accountant has its focus on individual characteristics (see e.g. Byrne and Pierce, 2007; Coad, 1999 in Lambert and Sponem, 2012).

This research has its focus on the influence of recent scandals on the role of the management accountant in the housing sector. The role of the management accountant is contingent upon organisational circumstances (Hopper, 1980, p. 401), so reactions to these scandals, as well as the rise of NPM supposedly have their influence on this role. Few studies have focused on management accountants’ role in a NPM-context (Paulsson, 2012). Available studies on this issue indicate there has been a development of the management accountants’ role (e.g., Lapsley and Oldfield, 2000; Jarvinen, 2006; Hellstrom and Ramberg, 2007; Moll and Humphrey, 2007 in Paulsson, 2012), but more research is needed.

From a theoretical point of view, it is interesting to learn more about the role of management accountants, and deepen our understanding about its interplay with an organisation’s supervisory structure. In addition, the effects of the change in legislation in the sector are part of this investigation. This research deepens the understanding of the various roles occupied by management accountants.

Research structure

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2. The housing sector

This goal of this chapter is to describe the housing sector, and more specifically its background, structure and general characteristics. This helps to understand better the sector in which the management accountant in this research finds himself.

The housing sector

In the Netherlands, social housing is provided by corporations, the so-called housing cooperatives. They are the focus of this research. Housing cooperatives build, manage and rent affordable housing (Rijksoverheid). Next to that, they aim to make living in the neighbourhood better. For instance, they invest in community schools. These community schools organise activities involving the whole community, varying from the running of libraries, day care centres, music schools, institutions for youth health and help with homework (Brede school).

Housing cooperatives, at their core, aim to make sure that enough social housing is available (MBZK). People who need it can make use of these affordable houses (Aedes, 3). In the Netherlands, about 400 housing cooperatives supply this demand (Jong, 2013, p. 8). Together, they own about 2,4 million houses. This number has been stable for years, as can be seen in table 2 (Aedes, 4, 5). Figure 1 graphically shows the development of the average number of houses owned by housing cooperatives. This number is increasing quickly, which is partly due to the high amount of mergers in the housing sector.

This system of corporations has been around since the 20th_{century. Before, social organisations and charities}

provided social housing. Government took over the responsibility for social housing in 1901, using housing associations and housing cooperatives, with the first housing law (Jong, 2013, p. 11).

Table 2. The number of housing cooperatives and houses in the Netherlands, history

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1990 824 2.124.300 2.578 1997 767 2.406.800 3.138 2000 628 2.435.400 3.878 2006 474 2.408.600 5.081 2007 455 2.407.500 5.291 2008 430 2.403.100 5.589 2009 418 2.410.700 5.787 2010 401 2.413.400 6.018 2011 389 2.413.400 6.204 2012 381 2.418.100 6.347 2013 378 2.422.500 6.408

Source: Aedes, 9; ILT

Figure 1. The average amount of houses per housing cooperative

Housing cooperatives operate in the semi-public sector. Noordegraaf (2004, p. 93) divides the public sector into government, semi-government and public organisations. However, it is hard to define the boundaries of the public sector clearly (Bovens et al., 2001 in Noordegraaf, 2004, p. 93). Housing cooperatives can be categorised as semi-government organisations, for they have private legal grounds, while incorporating social and public goals (Breeman et al., 2012, p. 152). Housing cooperatives build, manage and rent affordable housing, and help organise social activities. Their public character is visible in their close interplay with municipalities (Baker Tilly Berk, 2013, p. 7). In the semi-public sector, the government exerts its influence. This can be directly or indirectly, for instance through funding and levies.

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The housing cooperatives have had, throughout the 20th_{century, a varying relation with central government,}

municipalities and other parties. For instance, there were times in which they were very independent (the 20’s and 90’s). At other times, they barely have anything to say at all (the 30’s until the 70’s). To this day, this relation is ever fluctuating. For the sector as a whole, the adaption to external expectations has become more and more difficult, due to the ever-increasing complexity of the sector’s structure (Jong, 2013, p. 12).

Characteristics of the housing sector

 In 2013, housing cooperatives invested 7 billion euros in their houses (Aedes, 6);

 Together, housing cooperatives have 86 billion euros in outstanding loan to cover for the provision of social housing (Aedes, 7);

 Since 2008, housing cooperatives build, on average, 35.500 new houses every year. This is 67% of all new houses built in the Netherlands (Aedes, 8).

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3. Literature review

This goal of this chapter is to review the theories that are central to this research. These theories form an important part of this investigation, functioning as a basis for the conceptual framework. Section 3.1 will start with a review of the central actor; the management accountant, and zooms in on the role he plays in the organisation. Section 3.2 reviews the literature concerning NPM, which is used to characterise the organisation, and focus on the influence of private market techniques in the semi-public sector. Central in section 3.3 is agency theory. Agency theory is used to investigate how the role of the management accountant is linked to the organisational structure. Central to this subject is the position of the management accountant in the organisation. After this, section 3.4 reviews the literature concerning management control. It is very important for an organisation to be in control. This is also very true for housing cooperatives, for public concern is involved. The way in which control is achieved is investigated by the lens of management control. This chapter concludes with section 3.5, providing the conceptual model.

3.1 The management accountant

This section starts with a definition of the management accountant, followed by an investigation of his general tasks. Then, it resumes with the various roles the management accountant can play, along with the development of this role, and its implementation in the housing sector. A focus on specific tasks is provided, while the conclusion has its focus on the key factors that influence the role of the management accountant in the housing sector.

3.1.1 The management accountant

Management accountants are involved in supporting and advising the management of an organisation in planning, control and decision-making issues during the strategy implementation processes (Anthony and Young, 2004; Atkinson et al., 2004; De Loo et al., 2006 in Verstegen et al., 2007). A management accountant supports and advises the management of an organisation in realising their economic, public and financial goals (Anthony and Young, 2004; Atkinson, Kaplan and Young, 2004; De Loo et al., 2006 in Verstegen et al., 2007).

Management accounting involves collaborating in management decision-making, thinking of planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of the strategy of an organisation (IMA, 2008, p. 1). The way in which the management accountant plays his part has impactful consequences for the way in which the strategy of an organisation unfolds (Verstegen et al., 2007, p. 9).

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Management accountants can play various roles. It used to be that management accountants had a more passive role as an independent and objective assessor of the financial performance of the business functions. Main tasks were the monitoring and controlling of others’ performance (Burns and Baldvinsdottir, 2007 in Hopper et al., 2007). The management accountant has responsibilities in both the management and financial part of accounting. His two major responsibilities are (1) to produce financial information to help the management team in the business decision-making process and (2) to make sure financial information is accurate and that internal control practices conform to corporate policy and procedures (Sathe, 1983). These responsibilities represent the roles of, respectively, controller involvement and controller independence. (Anthony, 1988; Sathe, 1983 in Lambert and Sponem, 2012, p. 568). This corresponds with the management accountant2_{as Business Advocate or Corporate Policeman (Jablonsky and Keating, 1998).}

Simon et al. (1954 in Hopper, 1980) classified accounting information into scorecard, attention directing and problem solving. Scorecard is concerned with constraining and stabilising managerial behaviour, problem solving with creative decision-making and attention directing has to do with both (Hopper, 1980, p. 401). Problem solving roles aim to provide managers with relevant information for decision-making (Hopper, 1980; Sathe, 1983 in Lambert and Sponem, 2012, p. 565).

Overall, there is a duality apparent with on the one hand the independent, and on the other hand the involved management accountant. On the one hand, the management accountant is a watchman/scorekeeper/book-keeper, on the other hand the management accountant fulfils the role of information adapter/business partner/service-aid (Verstegen et al., 2007; Byrne and Pierce, 2007; Lambert and Sponem, 2012). The role of the management accountant is a well-represented theme in literature (Caplan, 1971; Hedberg and Jonsonn, 1978; Hopwood, 1974 in Hopper, 1980). Granlund and Lukka (1998) and others discuss the difference between the two types along several dimensions.

This research uses the terms ‘scorekeeper’ and ‘business partner’. The scorekeeper has its focus on the past, and has to “ensure that the financial data of a business unit is fair and that internal control practices comply with the company’s procedures and policy” (Sathe, 1983, p. 31). The production of financial reports is also part of this role. The business partner focuses on the present and the future. In addition, the business partner participates in decision-making processes, and is expected to know about operations (Paulsson, 2012). Operational managers are their primary client (Lambert and Sponem, 2012). In this role, the management accountant provides data for self-control (Hopper, 1980), and contributes to business decision-making this way (Granlund and Lukka, 1998).

In accounting literature, management accounting is seen as an occupation with a defined identity. It is unclear, however, whether this is the case. Management accounting work in practice is characterised more by the specifics of the organisation than occupational aspects, like, for example, audit (Ahrens and Chapman, 2000). More important is how the individual management accountant understands the organisation (Breeman, 1993).

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All management accountants share the same base, which is technical knowledge. This knowledge however, is very general and dependent upon organisational context. Management accountants share the same technical knowledge, but use it in their own personal field, and therefore gain their own personal experiences. The result is that management accountants may exercise very diverse activities, and have a broad range of tasks.

According to Katz and Kahn (1966, p. 173 in Lambert and Sponem, 2012, p. 567), roles cannot be observed directly, but only by looking at the tasks and activities performed. Verstegen et al. (2007) follow this idea. They use activities to distinguish groups of controllers, and divide these activities in five main groups. These five groups correspond to the two main roles and connect the activities to the two main roles (see table 3; specific activities in Appendix 5, Verstegen et al., 2007, p. 31). The role of watchmen corresponds to the scorekeeper-role, while the information adapter represent the business partner-role. By doing so, it is likely that not all activities management accountants perform are found (Morgan and Morrison, 1999 in Verstegen et al., 2007, p. 13-14), but rather it serves as a framework for further distinction between the two roles. These activities can be used to help determine the role of the management accountant.

Table 3. Categories of activities

Watchman (Scorekeeper)

Information adapter (Business partner) Designing and changing control

systems and supporting change processes

x

Internal reporting x

External reporting x

Supervising and maintaining

accounting information systems x

Risk monitoring x

Source: Verstegen et al. (2007, p. 14-15)

3.1.3 The development of the role of the management accountant

Since the late 1980’s, literature has examined the change of the role of the management accountant (Emsley, 2005 in Lambert and Sponem, 2012). Recently, the idea is common that management accountants adopt more of a business orientation. Literature suggests a development path of the management accountant from scorekeeping to business partner (Russel et al., 1999).

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of corporate performance management, planning, and budgeting; champions of the corporate governance process, providing risk management, internal control, and financial reporting at a time of great change; and experts in cost management methods that help the organization become more competitive and successful.” (IMA, 2008, p. 1)

However, not everyone is convinced there has been a shift towards a role that is more business partner-like. The adoption of it “is found to be ambiguous, conditional and uncertain” (Byrne and Pierce, 2007, p. 469). Most research still finds the scorekeeper-role (Vaivio, 2006 in Lambert and Sponem, 2012), and evidence of a fundamental shift remains relatively scarce (Burns and Baldvinsdottir, 2005). Lambert and Sponem (2012, p. 566) suggest it might be “that not all firms yearn for business partners”. Friedman and Lyne (1997) examine how far management accountants can be regarded as scorekeepers. They maintain that scorekeeping activities are still important and should, therefore, still receive much attention from management (Friedman and Lyne, 1997). Given the fact that 45% of the controllers in their sample operated as scorekeepers, Verstegen et al. (2007, p. 16) reckon the scorekeeping role is “still very much alive”.

Many controllers and operating executives believe that, generally, these two responsibilities are mutually exclusive, for a focus on one responsibility makes it more difficult to tend to the other responsibility (Sathe, 1983). In practice, reconciling the two roles is difficult to achieve (Lambert and Sponem, 2012, p. 586). The way in which these responsibilities affect the management accountant’s job differ from situation to situation.

Findings of Lambert and Sponem (2012) confirm the idea of Mouritsen (1996) on how the role of the management accounting function comes about in practice. The idea is that accounting departments are, at their core, involved in tasks related to bookkeeping. “All remaining department competencies are negotiable” (Mouritsen, 1996, p. 300 in Lambert and Sponem, 2012, p. 585), and are influenced by the way in which the department is empowered. When fully empowered, they can participate in management activities and consulting work.

It is important that the role that has to be played is clear, because research on the consequences of role ambiguity has discovered side effects like low job satisfaction, high tension, low self-confidence and a sense of futility (Kahn et al., 1964 in Katz and Kahn, 1978). In addition, it is most likely accompanied by a reduction in the effectiveness of performance.

Overall, it is clear that there has been a long-spread debate involving the dual roles of management accountants. This forms an extra stimulation for a deeper investigation into these dual roles. For this reason, they are a main topic in this research, and are investigated further in section 3.2. The goal of this investigation is to find out more about the role of the management accountant before the scandals that occurred in the period 2002-2012, as well as after these scandals. Important is the change of the role in the housing sector in the Netherlands. Furthermore, in some organisations, the function management accountant is not present. New legislation dictates this will be obligatory in the future. How will housing cooperatives implement this function?

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According to literature, there are many factors influencing the role of the management accountant. In this research, the focus will be on three of them, which are supposed to be most important in the housing sector in the Netherlands at present time:

(1) The use of private market techniques in the semi-public sector.

This factor represents the suitability of the use of private market techniques in the semi-public sector. Also, it is related to the character of the housing cooperative; the question whether it is a public or a private organisation.

(2) The position of the management accountant in the organisation.

The position of the management accountant is an important factor influencing the role of the management accountant. Central topics are organisational structure and independence.

(3) Public concern.

Relating to the scandals, public concern plays an important role. In the semi-public sector, a lot of public capital is concerned. Central to this factor is the way in which housing cooperative try to stay in control.

The rest of this paragraph clarifies the importance of these factors, further showing why they are chosen in this research. In order to investigate the influence of these factors, each is linked to a theory, which lens is used to research the topic.

The use of private market techniques in the semi-public sector

As mentioned in chapter 2, the housing sector is a special sector. It is not completely a public sector, it is not completely a private sector, it is somewhere in the middle. Housing cooperatives in the Netherlands have a private base, but a public goal. In the past, this has caused them to be at different sides of this spectrum. Sometimes, they found themselves to be more on the private side of the spectrum. At other times, they slide more towards the public side.

In the public sector overall, NPM has had its influence, and management reforms have become more and more significant. Governmental organisations learn from organisations in the private sector. Private market techniques are used in the public sector in order to enable public organisations to run more efficient and effective (Bekke, 1990; Bossert, 2002). However, recently several scandals involving mismanagement of projects, financial mismanagement and speculation, and fraud and self-enrichment occurred. The housing sector is, also due to the size of investments that have to be made, relatively sensitive to problems (Jong, 2013, p. 9). This provokes the question whether the use of market techniques is advisable for the housing sector. Does the sector loose its eye for social housing by becoming an entrepreneur too much? Has profit become too important?

This is researched using the theoretical lens of NPM. This theory will be reviewed in section 3.2.

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The organisational position of the management accountant is one of the central concepts concerning the role he plays (Gross et al., 1956 in Hopper, 1980). For instance, does the management accountant report to management, to the executive directors, or does he report to the supervisory board directly? The position of the management accountant in the organisational structure influences his responsibilities and activities, and therefore the role the he plays, and, indirectly, the amount of control that is realised.

Management has an influence on the role the management accountant plays. Hopper (1980) and Sathe (1982) found strong support for the influence of management expectations on the role of the management accountant (Byrne and Pierce, 2007, p. 487). This means that management accountants may have to adjust their role to different managerial styles and have to cope with role conflict if they desire a role the management does not perceive as fitting (Byrne and Pierce, 2007). Management can be very decisive to the role of the controllers. If management is oriented towards the management accountants as scorekeepers, then it is difficult for management accountants to change their role. Management accountants are deeply grounded in, and moving along with, the organisational culture (Järvenpää, 2007).

By the use the theoretical lens of agency theory, the management accountant’s position in the organisation is researched. This theory will be reviewed further in section 3.3.

Public concern

Recently, multiple scandals involving a lot of capital have occurred. There are not only financial interests, social interests are also very important in this sector. Social interest are not just important, they are the reason why the sector exists. Since in the housing sector public spending is concerned, the expectation is that the need for internal control has become high, since normative institutional forces, such as local cultural norms and values, have been reported to have an influence on the roles of management accountants (DiMaggio and Powell, 1983 in Byrne and Pierce, 2007, p. 490). It could be expected that, for the management accountant, a sense of independence from management is required in order to monitor management decisions and actions, in order to make sure policies, procedures and standards are complied with (Sathe, 1983). This points to the management accountant as a scorekeeper.

This factor is researched by the use of the theoretical lens used of management control. This theory will be reviewed further in section 3.4.

3.2 New Public Management

This section starts with an introduction of NPM and its influence in the housing sector (3.2.1). Hereafter, paragraph 3.2.2 investigates the influence of NPM on the role of the management accountant.

3.2.1 New Public Management

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this movement (Hood, 1991). This was central to the rise of NPM (Hood, 1995), and it became very popular quickly. NPM promotes the adoption of managerial tools and mechanisms from the private market by public sector organisations, in order to make them more efficient and performance-driven (Ferlie et al., 1996 in Anessi-Pessina et al., 2012, p. 2-3). In this view, organisations and their policies have to be simple and flexible (Noordegraaf, 2004, p. 132). The idea is that costs should decrease, while maintaining the volume and quality of the services provided. This way the demands on taxpayers will be less. In order to achieve this, many management reforms have taken place in the public sector. This development has been studied extensively by scholars (see e.g., Hood, 1995; Pollitt, 2000; Groot and Budding, 2008; Lapsley, 2008 in Paulsson, 2012). The introduction of internal markets, performance management, accrual accounting and budgeting, professional management, decentralisation and output-oriented resource allocation are common components in NPM (see e.g., Hood, 1995; Bromwich and Lapsley, 1997; Lapsley, 2008 in Paulsson, 2012). The introduction of these accounting principles to the public sector has greatly improved their efficiency (Brash, 1998, p. 3 in Lapsley and Pallot, 2000, p. 214). Another important component is the disaggregation of units in the public sector (Hood, 1991). This means that public organisations get their own budgets and become more independent. It is up to themselves to handle resources with more discipline and parsimony (Hood, 1991). This implicates they have to focus on profit more, in order to realise good results.

NPM should not be seen as a clearly defined construct, but rather as a collection of ideas, models and practices with one common goal: to get public organisations to be more result-oriented, better coordinated and more efficient (Noordegraaf, 2004, p. 86). Hood (1991) characterised NPM in a loose way, consequently this characterisation has been widely used (Noordegraaf, 2004, p. 87). This characterisation is summarised in table 4.

Table 4. Components of New Public Management

New Public Management doctrine Explanation

‘Hands on’ professional management Management becomes accountable for actions. Explicit standards and measure of

performance

Quantification of performance measurement. The definition of goals, targets and indicators of success. Emphasis on output controls Focus on results rather than procedures.

Disaggregation of units in the public sector

Public units get their own budgets. Dealing with other public units on ‘arms-length’ basis.

Greater competition in public sector The use of contracting and rivalry to lower costs and better standards.

Private sector style management The use of private sector management techniques. Flexible and pragmatic ethos.

Greater discipline and parsimony in the

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In NPM, insights from business and business economics are used in the public sector, in order to enable public organisations to operate effectively and efficiently (Mol, 1988 in Noordegraaf, 2004, p. 132). This shows the fusion of management practices with the economics paradigm (Lapsley and Pallot, 2000, p. 216). However, generalised claims about management, which are derived from economics, should not be adopted immediately, but should be regarded with “a healthy scepticism” (Seddon, 2010, p. 12). The public sector’s main goal is to provide service to the community, therefore the focus on efficiency should probably not be carried on too far.

The semi-public sector is a special sector in this regard. Originally consisting of public organisations, now the organisations in this sector are private corporations. At the same time, they have a public goal, this being the sole reason for their existence. Therefore, this research will start with exploring of the core of the housing sector, in order to discover whether this semi-public sector is more like a private or a public sector.

Proposition 1a

People working in the housing sector consider the sector to be public. Proposition 1b

People working in the housing sector consider the sector to be private.

3.2.2 New Public Management and the role of the management accountant

It can be argued that these private sector ideas, like an orientation on profit, are, at least partly, a cause of these scandals (Goodijk, 2012). Influences central in NPM have played their part in the scandals. A logical effect of these scandals seems a societal call for a guarantee that scandals like these will never happen again. In order to achieve this, important is that organisations will be in control in the future. The role of the management accountant fitting a tightly controlled organisation is the scorekeeper. Here, the management accountant is mostly focussed on monitoring and providing the necessary checks-and-balances, rather than working on the business side of the organisation.

On the other hand, the ideas that are central in NPM cause the role of the management accountant to be more like a business partner than a scorekeeper (Paulsson, 2012). This is, in part, due to the introduction of new management accounting tools and techniques involved in NPM (Järvenpää, 2007; Paulsson, 2012). The idea is that these new management accounting tools cause the scorekeeping part of the role to become obsolete, and in that way shifts the role of the management accountant to the side of the business.

This displays two different effects on the role of the management accountant. Therefore, its influence is unclear. In this research, the effects of NPM in the housing sector and their influence of the role of the management accountant are investigated.

Proposition 2a

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Proposition 2b

New Public Management causes the role of the management accountant to be more like a business partner.

3.3 Agency theory

This section starts with an introduction of agency theory (3.3.1), and agency problems in the housing sector are illustrated (3.3.2). Next, the position of the management accountant in the organisational structure is discussed in paragraph 3.3.3.

3.3.1 Agency theory

Agency relationships are contracts under which the principal has the agent perform a service on their behalf, involving delegation of decision-making power (Jensen and Meckling, 1976, p. 308). Agency relationships mostly originate from the separation of ownership and control. This separation creates conflicting objectives and general information asymmetry between owners and management (Coase, 1937; Jensen and Meckling, 1976; Fama and Jensen, 1983 in Dey, 2008, p. 1.146). A principal-agent relationship is one in which the agent provides efforts which cannot be directly observed by the principal (Holmström, 1979, p. 75). Because of the information asymmetry and conflicting objectives, managers sometimes take actions that are in their best interest, but not in the best interest of the shareholders. When this happens, agency problems occur (Watts and Zimmerman, 1986 in Dey, 2008).

The result of these agency problems is moral hazard (see Holmström, 1979). Moral hazard may arise in situations with information asymmetry, and refers to the lack of effort on the agent’s part. Agents may not put in the amount of effort on which was agreed, but the information asymmetry prevents discovery of this fact (Eisenhardt, 1989). As a result, agency costs arise due to core problems such as conflicts of interest between shareholders and management (Investopedia).

The governance structure of a firm contains certain mechanisms that minimise these agency conflicts. When firms are in greater need of oversight, the demand for these control mechanisms is likely to be higher (Dey, 2008, p. 1.147). One part of governance, and of these control mechanisms, is supervision. Supervision plays an especially important role in the housing sector, for public spending is concerned.

3.3.2 Agency problems in the housing sector

In the housing sector, however, there is no separation of ownership and control. Housing cooperatives operate in the semi-public sector, for they are private organisations (foundations), while having a public goal. In addition, housing cooperatives are not owned by shareholders. This means they operate in a different environment than the classic situation involving agency problems.

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principal has to be defined anew. One of the possible situations is the relation between the housing cooperative (the agent) and the supervising entity (the principal). Here, the agents are mostly represented by the executive director(s). The principal is represented by multiple supervisory entities: the supervisory board as well as external supervisory institutions.

Housing cooperatives have a public goal, therefore many parties are dependent on the way the housing cooperatives perform their tasks. Therefore, next to the supervisory structure, other parties could be designated as principals as well. These are (1) government, for the government delegates the social tasks to the housing cooperatives, and therefore demands they perform these tasks in society’s best interest. Furthermore, tenants living in social housing provided by the housing cooperatives (2) have a direct interest in the well-functioning of the housing sector.

In this research, the executive director(s) and the management team represent the agents. Being members of the organisation, they fill the role of agent, just like in the classic model. The principal in this research is represented by members of the supervisory board. They are suited to do so, for their goal is to make sure the organisation is functioning the right way, and social housing is provided effectively.

3.3.3 The position of the management accountant in the organisational structure The position of the management accountant in the organisational structure is important, for it has an impact on the role he plays in the organisation. Important is, for instance, the person the management accountant reports to. The management accountant could report to a financial manager, or exclusively to an executive director. It could be that he works in close relation with the supervisory board, on a more independent position. Also important are, for instance, the meetings with the supervisory board. The management accountant could be included in these meetings to encourage more transparency, having a more independent position from the rest of the organisation. It could also be that the supervisory board is informed by the executive director(s) only, by the use of documents.

One the one hand, the supervisory board desires the management accountant to be capable and autonomous. When the management accountant is capable and autonomous, he is able to provide more objective information on which decisions can be based. On the other hand, the management accountant must be able to advise and criticise management. In general, regulators look for strong leaders. However, after the many incidents, they have come to desire strong controllers who are able to keep management in control (Project Control Online). The way in which the management accountant is positioned in the organisation is expected to affect his job tremendously, and to influence the role he plays in the prevention of agency problems.

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Proposition 3

The management accountant has an important role in the prevention of agency problems.

3.4 Management control

This section starts with an introduction of management control in paragraph 3.4.1. Hereafter, paragraph 3.4.2 reviews the relation between management control and the role of the management accountant.

3.4.1 Management control

An organisation needs to make sure it is in control. Often, this is done using a management control system (MCS). A MCS helps the organisation to deliver value to its stakeholders. Managers implement controls in order to be able to do this. An organisation is ‘in control’ when it is able to achieve its goals (Merchant and Otley, 2006, p. 785). MCSs help an organisation to adapt to the environment, and keep them on track (Merchant and Otley, 2006), so they can achieve their goals.

This is the most global view on management control. There are also narrower views. Merchant and Stede (2007 in Malmi and Brown, 2008) make a distinction between management control and strategic control. Strategic control is related to strategic plans: their origination and the way in which they are executed. Management control deals with employees’ behaviour, these controls are meant to brace against human failing. Throughout the organisation, multiple control mechanisms have to be implemented to “increase the probability that organisational actors will behave in ways consistent with the objectives of the dominant organisational coalition” (Abernethy and Chua, 1996 in Malmi and Brown, 2008, p. 290). Flamholtz et al. (1985) look at organisational control, which, according to them, means how successful goals are achieved. They define organisational control as “attempts by the organization to increase the probability that individuals and groups will behave in ways that lead to the attainment of organizational goals” (p. 36). Most formal MCSs consist of the phases (1) programming, (2) budgeting, (3) operating and measurement, and (4) reporting and analysis (Anthony and Dearden, 1980, p. 19). However, the definition of an MCS has evolved from only the formal part, to include a broader scope (Chenhall, 2003, p. 129). According to him, the management control process also includes informal controls.

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3.4.2 Management control and the role of the management accountant

Taking the housing sector as a whole, a lot of capital, which takes the form of real estate, is concerned. This causes the sector to be relatively sensitive to problems (Jong, 2013, p. 9). Next to this, recently various scandals have occurred. Because of these recent scandals, the need for control is high in the housing sector. All parties involved in social housing, like the government, tenants, society and housing cooperatives themselves, try very hard to prevent scandals like these in the future. This suggests that, from a management control perspective, the degree of control has become tighter. This also presumably means that, for instance, housing cooperatives monitor their organisational processes in a more tight way, and generally strive for tighter management control.

From theory, two different effects can be distinguished. On the one hand, the management accountant can have an independent role, the role of ‘policeman’ (Jablonsky and Keating, 1998, p. 2). This corresponds with the scorekeeper role. With this role, information that is more accurate is guaranteed (Maas and Matějka, 2009). Management decisions and actions are monitored in order to make sure policies, procedures and standards are complied with (Sathe, 1983). Therefore, this accommodates more quality and hierarchical control. The idea is that the management accountant takes a role that is more like a scorekeeper, in order to achieve accurate information and control in an independent manner.

On the other hand, the management accountant can have a more involved role, the role of ‘business advocate’ (Jablonsky and Keating, 1998, p. 3). This corresponds with the business partner role. This role is supposed to provide better control, due to the management accountant’s involvement. The idea is that the scorekeeper is often perceived as an ‘outsider’, which causes control to be difficult to achieve (Sathe, 1983). In line with this, Jablonsky and Keating (1993 in Jablonsky and Keating, 1998) indicate that management accountants should be more like business partners, if they want to have more than a marginal role in the organisation. This suggests that in order to gain control, the management accountant should take a more involved role.

These two effects are quite opposite to each other. Therefore, one goal of this research is to investigate the management accountant’s role in the housing sector, and to see if the scandals have had their influence in this role.

Proposition 4

The incidents have caused the role of the management accountant to change. Proposition 4a

In order to gain more control, the management accountant’s role has changed to be more like a scorekeeper, more independent.

Proposition 4b

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3.5 Conceptual model

The conceptual model, as well as an explanation of it, are presented in this section. This model is a visual representation of the theoretical relations described in this chapter.

Central to this research is the role of the management accountant in the housing sector. As can be seen in the conceptual model (figure 2), this is central, and therefore located in the middle. Closely related to the role of the management accountant, and indirectly hugely affecting it, are the scandals that occurred.

The role of the management accountant is researched by the use of three theoretical lenses: management control, agency theory and NPM. Central to the topic of keeping the housing sector ‘in control’ is the amount of public spending concerned, this reflects the public concern. This is researched by the use of management control. Agency theory is used to investigate how the role of the management accountant is connected to the rest of the organisation. Regarding this connection, the position in the organisation as well as the connection with other organisational members (management/executive directors/supervisory board) are important. Lastly, the use of private market techniques in the semi-public sector is investigated by the theoretical lens of NPM.

This research uses propositions to investigate the abovementioned relations. These numbered propositions are displayed in the conceptual model (see figure 2). Proposition 1 aims at the character of the housing sector. Here, the question whether the housing sector is perceived as a public of private sector is investigated. This is used as a basis for proposition 2. Proposition 2 investigates the influences of NPM in the sector, and their effect on the role of the management accountant. Proposition 3 has its focus on the relation between the role of the management accountant and his position in the organisation. Proposition 4 intends to investigate the influence of public concern on the role of the management accountant.

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4. Methodology

This chapter describes the methodology of this study. In section 4.1, the method of research is explained. Next, this chapter exhibits the way in which organisations and respondents are selected and the way in which the data is interpreted (section 4.2). This chapter concludes with section 4.3, providing the topics of the interview.

4.1 Research method

The purpose of this paper is to improve our understanding of the influence of scandals on the role of the management accountant. More specifically, the influence of recent scandals, which occurred in the period 2002-2012, on the role of the management accountant in the housing sector in the Netherlands. This research is conducted at various housing cooperatives, in order to obtain a better view of the role of management accountants throughout the sector.

This study’s nature is exploratory, and aims at the induction part of the empirical cycle (Aken et al., 2012). While building on existing theories, its combined application is very specific, therefore it has not received much attention in literature. For this reason, a qualitative research method is used (Eisenhardt, 1989). Interpretive studies often generate a more thorough analysis (Järvenpää, 2007). This method is representative for it does not aim to provide a universal truth; rather it tries to gain a comprehensive picture of the development of the role of the management accountant, as well as the factors influencing it.

The term ‘reliability’ is often linked to quantitative studies, but this can also have a role in qualitative studies. In qualitative studies, reliability refers to the extend in which the study helps to “understand a situation that would otherwise be enigmatic or confusing” (Eisner, 1991, p. 58 in Golafshani, 2003, p. 601). This investigation strives to simplify the situation, and to gain insight in the role of the management accountant in the housing sector in the Netherlands, by the use of multiple theoretical lenses.

By the use of semi-structured interviews, management accountants, financial managers, an executive director, and members of the supervisory board are interviewed. In theory development literature, many different instruments have been used, but interviews are considered one of the most common methods (Eisenhardt, 1989). This study makes use of semi-structured interviews, for they provide guidance, while leaving ample room for additional questions.

4.2 Selection

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are supposed to be the most knowledgeable about the subject are chosen as respondents. In order to obtain data as rich as possible, people occupying different functions are interviewed, as well as interviewees working at different housing cooperatives.

In the Netherlands, about 400 housing cooperatives are active, together providing the social housing (Jong, 2013, p. 8). These housing cooperatives range from very large housing cooperatives, owning tens of thousands of units, to very small ones, owning a couple of hundreds of units. Housing cooperatives varying in size are approached, by mail and by phone, to participate in this study. The aim was to interview three persons per housing cooperative: the management accountant, the manager of the management accountant, and a member of the supervisory board. The goal is to obtain a complete picture of the role of the management accountant in the housing sector this way. Most organisations participating in this research were not able to provide all three functions; therefore, a mix of respondents from multiple housing cooperatives is used. In total, 24 housing cooperatives were approached to participate in this study. Of these 24, seven housing cooperatives did not respond, and eight housing cooperatives indicated they were not willing to participate, for various reasons. Nine housing cooperatives remained, two of which wanted to cooperate, but were not able to do so at the time of this investigation. Seven housing cooperatives did cooperate, together providing 10 respondents.

The respondents are employed at housing cooperatives where scandals took place as well as housing cooperatives where no scandals occurred. This way the effects on the role of the management accountant, throughout the entire sector, can be monitored. The housing cooperatives where scandals occurred are selected from various categories of scandals (see table 1, p. 5). In addition, the most recent scandals are selected.

Scandals prove to be a delicate subject. Accordingly, some respondents preferred to be interviewed anonymously. Other respondents did not seek anonymity at all. In order to treat the 10 respondents the same way, all were assigned a code (A-J). This provides somewhat less transparency, but this is unavoidable in order to guarantee the respondents’ anonymity. The following persons are interviewed:

 Three management accountants (respondents D, F, J);  Four managers Finance/Control (respondents A, B, G, I);  One executive director (respondent E);

 Two members of the supervisory board (respondents C, H).

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The average interview took between 30 and 35 minutes. Transcripts of the interviews were made, as well as a table containing the summarised information, showing the most important results. These results are used to find an answer to the propositions.

4.3 Interview topics

In chapter 3, propositions were formulated to describe the relations in the conceptual model. The goal of the interviews is to investigate these proposed relations. The propositions are leading in the format of the interview. The specific interview topics are displayed in Appendix A. They are divided into multiple sections, representing the multiple theories central to this research. Propositions 1 and 2 are researched by the sections 2 (NPM), 4 and 6 (the role of the management accountant). Proposition 2 is related to section 3 (agency theory). Proposition 4 is investigated by sections 5 (management control) and 4 and 6 (the role of the management accountant).

In the first section, general questions are asked. The purpose of these questions is to obtain an image of the respondent: what is the respondent’s function, how long has this person been working in this function, and how long has this person been working in the housing sector.

The second section contains topics related to the organisation. These topics find their roots in NPM. The first topics in this section are centred around the core of the housing sector: what are the main activities of the organisation, what is its main goal, and is the organisation public or private. These topics are based on the categorisation of the housing sector by Breeman et al. (2012) and Noordegraaf (2004). Later topics aim at locating influences of New Public Management in the semi-public sector. Important topics are based on NPM-influences described by Noordegraaf (2004) and Hood (1991), like a focus on profit and efficiency. Also, the relation between these NPM-influences and scandals, based on the idea of Goodijk (2012), is being investigated.

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The fourth section is aimed at finding out the role of the management accountant. Later on, in the sixth section, the respondents are asked about the role of the management accountant directly. Before this is done however, this section handles topics like the management accountant’s tasks, activities, responsibilities, and authority. This helps to obtain a more objective image of the role performed by the management accountant. This approach is line with other studies about the roles of management accountants (Byrne and Pierce, 2007; Hopper, 1980; Lambert and Sponem, 2012; Verstegen et al., 2007).

The topic of the fifth section is management control. This section handles questions about the way goals and norms have changed, the tightness of which results are monitored, the way of monitoring by the supervisory board and consequences following non-compliance (Merchant and Stede, 2012). These questions are related to the tightness of control, as Merchant and Stede (2012) identified two forms of control: tight and loose control.

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5. Results

The data obtained from the interviews is the main topic of this chapter. Section 5.1 provides an overview of the results. Next, the goal of section 5.2 is an analysis of the results. In this section, the results are linked to the predefined propositions.

5.1 Results from the interview

This section discusses the results, providing an overview of the most important findings.

5.1.1 Organisation

Paragraph 5.1.1 provides the results concerning the organisation. The findings are summarised in table 5.

Table 5. Organisation

Main activities of the housing

cooperative/importan ce of profit relative to social services.

 All agree that the core activity is the provision of social housing; profitability is not a goal. Sustainability is, however.

 Investing in the liveability of the districts. (G, I)

 An important goal is to live up to certain criteria, of which the most important are set by the WSW (Waarborgfonds Sociale

Woningbouw). (D)

Has this changed (since the

incidents)?

 No change. (A, C, F)

 Because of the incidents, there is stricter regulation. This means more supervision. (D, G, H, I)

 Also, no more activities beyond the core tasks. (H, I)

Public/private

 Private, no discussion. (B)

 Somewhere in between. Private base with public goal. (A, C, D, G, H, I)

 Organisation is still private. In practice however, this is different. (H)

Tensions private/public

 No tensions. (C)

 Tensions because of government’s interference. Makes the functioning of the organisation more difficult, and causes discussions. (B, D, G, H, I)

More emphasis on efficiency?

 Yes. First, we hardly looked at efficiency at all. Profit was no goal; money was no issue. Now things are different. (A, B, C, F, H, I)

 Yes, also benchmarking has become important. (C, G)

 Yes. (D)

Relation focus on efficiency and incidents?

 Not directly, but indirectly, yes. (C, D)

 Indirectly it caused the ‘verhuurdersheffing’ to arise, as well as focus on core activities, which forces the shift to efficiency. (G, H)

The semi-public sector

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goal is the responsibility of housing cooperatives to invest in the neighbourhood, to keep it safe and clean (respondents G, I). Management accountant D added that an important goal of the housing cooperative is to live up to certain standards, in order to be able to finance projects, and to build and maintain social housing.

Table 5 shows that some argued this has not changed since the incidents but has always been the case (respondents A, C, F). Others argued the incidents did change something. The incidents caused the regulation to become stricter, resulting in a refocus of the activities (respondents D, G, H, I). Before, the main goal of the housing cooperatives was much broader (respondents H, I). Respondents A, B, F and G indicated that housing cooperatives have had too much freedom in the past. “And that’s what happened at for instance housing cooperatives where things were wrong, they had way too much freedom. So freedom is not only a restriction, but also a measure of safety to protect people from themselves” (management accountant/financial manager A). Management accountant F indicated that looking back, they carried out some projects they should not have done.

The housing sector is a special sector, for it operates on the brink of the public and the private sector. As a result, it is not clear whether the sector is the one or the other. Some respondents view the organisation to be private. “It is private, there is no discussion there. It is a private corporation” (financial manager B). Most others argued that housing cooperatives operate somewhere in between. They have a private base, while having a public goal. Housing cooperatives have to deal with extensive legislation, making it more public. In addition, they work with public money. The use of it has to be justified, as well as decisions made about it (management accountant/financial manager A). All activities are in service of the social task (management accountant J). Commissioner H added that, while the organisations are still private, in practice they seem to have become more public.

The climate in the housing sector has changed completely since the incidents, much freedom is gone now (financial manager G). The great governmental influence causes tensions to rise (respondents B, D, G, H, I). “Well, the discussion starts because the government thinks and feels she has a say in it. That causes discussions to rise, yes” (financial manager B). The government exerts its influence mostly through increased legislation. Respondents perceive this as prohibiting the organisation in functioning correctly, making it harder for them to provide profitable housing (respondents D, G). What strikes the eye is the fact that, overall, the management accountants perceive the housing the sector to be more on the public side of the spectrum, while the financial managers and commissioners perceive the housing cooperative to be more like a private organisation.

Legitimation

Scandals in the housing sector in the Netherlands; the role of the management accountant