Editorial Board

A Refereed Monthly International Journal of Management

Change Management Application Challenges during IPSAS Implementation in the Kingdom of Saudi Arabia

 

Rehab Usama Trabulsi

Lecturer, Accounting Department

King Saud University,

Riyadh, Saudi Arabia

rtrabulsi@ksu.edu.sa

 

Dr. Ahmad Mohammed AlAmri

Professor, Accounting Department

King Saud University,

Riyadh, Saudi Arabia

ahamri@ksu.edu.sa

 

Abstract

The Kingdom of Saudi Arabia is experiencing rapid economic growth through structural economic transformation to reduce reliance on oil and diversify the economy. This necessitated accounting reforms to improve financial reporting quality through the application of accrual basis accounting based on accrual basis International Public Sector Accounting Standards. This study examines the stages of change management and challenges encountered during the transformation project from cash basis accounting to accrual basis accounting. A mixed methods design was employed, combining quantitative (135 questionnaire responses) and qualitative (42 semi-structured interviews and forum sessions) data. Participants included finance department employees and decision-makers in government entities, consultants, auditors, and trainers supported the transformation. Statistical tests analyzed the quantitative data, while reflexive thematic analysis was used for qualitative data, applying the neo-institutional theory based on Dillard et al. (2004) model. The study identified challenges in change management, such as human resources qualification, employees’ resistance, organizational structure change, and standards and procedures guides application. Additionally, it highlighted the vital role of the Accrual Accounting Center, along with its efforts, support, and collaboration with government entities. The findings may enhance the understanding of policymakers, practitioners, standard setters, regulators, and academics, and provide valuable insights for countries adopting accrual basis IPSAS based on the Kingdom’s experience in overcoming change management challenges.

 

Keywords: Change management, Public sector reforms, Accrual basis, Cash basis, International Public Sector Accounting Standards, Neo-institutional theory, Factor Analysis, Thematic analysis, Kingdom of Saudi Arabia

 

Introduction

Since 1980, countries have been pressured to adopt accounting reforms through new public management (NPM) strategies in the public sector.NPM emphasizes performance measurement, resources allocation, decentralization, and increase flexibility by incorporating private sector techniques(Hood, 1991, 1995). Several studies explore the pressures to implement NPM public sector accounting reforms across different countries (Dabbicco & Mattei, 2021; Ferry et al., 2018; Kowalczyk & Caruana, 2022; Krishnan, 2021). For instance, the UK and Italy adopted NPM reforms to enhance public sector efficiency (Dabbicco & Mattei, 2021).Accrual basis accounting (ABA) has become integral to NPM replacing cash basis accounting (CBA).ABA adoption in the UK and New Zealand has been linked to potential benefits, such as increased private sector investment and trade (Ellwood & Newberry, 2007) and improved legitimacy and transparency (Krishnan, 2021). International organizations have played a significant role in promoting these reforms and encouraged adopting International Public Sector Accounting Standards (IPSAS) (Adhikari et al., 2013). Organizations seek legitimacy by aligning with environmental and social pressures to safeguard their economic activities (Kowalczyk & Caruana, 2022). Governments and professional bodies establish accounting standardsto ensure accountability and social legitimacy (Meyer & Rowan, 1977).

The implementation of IPSAS requires structural reform through new laws, regulations, governance practices,and qualified staff recruitment (The Association of Chartered Certified Accountants (ACCA), 2017). A significant challenge for developing countries adopting IPSAS is the lack of qualified accountants, compounded by inadequate training(Saleh et al., 2021).For instance, Nigeria faces a deficiency of expertise (Beredugo, 2021), while Uganda struggles with a lack of qualified accountants and weak professional experience (Nangonzi, 2019). In Jordan, accountants’ resistance stems from a lack of self-efficacy (Al-Otoom & Alrabba, 2022). Other challenges included increased demand for financial reports, leading to a heavier workload (Baehr et al., 2024), changes in accounting standards and policies (Yusof & Jaafar, 2018), and organizational structure modifications (Hannan & Freeman, 1977).

Organizational change refers to improving an organization’s performance to achieve its goals in response to a dynamic environment (Parveen, 2022). In Oromia, organizational culture and transformational leadership positively influence change management, transformational leaders’ collaboration and guidance support change efforts and enhance effective change management (Abawari et al., 2024). Resistance to change must be managed with careful planning to ensure positive outcomes (Devi & Charan, 2013).For instance, Lithuania has encountered resistance to change (ACCA, 2017). Management commitment is crucial to change management success during IPSAS implementation and training programs are vital for developing employees’ skills (Abu Hasan et al., 2022).

This study examines the challenges of change management during the transformation from CBA to ABA based on accrual basis IPSAS in the Kingdom of Saudi Arabia (KSA) public sector. It is the first study to explore these challenges in the context of this transformation project. One of the primary goals of Vision 2030 is to improve financial reporting quality, enhance transparency, and provide accurate and timely information to support decision-making (MOF, 2019b). This can be achieved by adopting accrual basis IPSAS. CBA does not provide comprehensive data on the resources needed to finance services (Ibrahim & Al-Matari, 2022). However, the KSA faces significant challenges during ABA implementation. This study aims to address the following question:

RQ: What are the challenges associated with change management application during ABA based on accrual basis IPSAS implementation in the KSA public sector?

This study employed a mixed method approach, combining quantitative data (135 questionnaire responses) and qualitative data (42 semi-structured interviews and forum sessions). Participants included finance department employees and decision-makers in government entities, consultants, auditors, and trainers who supported the transformation project. Statistical tests analyzed quantitative data, while reflexive thematic analysis was used for qualitative data. The study identified challenges in change management, particularly related to human resources qualification, employees’ resistance, organizational structure change, and standards and procedures guides application. The study also highlighted the Accrual Accounting Center (AAC) efforts, including support and collaboration with government entities. This research contributes to the limited literature on change management in the public sector and provides theoretical insights using neo-institutional theory to understand organizational behavior during change. The findings may inform policy makers, practitioners, standard setters, and academics and assist countries adopting accrual basis IPSAS by learning from the Kingdom’s experience. The paper is organized as follows: the next section presents the literature review and theoretical framework, followed by the methodology, mixed method analysis results and findings discussion, and conclusions.

 

Literature Review

Public Sector Accounting Reforms

The NPM strategy emerged to enhance planning, accountability, transparency, and management in the public sector (Connolly & Hyndman, 2006). NPM emphasizes professional management control, performance measurement, resources allocation, decentralization, and increase flexibility (Hood, 1991, 1995).However, NPM has faced criticism for the substantial adjustments needed to generate information supporting decision-making (Hyndman & McKillop, 2019). Introducing ABA in the public sector as a fundamental component of NPM assumes that CBA no longer meets governments’ needs (Azhar et al., 2021). Proponents of ABA claim numerous benefits, including enhanced performance assessment, accurate efficiency and productivity measurement, better cost control, increased accountability, improved assets management, and the ability to evaluate the impact of public policies on financial positions, all of which support sustainability (Anessi-Pessina & Steccolini, 2007).

Countries have adopted IPSAS (Abdulkarim et al., 2020; Adhikari & Gårseth-Nesbakk, 2016; Adhikari et al., 2021; Al-Otoom & Alrabba, 2022; Beredugo, 2021; Polzer et al., 2021)to improve global financial reporting quality and uniformity. The International Public Sector Accounting Standards Board (IPSASB) issued Recommended Practice Guidelines to encourage adherence to best practices(Brusca & Martínez, 2016). Countries transferred to IPSAS to enhance international comparability, transparency, and accountability (Brusca & Martínez, 2016).For instance, IPSAS adoption has demonstrated benefits, such as enhanced public sector resources management in Russia (Antipova & Bourmistrov, 2013), better government debt management and financial risk reduction in China (Chan, 2016), and increased accountability in Malaysia (Ferry et al., 2018). However, challenges like multiple disclosure and valuation options, inconsistencies with national standards, high implementation cost (Polzer et al., 2021), and similarity to private sector (Brusca & Martínez, 2016).

Implementing ABA reforms requires creating an environment valuable to their success (Adhikari & Gårseth-Nesbakk, 2016). However, challenges to IPSAS implementation include lack of professional accountants, insufficient policy frameworks (Abdulkarim et al., 2020), insufficient communication (Adhikari et al., 2021), deficiency of qualified professionals (Nangonzi, 2019), and departmental resistance (Dorn et al., 2021).

 

Change Management Application

Change management involves using tools and processes to manage people and achieve desired outcomes(Hiatt & Creasey, 2003). It refers to a set of structured procedures for implementing changes in an organized way(Devi & Charan, 2013). Implementing IPSAS requires changes in financial culture, employees’ mindsets,and skills development (ACCA, 2017). Successful implementation depends on organizational readiness, including infrastructure, awareness, commitment from implementers, senior management support, and effective communication (Saleh et al., 2012). Organizational change progresses through phases include preparation, implementation, and reinforcement of change with application of the ADKAR model that divides the change process into five phases: awareness, desire, knowledge, ability, and reinforcement (Hiatt & Creasey, 2003).

 

Theoretical Framework

Neo-Institutional Theory

Institutional theory has been widely used to analyze public sector reforms e.g., (Adhikari & Gårseth-Nesbakk, 2016; Adhikari et al., 2013; Krishnan, 2021; Oulasvirta, 2014; Polzer et al., 2021). Organizations are shaped by cultural, social, and political forces, which drive them to align with prevailing standards and values, often dictated by law and norms, to ensure survival (Fogarty, 1996). Isomorphism describes change in administrative structures and practices aimed to legitimacy and social acceptance (Rodrigues & Craig, 2007) in three forms: coercive isomorphism, which arises from legitimacy and political influence (DiMaggio & Powell, 1983); normative isomorphism, which stems from professionalism (Dillard et al., 2004); mimetic isomorphism, which occurs in response to uncertainty(DiMaggio & Powell, 1983).

 

Conceptual Framework and Hypotheses Development

The KSA faces different challenges during ABA implementation, including rehabilitation, training of government employees, and attracting qualified talent (Deloitte, 2022). Since the beginning of the transformation project, the Change Management, Training and Development department at the AAC has been preparing the involved parties to accept change and engage effectively through communication, knowledge building, and reinforcing project continuity and sustainability (MOF, 2022). Policymakers, regulators, and government entities management commitment and support are crucial for ABA successful and smooth implementation (Ferry et al., 2018). Based on this, it is hypothesized that:

H1. Change management application significantly impacts the successful implementation of ABA.

Effective change management bridges knowledge gaps, improves compliance, and enables human resources to implement change efficiently. Challenges in this process include limited accounting skills, insufficient training, inadequate allocation of human resources, and a lack of understanding to generate financial reports(Whitefield & Savvas, 2016). By facilitating the adoption of new values, skills, and behaviors, change management enhances employees’ performance (Hiatt & Creasey, 2003) through training. Based on this, it is hypothesized that:

H1a. Change management application significantly influences human resources qualification.

Resistance may arise when staff are found to be incompetent (van Helden et al., 2021). The lack of accountability and reward systems contribute to resistance (Adhikari et al., 2013). Effective change management processes are crucial for overcoming resistance(SM.(IPSASB), Saudi Public Sector Accounting Forum (SPSAF), 2024). Leaders must encourage employees to adapt to new work culture to enhance performance and reduce resistance (Khatib, 2010). Based on this, it is hypothesized that:

H1b. Change management application significantly reduces employees’ resistance.

Adopting IPSAS necessitates effective management and communication (ACCA, 2017). Organizational restructuring requires increasing employees’ awareness, knowledge, and acceptance. To support this, the AAC developed the Organizational Structure and Job Descriptions Guide, which outlines the foundational organizational structure for the finance department, specifying job tasks and responsibilities (MOF, 2021b). Effective communication between all involved parties is crucial for successful implementation (Whitefield & Savvas, 2016). Based on this, it is hypothesized that:

H1c. Change management application significantly increases organizational structure change acceptance.

The AAC has provided detailed guides to assist government entities in their transformation journey, covering accounting concepts, standards, policies, organizational structure, job descriptions, and other procedures (MOF, 2021b). Implementing these guides requires raising awareness, training employees on policies and procedures implementation, and utilizing systems that support ABA. The preparation of financial statements relies on integrating standards and policies into the provided guides (AK.(MOF), SPSAF, 2024). Therefore, it is hypothesized that:

H1d.Change management application significantly influences the application of standards and procedures guides.

Employing Dillard et al. (2004) model clarifies change management application and associated challenges. It extends institutional theory by involving the creation, adoption, and disposal of institutional practices shaped by social, economic, and political contexts influencing organizational change (Dillard et al., 2004). This model has been applied in several studies on accounting changes, including (Adhikari & Gårseth-Nesbakk, 2016; Guerreiro et al., 2015). The model identifies top level actors, such as government officials and legislators, who influence managers and workers at lower levels, as the main entities in the process (Dillard et al., 2004). The framework shown in Figure-1illustrates a multi-level institutional approach to change management in response to institutional pressures during ABA implementation in the KSA.

Figure-1: Change management application study conceptual framework

The upper section of the diagram indicates that ABA application is the primary driver of change management application. The middle section highlights institutional pressures, which influence change management at three levels. First, the regulatory and political level, represented by the Royal Court, Ministry of Finance (MOF), and the AAC regulations, shapes and supports change management. Organizations experience coercive pressure from affiliated entities (Dillard et al., 2004). Second, the professional and organizational field level is reflected in the collaboration between the Change Management, Training and Development and the Saudi Organization for Chartered and Professional Accountants (SOCPA), training and consulting firms, and the General Auditing Bureau to support government entities. This level reflects normative pressure arising from professionalism (Dillard et al., 2004). Third, at the government entities level, change management aims to qualify human resources and reduce employees’ resistance through training, workshops, and simulation, as defined in research hypotheses H1a – H1d. This reflects mimetic pressure, where human resources learn by observing others, imitating successful practices, and developing their performance. Mimetic pressure driven by uncertainty (Dillard et al., 2004). The bottom section of the diagram outlines the expected outcomes of change management application, including empowerment of human resources with knowledge and skills, reducing resistance, organizational structure change acceptance, and guides application.

Methodology

Research Design

Social phenomena are continuously constructed by societal actors (Bell et al., 2023). This research employed a mixed methods approach, combining quantitative and qualitative methods to analyze stakeholders’ opinions, which enhances understanding and provides additional insights (Creswell & Creswell, 2017).

Ethical Considerations and Data Sample

Institutional Review Board approval was obtained for data collection. The research population consists of 223 government entities, the sample included finance department employees, decision-makers, participants from consulting and training firms involved in the transformation project who agreed to participate. A simple random sampling method was employed to ensure equal selection opportunities (Bell et al., 2023). Participants provided informed consent, ensuring anonymity, confidentiality, and the absence of conflicts of interest.

Data Collection

The primary quantitative data were gathered using a questionnaire, while primary qualitative data were collected through semi-structured interviews. In-depth interviews provide detailed insights (DiCicco-Bloom & Crabtree, 2006). The semi-structured interview format included initial guiding questions with additional questions developed flexibly during the interview process (Adhabi & Anozie, 2017).A total of 135 questionnaire responses were received and 42 interviews were conducted, each lasting 30 to 45 minutes. Of these, 31 interviews were in person and 11 were conducted via videoconferencing between March and June 2024. Secondary qualitative data were obtained from official documents and sessions at the Saudi Public Sector Accounting Forum (SPSAF).

Data Analysis

Questionnaire Data Analysis       

The questionnaire includes 21 items assessing how change management contributes to ABA implementation, focusing on challenges related to human resources qualification, employees’ resistance, organizational structure change, and standards and procedures guides application. Responses were measured on a five-point Likert scale, with values assigned to negative statements: (1) extremely high, (2) high, (3) moderate, (4) low, and (5) extremely low.

Interviews Data Analysis

The interviews were transcribed using Microsoft Word V10, with participants’ personal data removed to ensure anonymity. A reflexive thematic analysis approach (Braun & Clarke, 2006, 2019) was used to analyze the data with NVivo 14 software. Thematic analysis identifies coding, themes as meaning-based patterns across data to provide a coherent interpretation guided by the theoretical framework and the researcher’s active role (Braun et al., 2019).

 

Results and Findings Discussion

Questionnaire Results

Descriptive Statistics   

The questionnaire collected demographic data on participants’ position, sex, age group, education level, specialization, and experience as shown in Table-1, which includes frequency, percentage, mean (M), and standard deviation (SD). Most participants were finance department employees (49%), males (73%), aged 31 to <41 years (50%), held a bachelor’s degree (67%), specialized in accounting (70%), and had 11 to <21 years of experience (42%).

Table-1: Questionnaire participants’ demographic characteristics (n = 135)

Category	Frequency		Mean	Standard Deviation
	Number	Percentage (%)
Position
Finance departments employees	66	49
Decision-makers	25	19
Consultants	23	17
Auditors	17	12
Trainers	4	3	3.9	1.2
Gender
Males	98	73
Females	37	27	1.3	0.4
Age Group
20 to < 31 years	28	21
31 to < 41 years	67	50
41 to < 51 years	25	19
51 to < 61 years	10	7
61 years and above	5	3	2.2	0.9
Educational Level
High school and below	5	4
Diploma	4	3
Bachelor’s degree	91	67
Master’s degree	28	21
Doctorate’s degree	7	5	3.2	0.7
Specialization
Accounting	95	70
Business administration	19	14
General administration	3	2
Finance	2	2
Economy	2	2
Other	14	10	5.2	1.6
Years of Experience
Less than 5 years	20	15
5 to < 11 years	35	26
11 to < 21 years	57	42
21 to < 31 years	17	13
31 years and above	6	4	2.7	1.0

Note: Total of 135 participants.

 

 

Factor Analysis    

Construct validity combines content and criteria within a single framework to test hypotheses and relationships (Messick, 1994). Exploratory factor analysis (EFA) identifies the number of factors underlying observed variables, while confirmatory factor analysis (CFA) testsa hypothetical model of factors and their relationships with these variables (Dimitrov, 2012).

Exploratory Factor Analysis (EFA)      

The EFA was conducted using principal axis factoring and Promax rotation method. Four factors were extracted as indicated by eigenvalues greater than 1(Cattell, 1966). These factors accounted for 77.33% of the total variance, which is considered substantial (Hutcheson & Sofroniou, 1999). The factors that align with the research hypotheses outlined in the conceptual framework are discussed as follows.

Factor 1: Human Resources Qualification Challenges (HR): Items from HR_CH1 to HR_CH8 assess challenges, including limited knowledge of ABA and inadequate training through workshops, courses, and practical application.

Factor 2: Employees’ Resistance Challenges (RES): Items from RES_CH1 to RES_CH5 assess challenges, including adopting CBA procedures, fear, lack of confidence, and job instability.

Factor 3: Organizational Structure Change Challenges (STRC): Items from STRC_CH1 to STRC_CH4 assess challenges, including administrative levels, clarity of job descriptions, and communication channels.

Factor 4: Standards and Procedures Guides Application Challenges (GD): Items from GD_CH1 to GD_CH4 assess challenges, including guides role in implementing public sector accounting standards, policies, procedures, organizational structure, and job descriptions.

The correlation matrix showed a correlation of 0.63 between human resources qualification and employees’ resistance and a correlation of 0.53between human resources qualification and standards and procedures guidelines application. The Kaiser-Meyer-Olkin (KMO) value of 0.91 indicates sample adequacy for factor analysis, with values ranging from 0 to 1 (Kaiser & Rice, 1974). Bartlett’s test of sphericity (χ² = 2602.11, P=0.000) indicates the presence of a correlation between items. The EFA communalities, representing sum of squared correlation coefficients between each factor and item (Hutcheson & Sofroniou, 1999), ranged from 0.644 to 0.867 for all items, suggesting that the extracted factors explain the variance.

Confirmatory Factor Analysis (CFA)

The CFA model goodness-of-fit decision, based on the two-index rule, supports a good fit when the standardized root mean square residual (SRMR) is ≤ 0.08 and the comparative fit index (CFI) is≥ 0.95 (Hu & Bentler, 1999). The model shows an SRMR of 0.06 (≤ 0.08), CFI of 0.95 (≥ 0.95), and a chi-square (χ²) of 7672.90, as shown in Table-2.

Table-2: Model goodness-of-fit indexes

Model	χ2	df	p	CFI	SRMR	KMO
Factors	7672.90*	210	135	0.95	0.06	0.91
Note: χ2 = Chi-square; CFI = Comparative Fit Index; SRMR = Standardized Root Mean Square Residual. *P value = 0.000 (n=135).

The standardized factor loadings for the four factors are substantial, exceeding 0.40, and statistically significant (P value = 0.000), as shown inTable-3m indicating the collected data supports challenges factors’ structure.

Table-3: Factor structure standardized loadings

Item	Standardized Loadings	S.E.
Human resources qualification(HR)
HR_CH1	0.797***	0.030
HR_CH2	0.860***	0.025
HR_CH3	0.873***	0.021
HR_CH4	0.898***	0.019
HR_CH5	0.907***	0.018
HR_CH6	0.934***	0.013
HR_CH7	0.912***	0.017
HR_CH8	0.851***	0.026
Employees’ resistance(RES)
RES_CH1	0.910***	0.016
RES_CH2	0.950***	0.010
RES_CH3	0.852***	0.021
RES_CH4	0.872***	0.021
RES_CH5	0.896***	0.019
Organizational structure change(STRC)
STRC_CH1	0.782***	0.039
STRC_CH2	0.861***	0.026
STRC_CH3	0.838***	0.027
STRC_CH4	0.853***	0.026
Standards and procedures guides application(GD)
GD_CH1	0.856***	0.036
GD_CH2	0.869***	0.024
GD_CH3	0.918***	0.019
GD_CH4	0.832***	0.031
Note: ***p < .001. Item responses on a 5-point Likert scale from 1 to 5, (higher scores indicating higher level of agreement).

 

The CFA diagram in Figure-2shows the loading pattern and influence of each item, with higher loadings indicating greater influence on the variable.

Figure-2: Confirmatory factor analysis factor loadings

Reliability Analysis

The Cronbach’s alpha coefficient demonstrates strong stability, with a value of 0.710 for all questionnaire items, ranging from 0.860to 0.946. A Cronbach’s alpha coefficient of 0.70 is considered acceptable, while 0.80 and above indicates better stability, and 0.90 or higher is ideal (Nunnally, 1975). Table-4provides the stability coefficients for each factor, all of which are high. Figure-3 illustrates the stability of the questionnaire items.

Table-4: Cronbach’s Alpha coefficients (α)

Change management application challenges	Items No.	Cronbach’s Alpha (α)
1. Human resources qualification	8	0.946
2. Employees’ resistance	5	0.934
3.Organizational structure change	4	0.860
4.Standards and procedures guides application	4	0.896
Questionnaire general stability	21	0.710
Figure-3: Questionnaire items stability

 

Questionnaire Dimensions Analysis

Dimension analysis was conducted for each factor by calculating the weighted average of each dimension and comparing it to the weighted average of the five-point Likert scale to test the predefined hypotheses. Table-5displays the estimated interval scale based on the five-point Likert scale, which is compared to the weighted average of each dimension.

Table-5: Interval scale according to a five-point Likert scale

Response	Weighted Average	Period Length	Degree
Extremely low	1.00 - 1.79	0.79	Low
Low	1.80 - 2.59	0.79
Moderate	2.60 - 3.39	0.79	Moderate
High	3.40 - 4.19	0.79	High
Extremely high	4.20 - 5.00	0.80
Note: (1=extremely low, 2=low, 3=moderate, 4=high, and 5=extremely high)

Table-6 presents the frequencies and percentages of participants’ responses to human resources qualification challenge items. The item states “Inadequate training provided by the Accrual Accounting Center” ranked highest, with a mean of 2.61 (moderate) and a standard deviation of 1.09, as indicated on the five-point Likert scale in Table-5. In contrast, the item states “Lack of scientifically and professionally qualified human resources” ranked lowest, with a mean of 2.39 (low) and a standard deviation of 1.16. The overall weighted average for this dimension (human resources qualification challenge in change management) is 2.50, with a standard deviation of 0.94, indicating a low degree of challenge. This suggests that human resources qualification challenge is considered low. Participants average responses for this dimension are shown in Figure-4.

Table-6: Descriptive statistics for human resources qualification challenges

Statement	Frequency	Extremely high	High	Moderate	Low	Extremely low	Mean		Standard Deviation		Degree
1.Inadequate training provided by the Accrual Accounting Center	N	22	42	45	18	8	2.61		1.09		Moderate
	%	16%	31%	33%	14%	6%
2.Inadequate training provided by government entities	N	25	52	36	15	7	2.46		1.07		Low
	%	19%	38%	27%	11%	5%
3.Inadequate training provided by the Saudi Organization for Chartered and Professional Accountants	N	26	37	45	20	7	2.59		1.11		Low
	%	19%	28%	33%	15%	5%
4.Inadequate training provided by online electronic platforms	N	23	42	51	10	9	2.56		1.07		Low
	%	17%	31%	38%	7%	7%
5.Limited effectiveness of workshops and specialized courses to benefit from the provided training	N	29	41	41	15	9	2.51		1.14		Low
	%	22%	30%	30%	11%	7%
6.Lack of practical application and simulation to benefit from the provided training	N	28	37	53	10	7	2.49		1.06		Low
	%	21%	27%	39%	8%	5%
7.Lack of the necessary knowledge and skills to apply the required policies and guidelines	N	32	42	41	13	7	2.41		1.10		Low
	%	24%	31%	30%	10%	5%
8.Lack of scientifically and professionally qualified human resources	N	38	34	43	12	8	2.39		1.16		Low
	%	28%	25%	32%	9%	6%
Human resources qualification challenges dimension weighted mean and standard deviation								2.50		0.94
Note: 135 Responses, scale (1=extremely high, 2=high, 3=moderate, 4=low, and 5=extremely low)

 

Figure-4: Average responses of human resources qualification challenges

 

Table-7 presents the frequencies and percentages of participants’ responses to employees’ resistance challenge items. The item states “Being used to apply cash basis procedures and unwillingness to learn and apply different procedures” ranked highest, with a mean of 3.51 (high) and a standard deviation of 1.15, as indicated on the five-point Likert scale in Table-5. In contrast, the item states “Fear of job performance evaluation being linked to the efficiency of implementing transformation procedures” ranked lowest, with a mean of 3.28 (Moderate) and a standard deviation of 1.18. The overall weighted average for this dimension (employees’ resistance challenge to change management) is 3.14, with a standard deviation of 1.04, indicating a moderate degree of challenge. This suggests that employees’ resistance challenge is considered moderate. Participants average responses for this dimension are shown in Figure-5.

Table-7: Descriptive statistics for employees’ resistance challenges

Statement	Frequency	Extremely high	High	Moderate	Low	Extremely low	Mean	Standard Deviation	Degree
1.Being used to apply cash basis procedures and unwillingness to learn and apply different procedures	N	9	13	45	36	32	3.51	1.15	High
	%	7%	9%	33%	27%	24%
2.Fear and lack of confidence in the ability to implement transformation procedures efficiently	N	11	13	50	29	32	3.43	1.18	High
	%	8%	10%	37%	22%	23%
3.Fear of job performance evaluation being linked to the efficiency of implementing transformation procedures	N	14	15	49	33	24	3.28	1.18	Moderate
	%	11%	11%	36%	24%	18%
4.The personality traits of some may not support the application of transformation procedures	N	9	19	42	35	30	3.43	1.17	High
	%	7%	14%	31%	26%	22%
5.Threatening job security if implementing the transformation requires higher qualifications and skills than some people have	N	9	18	44	35	29	3.42	1.16	High
	%	6%	13%	33%	26%	22%
Employees’ resistance challenges dimension weighted mean and standard deviation							3.14	1.04
Note: 135 Responses, scale (1=extremely high, 2=high, 3=moderate, 4=low, and 5=extremely low)

 

Figure-5: Average responses of employees’ resistance challenges

Table-8 presents the frequencies and percentages of participants’ responses to organizational structure change challenge items. The item states “Ineffective communication channels between work teams and formed committees” ranked highest, with a mean of 2.70 (moderate) and a standard deviation of 1.15, as indicated on the five-point Likert scale in Table-5. In contrast, the item states “Lack of clarity about the authorities and responsibilities of committees and work teams in detail” ranked lowest, with a mean of 2.61 (moderate) and a standard deviation of 1.09. The overall weighted average for this dimension (organizational structure change challenge in change management) is 2.63, with a standard deviation of 0.95, indicating a moderate degree of challenge. This suggests that organizational structure change challenge is considered moderate. Participants average responses for this dimension are shown in Figure-6.

Table-8: Descriptive statistics for organizational structure change challenges

Statement	Frequency	Extremely high	High	Moderate	Low	Extremely	Mean	Standard Deviation	Degree
1.Lack of clarity about the authorities and responsibilities of committees and work teams in detail	N	23	39	50	14	9	2.61	1.09	Moderate
	%	17%	29%	37%	10%	7%
2.Ineffective communication channels between work teams and formed committees	N	22	35	54	9	15	2.70	1.15	Moderate
	%	16%	26%	40%	7%	11%
3.Lack of enough administrative levels to achieve flexibility, communication, and speed of decision-making	N	23	41	46	14	11	2.62	1.13	Moderate
	%	17%	30%	34%	11%	8%
4.Weak governance, level of accounting and accountability due to the lack of separation between executive and control activities	N	25	38	49	10	13	2.61	1.15	Moderate
	%	19%	28%	36%	7%	10%
Organizational structure change challenges dimension weighted mean and standard deviation							2.63	0.95
Note: 135 Responses, scale (1=extremely high, 2=high, 3=moderate, 4=low, and 5=extremely low)

 

Figure-6: Average responses of organizational structure change challenges

Table-9 presents the frequencies and percentages of participants’ responses to standards and procedures guides application challenge items. The item states “Being a reference to determine job tasks and responsibilities in government entities” ranked highest, with a mean of 2.44 (low) and a standard deviation of 1.02, as indicated on the five-point Likert scale in Table-5. In contrast, the item states “Being the reference to determine the accounts sections coding mechanism and their details” ranked lowest, with a mean of 2.37 (low) and a standard deviation of 1.00. The overall weighted average for this dimension (standards and procedures guides application challenge in change management) is 2.39, with a standard deviation of 0.91, indicating a low degree of challenge. This suggests that standards and procedures guides application challenge is considered low. Participants average responses for this dimension are shown in Figure-7.

Table-9: Descriptive statistics for standards and procedures guides application challenges

Statement	Frequency	Extremely high	High	Moderate	Low	Extremely low	Mean	Standard Deviation	Degree
1.Being a reference to determine job tasks and responsibilities in government entities	N	25	49	41	16	4	2.44	1.02	Low
	%	19%	36%	30%	12%	3%
2.Apply accounting policies related to the financial reporting process effectively	N	28	48	43	9	7	2.40	1.05	Low
	%	21%	35%	32%	7%	5%
3.Determine procedures for effectively inventorying, classifying, coding, measuring, and recording non-current non-financial assets (fixed assets) in detail	N	32	47	38	10	8	2.37	1.10	Low
	%	24%	35%	28%	7%	6%
4.Being the reference to determine the accounts sections coding mechanism and their details	N	28	47	48	6	6	2.37	1.00	Low
	%	21%	35%	36%	4%	4%
Standards and procedures guides application challenges dimension weighted mean and standard deviation							2.39	0.91
Note: 135 Responses, scale (1=extremely high, 2=high, 3=moderate, 4=low, and 5=extremely low)

 

Figure-7: Average responses of standards and procedures guides application challenges

The Application of ABA Based on IPSAS in the KSA

In 2016, the KSA adopted accrual basis IPSAS, following Royal Decree No. 13059 which mandated ABA for all government entities, replacing CBA system(MOF, 2017). The Royal Decree specified that the transformation project should be supervised by the Finance Committee of the Royal Court and the Executive Committee, led by the Minister of Finance (MOF, 2021a). To support this transformation, the MOF established the AAC based on international best practices, aiming to enhance accounting sustainability, advance the financial system, and encourage an environment for knowledge transfer and the use of advanced technical tools (MOF, 2021b).

Change Management Application

Pollitt (2001) identified four main stages of convergence: rhetorical convergence (defining transformation project concepts), decision convergence (announcing responsible parties), practice convergence (implementing the new system),and convergence (when reform results begin to appear. The change management process followed five stages to support the transformation and enhance government entities’ ability to manage the change, as shown in Figure-8 and discussed as follows.

Figure-8: Change management process

Current Situation Assessment

This stage analyzes the situation and conducts a gap analysis by examining leading international practices and transformation processes in 17 countries (MOF, 2021a). The KSA built on previous research and experiences by visiting: Austria, France, Switzerland, and the UK to define transformation requirements (AN.(MOF), SPSAF, 2024). The KSA assessed government entities readiness and established several committees, including the Training Committee, to evaluate and approve training materials and the Financial Managers Committee to support ABA transformation and manage change (MOF, 2019a).

Prepare for Change

The transformation planning and design involved creating accounting concepts, standards, policies, a unified chart of accounts, organizational structure and job description guides, governance procedures, and implementation strategies (MOF, 2021a). According to Dillard et al. (2004) model, top-level actors, such as government officials and legislators, exert internal coercive pressure on government entities to implement ABA. Centralized capabilities were provided by the AAC departments, including the Change Management, Training and Development department to support government entities during the transformation project. This stage serves as the “guiding principle” for the subsequent stages(AM.(MOF), SPSAF, 2024).

Change Implementation

This stage focuses on equipping government entities with human resources training and implementing departmental structuring changes (MOF, 2021a). According to Dillard et al. (2004) model, the second level involves the professional and organizational field supporting government entities in applying best practices as normative pressure. The Change Management, Training and Development department has been preparing the implementing parties to accept and engage in change through communication, knowledge building, and ensuring continuity and sustainability (MOF, 2022). This department manages change through courses, workshops, and practical application; as an employee said: “We really benefited from courses we attended in the AAC.” Key actors should participate in ongoing training programs to manage change (Nyongesa, 2016). This department applied the ADKAR model, starting with raising awareness of the transformation benefits, stimulating the desire for change, increasing knowledge through training, enhancing ability through continuous support, and overcoming challenges, then reinforced development for continued progress; as a trainer said: “We collected data about employees through questionnaires to identify their level, then applied the ADKAR model, starting with awareness and progressing through the stages.” A comprehensive and effective change plan is crucial when applying the ADKAR model, a well-known framework in change management that starts with awareness and ends with sustainability (AN.(MOF), SPSAF, 2024). This helps diagnose resistance causes and develop corrective actions to manage transformation (Hiatt & Creasey, 2003).

Training programs enhance employees’ skills (Abu Hasan et al., 2022). In collaboration with SOCPA and training firms, training on accounting standards, policies, and procedures was provided under the supervision of the AAC through various program tracks. SOCPA also introduced special courses and a specialized test on public sector ABA. Normative pressure is reflected in applying standardized practices across government entities, while qualifying human resources to utilize the available enterprise resource planning systems supporting ABA. Furthermore, regular meetings of transformation ambassadors and their deputies encourage the exchange of experiences and solutions among entities. These efforts, driven by professionalism, provide formal support for qualifying government entities employees.

The model identifies the third level as organizational adoption by government entities interacting with professional bodies. This level reflects mimetic pressures, where entities gradually learn through implementation phases, imitating the successful practices of others to enhance performance and address the challenges shown in Figure-9.Mimetic pressure emerges from uncertainty and a lack of direction, prompting an organization to reflect the successful practices of another(Dillard et al., 2004).

Human Resources Qualification Challenges

Change management faced significant challenges in qualifying human resources due to several factors, including a limited number of employees in finance departments; as a decision-maker said: “There was difficulty of recruitment.” Additionally, various employees held non-financial specialties; as a decision-maker said: “There are quite a few non-financial, non-accounting people who have been working for years with experience.”Addressing this issue requires huge efforts in spreading awareness and providing training. Attracting competent individuals became a priority as recruiting from private sector; as an employee said: “Among the things that helped was the recruitment from private sector.” Another solution was recruiting graduates from the Tamheer program, which qualifies new accounting graduates under the supervision of the AAC to support government entities. “Tamheer,” means acquiring skills in Arabic, has been a valuable resource in this context; as an employee said: “One of the solutions is to attract Tamheer program graduates.”

The interview findings and factor analysis of eight items measuring human resources qualification challenges support hypothesis H1a aligning with previous literature. Many African countries face challenges, such as insufficient stakeholder engagement and acceptance, the need for professional bodies to raise awareness, and a lack of qualified staff(Kalisa, 2019). For instance, South Africa struggles with workforce shortages, while Malaysia has focused on recruiting qualified accountants and organizing seminars and workshops to improve awareness and knowledge (Saleh et al., 2021).

The AAC awarded medals and honors to government entities, accrual ambassadors, and their deputies to encourage the completion of the transformation project. Observing peers’ performance helps entities achieve success. The competitive spirit encourages government entities to imitate each other and strive for medals and honors like those earned by predecessors, which can be interpreted as mimetic pressure.

Figure-9: Change management application challenges

Employees’ Resistance Challenges

Resistance to ABA implementation can be attributed to several factors, including a lack of knowledge and the complexity of more advanced accounting issues; as a trainer said: “There is a lack of capable and qualified human resources in most government entities,” and a consultant said: “Some of them resist the transformation due to lack of knowledge.” Additionally, employees with long service periods, particularly those experienced in CBA, reluctant to apply change; as a decision-maker said: “Few employees want to continue working the same way they used to work,” and a consultant said: “Some employees are unwilling to learn about ABA as they expect to retire before the project concludes.”

Employees also fear job loss if they fail to adapt to ABA procedures, as doing so may expose their limited accounting knowledge; as a trainer said: “They hide their lack of knowledge by refusing the transformation to avoid revealing their accounting abilities.” Furthermore, government entities are implementing both CBA and ABA until the transformation is completed, resulting in an excessive workload; as an employee said: “Our biggest challenge is working with both CBA and ABA.” This added workload is not accompanied with additional benefits in some entities; as a decision-maker said: “For employees, increased work pressure without additional benefits,” and a consultant said: “Government employees are using different methods to record the same transactions.”

The interview findings and the factor analysis of five items measuring employees’ resistance challenges support hypothesis H1b. These results align with previous literature, which suggests that resistance to change stems from low administrative stability, lack of accountability and rewards, and inadequate salaries and benefits (Adhikari et al., 2013). For instance, Nigeria has experienced a lack of enthusiasm among key stakeholders toward the adoption of accrual basis IPSAS (Beredugo, 2021), while Jordan has faced resistance from public accountants due to their lack of self-efficacy (Al-Otoom & Alrabba, 2022).Therefore, change management strategies should address resistanceby offering courses, seminars, and meetings, strengthening management support to encourage creativity, recognize and reward outstanding performance, and clarify the importance of employees’ continuity, with the possibility of redistribution and restructuring (Nyongesa, 2016).

Organizational Structure Change Challenges

Human resources allocation and entities restructuring play a significant role in IPSAS implementation (Whitefield & Savvas, 2016). Restructuring involves transferring employees within the same government entity; as a decision-maker said: “We recruited internally qualified employees from other departments,” another decision-maker said: “We utilized the existing human resources in the entity,” and a consultant said: “Some entities found employees with accounting expertise in other departments, so they were transferred to the finance department.”The interview findings and the factor analysis of four items measuring organizational structure change challenges support hypothesis H1c. These results are consistent with previous studies. For instance, Nigeria has faced challenges in making structural changes to meet IPSAS application requirements (Beredugo, 2021).

Effective communication channels among stakeholders involved in ABA implementation are crucial (Whitefield & Savvas, 2016). The document cycle passes through multiple departments and organizational levels; as an employee said: “Documentary cycle begins in one department and ends in another,” and a decision-maker said: “The transformation is not only in finance department but includes all departments in the entity.” The lack of communication networks hinders reforms implementation (Adhikari et al., 2021).

Standards and Procedures Guides Application Challenges

The AAC provides standards and procedures guides to support and assist government entities in the transformation process. For instance, the Public Sector Accounting Concepts and Standards Guide, Organizational Structure and Job Descriptions Guide, and General Framework for the Accounts Guide in Government Entities(MOF, 2021b). Designed with clarity and details, these guides are continuously updated and serve as a comprehensive reference with practical examples and explanations; as an employee said: “The guides are excellent, clear and detailed,” another employee said: “The guides are as general as possible for everyone,” a decision-maker said: “The guides are constantly updated,” another decision-maker said: “Guides are sufficient and comprehensive,” and a consultant said: “The guides are excellent, useful, and explained with practical examples.”

The interview findings and the factor analysis of four items measuring standards and procedures guides application challenges support hypothesis H1d. These results align with previous literature, which indicates the transformation to ABA requires policy development (Ibrahim & Al-Matari, 2022). For instance, Nigeria has faced challenges in legal amendments and a lack of staff knowledge and skills, necessitating the development of application guides during IPSAS implementation (Beredugo, 2021). Similarly, Malaysia has encountered delays in approving amendments to relevant laws and policies (Saleh et al., 2021).

In summary, the agreement between the findings of quantitative and qualitative methods enhances the study’s reliability. These results support hypothesis H1, which posits that change management application influences ABA implementation by addressing the associated challenges. Previous literature has shown that successful reforms require professional skills development (Cohen et al., 2021), competencies, and expertise, all supported by continuous training to achieve reforms goals (Gómez-Villegas et al., 2020). For instance, Nigeria has faced challenges due to a lack of expertise among staff implementing IPSAS (Beredugo, 2021). The presence of qualified accountants is crucial for successful IPSAS implementation (Abdulkarim et al., 2020).

The analysis revealed agreement across the five categories of participants regarding the challenges facing the application of change management. These challenges include a lack of employees’ knowledge, the urgent need for training and skills acquisition, resistance due to insufficient knowledge, excessive workload, and reluctance to change, as well as organizational structure change. On the other hand, participants agreed on the necessary capabilities and support, highlighting the AAC efforts to change employees’ mindsets, enhance financial culture, and improve competencies to boost performance through knowledge and skills development.

Change Monitory and Reinforcement

This stage requires follow-up application to develop qualification strategies and procedures and overcome challenges. Implementing ABA involves shifting the financial culture from CBA to a completely different mindset, aligning with medium-term financial planning initiatives(AF.(MOF), SPSAF, 2024).Managing change in public administration has become integral to public resources management, enabling better decision-making(SM.(IPSASB), SPSAF, 2024).Most capabilities are centrally provided under the AAC supervision, including guides, human resources training, technical enablers, and consulting firms’ contracts; notably, the Big Four have been contracted; as a decision-maker said: “The Big Four play a major role in supporting the AAC departments during transformation phases, with their knowledge and experience.” Consultants are hired for their experience and ability to transfer knowledge while interacting with public sector entities (van Helden et al., 2012).

Change Sustainability

The Financial Skills Center (FSC) was established at the MOF to build the capabilities of public sector financial employees and develop their skills in line with best practices, supporting one of Vision 2030 pillars, which aims to empower financial through dedicated programs (MOF, 2024).Achieving this requires ABA continuous application; as a decision-maker said: “Transformation was difficult, but sustainability is more difficult,” and another decision-maker said: “Rising to the top is easy given the available capabilities, but maintaining the top is difficult; this is sustainability.”

The FSC has formed strategic partnerships with public and private sectors, training and consulting centers, universities, academic institutions, and financial associations (MOF, 2024)to design and implement specialized programs to improve public sector finances(MJ.(MOF), SPSAF, 2024).Through these efforts, the FSC has trained over 6,500 government employees, qualified more than 400 change ambassadors, and trained more than 250 participants in the Tamheer program to help government entities navigate challenges during the transformation project (AN.(MOF), SPSAF, 2024).

Research Theoretical and Practical Implications

The study findings highlight the effectiveness of neo-institutional theory in analyzing and interpreting change management application and the challenges encountered during the transformation to ABA. Coercive pressure is evident in the centralized provision of transformation capabilities under the AAC supervision at the MOF, including adopting standards, creating technical guides and enablers, training human resources, and managing consulting firms’ contracts, which result in lower costs compared to decentralization. This also involves directing government entities, monitoring their performance, and ensuring adherence to the transformation project completion plan. Normative pressure is reflected in the AAC collaboration with SOCPA and other training and consulting firms to qualify public sector human resources to apply professional standards, values, and behaviors, equipping them with the knowledge and skills needed to implement policies, procedures, and operate technical systems supporting ABA(SOCPA, 2021).Mimetic pressure is also observed through the study of other countries’ experience. Furthermore, the AAC efforts to motivate government entities stakeholders to share solutions and exchange experiences by offering incentives such as medals and honors, encouraging competition, and imitation to enhance performance.

The research findings enhance the understanding of change management application strategies and associated challenges for policy makers, practitioners, and academics. Since the transformation project began, the demand for qualified accountants has risen, increasing pressure on educational institutions, such as universities to incorporate ABA into curricula to align educational outcomes with the labor market and ensure long-term workforce sustainability(AN.(MOF), SPSAF, 2024). SOCPA also plays a key role in qualifying accounting graduates and equipping them with the knowledge and skills by transferring international best practices and raising awareness of professional certifications(SOCPA, 2021). Additionally, these findings will help countries aiming to implement accrual basis IPSAS by learning from the Kingdom’s successful experience.

Conclusions

This study employed a mixed methods design through combining quantitative data (questionnaire) with qualitative data (semi-structured interviews and forum sessions) to provide a deep understanding. The research aimed to enhance the understanding of change management application, and the challenges associated with accounting reforms, specifically ABA based on accrual basis IPSAS implementation in the KSA public sector. The study found that effective change management is crucial for the successful implementation of ABA, addressing challenges related to human resources qualification, employees’ resistance, organizational structure change, and standards and procedures guides application. To overcome these challenges, various capabilities were developed, including the AAC support, collaboration, and efforts with government entities, which contributed to the project success. The FSC was established to ensure sustainability in qualifying public financial sector employees and decision-makers, bridging the gap in financial knowledge and planning skills, accreditation, and management of training programs (MOF, 2024).

This research contributes to the limited literature on change management application and the challenges associated with ABA based on accrual basis IPSAS implementation. Future research opportunities include exploring the institutional factors that led the KSA to adopt ABA and addressing other challenges associated with ABA implementation, such as technical systems supporting ABA implementation, fixed assets inventory and valuation, and the impact of ABA application on financial reporting quality. Additionally, due to time and cost constraints, this study was unable to cover all government entities in the questionnaire and interviews due to their substantial number. Interviews were organized with participants, relying on the data based on their experiences. This limitation was mitigated by referencing to official documents supporting various aspects.

 

Acknowledgment

The authors extend their appreciation to the Deanship of Scientific Research at King Saud University for supporting this work.

 

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