Local government organizations experience significant changes in operations and ownership structures. The changes are fueled by the reforms introduced in the organizations through the adoption of New Public Management [NPM] practices and its related agenda. This increases research interest in areas such as financial reporting, management accounting, auditing, accountability and governance as well as performance measurement practices. Despite these efforts, there are concerns within the accounting literature that the public sector accounting researches are characterized by limited theoretical foundation. The state of art is even worse in developing countries where few public sector accounting researches have been undertaken. Since public sector accounting research is a context based, full understanding of the accounting practices as applied in developing countries can only be understood through examining its local context. The literature also recommends the use of interpretive approach to investigate the actor’s perceptions and meanings attached to the accounting practices without imposing any preconceived theory. The current study aims to address these concerns.

 The study adopts grounded theory approach to investigate the accounting practices in the Tanzanian local government authorities. In-depth interviews, observation and documentary sources were used to gather important information. 67 interviews [44 tape recorded, 23 hand-written] were conducted and 28 documentary sources were analyzed. The observation of various council’s activities was made overtly.

 Preliminary findings indicate that the accounting practices in the Tanzanian local government authorities are characterized by ambiguous regulations, unsupportive cultural practices, uncertain funding environment and fragile governance structures. These circumstances force the organizational actors to undermine the accounting practices in order to comply with institutional pressure. The findings of this study challenge the way accounting has been used to legitimize the public sector reforms in the developing countries.