OECD Journal on Budgeting

The OECD Journal on Budgeting is published three times per year. It draws on the best of the recent work of the OECD Working Party of Senior Budget Officials (SBO), as well as special contributions from finance ministries, academics and experts in the field and makes it available to a wider community in an accessible format. The journal provides insight on leading-edge institutional arrangements, systems and instruments for the allocation and management of resources in the public sector.

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Cash or accruals for budgeting? Why some governments in Europe changed their budgeting mode and others not

This paper investigates why central governments in some countries (especially the UK and Austria) have moved from a cash budgeting system to accrual budgeting, while others (particularly Belgium and Portugal) continue to use cash budgeting, given that both groups of countries share that their financial reporting system have become accruals-based. Our research shows that the two countries opting for a complete change to accruals emphasise the importance of consistency of the entire accounting system and the imperative to inform also about resource consumption in the budget. In sharp contrast, the two countries deciding for a partial change and for staying with cash budgeting argue that a clear and unambiguous view at cash spending is authoritative for their budgeting concept and that political decision makers would not accept an accrualbased budget. The change process in all four countries was influenced by several contextual factors, such as cash-accounting legacies and previous NPM-reforms. We conclude that stakeholders in government show more reluctance when deciding on a budgeting concept than about a financial reporting change which is perceived as less essential. We also conclude that the less ambitious reform mode (cash-based budgeting with accrual financial reporting) takes more implementation time than the more ambitious reform mode (accruals for budgeting and reporting).

JEL codes: H61, H83, M41

Keywords: cash budgeting, accrual budgeting, international comparison                                               


JEL: H61: Public Economics / National Budget, Deficit, and Debt / Budget; Budget Systems; H83: Public Economics / Miscellaneous Issues / Public Administration; Public Sector Accounting and Audits; M41: Business Administration and Business Economics; Marketing; Accounting; Personnel Economics / Accounting and Auditing / Accounting
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