Reconciling cash and accrual budgeting in the public sector

Abstract

Purpose: Cash and accrual budgeting have long been seen as two competing approaches for presenting budgetary information. This divide can be seen in both the literature and in practice with different parties supporting different methods. Therefore, the main objective of this thesis is to present possible scenarios where the utilisation of both methods together can lead to a more useful budgetary statement without sacrificing understandability. Design: Both quantitative and qualitative research methods were utilised in compiling the necessary information for this study. A questionnaire was distributed to Maltese MPs in order to gather the necessary quantitative statistical data in their role as the users of the budget. Furthermore, certain MPs opted for an interview which greatly helped to gather further qualitative data which substantiated the data analysed. Furthermore, an interview was carried out with the budget office to further understand the perspective of the budget preparers. The existing pool of literature proved helpful in compiling the literature review and to structure the questionnaires. Findings: The findings showed that while compiling statements including both cash and accrual budgeting is both possible and useful, such a step can be considered to be slightly premature in the Maltese scenario. Only the existing statement relating to capital programmes and the introduction of a reconciliation statement, closely mirroring the cash statement in the private statement, can probably benefit from such changes at the current level of understanding of accrual concepts. Steps also need to be considered with respect to both the IT infrastructure and training the users of budget statements. Conclusion: Therefore, while cash and accrual budgeting can be combined to produce statements showing a more complete picture without sacrificing understandability, such a step may be considered to be slightly early in the Maltese scenario Value: While this study continues to add to the literature on the budget statement, this can also be considered to be of public interest as it provides insights of what may be required to introduce accrual budgeting in the public sector.