Medium-term financial planning in government : an accruals accounting framework

Abstract

The transition to accrual accounting is only part of improving Government financial management. Once this essential tool has been successfully implemented, other tools for achieving this goal will develop in turn, most important of which is the transition to accrual based medium-term financial planning. Such a transition demands drastic changes which have to be provided for and actually implemented. The first thing that crops to mind is that planning under the accrual basis purports the need of accounting for a substantial amount of items not accounted for under a cash basis. The aim of this study is to establish, in broad terms, the impact of accrual accounting on the medium-term financial planning practices of Central Government, which is currently, one of the main issues being considered by government in its reform of the public planning and accounting processes. This has been done by: • Investigating the shortcomings of the present medium-term financial planning regime under the cash accounting methodology; and • Identifying the necessary changes that need to take place in Central Government's medium-term financial planning and budgeting practices as a direct consequence of an accrual based financial management regime. Results show that the present planning regime is still input focused. However, Government is moving on to the concept of aligning resources used to results. This approach changes the focus of the planning regime on which this study is focused.