EFFECTS OF BUDGETARY AND ACCRUALS ACCOUNTING COEXISTENCE: EVIDENCE FROM ITALIAN LOCAL GOVERNMENTS

Over the last decade, many countries have introduced accruals accounting at one or more levels of government, as a component of wider public-sector reforms (Hood, 1991 and 1995; Olson et al., 1998; and Lueder and Jones, 2003). In the literature, the introduction of accruals accounting has been the subject of significant debate. Supporters have emphasised its ability to better meet user needs and its consistency with the overall shift from ex-ante constraints to ex-post accountability. Critics have raised both theoretical and practical objections. At first sight, an appealing compromise would be for accruals accounting to coexist with traditional, cashor commitment-based budgetary accounting, letting governments reap the benefits of ‘both worlds’. This compromise is being increasingly discussed among academics, professionals and policy-makers, but empirical evidence is still scarce. This paper draws from the experience of Italian Local Governments (LGs) to empirically analyse the effects of such coexistence. The paper is organised into five further sections. The next section reviews the existing literature and specifies the research questions. The third section provides a short background on Italian LGs’ accounting system. The fourth section describes materials and methods. Results are presented in the fifth section. The final section draws some conclusions and discusses implications for policy makers and researchers.