Accrual-basis Budgeting: International Experience. Edition №1

Last year, EU4PFM held a series of workshops on Public Sector Accounting for the Ministry of Finance. In a Q&A format, we are launching a new rubric to spotlight pivotal insights from these sessions that could be valuable for PSA experts.

Q1: What is the role of accrual-basis budgeting in public finance management?

A1: Accrual-basis budgeting supports better decision making and accountability in line with the objectives of general purpose international financial reporting. It also promotes an output-focused orientation, where the measurement of value for money (effectiveness, efficiency, and economy) is important.

Q2: What is the significance of accrual-basis budget execution reports according to the PEFA 2019 report?

A2: The PEFA 2019 report highlights the CoM’s Strategy for the Modernization of the Public Sector Accounting and Financial Reporting System until 2025, aiming to reflect the accruals method in budget execution statements. It also notes that the Treasury reflects treasury operations on a cash basis while accounting for government debt and the liabilities of spending units. This is possible because the spending units account for their liabilities in their systems.

Q3: What do the PEFA reports reveal about the implementation of accrual-basis budgeting in various countries?

A3: The PEFA 2019 report highlights the following key points regarding the implementation of accrual-basis budgeting in various countries:

Q4: What are the different models for combining budgetary management and financial reporting?

A4: Three models to consider are:

Cash Basis

Accrual Basis


Q5: What are the findings from the IFAC data on countries around the world regarding the adoption of accrual-basis financial statements?

A5: According to the IFAC data, in the 2021 survey, 30% of countries published accrual-basis financial statements, with 40% adopting a partial accruals basis and 30% adopting a cash basis for financial reporting. The 2021 survey did not mention the basis of budgeting in these countries, but the 2018 survey stated that only 15 governments (about 10% of all jurisdictions responding to the survey) prepared fully accruals-basis budgets.

Q6: What are the benefits of accrual-basis budgeting according to international research?

A6: From international research, the benefits of accrual-basis budgeting include:

Q7: What are the arguments for Cash basis budgeting?


Q8: What are the risks associated with accrual-basis budgeting?


Q9:  Is there a successful example of aligning budgeting and financial reporting?

A9: The UK’s “Clear Line of Sight” project successfully merged budgeting and financial reporting systems, fostering greater trust in public sector accounting.

The project was envisaged as a way of providing a single set of data for budgeting and financial reporting. Initially, there were misalignments, including the following:

As a result of the alignment project, the majority of transactions are recorded in budgets and financial statements at the same value and in the same period (with some exceptions).

Having a single system of accounting for government’s management of the economy engenders greater trust in public sector accounting generally. The UK government appears to have successfully brought budgeting and accounting into the same chart of account codes such that very few anomalies remain.