The reconciliation of budgeting with financial reporting: A comparative study of Italy and the UK

ABSTRACT

This paper provides a comparative analysis of the development of public sector accounting systems in Italy and the UK. By analysing the differences in practices and technical aspects regarding the budgeting and accounting processes of these two countries, the authors identify best practices from these countries’ experiences of public sector accounting reforms across all levels of government. While both countries were inspired by New Public Management-based principles, the results show their different points of development in addressing the needs of parliament and the public and the links and interrelationships between budgeting and accounting.

IMPACT

Uniformity and alignment of practices in public finance reporting systems aids in the understanding of the relationships between financial reporting and budgeting processes. The authors explain how this is being achieved in the UK and compare it with the resistant-to-change traditional budgetary accounting systems in Italy, where a mostly secondary role is assigned to accrual accounting and there is a weak understanding of the relationships between financial reporting and budgeting. Lessons and best practices are identified that will be valuable for the future development of government accounting reforms in other countries.

KEYWORDS:

• Accrual basis
• budgeting and financial reporting
• cash basis
• IPSAS 24
• Italy
• national governments
• reconciliation
• UK

Acknowledgements

Although the paper is the result of an equal joint effort by the authors, their primary individual contributions are reflected in the following sections of the paper: Giovanna Dabbicco contributed to theoretical perspectives in accounting and budgeting development: literature review; Budgeting and accounting in the UK; Discussion; Conclusion. Giorgia Mattei contributed to Introduction; Research method; Budgeting and accounting in Italy; Comparative analysis.

Disclosure statement

No potential conflict of interest was reported by the author(s).