A Proposal of an Accrual-Based Budget for Public Adminitration

This article has a twofold objective. Firstly, it reviews the budgetary systems of public entities in accordance with the accounting bases used in the elaboration of the budget. Secondly, it makes a proposal of an accrual-based budget for public entities, taking the International Public Sector Accounting Standards (IPSAS) as references. This proposal of an accrual-based budget can be justified mainly on the following grounds: the limitations of a cash-based budget; the homogenization of an accrual-based budget to national accounting; and the problems caused by dual systems, which use the accrual basis for the financial reporting at the year-end, but where the budget is still prepared on the cash, modified-cash or obligation bases. The paper explains the relationship among accrual budgeting, management by results and budgeting by results, which are being introduced by many Western countries. The proposal of an accrual-based budget consists of the presentation of the following financial statements: a budgetary statement of financial position, a budgetary operating statement, a budgetary statement of cash flows and a capital budget statement. With an integrated system of an accrual-based budget and financial statements on an accrual basis, public managers would have an adequate tool to know all the expenses and incomes, assets and liabilities, and the implications of decisions on the financial situation of a public entity. An accrual-based budget aims to complement cash flow information, improve the quality of financial reporting and contribute to transparency and accountability, which are key elements of public governance.