Accrual accounting and public finance reforms in Hungary: the study of application in the public sector

Abstract

Introduction. The increasing measurability of performances in the public sector in the countries of the post-soviet region, including Hungary, has come to the limelight in recent decades. Accrual accounting, adopted in Hungary in 2014 on the recommendation of the European Union, provides decision-makers with reliable information and simultaneously improves transparency in spending. Purpose and Methodology. This study focuses on the impacts and synergies of the parallel comprehensive reforms in the public finances and the adoption of the accrual accounting system. We conducted an empirical research among 2425 budgetary organisations (during June 2018 - January 2019) and analysed the correlation between the variables with cross-table analysis. Our survey covered 19.1 per cent of all the budget organisations in Hungary. Thus, thanks to the sample size the survey results analysis gives a comprehensive view of the entire country based on the real feedback regarding the implementation of the new practices. Results. In the course of the survey, the organisations were asked to describe how they were affected by the transition to the new accounting system, how they had prepared for the statutory changes and compliance, what additional tasks the adoption of the new system required of them, and how they evaluated the impacts of the application of accrual accounting after five years. The inquiry focussed on the impact this new accrual-based accounting system had on the business management of the given organisation and thus the efficient use of public funds. The results confirm that the historical background and the peculiarities of managing public funds in a country should also be taken into account during the adoption of reforms along with thorough preparation. Our research also sheds light on the fact that the successful 2014 adoption of accrual accounting could achieve its full purpose in an environment ensured by comprehensive public finance reforms and laws adopted after 2010. In other words, the precondition of enforcing the new rules of accrual accounting applied in the public sector included the reinforcement of budgetary regulation and control procedures. Conclusion. The study reports more favourable public sector procedures, proves that the adoption of accrual accounting has been justified and that the higher focus on performance and efficiency achieved through accrual accounting is important.

Some Taxonomic Elements of the Internal Control of Public Finances and Experiences of Teaching them at the University of Public Service

“…ing is widely disputed (e.g. Tóth, 2020; Molnár, Hegedűs, 2017), the author of this paper sees its changes, overall, as a positive, forward-looking shift (Lentner, 2020). compare the opinions with the original objectives: Bathó, 2012. functioning of the selected auditors in the category of external audit.…”

Audit of public finances: methodological issues and the case of Ukraine

“…Current research in different countries confirm the relationship between the performance of the SAIs and the maintenance of good governance (Meiss et al, 2017;Milojević et al, 2018;Nevidomyi & Kanonishena-Kovalenko, 2019;Lentner et al, 2020;Bardash & Osadcha, 2020;Çeku, 2021;Bostan et al, 2021).…”

“…As noted by Lentner et al (2020), the most significant disadvantage of the cash approach is that it is impossible to accurately determine the financial position of the particular budgetary organization, as well as to adequately establish the total amount of actual expenses.…”

Constraints and stimuli in the implementation of public accounting reform: systematic literature review and future research agenda

“…The literature shows that local governments have largely perceived consolidated financial statements as a tool that they can use to provide a clearer picture of their efficiency and effectiveness in the use of public resources while improving their transparency and raising the public’s perception of their organizational conduct (Santis et al , 2019). In European countries such as Portugal (Gomes et al , 2015), Estonia (Haldma and Kenk, 2014), Hungary (Lentner et al , 2020) and Malta (Jones and Caruana, 2014) pressure from the central and local governments is seen as a stimulus in accounting reform through the adoption of the business accounting model to improve the economy and the efficiency and effectiveness of government operations.…”

“…Limited financial resources. In developed countries, the processes to implement accounting reforms are very costly and involve many expenses, including staff training, hardware and software acquisition (Klimavi cien_ e and Mykolaitien_ e, 2007; Lentner et al, 2020;Nakmahachalasint and Narktabtee, 2019;Ridder et al, 2005). For example, in a recent study about the constraints for the implementation of an accrual basis in public sector accounting in Croatia, Hladika (2022) found that public sector managers rated financial resources as the greatest constraint.…”