Abstract of the research project

The modernisation of budgeting and accounting in the German public sector is initiated. With the adoption of accrual budgeting and accounting based on the double entry bookkeeping technique a paradigm shift has taken place in the last years. However, the state of the reform process is most heterogeneous: The municipalities of some German federal states (“Länder”) have already implemented the new budgeting and reporting system.[1] Other states have just closed the underlying legislation process. At last, an “Act to modernise the law on budgetary principles for the federal government and the federal states” was passed in July 2009 that also allows the federal government (“Bund”) and the 16 state governments to replace the cash accounting (the so called cameralist’s bookkeeping) by implementing double-entry bookkeeping. However, some federal states have already applied the latter in their (budgets and) accounts on a voluntary basis.

There are not only differences concerning the reform schedule but also in the way the accrual concept is put into regional legislation. The idea of federalism led to specific accounting regulations and directives in all federal states. There are even differences between the budgeting and accounting law of municipal and state government level within the same federal state. Differences might be found in terms of the terminology, the structure of the budgets and accounts, the valuation of assets and debts as well as in the guidelines how to reach an equilibrium in the accounts (and budgets). To sum up, Germany is facing a status of fragmentation of its public sector budgeting and accounting.

The objective of the present research project is to gain an overview of the public sector accrual budgeting and accounting rules and standards in the current status of development – considering all existing flaccidities and strengths the different regional concepts have. Thereafter, basic investigations should be started on the specific information needs of the public sector (compared with business sector) as well as the necessary German distinctions concerning budgeting and accounting (compared with such international public sector rules and methods). As a result, there will be a common “conceptual framework” of public sector budgeting/accounting in Germany. In a third step, the already existing German legislation will be analysed and evaluated by applying this conceptual framework. The expected findings of this project might be helpful to abolish the diversity of existing double entry bookkeeping rules and procedures and to reach a more harmonised German public sector budgeting and accounting.

Expected results:

Conceptual foundation of new accrual budgeting and accounting
(on basis of the double entry bookkeeping technique)
→ What kind of information does the German public sector really expect from its budgeting/accounting?;
Analysis and evaluation of the existing budgeting and accounting law;
Based on the issues mentioned before: identification and presentation of possibilities for a harmonisation in the German public sector budgeting and accounting law;
Highlighting the intersections of commercial and public sector accounting in Germany but also placing emphasis on German specifics in budgeting and accounting compared with other international public sector regulations in this field.

[1] The Federal Republic of Germany is characterised by the separation of state power between the federal government (“Bund”) and the 16 state governments (“Länder”). The “Länder” are also in charge of the legislation for the roughly 12.300 German local authorities (“Kommunen”).

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