Academic journal article Economics, Management and Financial Markets

The Reform of the Romanian Budget System - a New Step

Academic journal article Economics, Management and Financial Markets

The Reform of the Romanian Budget System - a New Step

Article excerpt


The world public sector will undergo important reforms which will take place especially in the next two years. After the introduction of the accrual accounting on a wide scale, it is time for the budget, as the main tool used in the decision-making process, to overcome the boundaries imposed by the traditionalism and be replaced by the budget commitments. Many countries of the world and, of course, from Europe are making efforts in this respect and will either adopt the accrual budget system or have already done so. For this reason, the present paper starts from the benefits of adopting the accrual budgeting, as outlined by those who support them and who make efforts in steering Romania in this direction. In Romania, at present, the public institutions prepare cash budgets, but it is said that in the near future they will be drawn according to the accrual ones. For this reason, we intend to present the experience of other countries related to the implementation of these reforms. We chose the case of Austria because it is the latest and because it could be an example for the Romanian authorities. The research methodology is based on the study of the scientific articles published on this topic, papers, national legal regulations as well as our own experience.

JEL codes: M41

Keywords: accrual; budget; cash

1. Introduction

Our paper analyses the role of the budget system reforms of the emerging economies (which includes Romania) in terms of budget performance. Moreover, we believe that if we take into consideration the costs of adopting the accrual accounting, at the expense of the cash accounting, then such a transition is useful in the context of the adoption of broader reforms in the public sector.

The public administration reforms from the early 90s in the Anglo-Saxon countries, through which the public sector receives better transparency and governance, were named "New Public Management" (NPM) by Christopher Hood. Subsequently, this concept, through which the traditional public management is replaced by one based on results, was supported by the International Monetary Fund, the World Bank, the European Bank, and the Organization for Economic Co-operation and Development (OECD). NPM leads to a higher demand for useful information for the decision making process and responsibilities beyond budgetary control (Cortes and Marti, 2012). These changes are aimed at blurring the boundaries between the public and the private sectors. Among the NPM provisions we find the introduction of the accrual accounting in the public sector at the expense of the cash accounting.

Champoux (2006) states that by using the accrual accounting only for the financial reports, they may not be taken seriously and risk becomes a purely technical exercise. Furthermore, "one of the major goals that justified the introduction of the accrual accounting in the public budget was to make the latter more transparent and to improve the efficiency of the public expenditures and of accountability" (Monteiro and Gomes, 2013).

In these circumstances, the budget becomes a fundamental tool in the management of the public institutions. For some authors, the budget is the main tool used in planning ahead and in describing what the institution wants to achieve (Hoek, 2005). For other authors, the budget is a mandatory forecast document which compares the revenue and expenditure for the period to which it relates (Dascälu et al, 2006). Most of the reforms applicable to the field of budgeting in the public sector represented a step towards changing the traditional model of the public management with one based on results (Cortes and Marti, 2012).

Internationally, the public management models use two types of budgets: the budgets prepared according to the cash accounting and the budgets prepared according to the accrual accounting.

The difference between the two methods consists in the moment where the transactions occur. …

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