Lost in the transition from cash to accrual accounting. Assessing the knowledge gaps in Italian public universities

• Pages: 811-826
• DOI: https://doi.org/10.1108/IJPSM-07-2017-0184
• Published date: 08 October 2018
• Date: 08 October 2018
• Author: Sabrina Gigli,Laura Mariani
• Subject Matter: Public policy & environmental management,Politics,Public adminstration & management

Lost in the transition from cash to

accrual accounting

Assessing the knowledge gaps in Italian

public universities

Sabrina Gigli

Department of Management, University of Bologna, Bologna, Italy, and

Laura Mariani

CRIFSP –Center for Research and Training in the Public Sector,

University of Bologna, Bologna, Italy

Abstract

Purpose –The purpose of this paper is to examine the change from cash accounting to accrual accounting,

identifying and assessing the institutional and organisational barriers that may affect this process. A specific

focus on knowledge gaps is provided.

Design/methodology/approach –The study employs a mixed method design, combining action research

activities, a survey, and in-depth qualitative interviews in the setting of Italian public universities.

Findings –The findings highlight a low degree of compliance with the accrual accounting system and

budgeting system, which is the result of the lack of an accrual accounting culture in the Italian public sector.

Originality/value –The analysis confirms some barriers to the transition highlighted by previous literature

and also adds further explanations of such limitations in terms of the lack of skills and accounting knowledge

of the universities’administrative staff possesses.

Keywords Public sector accounting, Public university, Accrual accounting, Budgeting process

Paper type Research paper

1. Introduction

Changes in accounting regimes have already been discussed in many contributions that aim

to highlight the information limits of cash accounting systems, comparing the opportunities

offered by an accrual accounting system (Parker et al., 1990; Perrin, 1998; Chan, 2003;

Anessi‐Pessina, Steccolini, 2007). In a small number of studies, the context of analysis was

that of public universities (Gray and Haslam, 1990; Christiaens and De Wielemaker, 2003;

Agasisti and Catalano, 2013; Agasisti et al., 2008; Agasisti et al., 2015; Upping and Oliver,

2012). The assumption of this literature is that cash accounting systems are insufficient to

guarantee the appropriate control of public organisations’performance. Such control

can be properly replaced or supported by other tools –primarily an accrual accounting

system –inspired by the accounting system of business corporations. The transition from

cash accounting to accrual accounting is a consequence of the attention that new public

management (NPM) reforms give to the principles of management responsibility and

continuous improvement in public administration (Hood, 1995). The introduction of these

principles implied the identification of accrual-based accounting tools, able to support the

fulfilment of financial balance, efficiency in service provision, higher transparency, and

publicly accountable institutions. Aimed to make individual administrations responsible

and accountable for the use of public resources, these innovations play a fundamental role in

the process of quantification, control and communication of performance. They modify the

methods whereby public administrations fulfil their accountability duties (Hood, 1995),

while still maintaining the overall balance between cash inflows and outflows. In this

context, the accrual system is meant to maintain the structure of ex ante constraints

and authorisations but also to support processes of decision making and control, and

International Journal of Public

Sector Management

Vol. 31 No. 7, 2018

pp. 811-826

© Emerald PublishingLimited

0951-3558

DOI 10.1108/IJPSM-07-2017-0184

Received 16 August 2017

Revised 8 November 2017

24 January 2018

27 February 2018

Accepted 5 March 2018

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/0951-3558.htm

811

Transition

from cash to

accrual

accounting

incorporate new dimensions originally focused on ex-post accounting issues (Christiaens

and De Wielemaker, 2003).

After the fervent introduction of accounting accrual-based innovation in the public

sector, however, a significant debate ensued over its effectiveness. Different factions have

highlighted how the introduction of the accrual-based systems and correlated measurement

of assets has not only not achieved the desired effects but indeed has brought with it some

serious difficulties in implementation (Guthrie, 1998; Newberry, 2002; Carlin and Guthrie,

2003; Hodges and Mellett, 2003). At times, such difficulties have weakened management

systems in the public sector (Gray and Jenkins, 1993; Burritt and Welch, 1997; Behn, 1998;

Olson et al., 2001). The reference literature, therefore, warns of the risks deriving from the

potentially critical transposition of accounting tools developed in the business world to the

public sector, mainly because of the structural diversities of the contexts (Christiaens, 1999;

Carnegie and West, 2005; Guthrie, 1998). Changes in Italian public accounting systems, in

particular, have frequently suffered because of these risks ( Jones and Mussari, 2004;

Anessi‐Pessina and Steccolini, 2007), confirming the existence of different potential barriers

to the effective implementation of accounting innovations in the public sector. In particular,

empirical evidence shows the existence of several obstacles to the effective transition that

are related, on one hand, to organisational barriers and, on other hand, to technical aspects

of both the accounting standards and the regulatory framework (Cohen et al., 2007).

We aim to contribute to this debate by exploring, through a qualitative research, the

characteristics of the skills and knowledge gaps of the administrative staff engaged in the

accounting transition. Furthermore, with reference to the relationship among different types

of barriers, we explore how institutional obstacles affect the emergence of organisational

barriers. Finally, we highlight the implications of these obstacles for the effective

implementation of an accrual-based accounting system.

The recent reform of Italian universities provides an interesting field for the observation

this topic. In 2010, the Italian Parliament approved the introduction of accrual accounting in

public universities. The reform was completed five years later, and in this period –from

2014 to 2015 in particular –public universities were obliged to prepare accrual-based

budgets, without specific directives and common rules concerning their content. Therefore,

for one year, each university had to decide how to construct the budgetary system on their

own, and this event became an interesting opportunity for us to assess their ability to pass

from cash to accrual accounting.

We organised the paper as follows: after the presentation of the most relevant literature

on the barriers to the accounting change highlighted by both neo-institutional (NI) and

resource-based view (RBV) theories, we provide the assessment of the transition from cash

to accrual accounting in the budgeting system with a sample of Italian public universities.

Our findings stress some gaps of accounting knowledge, often caused by institutional

conditions, that must be filled in order to allow an effective implementation of the reform.

2. Theoretical background

The barriers to the effective accounting change

According to Christensen (2002), different drivers and barriers can affect the effective

introduction of accounting innovation in the public sector. Answering to external stimuli for

change, in fact, public organisations react to the actions of promoters of change –such as

consultants, academics, or organisations representing professional interests –to fulfil the

expectations of the main users of the information, who are the politicians responsible for

individual portfolios. In this process, some obstacles may affect the effective transition.

These implementation barriers are characteristics of the political or bureaucratic

environments that act to increase the cost or time required to implement accounting

changes (Christensen, 2002; Lüder, 1992). Kasurinen (2002) classified the barriers to

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