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

Economic Annals-ХХI: Volume 183, Issue 5-6, Pages: 89-105

Citation information:
Lentner, Cs., Molnár, P., & Nagy, V. (2020). Accrual accounting and public finance reforms in Hungary: the study of application in the public sector. Economic Annals-XXI, 183(5-6), 89-105. doi: https://doi.org/10.21003/ea.V183-09

Csaba Lentner
Full Professor,
CSc. habil (Public Finance),
Faculty of Public Governance and International Studies,
National University of Public Service
Post Box 60, Budapest, 1441, Hungary
Lentner.Csaba@uni-nke.hu
ORCID ID: https://orcid.org/0000-0003-2241-782X

Petronella Molnar
Assistant Professor,
Faculty of Finance and Accounting,
Budapest Business School – University of Applied Sciences
Post Box 35, Budapest, 1426, Hungary
Molnar.Petronella@uni-nke.hu
ORCID ID: https://orcid.org/0000-0002-5588-6318

Vitez Nagy
Assistant Professor,
Corvinus Business School,
Corvinus University of Budapest
8 Fővam Str., Budapest, 1093, Hungary
Vitez.nagy@uni-corvinus.hu
ORCID ID: https://orcid.org/0000-0002-1310-7646

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.

Keywords: Accrual Accounting; Public Sector; Hungary; Public Finance Reforms; Public Funds; Budgetary Regulation and Control; Performance; Compliance; Organization; Crosstab; Cramer’s V Indicator

JEL Classification: C10; H50; M49

Acknowledgements and Funding: The authors received no direct funding for this research.

Contribution: The authors contributed equally to this research.

DOI: https://doi.org/10.21003/ea.V183-09

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Received 1.02.2020
Received in revised form 20.02.2020
Accepted 26.02.2020
Available online 4.06.2020