Accrual Budgeting:

Experiences of Other Nations and Implications for the United States

AIMD-00-57: Published: Feb 18, 2000. Publicly Released: Feb 18, 2000.

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Pursuant to a congressional request, GAO reviewed other countries' experiences in accrual budgeting, focusing on: (1) countries' reasons for shifting to accrual budgeting; (2) the ways other countries are using accrual-based information in the budget; (3) the implications of accrual budgeting for decision-making; (4) the key implementation challenges (technical and political) associated with the use of accrual budgeting; and (5) issues raised by these countries' experiences that may be informative to the United States.

GAO noted that: (1) several countries have adopted accrual budgeting as a tool to address concerns about public sector performance, sustainability of government activities, and accountability; (2) much more than an isolated technical exercise, the shift to accrual budgeting has generally reflected much wider and more fundamental reform efforts; (3) although these countries are still in the early stages of developing and implementing accrual budgeting, proponents believe that it provides more complete information and better incentives to address these concerns; (4) accrual budgeting has been used as a tool to support performance-focused management because, in some cases, it more clearly links the total cost of resources used to the performance achieved; (5) proponents believe that accrual budgeting improves incentives to address the longer-term implications of current decisions by better reflecting year-to-year changes in assets and liabilities; (6) proponents also believe that accrual budgeting improves accountability and control by enhancing the consistency of budget information, even though it raises some new oversight issues; (7) others have expressed skepticism and concerns about the use of accrual budgeting; (8) some experts have expressed concern about reduction in the transparency of information on the government's cash borrowing requirement and about the ability to clearly track and control government spending; (9) countries faced a number of implementation challenges, such as identification and valuation of assets; (10) despite obvious significant political, cultural, budget, and economic differences, these countries' early experiences with accrual budgeting provide some valuable insights for the United States; (11) however, the challenge is how to translate useful ideas developed in a parliamentary political system to the U.S.' system in ways that could improve the U.S.' decision-making process while protecting its unique institutional needs; (12) GAO believes that the selective application of accrual budgeting to certain long-term commitments can strengthen the information and accountability for these costs; (13) decision-making could benefit from incorporating accrual measurement into the budget in ways that better match the cost of resources consumed with the performance achieved without forfeiting budgetary control; and (14) even without changing the measurement basis of budgeting to accrual, congressional oversight and managerial decision-making could be enhanced by better integration of supplemental accrual-based information into the decision-making process.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The House defeated H.R. 853, which would have required moving to accrual budgeting for federal insurance programs, among many other budget process changes. Unlike other parts of the bill, the accrual budgeting for insurance proposal enjoyed bipartisan support. Thus it is likely that the proposal may be made in future congresses. The Administration has proposed legislation to require agencies, beginning in FY 2003, to contribute the agency share of the full actuarial cost of retirement for Civil Service Retirement System (CSRS) employees and the agency portion of the government's share of post-retirement health benefits costs. As of August 2006, we are in consultation with a number of Members to move forward on this issue with legislation to be introduced in the next Congress.

    Matter: As Congress considers changes in the budget structure and process, it would be well served to explore ways to improve information on two dimensions: breadth and time horizon. This report dealt with one way to lengthen the time horizon for information. Congress should consider the selective use of accrual measurement in the budget in areas where it would enhance obligation-based control.

  2. Status: Closed - Not Implemented

    Comments: OMB staff are supportive of mechanisms like capital acquisition funds. According to the FY 2002 budget documents, OMB is encouraging agencies to examine their budget structures to align them better with program outputs and outcomes and to charge the appropriate account with significant costs used to achieve these results. The capital acquisition funds would contribute to this.

    Matter: As Congress considers changes in the budget structure and process, it would be well served to explore ways to improve information on two dimensions: breadth and time horizon. This report dealt with one way to lengthen the time horizon for information. Congress and the Office of Management and Budget should consider whether and when to use mechanisms, such as capital acquisition funds, to better match budget recognition with the consumption of resources while preserving up-front control.


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