Schmalenbach Business Review
15 März 2020
Abstract: Despite its benefits, municipalities frequently struggle to take advantage of accrual accounting as a basis for managerial decisions. We assume that the reason for this is that municipalities technically implement accrual accounting but sometimes keep it decoupled from daily decision making. To identify factors that facilitate a more sophisticated usage of accrual accounting in German public administrations, we examined the influence of the municipality’s contextual situation, organizational structure, and resource provision on the degree of sophistication in the use of accrual accounting. We found that the most relevant driver for a more sophisticated use of accrual accounting is the contextual situation in which the municipality is embedded. In our research model, a municipality’s contextual situation consists of fiscal stress, its political competition and culture, and the relevant legal system. Another important factor is the adequate provision of resources, such as an IT system that delivers easily accessible and accurate accounting information. Notably, the specific organizational structure of the municipality, which is often regarded as highly bureaucratic and the main obstruction to reforms, is not significant.
