Public Sector Financial Reporting Reforms and Budgetary Accountability Outcomes

Abstract

This research investigates the underexplored causal relationship between specific public sector financial reporting reforms and tangible budgetary accountability
outcomes, moving beyond traditional compliance-based assessments. While prior
literature has extensively documented the implementation of accrual accounting
and International Public Sector Accounting Standards (IPSAS), a significant gap
exists in empirically linking the granular features of these reforms—such as the
level of asset recognition, the treatment of social benefits, and the disclosure of
performance information—to concrete changes in budgetary behavior, legislative
oversight efficacy, and public engagement. This study posits that the accountability impact of reporting reforms is not monolithic but is critically mediated by
the institutional architecture of the budget process and the political economy of
oversight actors. Employing a novel, cross-disciplinary methodological framework
that integrates quantitative fiscal panel data analysis with qualitative comparative
case studies rooted in political science and institutional economics, we examine
a longitudinal dataset from 42 national governments over a 15-year period. Our
methodology uniquely operationalizes ’accountability outcomes’ through a composite index measuring budget amendment responsiveness to audit findings, the variance between initial appropriations and final execution reports, and the frequency of
legislative hearings triggered by financial statement disclosures. The findings reveal
a non-linear and contingent relationship: reforms emphasizing service performance
reporting and non-financial asset capitalisation show a stronger correlation with improved budgetary discipline in contexts with robust, non-partisan legislative budget
offices. Conversely, the mere adoption of accruals, without complementary reforms
to the budgetary classification system, shows negligible effects on accountability.
The study makes an original contribution by deconstructing the ’black box’ of reporting reforms and providing a nuanced, evidence-based model for policymakers
to design financial reporting systems that are not just technically sound but are
institutionally calibrated to activate accountability mechanisms. This shifts the
discourse from a focus on accounting standards compliance to a strategic focus on
the informational needs of accountability actors within the public financial management ecosystem