Reconsidering public budgeting after the COVID-19 outbreak: key lessons and future challenges

PurposeThe paper aims to offer a viewpoint on how governmental budgeting needs to be reconsidered after the COVID-19 outbreak.Design/methodology/approachBuilding on extant research, and drawing on the Italian context, the paper provides reflections on four interrelated aspects: (1) how budgeting and reporting processes and formats are being modified; (2) how budgeting may enhance governments' financial resilience; (3) how citizens are involved in the budgeting cycles and (4) how emergency responses may produce opportunities for corruption.FindingsTo tackle COVID-19 related challenges, budgeting, rebudgeting, reporting processes and formats need to be reconsidered and supported by the development of new competencies. Governments will need to put stronger emphasis on the anticipatory and coping roles of budgeting to reduce public organizations' exposure to shocks and support governmental resilience. The involvement of citizens has proven critical to face the pandemic and will become increasingly relevant due to the financial impacts of COVID-19 on future public service provision. Greater attention to the risks of increased corruption is also needed.Originality/valueDrawing lessons from one of the countries most hit by COVID-19, the paper offers a viewpoint on a timely topic of international relevance by looking in an integrated way at interrelated topics such as budgeting, rebudgeting, reporting, financial resilience, coproduction and corruption.

BUDGET RATCHETING IN GOVERNMENTAL BUDGETING: AN EMPIRICAL INVESTIGATION

Previous literature has documented various aspects of behavior in the budgeting process. Behavioral problems that are often discussed include budgetary slack and opportunistic behavior that occur due to information asymmetry. However, there is little attention to behavioral problems in previous studies called ratcheting behavior. This study investigates such behavior in a governmental budgeting setting. Besides, this study extends by testing ratchet behavior when local government adopts a well-known budget control mechanism, called analysis on standardized expenditure. To accomplish this purpose, study participants role-played as the budget preparer on a government budgeting task. The experiment used a web-based instrument that involved 51 participants. Results showed that budget preparer engaged in a ratchet behavior when setting their budget. Furthermore, budget ratcheting did not occur when preparer using an analysis of standardized expenditure. However, this situation only remains for one year. In the next year, preparer engaged in a ratchet behavior, at a lower intention. These findings underscore the importance of analysis of standardized expenditure in a government budgeting process environment. As a practical contribution, these findings suggest that using and monitoring for the adoption of analysis on standardized expenditure should be maintained continuously.

The Use of Accrual Accounting in New Zealand’s Central Government: Second Thoughts

Business-style accrual accounting for governmental budgeting and financial reporting is widely promoted as appropriate for governments and promoted as successful in the countries that have already adopted it. There are, however, both constitutional and democratic reasons for close attention to their implications and effects. Accounting has a power of its own and, matters that “appear on the surface to be technical … can be found to be intimately tied up with political, behavioural and constitutional concerns” (

The British navy’s 1888 budgetary reforms

Reforms to the British navy’s estimates for 1888—9 radically changed the way that budgetary information was presented to parliament. Motivated by a desire to facilitate efficiency judgments about public expenditure, in the new-style estimates expenditure was classified according to object or purpose rather than on the basis of the traditional subjective categorizations. These reforms were instituted, in the face of strong Treasury opposition, almost as a fait accompli, by Mr Arthur Forwood (later Sir Arthur Forwood, Bt), Parliamentary and Financial Secretary to the Navy, supported by his senior minister, Lord George Hamilton, First Lord of the Admiralty, both of whom possessed unusually advanced ideas about public-sector efficiency and management. The article examines the background to and nature of the reforms and the unusual dynamics of the reform process, as well as attempting to ascertain their wider place in the history of governmental budgeting and accounting.

GOVERNMENT/BUSINESS SYNERGY: EARLY AMERICAN INNOVATIONS IN BUDGETING AND COST ACCOUNTING

This paper examines certain interactions between American government and business which resulted in important innovations in the areas of budgeting and cost accounting early in the twentieth century. The evidence suggests that budgeting methods were initially developed by municipal reformers of the Progressive era and were subsequently adapted by business for planning and control purposes. In like fashion, standard costing and variance analysis were significant cost accounting techniques born to an industrial environment which came to contribute markedly to a continuing improvement of governmental budgeting procedures.