The purpose of this study was to analyze the accrual-based performance budgeting systems in the United Kingdom, Australia, and New Zealand. The analysis focuses on the content and format of implemented performance budgets and the added value that accrual budgeting brings to performance budgeting. The author addressed four research questions. The research seeks to highlight and identify the different models of accrual and performance budgeting that exist, and what kind of performance information is included in the budget documents of central governments. It also seeks to know how performance information and accrual budgeting integrated into budgetary documents and what added value do accrual budgeting brings to performance budgeting.

The research employed the use of critical analysis of governmental and parliamentary documents, performance information, appropriations, policy paper, financial statements, and departmental budgets to identify the models of accrual-based performance budgeting systems in the United Kingdom, Australia, and New Zealand. The article concluded by showing that there are two ways to implement accrual budgeting. In New Zealand and Australia, the implementation of accrual budgeting requires the preparation of budgeted financial statements with the same format as those presented at year-end. In the UK, appropriations are approved by Parliament on both the cash and accrual bases. The three countries analyzed changed their budget structures to focus on outcomes and outputs as part of their initiatives to introduce accrual-based budgeting. Input information was not replaced by output and outcome information. Performance measures and inputs are provided together with other, more sophisticated criteria, such as effectiveness, impact, timelines, and quality. It also showed that accrual budgeting and performance budgeting is, in general, complementary tools, even though there are some differences between the three countries.

Main Points and Relevance

One of the major takeaways from this research is that accrual budgeting provides measures of the full cost of services/outputs in the budgetary statements. A complete accrual accounting system that registers costs rather than cash flows is required for measurements of efficiency or cost-effectiveness. Martí (2013) inferred that if the government wants to present performance measures of the effectiveness or profitability of the services provided, the costs of the outputs must still be calculated using accrual-based figures, even if an accrual-based budget system is not implemented. The application of full accrual budgeting measures is not limited to the public sector alone. Comprehensive accrual budgeting measures are necessary for decisions that require a comparison of prices with other public- or private-sector providers. Lastly, this article concludes that accrual budgeting allows departments to base their expenditure prioritization decisions on the full costs of alternative programs within a medium and long-term framework of expenditure.

I currently work for a government agency as an accountant, and I do not have to be in the executive hierarchy to know that state budgets are complex and fluid, as they depend on anticipated revenues and planned expenditures, which may alter for a fiscal year. The state executive arm is committed to using accounting practices that highlight the actual size of deficits. The State had previously use a cash-based accounting system, but it’s now using generally accepted accounting principles or GAAP. The crucial difference between these two methods is that GAAP includes what’s called “accrual-based” accounting. In accruals-based budgeting, a budget balance is defined by adding the present value of assets and the long-term cost of liabilities. This has further strengthened the balanced budget provision of the Illinois Constitution to require end-of-year balance, rather than just prospective balance. Marti (2013) stated that cash-based accounting underreports actual budget deficit and unlike accrual-based budgeting. I think the State of Illinois agrees with this position as it is reflected in their budgetary policy.


Martí, C. (2013). Performance Budgeting and Accrual Budgeting. Public Performance & Management Review, 37(1), 33–58. doi: 10.2753/pmr1530-957637R

Discussion 2

In Stearns The Moderating Effects of Personality on the Relationship between Budget Participation and Motivation to Reach the Budget Goal, the effects of personality are observed among budget participation and motivation to reach the budget goal. Different dimensions of personality are observed to have effects on how individuals participate in budgeting activities and how motivated they are to reach those budgeting goals (Stearns, 2016). Participation was administered at three levels and personality of participating individuals was measured by the five-factor model of personality, perception of participation, and motivation. Results indicated strong relationships among personality and participation effecting the motivational involvement to reach budget goals (Stearns, 2016). Such results indicate that personality among participative budgeting systems can influence the motivation to achieve budget targets.

This study observes and studies the certain aspects that can have affects on company budgets and the success of fulfilling them. One aspect underlines the purpose of the study. Past studies have illustrated possible variables affecting the participation-motivation relationship; however, the results have not been consistent and this study looks at “how the dimensions of the five-factor model might intervene in the participation motivation relationship” (Stearns, 2016, p. 144). Another key aspect is the observation and hypothesized idea of participation and variables in such. Inconsistent answers from past studies gained positive and no effect results for participation in goal commitment and this study analyzes the main effect of participation on motivation to reach budget goals (Stearns, 2016). Results indicated that more neurotic individuals will increasingly be more involved with less motivation to reach budget goals; moreover, a level of participation is correlated with an individual’s motivation and dimension of personal neuroticism (Stearns, 2016).

Relevance in today’s world reaches many aspects of businesses. Understanding how individuals act/perceive basic budgeting practices and goals can determine how managers structure planning systems and the measures taken to design structed goal planning. This can also structure how managers organize motivation. Drivers of motivation vary among individuals and this study can be used for further experimentation to understand how individuals can be most successful with budgeting practices. Compared to my level of experience, this can be related to certain aspects of the company I work for. On a more individualistic level, my coworkers and I do not deal with such budgeting matters collectively but such points can still be relevant. How the office managers budget certain components are dependent on multiple individuals and how they interact with each other. Motivation to achieve budgeting goals can varying depending on the individual and therefore the motivational drivers vary themselves. This article was very insight on the personal and collective neurological processes that go into the simplistic process of planning and achieving budget goals.


Stearns, J. (JP). (2016). The Moderating Effects of Personality on the Relationship between Budget Participation and Motivation to Reach the Budget Goal. International Journal of Business, Accounting, & Finance, 10(1), 144–164.

Discussion 3

The article I chose for this week discusses the need for what the author refers to as “financial engineering.” Although the article focuses on Ukrainian enterprises, the content is applicable to institutions and businesses around the world. Many of the problems that are arising for larger businesses in the Ukrainian markets were solved here in the United States, and the author is adapting those solutions to enterprises in Ukraine.

Essentially, thanks to fierce competition in that market, the need for newer instruments and methods related to budgeting and management accounting are needed for larger companies to succeed. The author breaks it down into businesses managers needing to segment into “responsibility centers” that are responsible for their own individual budgets. Mangers of those individual responsibility centers mange their budgets that are overall, set by the business managers.

My own organization, like most larger corporations, work this way. The company sets their overall annual budget that is separated by operational segment. The corporate segment sets the budget for our large segment, who further segments the budget by each individual operational unit. Eventually, that large budget set by corporate filters all the way down to my individual segment. To break it up into easier terms, The Walt Disney Company sets the overall company budget. Walt Disney Parks & Resorts sets their overall budget from that. Walt Disney World then sets their budget from that, eventually filtering down through each park and resort until our individual area, Star Wars: Galaxy’s Edge Operations in Florida gets their annual budget. Our proprietor is ultimately in charge of the budget for our responsibility center.

The article also talks about budget management that should follow certain financial engineering procedures. In my particular segment, attractions operations, we do not directly influence revenue. Our collective job is to operate the two marquee attractions in the park, Millennium Falcon: Smuggler’s Run and Star Wars: Rise of the Resistance. Because we do not sell anything, we eventually influence company revenue through our interactions with customers and by keeping people happy. How this relates to financial engineering gets a little murky. Our segment is more or less regulated by metrics that relate to Guest satisfaction rather than black and white financial metrics. If one simply treats those non-financial numbers as dollars and cents, our annual budget can be driven by how we perform based on a standard set by a higher responsibility center (the park Vice President, President of Walt Disney World, etc).

To conclude, the biggest theme in this article was how different responsibility centers must be in control of their own budgets for the enterprise as a whole to be successful. While the overall business manager(s) can set the budget for the company, it is eventually up to the managers of each individual responsibility center to ensure the success of the company.


Herasmovych, I. A. (2015). Budgeting Of Business Processes – The Basis of Financial Engineering And Operating Activities Of An Enterprise. Practical Science Edition “Independent Auditor”, No14.

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