The Influence of Management Accounting Departments Within German Municipal Administrations

Abstract

The achievement of better performance from municipal administrations is an ongoing challenge. We use the contingency theory perspective, which concentrates on the specific environmental settings of organisations, to examine the influence of management accounting departments within German municipal administrations. Our findings indicate that as the size of municipalities increases, the level of their administrative performance decreases. We additionally show that this negative effect can be mitigated when management accounting is seen as being highly relevant and when the management accounting department performs well. Furthermore, a comparison of the accounting systems (cash versus accrual accounting) used in municipal administrations reveals that a successful working management accounting department can only exert a positive effect when the municipal administration acts under an accrual accounting regime.

Accrual Accounting and the Local Government Budget - A Matching Evaluation

“…Among local politicians, higher effectiveness and improved management capabilities seem to be most important. In a similar approach, Hirsch et al (2015) find that a municipal management accounting department has a higher moderating effect on administrative performance if it applies accrual accounting. In a repeated cross-sectional analysis Christiaens (2007) investigated potential drivers of reform implementation at the local level for Flemish municipalities (Christiaens and Van Peteghem, 2007) and found only a limited impact of most analysed variables (e.g.…”

The Influence of the Organizational Structure, Environment, and Resource Provision on the Use of Accrual Accounting in Municipalities

“…By contrast, in an accrual accounting system, the budgeting process is much more results-oriented; thus, outputoriented measures are integrated into information, planning, and control processes. When using such an output-oriented accounting system, it is expected that better decisions will be made and that more transparency regarding the municipality's financial situation will be provided (Ouda 2004;Hilgers 2011;Hirsch et al 2015). According to Lüder (1992), a modern accounting regime in public administration delivers the basis for better financial control of public activities.…”

“…Using a survey in our study might be criticized because the participants' evaluations are subjective (Hirsch et al 2015). Subjective measures have been criticized on the grounds that they are more predisposed to common method bias and are possibly affected by a positivity bias of "social desirability" regarding performance measurements (Song and Meier 2018).…”

“…The federal states of Germany have high autonomy and exert legislative power to regulate and set the general conditions for local governments' financial management (Pina et al 2009). In contrast to other European countries, Germany can be considered a late adopter of accrual accounting, as municipalities were decreed to implement accrual accounting in twelve of the sixteen federal states beginning in late 2009 (Hirsch et al 2015). In three of the sixteen federal states-Bavaria, Schleswig-Holstein, and Thuringia-municipalities can voluntarily decide to adopt accrual accounting, but it is not obligatory.…”

“…Finally, our study shows that a more sophisticated implementation of accrual accounting supports the unfolding of an accounting reform's potential. We find evidence that using an output-oriented accounting system can increase the performance in the sense that better decisions are made and more transparency regarding the municipality's financial situation is provided (Ouda 2004;Hirsch et al 2015;Hilgers 2011). Accordingly, scholars and practitioners need to be aware that to perceive the benefits of accrual accounting in municipal administrations, it is important to enable the sophistication of accrual accounting practices.…”