The recent decision of the European Commission to develop accruals-based European Public Sector Accounting Standards (EPSAS) for adoption by European Member States, has attracted significant debate. EPSAS have been advocated as a means to strengthen transparency over public finances, especially in the aftermath of the global financial crisis. But it may also become a costly exercise for Member States if the diversity of European countries cultural and administrative contexts is not taken into due consideration.

The experiences of the Italian central government’s public sector accounting reforms may shed light on how the adoption of new reforms could lead to critical issues.

The Italian government’s accounting processes have undergone several rounds of reforms over the last three decades. By adopting forms of cost accounting and accruals accounting across public sector entities, the Italian government sought to strengthening managerial accountability and separate more clearly the political and the managerial sphere. However, the “modernization” of accounting processes appears to have generally fallen short of expectations.

Indeed, research I conducted for Newcastle University in the UK shows that in Italy, despite political claims, cost accounting or accruals reporting are far from becoming entrenched in the everyday practice. Instead, although on the surface they appear to be modernized, accounting and administrative systems actually remain strongly rooted in the “old” public administration bureaucratic tradition, where cash and commitment budgetary accounting still play a central role.

This, perhaps, suggests that despite the EU’s aspirations, the move to EPSAS may take more time and be more difficult than anticipated. Indeed, EPSAS will have to deal with a number of social, cultural, and political factors individual to each Member State.

Our analysis suggests that reforms may be more successful when these differences are respected. And so, policy- and decision-makers behind EPSAS must not just focus on the technical issues of design and implementation, but also pay attention to the political and cultural process that such a vast project will entail.

It is only under these conditions that EPSAS won’t result in different countries just adopting a few stylistic changes that give the appearance of novelty but will instead mean deep-rooted and significant reforms.

Ileana Steccolini

Member, CIPFA Faculty Board, Professor of Accounting and Finance & Research Director, Newcastle University London

Ileana Steccolini is a Professor of Accounting and Finance and Research Director at Newcastle University London, the chair of the IRSPM Accounting and Accountability Special Interest Group and a member of CIPFA Faculty board. Her research develops at the interface among public administration, management and accounting and focuses on public sector accounting and accountability, performance management and governmental financial resilience.