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

Abstract

Despite its benefits, municipalities frequently struggle to take advantage of accrual accounting as a basis for managerial decisions. We assume that the reason is that municipalities implement accrual accounting in a symbolic way for legitimacy purposes. To identify factors enhancing a more sophisticated usage of accrual accounting, we examined the influence of the specific municipality context, the organizational structure and resource provision on the degree of sophistication in the use of accrual accounting. We found that the most relevant driver for a more sophisticated use of accrual accounting is the specific context in which the municipality is embedded. Another important factor is the adequate provision of resources, such as an IT system that delivers easily accessible and accurate accounting information. Notably, the specific organizational structure of the municipality, which is often regarded as highly bureaucratic and the main obstruction to reforms, is not significant.