New development: Whole state accounting—Experiences of the state of Hesse

IMPACT

The state of Hesse began voluntarily converting its cash and budget system to an accrual-based accounting system in 1998. A particular challenge in the conversion of the accounting system is involving all departments and employees in this reform process, as the transition from cash accounting to accrual accounting requires a fundamental change to existing administrative processes. The continuous political support of the state government over several legislative periods was of particular importance. The path that Hesse has taken in converting its accounting system from 1998 to the current adoption of the new financial regulations in 2022 has been highly successful. The state now has a sensible combination of the strengths of accrual-based and cash-based accounting with performance-oriented management. The accrual accounting system increases the transparency of the budget and provides significant additional information for politicians, managers and citizens. The cash-based budget remains an important management tool for budget preparation and the debt brake.

ABSTRACT

This report on the current state of the German state of Hesse with regard to accounting is based on the authors’ practical experience over the past 10 years. An audit by the independent Court of Audit in accordance with general auditing standards emphasise the state's contribution from a scientific point of view.

KEYWORDS:

• Budget
• cash accounting
• double-entry accounting
• federal state
• Germany
• harmonization
• public sector
• transparency

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Gerrit Rüdiger

Gerrit Rüdiger heads the Budget Department of the Hessian Ministry of Finance, Germany. The department is responsible for the preparation and execution of the state budget with a volume of approximately 30 billion euros per year. The department is also responsible for accounting, credit management and fundamental economic issues of the state.

Harald Bott

Harald Bott holds a degree in finance and is a ministerial councillor. He heads the Accounting, Financial Statistics and Payment Transactions Department at the Hessian Ministry of Finance, Wiesbaden, Germany, which is responsible for preparing the consolidated financial statements and the annual report of the state.