Accounting information for performance management in the public sector

Abstract

Performance information indicates how well an institution is meeting its aim and objectives and which policies and processes are working. This article argues that the current system of accounting used by government for the preparation of its accounts has certain limitations in as far as the provision of performance information is concerned. Existing theory points to the fact that performance in the public sector is measured in terms of the economical, efficient and effective use of resources. However, the traditional government accounting system was developed to respond to the accountability requirements of the public and not to promote the economical, efficient and effective use of resources. Based on a case study conducted at the Northern Cape Provincial Legislature, it was determined that the modified cash basis of accounting used by government does not provide management with the information needed to enable performance management. The outcomes point to the fact that the accrual basis of accounting is a more effective basis for accounting and can contribute to more economical, efficient and effective use of resources. This is relevant because other government institutions also make use of the modified cash base of accounting to prepare their financial statements.