Innovation and transparency in Public Administration Financial Management
How to achieve compliance with PNRR Reform 1.15 by fully adopting ACCRUAL accounting principles.
Public sector accounting is evolving to align with European standards. Regions, Metropolitan Cities, Provinces, Municipalities, and public-owned companies are required to ensure greater transparency and improve operational efficiency.
This calls for further progress, involving a revision of current accounting models and administrative procedures, with the implementation of advanced information systems capable of supporting more integrated financial management.
The regulatory framework and initial requirements
Article 10 of the Decree-Law dated August 9, 2024 (converted, with amendments, into Law No. 143 of October 7, 2024), titled “Provisions regarding publicly controlled companies and the implementation of NRRP measures,” initiates reform 1.15 of the National Recovery and Resilience Plan (NRRP). It mandates that by 2026, all Public Administrations (PAs) adopt a single ACCRUAL-based economic and patrimonial accounting system.
The decree establishes a Pilot Phase starting in 2025 to facilitate the adoption of the reform’s requirements, defining various tasks for the institutions involved. Ultimately, the reform calls for a transition to ACCRUAL-based accounting, which aligns with international and European guidelines for the development of public sector accounting standards (IPSAS/EPSAS) and implements the EU Council Directive 2011/85/EU. This transition is crucial for fully recognizing and valuing public assets.
The new ACCRUAL accounting system will not replace the financial accounting system in its role as an authorization tool, but rather complement it in managing the Balance Sheet and Economic Competence. The new multidimensional chart of accounts will replace the current one (as per Legislative Decree 118/2011). However, for the 2025 reporting (and throughout the Pilot Phase), entities must activate procedures to produce, for experimental purposes, an Economic-Patrimonial statement based on ACCRUAL principles, in addition to the one required under Legislative Decree 118/2011.
The Pilot Phase is essential for each entity to revise their internal management processes and update their Information Systems to ensure compliance with the new accounting standards and principles.
What are the challenges for Public Entities?
- Resolve longstanding issues in economic and asset-based financial statements to provide a truthful and consistent representation.
- Prepare everything needed for a 2025 financial statement compliant with ACCRUAL standards, enabling the full opening of the 2026 economic-financial statement.
- Adapt management processes to ensure regulatory compliance with ACCRUAL accounting, designing applications to meet specific operational needs and integrate with existing systems.
- Meet the timelines set by the legislation.
How the Engineering Group supports Public Administration in this transition?
SICER: Accounting Information System for Regions and their Instrumental Bodies and Organizations
The introduction of ACCRUAL accounting aligns with the regulatory developments over the years—even preceding Legislative Decree 118—that have increasingly emphasized Economic-Patrimonial accounting.
This context led to the choice of an Integrated Single Accounting model for the development of SICER, our solution for integrated management of Financial, Economic-Patrimonial, and Analytical Accounting, fully compliant with Legislative Decree 118/2011. SICER supports double-entry Economic-Patrimonial accounting, which has proven particularly effective in managing taxation and VAT, where the complexities of double-entry bookkeeping have been made as transparent as possible for users less familiar with the method.
Opting for an Integrated Single Accounting model has proven to be a forward-looking decision. In particular, for entities whose accounting system is based on Financial Accounting, implementing ACCRUAL accounting in full compliance with the principles set out in ITAS and the postulates of section 2.4 of the Conceptual Framework would be extremely difficult without the close linkage offered by the Integrated Single Accounting paradigm across different accounting areas.
This paradigm must extend to all management processes, pursuing the goal of maximum cooperation among all the Organizational Units of the institution through the information system. It enables integrated management of the Revenue Cycle, Expenditure Cycle, Movable and Immovable Assets, and Inventory. Such cooperation is essential for gathering the data needed by Administrative Services to make decisions in line with the principles described by ITAS.
JEnte: the Unified Accounting System for Municipalities, Provinces, and Metropolitan Cities
ACCRUAL accounting aims to provide a true and fair representation of an administration’s assets, financial results, and cash flows. This is reflected in the processes and documents through which information is reported about the origin of financial resources, their use, and the outcomes achieved - in economic, patrimonial, financial terms, and in terms of service quantity and quality - as well as about a public administration’s capacity to deliver services.
Our JEnte platform was built to meet these goals.
The solution is designed and structured to maximize process efficiency, particularly by addressing all aspects that could reduce the operational impact, through unified tracking of management events. The Unified Accounting System centrally and cohesively manages data from multiple sources, even when they produce different accounting effects.
Collaboration across all the Organizational Units of the institution ensures integrated management of Planning and Control processes, Revenue Cycle, Expenditure Cycle, Movable and Immovable Assets, Inventory, and more. This integration extends to systems managing Documents, Personnel, Protocols, etc., so that all informational assets are shared. This ensures a financial representation that is accurate, clear, and transparent, and truly reflects reality.
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