Accrual Accounting for Municipalities: The 2025 Pilot Phase Begins
In 2025, the pilot phase of Accrual Accounting (accrual-based economic and patrimonial accounting) will begin, involving all Municipalities with a population exceeding 5,000 inhabitants.
The reform, included among the strategic objectives of the National Recovery and Resilience Plan (PNRR – Milestone M1C1-118), represents one of the most significant innovations in Public Administration accounting management.
Which Public Entities Are Involved in the Accrual Accounting Reform?
The reform will involve the following entities:
- Central administrations included in the State budget, the Presidency of the Council of Ministers, and tax agencies;
- National research institutions and organizations;
- Regions and autonomous provinces;
- Provinces and metropolitan cities;
- Municipalities with a resident population of at least 5,000 inhabitants as of January 1, 2024;
- National Health Service entities and organizations;
- Public universities and higher education institutions;
- Chambers of commerce, industry, crafts, and agriculture, as well as their regional unions;
- Port System Authorities;
- National social security and welfare institutions.
What Is Accrual Accounting?
The Accrual system introduces the accrual principle, according to which costs and revenues are recorded in the relevant financial period, regardless of when payments or collections actually occur.
This model complements — without replacing — financial accounting, which continues to retain its authorization and cash-flow control functions.
Why Accrual Accounting Changes Public Budget Management
The objective is to enable public entities to measure the efficiency and economic sustainability of management activities more realistically through the preparation of new accounting documents such as:
- The Balance Sheet;
- The Income Statement.
This reform therefore represents not only a technical change but also a cultural and organizational transformation aimed at making public sector reporting more transparent and comparable.
The 2025 Pilot Phase: What Municipalities Need to Know
With Decree-Law No. 113 of August 9, 2024, the experimental phase of Accrual Accounting was officially launched.
Priority involvement will be given to entities representing more than 90% of primary public expenditure, including all Municipalities with a population equal to or greater than 5,000 inhabitants as of January 1, 2024.
Activities Planned During the Experimental Phase
During this phase:
- Entities will be required to prepare Accrual reporting templates for experimental purposes (Balance Sheet and Income Statement);
- Reconciliation models between financial accounting and accrual-based accounting will be tested;
- IT adaptation processes for management software and reporting workflows will be initiated;
- Staff training on accounting principles, procedures, and harmonized standards (ITAS) will be provided.
Municipalities with fewer than 5,000 inhabitants will instead be involved at a later stage through a simplified version of Accrual Accounting planned for the 2026–2030 period.
Challenges of the Transition to Accrual Accounting
The transition to Accrual Accounting requires public entities to:
- Reconcile financial data with economic and patrimonial data;
- Adapt existing management systems to the new accounting structures;
- Update internal recording and reporting processes;
- Ensure consistency between traditional financial statements and the new Accrual frameworks.
This is a complex process that requires planning, technical expertise, and updated digital tools.
Tecnosys Italia Support for Municipalities
To support local authorities during this transition phase, Tecnosys Italia provides its expertise in Public Administration digitalization and accounting management.
Our Services for Accrual Accounting Implementation
Our dedicated services include:
- Preliminary analysis and accounting assessment of the entity;
- Operational support in preparing Accrual reporting templates and reconciliation models;
- Staff training on principles, methodologies, and tools of the new system;
- IT and management support for adapting software and accounting workflows;
- Ongoing consultancy to ensure proper regulatory and procedural alignment.
A Guided Path Toward Full Accrual Accounting Adoption
Our goal is to provide Municipalities with a guided, sustainable, and tailored path that enables them to confidently and effectively manage both the 2025 pilot phase and the subsequent full implementation.
