Almost all decisions and activities of the public sector prompt financial transactions. Therefore, the planning of revenues and expenses, their budgeting and managing, as well as the documentation of their use are of paramount importance for the steering and controlling effort of the political and administrative decision makers. It requires an adequate organisational and content-wise arrangement of all parts of public finance, particularly the budgeting and accounting system (BAS). This BAS is currently undergoing a far reaching reform process, which will extend to affect all administrative levels, the Länder and the Bund, in the next years. The object of the reform process is not primarily the organisational aspect as the regulatory framework has been effective in the past years; there is thus no pressing need for reforms in this regard. The focus of the current reform efforts is directed at the content component, i.e. the structure and the content of the budget and the manner of bookkeeping and financial reporting.The organisational arrangement of the BAS includes the regulations of the budgetary law that concern the annual process of budget planning from the first drafting to the final passing. The comprehensive and democratically legitimized involvement of the political and administrative decision makers is highly important in this process. A fundamental goal of the process is to incite and strengthen citizen interest in local affairs. A legally binding budget on the local level requires the involvement of the citizens as well as the state level. In the ideal case, the observance of the regulations in the budgetary law is guaranteed as well as there are safeguards against the possibility for the council and the administration to work together in an effort to financially harm the citizens.An additional organisational regulatory area includes the principles and rules for the planning and management of the budget. It aims at enabling the cities to fulfil their duties continuously and in a sustainable manner, which requires a financially capable community. The regulations also work to avoid waste as well as embezzlement and fraud of public funds.A number of regulations of the budgetary law concern the steering and controlling of budget management throughout the fiscal year as well as the auditing of the financial report after the end of the fiscal year. The problem imminent in these regulations is that only organisational units of the public sector are involved in the auditing process; private auditing companies are not involved. An audit commission may ask a private audit company to be involved. It is not required to do so however.The budgeting system currently in use is an equivalent of its predecessors in so far as it contains only financial transactions (cash receipts and payments) and is thus cash-based. This is valid for the accounting system as well; the financial report is neither a balance sheet showing assets and debts nor a profit and loss statement equivalent to those in private enterprises. This system is not suitable to provide the information necessary for differentiated steering and controlling focusing on efficiency and efficacy of the administration.Therefore, the following guidelines for the creation of a new BAS are cited: a) Integration and presentation of the complete resources available and used in order to meet public demand and fulfil public services, not merely the financial cash flow. It is due to this suggestion that the model is titled "From the total cash resources concept towards the total economic resources concept"; b) Recording and presentation of the complete assets of a jurisdiction, specifically including the fixed assets. This has not been the case in the past, so that a first-time recording and evaluation of all fixed asset items will require an immense effort; c) Incorporation of goals, objectives and performance measurement with internal and external assessment, outputs, and outcomes into budget management; d) Development of prerequisites for flexibility in budget management of agencies, which will support incentive structures for staff members to increase the efficient and effective use of budget funds; y e) Use of a uniform style of accounting for all agencies in a jurisdiction based on double-entry bookkeeping, as used in private enterprise, i.e. accrual-based accounting in addition to cash-based accounting.At the centre of the new content structured organisation of the BAS is the annual budget. It consists of two plans. The distinction between the two plans is not primarily made based upon the purpose of the revenues or expenses (i.e. are they used to cover regular administration purposes or investment purposes?) but rather based on the nature of the amounts: a) The accrual-based income plan which accounts for the anticipated revenues and the appropriated expenses. This plan is equivalent to the profit and loss statement of private enterprise, because the rules for the integration of revenues and expenses into the budget are analogous to commercial and fiscal law for private enterprise. Therefore this plan is equal to an operating budget respectively current budget and will function as a total economic resources concept; b) The cash-based plan, which registers the anticipated cash receipts and payments. Cash receipts and payments consists of the cash items of the ongoing activities in the jurisdiction and cash items, which are connected to capital projects and financial management. Therefore this plan shows the cash flow in detail.The income plan and the cash plan can be reduced into smaller parts, i.e. the products of the single jurisdictions which are usually equal to the departments and divisions of the administration. The basis for this process is a state-wide product plan so that comparability and, consequently, benchmarking possibilities between all local jurisdictions of a state are guaranteed.

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