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The System

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The main references for the general government economic accounting single system are Legislative Decree n. 29/1993 (now Legislative Decree n. 165/2001), Law n. 94/1997 and Item III of Legislative Decree n. 279/1997. 


The normative framework is characterized by the following principles:

a) division between political direction and administrative direction.

"The organs of government exercise political-administrative direction establishing objectives and programmes ( to this end they enact a special annual directive ), .and they verify the correspondence between administrative-managerial results and directions given" ( article n. 4, Legislative Decree n. 165/2001).

b) chief executives can propose objectives and operating programmes.

During the preparation of the annual draft state budget, it is chief executives' (or their equivalent) specific duty to propose objectives and operating programmes to political authority, taking into account costs borne for carrying out institutional functions and services (article n. 14, Legislative Decree n. 165/2001, article n. 17, Law n. 59/1997 and Legislative Decree n. 286/1999, and article n. 4 bis, Law n. 468/78).

c) chief executives have managerial power.

Direction, management, spending, arrangement and control duties have been assigned to chief executives and they are responsible for administrative activity, for management and for results. Besides, in order to verify the efficient execution of activities and services,

". chief executives take appropriate organizing measures for carrying out a cost-benefit analysis of administrative activity, of management and of organizing decisions" (article n. 18 Legislative Decree n. 165/2001).

d) budget monitoring; cost recording and control.

"In order to carry out an effective budget control (also on budgets structured by functions and programmes) and a cost recording.the Ministry of the Treasury (now Ministry of the Economy and Finance) . gathers information about . general government flows" (article n. 58 Legislative Decree n. 165/2001).

"Government administrations define their activity programmes and transmit them to . the Ministry of the Treasury. (now Ministry of the Economy and Finance) all data necessary for cost recording and control. To this end, and "in order to show the economic profile of the expenditure" (i.e. the cost), this Ministry "defines internal procedures and surveying techniques" (article n. 59 Legislative Decree n. 165/2001).  


The internal control and planning process is broken down under three stages: 1)planning stage (objectives are defined, resources are planned and timing is scheduled); 2)	management stage (events and data are collected); 3)	control stage (managerial activity is periodically checked in order to verify its gradual approaching and attainment of the prearranged objectives).

e) a new procedure for the national budget: to take into account the cost of functions and the cost of institutional services.   The political authority puts forward its proposals about annual resource allocation (i.e. its budget proposals) on the basis of costs borne, benefits obtained and results achieved for functions and institutional services performed. These costs, benefits and results are highlighted by economic and statistical information supporting internal management control.
The Minister of the Economy and Finance, as coordinator of public finance and public accounts, receives the proposals, examines and evaluates them as a whole on the basis of functions and institutional service costs. Then, he proceeds to draw up the Budget Bill to be submitted first to the Government and then to the Parliament (article n. 17, Law n. 59/1997 and Legislative Decree n. 286/1999, and article n. 4 bis, Law n. 468/1978).

The general government control and planning process is broken down under three stages: 1)	planning stage (the Minister of Economy and Finance considers and weighs the proposals put forward by the management internal control and defines the draft budget to be submitted to the Government and to the Parliament); 2)	control stage (an economic analytic accounting by cost centre has been introduced and, in addition to the State financial budget, a State economic budget is now drawn up); 3)	verification stage (check on objectives attained and to be pursued).

f) a single economic analytic accounting system for the whole General Government.   In order to improve the utilization of resources and make the government budget (and in particular the State budget) consistent with the new requirements of the administrative action - now moving towards efficiency within the route "objective-resource-result" - the Parliament, through the Law n. 94/1997, delegated the Government to introduce an economic analytic accounting by cost centre. The Legislative Decree n. 279/1997 carried this delegation into effect. The third Item of this Legislative Decree regulates the new economic accounting system for General Government and its foundations (chart of accounts, cost centres, supply of services), correlating some aspects of the system with the reform of the property account/statement of assets and liabilities provided by the same decree.

Within the framework of the financial budget procedures, this system replaces the historical expenditure principle (now abolished). The new system aims at becoming the informative tool with the functional requirements and the feasible objectives for both the General Government - in their autonomous budget process - and the Ministry of the Economy and Finance - as coordinator of public accounts (articles n. 3 and n. 5, letters g and h, Law n. 94/1997).

With regard to the General Government, the new system:


  • allows it to carry out a constant monitoring of their own administrative costs;
  • allows a permanent dialogue with the Ministry of the Economy and Finance - within the framework of the considerations concerning financial planning and drawing-up of the annual budget - and selective intervention aimed at reducing costs and expenses;
  • so, within the limits of General Governments autonomy, this system is a common point of reference for adopting record, verification and control instruments, as provided for by the Law n. 59/1997 and by the Legislative Decree n. 286/1999 (the latter established the internal control system of which each government has to provide itself).


For the Ministry of the Economy and Finance - State General Accounting Department - the System is also an instrument to accomplish its institutional tasks, namely:


  • analysis, control and evaluation of central governments costs and of functions and institutional services, in order to assure financial planning, prearrange the draft State Budget and allow the optimum resources allotment;
  • monitor the effects of budget measures;
  • technical evaluation of cost and burden deriving from measures and law initiatives introduced by central government;
  • consolidation of costs pertaining to public bodies institutional functions;
  • drawing up of informative documents to submit to political and controlling bodies.


In particular, the aims pursued by the economic analytic accounting system concern closely the structure of State General Accounting Department: Inspectorates General (and especially the Inspectorate General for the Budget Policies) and Central Budget Offices. The Inspectorate General for the Budget Policies, through Cost-Benefit Analysis Office, is entrusted with these tasks. It also makes use of the computerized system for data processing and communication that uses this portal beginning with the 2003 Economic Budget.


The economic analytic accounting single system correlates utilization of resources, achieved results and managerial responsibility. It is based on the following principles: a) identifying the administrative phenomena on an accrual basis; b) correlation between necessary resources and their allocation; c) comparison between forecasts and achieved results.
In order to allow an economic evaluation of management and objectives pursued, instead of taking the expense into consideration, this accounting system refers to the cost, namely the value of the actually utilized human and instrumental resources (goods and services). This approach is based on the different nature of cost and expense: the expense is a cash disbursement linked to acquisition of resources, whereas the cost originates in the utilization of resource. Therefore, the cost is quantified according to actual use of resource and is attributed to the accounting period in which this actual use occurs, apart from the moment when the relevant cash disbursement occurs.
In addition, the resources - classified according to their own nature through a Chart of Accounts - are linked to the "purposes" and, as a consequence, to the activities on which the result has to be evaluated. This "linkage" allows the methods used to achieve the objectives to be analysed. The Legislative Decree n. 279/1997 stresses the importance of the responsibilities assumed by the head of a cost centre (he decides how and when the assigned resources have to be used) and of the aims to be pursued (institutional missions or "functions-objectives").
This new accounting system compares methodically the fixed objectives with the achieved results, allowing periodic checks- during the accounting period - to be carried out matching expectations to actual results. So, it is an instrument for management control.
The process has four stages:


    a) planning: objectives are fixed and resources, actions and time requirements are planned (budget);

    b) management: events occurred are entered;

    c) control: half-yearly, it is verified that management goes on according to plan and that progress towards the attainment of objectives proceeds as scheduled;

    d) final statement: final outcome is accounted for.


The cost analytical accounting system requires:


  • introduction of new procedures to carry out the process;
  • adaptation of the structure for managing new information flows;
  • adoption of the appropriate instruments for measuring and entering information.

A. 2000 Economic Budget: start up of the new system, involving only the ministries (cp. Circular letter n°32/1999 of the then Ministry of the Treasury, Budget and Economic Planning); allocation of costs is kept to the nature of costs and to the cost centres; the computerized system for data collection and processing is activated; the first economic budget is printed and made available to Parliament (as an informative paper).

B. Subsequently, through analogous procedures, the following performances have been carried out and as many papers made available to Parliament:


  • drawing-up of the 2001 economic budget (cp. Circular letter n°18/2000 of the then Ministry of the Treasury, Budget and Economic Planning);
  • 2000 first half-year cost recording and economic budget adjustment (cp. Circular letter n°23/2000 of the then Ministry of the Treasury, Budget and Economic Planning);
  • 2000 second half-year cost recording (cp. Circular letter n°42/2000 of the then Ministry of the Treasury, Budget and Economic Planning);
  • drawing-up of the 2002 economic budget (cp. Circular letter n°17/2001 of the then Ministry of the Treasury, Budget and Economic Planning);
  • 2001 first half-year cost recording and economic budget adjustment (cp. Circular letter n°29/2001 of the Ministry of the Economy and Finance);
  • 2001 second half-year cost recording (cp. Circular letter n°1/2002 of the Ministry of the Economy and Finance).


C. 2003 Economic Budget:


  • amendment of the Single Chart of Accounts (Ministerial Decree 25 March 2002);
  • full completion of the new economic budget process, with costs according to their purposes (Institutional Missions or Functions-Objective connected with national accounts classification) and according to organizational structure;
  • half-yearly economic forecasting;
  • development of the computerized system and starting up of the economic accounting portal (cp. Circular letter n°16/2002 of the Ministry of the Economy and Finance).


D. Next steps:
  • development and improvement to the system through introduction of "institutional missions";
  • make full use of the Account Chart, to the deepest level of detail;
  • extension of the system to other Government Departments;
  • introduction of a "proceeds accounting".


State General Accounting Department
Cost-Benefit Analysis Office