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Jun 2010

Annuality in public budgeting: an exploratory study

Annuality in public budgeting is a widespread phenomenon. It refers to the way in which budget allocations have to be spent by the end of a financial year or be surrendered to a central authority or budget-holder. While there are certain benefits of annuality for those at the centre of an organisation who wish to impose traditional central control, it is argued that it can lead to dysfunctional spending behaviour that is uneconomical, inefficient and ineffective and can therefore fail to provide value for money.

It is against this backdrop that this exploratory study of annuality was undertaken. By interviewing a cross-section of budget-holders, financial controllers and consultants in public sector organisations it was possible to uncover some of the perceptions held on the benefits and pitfalls of annuality.

We find year-end is very problematic for us in some ways but, on the other hand, one of the advantages of annuality is that because we’ve got quite a bit of slippage out of the department this year where their expenditure has slipped, so we’ve been able to fund some things they wouldn’t give us money for.

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Annuality in public budgeting: an exploratory study