Acknowledgements -- A framework for cost accounting systems in government / Zachary T. Mohr -- Contextualizing cost accounting in government from a historical perspective / Zachary T. Mohr and William C. Rivenbark -- The intrinsic value of cost accounting for benchmarking service efficiency / William C. Rivenbark -- Cost accounting for rates and user fees / JoEllen Pope and Zachary T. Mohr -- Cost accounting for government grants / Robert J. Eger, III and Bruce D. McDonald, III -- Cost management innovations in federal agencies / Dale R. Geiger -- Cost accounting in European countries / Ringa Raudla and James W. Douglas -- Extending the application and theory of government cost accounting / Zachary T. Mohr -- Contributors -- Author index -- Subject index
"Managerial cost accounting is the financial and managerial tool that is used to estimate the organizational cost of products and services in business and government. In recent decades, cost accounting in the United States and other advanced industrial countries has been dominated by discussions of Activity Based Costing or ABC. While ABC can be shown to produce a more accurate estimate of cost than older and more basic types of cost accounting, ABC is not used extensively in many governments. We argue that this recent focus on ABC has stifled examination and discussion of how government cost accounting is being used and how it could be used in practice. The study of cost accounting practice reveals an important and underexplored area of financial management in government. Given the scandals that cost accounting estimates can create and that different types of cost accounting can create different estimates of cost it may be reasonable to ask whether the cost accounting exercise is worth it? Cost Accounting in Government: Theory and Applications addresses these unusual and unusually important topics through a series of studies of different government cost accounting practices. The first section of the book presents two chapters on the history and basic elements of cost accounting. The second section of the book provides further discussion and case studies of actual cost accounting practices in the main areas that cost accounting has been used in government: benchmarking the performance of government services, rate setting, grant overhead cost recovery, and cost management. The last two chapters discuss cost accounting practices in Europe and the future of cost accounting. These cases span local and federal governments and provide a much needed context to the study of cost accounting in government. Aimed at academics, researchers and policy makers in the fields of Accounting, Public Administration, and Government Studies, Cost Accounting in Government: Theory and Applications seeks to address the practical and theoretical gap in government cost accounting research with case studies of different public agencies that are using cost accounting for different purposes. The case studies illustrate that different purposes for cost accounting create unique and interesting cost accounting practices. The case studies provide useful examples of actual cost accounting systems that can inform both research and instruction"--Back cover.
Cost accounting has been used in public organizations for over 100 years. In spite of cost accounting's history, there remains little empirical research of multiple organizations use of cost accounting at the department or service level. This paper uses the data from large U.S. cities' central cost accounting plans, budgets, Comprehensive Annual Financial Reports, and common measures of transaction costs to examine the influence of economic transaction costs on the measurement of indirect cost measurement for services. The results indicate that indirect cost measurement is limited by the transaction costs that arise from asset specificity at the service level but measurement uncertainty is related with a higher likelihood of observing an indirect cost driver. Transaction cost theory may help explain the notable underutilization of cost accounting in public organizations, but it also highlights the need for understanding the different dimensions of transaction costs for cost accounting and performance measurement.
Cost accounting in government is a topic that has an oddly uncertain place in public financial management. Many people know what it is as an ideal construct but do not know what it is in practice. This uncertainty of practice and strong expectations about what it should be creates a tightrope that must be consciously attended to and exacts a toll on those who study its practice. For example, activity based costing, or ABC, was generally presumed to be the state of the art for cost accounting in government (Geiger, 2010). While there has been much research about cost accounting in the context of private organizations, the literature on cost accounting in public organizations has not kept pace with its development for the past two decades, especially when many public organizations are experiencing fiscal stress and there is a renewed interest in the subject of cost measurement and containment. This thesis reviews the development of cost accounting research and practices, including the practice of a hybrid of traditional cost accounting and ABC. The research then applies transaction cost theory and a variety of contextual factors that are supported in the literature to create a theoretical model of how cost accounting is used in public organizations. The model is tested on a case study of an ABC implementation in a small city. The insights from this analysis are corroborated through the analysis of the cost accounting practices in a sample of 30 large US cities. The hierarchical logistic regression of 1122 services in these cities finds that the transaction cost variables of asset specificity and uncertainty are significant factors that influence which services get measured in the cost accounting plans. The final empirical chapter looks at why cost accounting is used in US cities and shows that fiscal stress is related to US cities using cost accounting. The last chapter draws conclusions from the current research and discusses avenues for future research.
AbstractIn the public administration literature, research on performance measurement has recognized the important place of cost accounting in relation to performance. Extant research, such as the North Carolina Benchmarking Program, supports the proposition that performance and cost accounting naturally complement each other to increase trust in performance information and increase organizational learning. Other statements about cost accounting suggest that performance measurement and cost accounting compete as systems of control. This research uses general cost accounting plan information and performance measurements in the budgets of large U.S. cities to test the competing and complementary control relationship at the organizational and service levels. It finds that performance measurements and cost accounting are negatively related at the service level, which supports the competing control system hypothesis. At the organizational level, performance and cost accounting are positively related but not at traditional levels of significance.
