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Cost Accounting Systems and Practices in Public Organizations: A Framework for Understanding Costing Evolution and Connections to Sustainability Strategies

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Financial Sustainability of Public Sector Entities

Part of the book series: Public Sector Financial Management ((PUSEFIMA))

Abstract

This chapter discusses the use of cost accounting as an important organizational tool for informing operational and financial sustainability strategies in public organizations. While the main accounting and budgetary theories tend to overlook cost accounting, the information that cost accounting provides is important for the effective functioning of both accounting and budgetary theories of public organizational sustainability. Furthermore, cost accounting informs two structural responses to sustainability challenges: contracting service delivery with private providers, and collaboration with government and nonprofit providers. In its current incarnation in the public sector, cost accounting may not be capable of addressing the large and important problem of financial sustainability of public services. As such, a systems-practices framework is developed to make a distinction between cost accounting systems from cost accounting practices. This model draws attention to differences in costing discussions and provides a basis for thinking comprehensively about how many disparate discussions of public cost accounting are interrelated.

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Notes

  1. 1.

    Generally, cost accounting can be used for whatever cost object is appropriate in the context. However, it is one of the purposes of this chapter to note that general public managers, at least in the United States, are not familiar with even these basic managerial accounting terms like cost objects. Also, financial managers and accountants may not, except in rare circumstances, be involved in the discussions about the appropriate cost object. This leads to a situation where the appropriate level of cost is not discussed as thoroughly as it could or should be. This is another reason why examining the systems and practices of cost accounting is important. With the newfound emphasis on sustainability, this is a good time to bring these issues up for discussion.

  2. 2.

    In a queuing strategy, resources are allocated on a first come first served basis and so costs need only be passed down to the department on the basis of departmental need. However, the pricing strategy may change individual behavior that may be influenced by prices. Therefore, the cost needs to be passed down to the individual service.

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Author information

Authors and Affiliations

  1. Department of Political Science and Public Administration, University of North Carolina at Charlotte, Charlotte, NC, USA

    Zachary Mohr

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  1. Zachary Mohr
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Correspondence to Zachary Mohr .

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Editors and Affiliations

  1. Department of Accountancy, University of Malta, Msida, Malta

    Josette Caruana

  2. Department of Accounting and Finance, University of Zaragoza, Zaragoza, Spain

    Isabel Brusca

  3. Department of Economics “Marco Biagi”, University of Modena and Reggio Emilia, Modena, Italy

    Eugenio Caperchione

  4. Department of Business Administration, Athens University of Economics and Business, Athens, Greece

    Sandra Cohen

  5. Department of Management and Innovation Systems, University of Salerno, Fisciano, Italy

    Francesca Manes Rossi

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Mohr, Z. (2019). Cost Accounting Systems and Practices in Public Organizations: A Framework for Understanding Costing Evolution and Connections to Sustainability Strategies. In: Caruana, J., Brusca, I., Caperchione, E., Cohen, S., Manes Rossi, F. (eds) Financial Sustainability of Public Sector Entities. Public Sector Financial Management. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-06037-4_8

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