Public Sector Governance and Accountability Series: Budgeting and ...

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228 Gary Cokins Without visible, relevant, and valid data, it is difficult for organizations to stimulate ideas and evaluate what options are available—and what their financial effect will be.ABC/M data provide fundamental information that is part of the solution.Applying ABC/M may well be critical to an organization’s survival. Government is moving past the initial stage of rethinking what government does and how it does it. Restrictive funding pressures have already jump-started that activity. Now government units are adopting a greater performance orientation and are replacing a detailed micromanagement style with a more practical approach, one in which the costs are justified by the benefits. ABC/M is now playing and will continue to play an important role in helping the government to manage its affairs. As important as it is, however, ABC/M is not a panacea. As mentioned earlier, cost management should always be done in the broader context of performance management, integrating time, quality, service levels, capacity planning, and costs. But an organization’s understanding of its cost-structure behavior is critical, so a managerial accounting system that supports managerial economic analysis, which ABC/M does, is critical for all stakeholders— employees, the community, loyal customers, and shareholders. Annex 7A: Case Study ABC/M in a State Road Maintenance Department The “end of the road”final-final cost objects consume all the cost assignments that have occurred to that point. Some cost assignments are direct to the final-final objects, but in increasingly overhead-intensive organizations, most costs arrive as indirect and shared costs. As an example, a government road maintenance and repair department does not directly service individual types of cars or trucks or individual types of drivers. The inherent diversity originates in the type of road. The characteristics of the road cause the work crews to do more or less work. The weight of trucks may cause more road damage than the weight of automobiles, but the type of vehicle is more of a higher-order cost driver than an activity driver. The causal force of trucks versus automobiles may certainly be discussed when seeking ways to improve costs. However, for the purposes of ABC/M, the roadbed itself serves as the best source (that is, the final-final cost object) for understanding the interdependencies of costs. The roadbed is the only practical way of connecting an output of the department’s workload back to the used resources (types of trucks, garages, employees, and so on). Figure 7A.1 provides a simplified diagram of the ABC/M cost-assignment network
Resources Activity-Based Cost Management in the Public Sector 229 US$ Dept. 1 xxxxxxx xxxxxxx xxxxxxx xxxxxxx xxxxxxx Dept. 2 xxxxxxx xxxxxxx xxxxxxx xxxxxxx xxxxxxx Dept. 3 xxxxxxx xxxxxxx xxxxxxx xxxxxxx xxxxxxx Process measures Outputs X = activities = process = cost drivers Type of cement Pavement Organization sustaining Final cost objects Signage Lane stripe Roadbed type Source: Author’s representation. FIGURE 7A.1 Highway Road Maintenance ABC/M Cost Assignments for a road maintenance function with an incomplete but representative example of final cost objects that are consumed in different proportions by various types of roadbed—the final-final cost object. The inherent diversity of the road can be segmented into several dimensions with two or more classifications: Number of lanes: two-lane versus four-lane Road surface: cement versus asphalt Location: rural versus urban Designation: expressway, state highway, or city road. Using only those four dimensions and choices produces 24 ABC/M final-final cost objects (2 2 2 3 24). The organizational discovery and learning comes when the costs for each type of road are compared on a relative basis—for example, the average cost for each mile or kilometer of road. Many roadway organizations have already captured data describing the number of miles or kilometers for each of these 24 combinations. By dividing the annual cost (or any time range) for each unique type of road,
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PUBLIC SECTOR GOVERNANCE AND ACCOUN
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Introduction to the Public Sector G
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©2007 The International Bank for R
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vi Contents Conclusions 48 Notes 49
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viii Contents A Simple Way to Under
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x Contents Reform Priorities and Se
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xii Contents 9.4 Transfers between
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xiv Contents 10.2 Pros and Cons of
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xvi Foreword highlights frameworks
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xviii Preface This volume represent
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xx Acknowledgments The editor is gr
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xxii Contributors Work, Activity-Ba
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xxiv Contributors published by the
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xxvi Abbreviations and Acronyms EU
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Overview anwar shah B udgetary inst
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Overview 3 Chapter 2 by Salvatore S
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Overview 5 governments still are on
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Overview 7 Since the 1970s, the cos
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Overview 9 helpful in improving bud
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Overview 11 not need it. But the pr
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Overview 13 For efficient implement
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Overview 15 a difficult environment
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Overview 17 is asked to perform. To
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Overview 19 set up a special aid ma
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Overview 21 allocations, low budget
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Overview 23 specifies who is respon
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1 Budgeting Institutions for Better
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Budgeting Institutions for Better F
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information from the executive and
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54 Salvatore Schiavo-Campo Good Gov
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56 Salvatore Schiavo-Campo In such
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58 Salvatore Schiavo-Campo country
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60 Salvatore Schiavo-Campo Principl
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62 Salvatore Schiavo-Campo some cas
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64 Salvatore Schiavo-Campo transact
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66 Salvatore Schiavo-Campo pay off
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68 Salvatore Schiavo-Campo BOX 2.1
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72 Salvatore Schiavo-Campo studies
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74 Salvatore Schiavo-Campo TABLE 2.
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76 Salvatore Schiavo-Campo Loan Gua
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80 Salvatore Schiavo-Campo when the
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84 Salvatore Schiavo-Campo Division
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86 Salvatore Schiavo-Campo Article
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88 Salvatore Schiavo-Campo Polackov
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90 A. Premchand performance. It is
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92 A. Premchand 1970s. It found tha
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94 A. Premchand TABLE 3.1 Receipts
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96 A. Premchand To arrive at such d
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98 A. Premchand TABLE 3.2 (continue
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100 A. Premchand affecting construc
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102 A. Premchand by most developing
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104 A. Premchand TABLE 3.3 Position
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106 A. Premchand TABLE 3.4 (continu
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108 A. Premchand defense) as some c
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110 Alta Fölscher money by spendin
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112 Alta Fölscher “satisficing.
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114 Alta Fölscher inputs. It is on
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116 Alta Fölscher them in a better
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118 Alta Fölscher political proces
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120 Alta Fölscher BOX 4.1 A Confus
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122 Alta Fölscher Three years late
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124 Alta Fölscher budgeting are lo
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126 Alta Fölscher TABLE 4.2 A New
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128 Alta Fölscher the 1980s, when
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130 Alta Fölscher classification a
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132 Alta Fölscher ministries to li
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134 Alta Fölscher Conclusion The i
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5 A Primer on Performance Budgeting
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A Primer on Performance Budgeting 1
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155 China Line-item budgeting Line-
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TABLE 5.6 Performance Budgeting Ref
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C. Is it common that politicians us
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9 Budget Execution daniel tommasi B
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Budget Execution 281 in budget mana
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Budget Execution 283 appropriations
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Budget Execution 285 The distributi
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Budget Execution 287 In Malawi, the
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Distribution of Responsibilities Bu
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Budget Execution 291 The financial
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Budget Execution 293 cases, these s
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Budget Execution 295 provided that
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Budget Execution 297 termed viremen
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Budget Execution 299 BOX 9.4 Transf
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Budget Execution 301 time limited,
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Budget Execution 303 personnel mana
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Budget Execution 305 which ones wer
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Budget Execution 307 projects withi
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The Treasury Function Budget Execut
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Budget Execution 311 Case 1. Paymen
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Budget Execution 313 Although, in p
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Budget Execution 315 payments, and
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Budget Execution 317 Cash planning
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Organizational arrangements Cash pl
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Budget Execution 321 9. Since the 1
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10 Automating Public Financial Mana
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Automating Public Financial Managem
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A Concluding Word Many years ago Go
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11 What Would an Ideal Public Finan
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What Would an Ideal Public Finance
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National and sectoral policy review
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12 Strengthening Public Expenditure
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Strengthening Public Expenditure Ma
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should be conducted largely on the
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436 Salvatore Schiavo-Campo period.
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438 Salvatore Schiavo-Campo going b
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440 Salvatore Schiavo-Campo strateg
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442 Salvatore Schiavo-Campo No com
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444 Salvatore Schiavo-Campo donors.
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446 Salvatore Schiavo-Campo 2. Is t
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448 Salvatore Schiavo-Campo serious
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450 Salvatore Schiavo-Campo assets,
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452 Salvatore Schiavo-Campo and pla
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454 Salvatore Schiavo-Campo corrupt
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456 Salvatore Schiavo-Campo The mai
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458 Salvatore Schiavo-Campo Moreove
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460 Salvatore Schiavo-Campo Schiavo
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462 Alta Fölscher development budg
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464 Alta Fölscher the quality of i
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466 Alta Fölscher between policy a
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468 Alta Fölscher Public Policy Re
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470 Alta Fölscher Allocating Scarc
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472 Alta Fölscher a guide to the m
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474 Alta Fölscher The MPERs are ta
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476 Alta Fölscher BOX 14.1 Kenyan
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478 Alta Fölscher BOX 14.2 The IP-
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480 Alta Fölscher the IP-ERS objec
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482 Alta Fölscher MTEF, these ceil
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484 Alta Fölscher macroeconomic ou
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486 Alta Fölscher Across and withi
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488 Alta Fölscher phases and instr
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490 Alta Fölscher decisions, rathe
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492 Alta Fölscher Realizing the co
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494 Alta Fölscher against prioriti
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496 Alta Fölscher selected across
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498 Alta Fölscher be sequenced and
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15 Country Case Study: South Africa
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health, social services, and housin
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Country Case Study: South Africa 50
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A Credible Budget Process Country C
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Index Boxes, figures, notes, and ta
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Index 537 defined, 327, 328f, 354n8
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Index 539 delegation approach to, 3
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Index 541 reporting requirements, 3
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Index 543 Indianapolis, IN case stu
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Index 545 change factors influencin
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Index 547 reasons for adopting, 138
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Index 549 Public Expenditure and Fi
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Index 551 HIPC debt relief, budgeta
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ECO-AUDIT Environmental Benefits St
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