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

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.