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Management Control in Government Organizations

Management Control in Government Organizations. Shane Rector. Introduction. Cost/Managerial accounting is typically viewed from a for-profit perspective Many principles apply to both sectors Both sectors also have unique differences 3 vantage points- historical, current, and prospective.

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Management Control in Government Organizations

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  1. Management Control in Government Organizations Shane Rector

  2. Introduction • Cost/Managerial accounting is typically viewed from a for-profit perspective • Many principles apply to both sectors • Both sectors also have unique differences • 3 vantage points- historical, current, and prospective

  3. Historical • Late 1800s- cost accounting introduced to local governments • 1972- Freeman finds that alignment of financial management, cost accounting, and performance measurement improve local governments overall • Not much else has been done. Why?

  4. Barriers • 1985- David Ammons finds 37 barriers to productivity in local government • Absence of cost accounting systems • Horizon problem • Policy over performance • Efficiency vs. Effectiveness • Short-term/day to day focus • Overall Value Sets

  5. Different Value Sets • Results of empirical study

  6. Current Trends • SOG case study • GASB Statement 34 created financial reporting model for public sector entities • School of Government (SOG) at UNC- Chapel Hill developed a financial condition analysis model • SOG model took financial statements and interpreted them for use by top elected officials

  7. Current Trends • Three North Carolina cities implemented the SOG model • SOG model increased official’s understanding of financial operations, and impacted behavior • Asked more questions about audit reports • Involved more management in long-term planning • Impacted fiscal policy decisions • Currently working on implementing SOG model in more governments

  8. Prospective Issues • Three issues that may affect public sector financial management in the next few years • Proposed GASB changes • Adoption of IFRS • Emphasis on environmental sustainability

  9. GASB changes • GASB currently evaluating proposal to require long-term projections for governmental entities • Project currently on hold • Many specifics still to consider • Forces governments to consider long-term issues • Systems similar to the SOG model would be beneficial

  10. IFRS • Main IFRS research focus is on private sector, but there are public sector considerations as well • Research in New Zealand showed significant changes to government financial statements • Liabilities • Disclosures • Not much research done in US yet

  11. Environmental Sustainability • Environmental concerns have been growing and will continue to grow • Societal and regulatory pressures result in greater focus on environmentally related costs • Waste management case study

  12. Environmental Sustainability • Case study showed that only high level costs were captured • Only direct costs • External costs difficult to determine • Highly aggregated • More detailed cost system needed in this case • Same logic can be applied to other focus areas as well

  13. Conclusion • Cost and managerial accounting is not just for the private sector • Many barriers unique to government exist that impede progress • Public sector managerial accounting should be researched more, in spite of inherent barriers

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