1. Public Policy Management and Transparency Network: Development Effectiveness and Result-based Budget Management Washington DC, May 7th, 2007 1 RESULT-ORIENTED COSTS IN THE PUBLIC SECTOR Humberto Petrei

2. Public Policy Management and Transparency Network: Development Effectiveness and Result-based Budget Management Washington DC, May 7th, 2007 2 Accountability of public employees and government officials: Control ( to avoid abuse and fraud) Proper use of funds Continuous improvement

3. Public Policy Management and Transparency Network: Development Effectiveness and Result-based Budget Management Washington DC, May 7th, 2007 3 Follow-up at program level is insufficient for management and public transparency purposes Answer: subdivision of programs, cost centers, analysis by activity

4. Public Policy Management and Transparency Network: Development Effectiveness and Result-based Budget Management Washington DC, May 7th, 2007 4 Cost Information – necessary for: Detailed knowledge to meet goals Financial information Budget preparation (analysis of alternatives) Efficiency control Transparency Control and evaluation

5. Public Policy Management and Transparency Network: Development Effectiveness and Result-based Budget Management Washington DC, May 7th, 2007 5 Financial information and cost accounting different coding degrees Financial information: limited use It does not report on efficiency In the public sector t here is no equivalent to the profit and loss statement

6. Public Policy Management and Transparency Network: Development Effectiveness and Result-based Budget Management Washington DC, May 7th, 2007 6 United States Methodologies: under agencies’ responsibility Accounting rules: OMB (Office of Management and Budget), GAO and the Treasury FASAB (Federal Accounting Standards Advisory Board) For sub-national governments: GASB (Government Accounting Standard Board)

7. Public Policy Management and Transparency Network: Development Effectiveness and Result-based Budget Management Washington DC, May 7th, 2007 7 U.S.A. Summary of the degree of progress in the application of cost accounting

8. Public Policy Management and Transparency Network: Development Effectiveness and Result-based Budget Management Washington DC, May 7th, 2007 8 United Kingdom: At an aggregated level, objective-oriented costs (96 in 2006) and performance-oriented costs (150 in 2006), are recorded Most agencies use activity-based costing or cost center accounting. Accounting rules: Treasury’s responsibility with the advise of a special body representing different government offices.

9. Public Policy Management and Transparency Network: Development Effectiveness and Result-based Budget Management Washington DC, May 7th, 2007 9 New Zealand Full correspondence between products (474 in 2006) and budget allocations and rendering of accounts Legal sources Application guide in order to calculate the cost of products Treasury’s instructions

10. Public Policy Management and Transparency Network: Development Effectiveness and Result-based Budget Management Washington DC, May 7th, 2007 10 New Zealand Each ministry or agency must use cost accounting Each ministry and agency must publish the policies followed concerning costs From 2007 on, the international IASB ( International Accounting Standard Board ) accounting rules are complied with

11. Public Policy Management and Transparency Network: Development Effectiveness and Result-based Budget Management Washington DC, May 7th, 2007 11 Information systems and cost accounting Costs and budget (advantage of products vs. results) Disaggregation by cost centers or activities or segments Financial accounting and management accounting Accrual accounting