MANAGEMENT ACCOUNTING IN LOCAL GOVERNMENT

Abstract

Most of the management accounting activity in local government has traditionally been thought of as being confined primarily to the requirements of budget preparation and budgetary control. The budget is generally recognised as being at the heart of planning, decision-making and control and yet there have been many examples of the limitations in conventional budgeting and budgetary control practices being pointed out. It might have been expected that the period of consistent financial stringency faced by local government from 1979 onwards would have quickly exposed any limitations and brought about changes. In reality it seems that the management accounting and budgeting practices in local government responded surprisingly slowly to the financial pressures and it is only with the relatively recent introduction of the ‘private sector’ philosophies of devolved management and market testing that widespread developments in management accounting have begun to occur. Many of these developments are still evolving and because of this it seemed inappropriate at this stage to attempt a cross-sectional survey of current practices. This paper therefore concentrates on the position in two specific local authorities and examines the current DSO accounting practices. In addition, the analysis undertaken by one of the authorities of the steps needed to implement internal trading accounts for financial support services is discussed and the interesting experimental attempt by one of the authorities to introduce zero base budgeting for a major service is also examined.

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