Enhancing efficiency in local governments : a comprehensive cost accounting model for optimized service management

Abstract

PURPOSE: The purpose of this article is to present a valuation model for public services in the local government sector. The model aims to identify the total cost of services by implementing cost accounting practices commonly used in the private sector.

DESIGN/METHODOLOGY/APPROACH: The research is conceptual in nature. A critical and indepth literature review method was used to evaluate the existing practices in public service valuation and to address some of their limitations. A model concept has been proposed to complement the currently used solutions.

FINDINGS: The model includes a catalog of services for which the total cost has been calculated using the proposed algorithm. The concept is based on the consideration of both direct and indirect costs, including departmental costs and overhead costs. In the proposed approach, indirect costs are allocated using a work-time key, with a two-stage allocation process that reduces inadequate divisions, which is particularly valuable in organizations with highly diversified operations. The algorithm takes into account the scenarios of service delivery within a single department as well as across multiple departments.

PRACTICAL IMPLICATIONS: Public funds should be spent purposefully and economically, making their control crucial in this context. Additionally, for decision-makers in local governments, information on the costs of service delivery is key for evaluating efficiency and optimizing costs, and, in the longer term, for freeing up additional financial resources. The practice of valuation also contributes to building the managerial maturity of the unit and can serve as a foundation for benchmarking cooperation.

ORIGINALITY/VALUE: This article fills a gap in the literature by proposing an advanced public service valuation model specifically tailored to the local government sector. This approach may prove to be a significant step, particularly in efforts to identify the unit costs of services.