Cost Accounting

Workshop: October 2 – 4, 2018ILjubljana, SloveniaIAccounting

Costing techniques are little used in countries of the Balkans and Eastern Europe. All such countries use the term ‘efficiency and effectiveness’ but without the application of costing techniques such terms have little real meaning. This learning event focused on costing techniques, their usage, and the linkages between costing activities and more effective and efficient delivery of public services.

About this learning event

Countries wishing to join the European Union and neighborhood countries are all expected to implement financial management and internal control.  One of the reasons for the EU requiring this is to improve the efficiency and effectiveness of public services. But in these countries the tendency is to equate cost with budgetary allocations.  Yet they are totally different. It therefore appears that there has been a limited understanding of the term “cost”.  However, countries are starting to realize the importance of costing activities and good quality financial information because of the impact on decision-making. Cost means much more than a budgetary allocation or a purchase cost. Better information on cost enable managers to make decisions about new services, activities, and investments. In other words, it enables them to review and understand how efficiently and effectively resources are being used.

Current budgeting developments include the introduction of program and performance budgeting. Program budgets are usually based upon an allocation of available resources to a particular program and performance is usually based upon what a policy maker hopes to achieve. Cost as a rule is not fully taken into account in such calculations. Usually no work is undertaken to identify what is the actual cost of achieving a specified level of performance and therefore the budget allocation also does not reflect actual cost. As a result program and performance budgeting becomes an aspiration rather than a practical tool to help decision makers allocate resources in the most efficient and effective manner.

During the budget process there is usually no time available to make such calculations and therefore such calculations should be made outside the normal budget timetable. One of the objectives of this course was to show how such calculations can be made and that in turn should lead to better quality allocation decisions and more realistic relationships between expected performance and the available resources.

The aim of the workshop was to discuss dilemmas and challenges related to the introduction of costing systems and to practice various costing techniques. It also allowed participants to distinguish between various cost concepts and methodologies of measurement. The focus was on how cost accounting adds value through understanding cost behaviors and cost drivers, thus providing management with meaningful cost measurement that they can use in the search for value for money.  

What did you learn?

Cost accounting is a very useful management tool. It does not really matter whether a country is using accrual or cash accounting, using budgeted or actual figures - cost accounting is of value in all situations. The generation of costing information helps public organizations to improve their financial management and enhance the quality of their budgeting.

This workshop examined how cost accounting can be used in government activities and how important it can be in helping to secure more rational budgetary allocation decisions. Costing can be used to determine unit costs such as the full cost of educating a child in a school for a year and can therefore generate benchmarking information to determine why costs may vary from school to school and from one public education body to another. Such information is vital in resource allocation and in assessing value for money. Another example would be to identify the costs of different regional offices delivering the same type of service so that both costs and performance on those offices can be compared. Again where new programs are proposed the costs can be clearly calculated.  Further, the workshop discussed how costs can be identified and classified as well as which concepts of costs to use.

During the workshop we discussed the following topics:

  • Introducing effective cost accounting and the importance of cost accounting
  • Absorption costing
  • Unit costing, job costing
  • Activity based costing
  • Marginal costing
  • Relevant costing technique


How did you benefit?

By attending this workshop you benefited from refreshing your knowledge about costing, methodologies, and you were able to identify opportunities for using cost accounting in your organization.  

By the end of the course participants were expected to:

  • appreciate the importance of cost accounting and its role in modern public services (including the roles of the accountant and the manager in cost accounting)
  • understand the changes that will be required to existing accounting and coding systems
  • apply the principles and methodology of absorption costing within a public sector environment
  • understand the principles of activity based costing and its application in the financial management of public bodies
  • appreciate the principles of marginal costing in managerial decision making
  • understand the role that relevant costing can play in a public sector context

Who attended?

This workshop was designed for accountants, financial officers and managers who are involved in applying cost accounting principles in their job. The workshop was highly participatory. Participants were encouraged to be active in discussions and exercises throughout the three day event, and to share country experiences and challenges.


Noel Hepworth

Noel Hepworth was Chief Executive of CIPFA from 1980-1996. He was Chairman of the Féderation des Experts Comptables Européens Public Sector Committee from its establishment in 1985 to 2003.  As part of this he was responsible for providing a European perspective on the IFAC public sector standards proposals. He was also a technical adviser to the IFAC public sector committee for a period of years.

From 1996 he was also Chairman of the Institute of Public Finance (a wholly owned subsidiary of CIPFA). In this capacity he was responsible for the development and management of the Institute’s international strategy with particular regard to the establishment of certified training programmes in public sector accounting and internal and external audit, in developing and transition economy countries, including Slovenia, Croatia, Albania, Macedonia and Kosovo.

More recently, he has worked extensively with OECD/SIGMA and completed peer reviews and annual assessments of public financial management in many Balkans and Eastern European countries. He is also the external adviser to the Palestine Ministry of Finance Audit Committee.

Noel Hepworth is a qualified accountant and has been a member of the Chartered Institute of Public Finance and Accountancy (CIPFA) since 1958.  He holds a post graduate diploma in public administration from the University of London. He has been awarded honorary doctorates by the University of Hull, by the University of Brighton and by London City University.  He is a member of the Royal Society of Arts and was awarded an OBE by Her Majesty the Queen in 1980.

Gary Gilbert

Gary Gilbert has over 40 years' experience of working in the field of public financial management. He is an experienced professional chartered public finance accountant and an expert trainer who has spent 14 years as leader of a professional training college. He has worked in a number of different UK public sector organisations (local government and higher education).

He worked in various positions for CIPFA, the leading accountancy body in the world in the field of public financial management. In 1986 Gary was invited to be part of the team that established the CIPFA Education & Training Centre (CETC). He led CETC from 1996 until his retirement in 2010 and over that period was responsible for ensuring that CETC became the global market leader of CIPFA professional training. During this period he worked with senior staff from the University of Hull to design, develop and deliver an MBA programme in Strategic Financial Management in Hong Kong.

Furthermore, Gary played a prominent role in ensuring that CIPFA and CETC had a leading role to play in developing, designing and delivering qualifications to improve the quality of public financial management in the world, in particular the CIPFA International Certificate and Diploma in Public Financial Management – ICDPFM. This was achieved through developments which came from two significant initiatives working with the Center of Excellence in Finance (CEF) based in Ljubljana, namely Capacity Building in Public Accountancy (CBIPA) and Training Internal Auditors in the Public Sector (TIAPS). Both of these initiatives had a reach beyond Slovenia into Croatia, Albania, Macedonia, Kosovo, Moldova, Montenegro and Slovakia, and further afield into Zambia, Bhutan, Kiribati, Lesotho, Nigeria and Bangladesh. Most recently this programme is now delivered in many countries across the world to finance personnel working in the United Nations Organisation.

In addition, Gary also led the development of bespoke programmes delivered by CETC to enhance accountancy and auditing within the European Commission and the European Court of Auditors. He further ensured that CETC had a leading role in designing and delivering training courses on the Public Expenditure and Financial Accountability (PEFA) framework.

“In my experience I know that the implementation of PFM reforms across the world is dependent upon the quality of staff employed in the finance function. Staff expertise is achieved through sustained capacity building programmes based on high quality relevant education and training in public finance.”

Arthur van Vliet

Arthur van Vliet has over 35 years experience in the Netherlands Armed Forces and is currently director within the Principal Directorate of Finance and Control of the Ministry of Defence. Amongst others he is responsible for the implementation of elements of cost accounting in the MoD and the armed forces. He holds a masters degree in Economics from the University of Tilburg.


This learning initiative was supported by:

Slovenia's Development Cooperation International Monetary Fund