Management Accounting in Public Service Decision Making

283 Pages·2021·3.762 MB·English

by  Malcolm J. Prowle

Management Accounting
in Public Service
Decision Making
Radical changes to public service delivery have swept across many regions of the
world. Management accounting methods are vital to support operational and
strategic decision making in public services internationally. This book provides
a comprehensive and “leading-edge” guide to the topic.
Written by an expert scholar with practical experience of public service de-
livery, this book takes account of key trends such as increased demand for public
services, financial austerity, technological change and enhanced performance
management.
A globally relevant book, informed by cutting edge academic research and
benefitting from integrated case studies, this is essential reading for both stu-
dents and practitioners involved with the financial aspects of public services
management.
Malcolm J. Prowle is currently a professor at the Gloucestershire Business School
who has extensive experience of public services finance, in the UK and overseas.
What the experts say
“This book comes when public services face three major challenges: the austerity leg-
acy, the pandemic and climate change. These require new strategic thinking and make
unprecedented demands on decision makers. Without sound information, through
good management accounting, decisions are made in ignorance. With its emphasis
on strategic issues, it should be essential reading for public sector managers and ac-
countants alike.”
—Roger Latham, CPFA, Former Chief Executive and County
Treasurer, Nottinghamshire County Council, Past President
of CIPFA, UK
“This book offers an interesting and complete analysis of the crucial role Manage-
ment Accounting should play in public services. It is written in a format for inter-
national relevance, both for students and public managers. Its contribution is very
necessary in the current economic context of countries like Spain that are facing the
challenge of optimizing their public spending.”
—Dr Carolina Pontones Rosa, Associate Professor, Public
Sector Accounting, University of Castilla-La Mancha, Spain
“Professor Prowle utilises his wealth of practitioner and scholarly experience, ad-
vanced methods and applied case studies to explore and bring alive the impact of
high quality management accounting on decision-making across the public sector.
Traditionalist to contemporary, operations to strategic, performance to risk; this
book compares and contrasts through expert-informed, well-researched and lived
insight.”
—Dr Peter Cross, CPFA, Chief Financial Officer, De  Montfort
University, Leicester, Former NHS Finance Director, UK
“An excellent book that covers wide areas of management accounting in public sector
organisations. It is one of a few books that address the context of the public sector in
which management accounting operates at the international level. With its practical
applications, the book will be useful for both managers and students in my country.”
—Dr Ali Alyamoor, Senior Lecturer in Management
Accounting, University of Mosul, Iraq
“Malcolm Prowle puts management accounting into the context of public services,
and from there goes on to elucidate how best to apply state-of-the-art approaches at
a practical level. This involves considering the various strategic and operational deci-
sions that face public services and examining the potential relevance and applicability
of management accounting methods in each case.”
—Rob Whiteman, CPFA, Chief Executive, CIPFA, UK
“An easily accessible and informative book for anyone keen to develop knowledge and
understanding of the role of management accounting in public sector decision mak-
ing. A vitally useful source for all public service managers grappling with a plethora of
financial and practical challenges, resulting from increased demand and supply-chain
pressures, made more complex in our post-Covid 19 world.”
—Lynne Barrow, CPFA, Assistant Dean (International),
Hull University Business School, UK
“The title of Professor Prowle’s book does scant justice to its relevance. Consistent
with the premise that management accounting is a vital tool for decision making
across a broad range of public sector organisations and functions, the text itself is
much more than an arid accounting textbook. Using straightforward language, and
drawing on numerous examples from the author’s extensive practical experience, it
is as much about management as it is about accounting. While undoubtedly an inval-
uable resource for members of the management accounting profession, this book is
also essential reading for anyone who is, or aspires to become, a financially literate
public sector manager.
Professor Prowle’s book is also highly relevant for those who are tasked with
leading public services in the developing world. Without undue reliance on specialist
language, it provides a clear explanation of key concepts in public sector manage-
ment, describes the vital role that information can play in guiding both operational
and strategic decision making, and explores the contributions that management
accounting can make in support of efforts to improve or reform public services. As
such, the book occupies an important ‘sweet spot’ between generic management
textbooks and more technical material.”
—Philip Davies, Former Permanent Secretary, Fiji Government
Ministry of Health & Medical Services, Former Deputy
Secretary, Australian Government Department of Health &
Ageing, Former Vice-Chair, WHO Executive Board

Management Accounting
in Public Service
Decision Making
MALCOLM J. PROWLE
First published 2021
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
52 Vanderbilt Avenue, New York, NY 10017
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2021 Malcolm J. Prowle
The right of Malcolm J. Prowle to be identified as author of this work has been
asserted by him in accordance with sections 77 and 78 of the Copyright, Designs
and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or utilised
in any form or by any electronic, mechanical, or other means, now known or
hereafter invented, including photocopying and recording, or in any information
storage or retrieval system, without permission in writing from the publishers.
Trademark notice: Product or corporate names may be trademarks or registered
trademarks, and are used only for identification and explanation without intent to
infringe.
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Names: Prowle, Malcolm J., author.
Title: Management accounting in public service decision
making / Malcolm J. Prowle.
Description: 1 Edition. | New York: Routledge, 2020. |
Series: Mastering public finance and accountancy |
Includes bibliographical references and index.
Identifiers: LCCN 2020035962 (print) | LCCN 2020035963 (ebook)
Subjects: LCSH: Managerial accounting. | Public administration. |
Decision making.
Classification: LCC HF5657.4 .P768 2020 (print) |
LCC HF5657.4 (ebook) | DDC 352.3/3—dc23
LC record available at https://lccn.loc.gov/2020035962
LC ebook record available at https://lccn.loc.gov/2020035963
ISBN: 978-1-138-36616-9 (hbk)
ISBN: 978-1-138-36617-6 (pbk)
ISBN: 978-0-429-43046-6 (ebk)
Typeset in Sabon
by codeMantra
CONTENTS
List of figures xi
List of tables xii
List of case studies xiii
Foreword xiv
Preface xvi
About the author xviii
List of abbreviations xix
PART A C ontext of management accounting in
public services
CHAPTER 1 Public service organisations and the public sector 3
Introduction 3
What are public services? 4
What are the distinctive features of public services? 12
Challenges facing public services 14
Aims and structure of this book 17
CHAPTER 2 Operations management of public services 19
Introduction 19
Aspects of public service operations 20
Operations management activities in public services 21
Relevance of management accounting 27
CHAPTER 3 The importance of strategy in public services 29
Introduction 29
The nature of strategic management 29
Strategic change in public services 31
The strategic management process in public services 34
Management accounting and strategic decision making 47
CHAPTER 4 Public service reforms 49
Introduction 49
Why does public service reform take place? 49
What are the objectives of public service reform? 50
What constitutes public service reform? 52
vii
viii Contents
Success and failure in public service reform 56
Lessons and causes of past reforms 59
The role of management accounting in public service reform 60
CHAPTER 5 Leadership, management and decision making in
public services 61
Introduction 61
Leadership and management in public services: distinctive features 61
Decision making in public services 65
Management accounting and decision making in public services 74
CHAPTER 6 The relevance of management accounting in
public services 77
Introduction 77
The nature and purpose of management accounting 77
The modern roles of management accounting in relation to public services 81
Behavioural aspects of management accounting 83
Financial analysis and economic analysis in public services: the distinction 85
The management accountant in public services 85
Factors that drive the configuration of management accounting in public
service organisations 88
PART B Management accounting practice in
public services
CHAPTER 7 Costing and cost information for decision making
in public services 93
Introduction 93
How cost information can be used to manage public services 94
Approaches to the classification of costs 96
Costing systems and cost models in public services 106
Traditional overhead costing and Activity Based Costing (ABC) 111
Identifying and estimating costs in public services 118
Difficulties and complexities of costing in modern public services 123
Developing costing systems in public services 125
CHAPTER 8 Management accounting and operational/tactical
decision making in public services 129
Introduction 129
Operational/tactical and strategic decision making: the distinction 129
Operational/tactical decision making in public services 130
Management accounting methods 134
Contents ix
CHAPTER 9 Management accounting and public service
strategy 145
Introduction 145
Cost and income benchmarking 146
Strategic capital investment appraisal 148
Strategic cost improvement 155
Programme/client group analysis and budgeting 158
Strategic options evaluation 161
Strategic financial forecasting 162
Decision support models and strategic financial forecasting 167
Pricing strategies in public services 169
Strategic financial leadership 173
CHAPTER 10 Management accounting and management control
in public services 175
Introduction 175
Key management tasks 175
Nature and purpose of management control 176
Operational/tactical management control 178
Cash and working capital control and management 178
Budgeting systems and budgetary control in public service management 180
Strategic management control 193
CHAPTER 11 Management accounting and performance
management/improvement in public
services 195
Introduction 195
Nature of performance in public services 196
Dimensions of performance 196
Systems of performance management 203
Performance information 204
Improving performance in public services 205
Management accounting contribution 209
CHAPTER 12 Management accounting and risk management in
public services 213
Introduction 213
Distinction between risk and uncertainty 214
Risk and risk management in public service organisations 215
Risk management features in public services 218
Importance of organisational resilience 221
Management accounting in an environment of risk and uncertainty 223