Managerial Cost Accounting Practices

Authoritative bodies have promulgated laws, accounting standards, information system requirements, and related guidance to emphasize the need for cost information and cost management in the federal government. For example, the Chief Financial Officers (CFO) Act of 1990 contains several provisions related to managerial cost accounting (MCA), one of which states that an agency's CFO should develop and maintain an integrated accounting and financial management system that provides for the development and reporting of cost information. Statement of Federal Financial Accounting Standards No.4, Managerial Cost Accounting Concepts and Standards for the Federal Government, and the Joint Financial Management Improvement Program's (JFMIP) Framework for Federal Financial Management Systems established accounting standards and system requirements for MCA information at federal agencies. The Federal Financial Management Improvement Act of 1996 built on this foundation and required, among other things, CFO Act agencies to comply substantially with federal accounting standards and federal financial management systems requirements. In light of the requirements for federal agencies to prepare MCA information, Congress asked us to determine the extent to which federal agencies develop cost information and use it for managerial decision making. The objectives of our review were to determine how federal agencies generate MCA information as well as how governmental managers use cost information to support managerial decision making and provide accountability. This report summarizes information provided during our briefing to Congressional staff on September 7, 2006, concerning our review of MCA practices at the Department of Agriculture (USDA) and the Department of Housing and Urban Development (HUD). This was our fourth in a series of briefings concerning the status of MCA activities at large government agencies.

Similar to issues that surfaced in our earlier reports, we found that stronger leadership would be needed to enhance the development and use of managerial cost information at USDA and HUD. The departments generally had not developed policies on the development and use of cost information, were not promoting the benefits of identifying the cost of performance, and were not monitoring implementation in the components.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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