Is Activity-Based Costing Up to the Challenge When it Comes to Privatization of Local Government Services?

22 Pages Posted: 7 Jan 2004

See all articles by Daniel R. Mullins

Daniel R. Mullins

American University - School of Public and Environmental Affairs

C. Kurt Zorn

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Abstract

After its initial success in the private sector, activity-based costing (ABC) has been embraced by the public sector as an analytical tool that can be used to improve the efficiency of government operations, especially in the area of the privatization of operations. Despite claims that ABC can greatly enhance the evaluation of how to most efficiently deliver services, there are significant obstacles that must be overcome before ABC can be effectively implemented. In order to underscore the challenges facing successful ABC execution in the public sector, the use of activity-based cost accounting by the City of Indianapolis for its privatization initiatives is discussed. Generally ABC is not up to challenge of providing local governments with tool necessary to comprehensively evaluate direct services and determine which are candidates for contracting out or privatization.

Suggested Citation

Mullins, Daniel and Zorn, Charles Kurt, Is Activity-Based Costing Up to the Challenge When it Comes to Privatization of Local Government Services?. Available at SSRN: https://ssrn.com/abstract=468270

Daniel Mullins (Contact Author)

American University - School of Public and Environmental Affairs ( email )

Ward 344
4400 Massachusetts Avenue
Washington, DC 20016
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202-885-6117 (Phone)

Charles Kurt Zorn

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States
(812) 855-0563 (Phone)

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