Costing key for Scots best value

Activity-based costing could become the cornerstone of the government’s best value regime north of the border, according to Scottish finance directors.

This costing method has been used successfully in industry, but local government has traditionally concentrated on the cost of resources rather than activities and outputs.

Last week, CIPFA Scotland’s directors of finance best value working group published draft guidance explaining the principles underlying activity-based costing. The document also set out how the technique can help local authorities to understand the cost of their activities and business processes.

Tom Cairns, the group’s chair, said: ‘If undertaken correctly, it can provide a critical insight into how services are planned and delivered.’

Activity-based costing could become an integral part of the service reviews required under best value. ‘By scrutinising areas of weakness, options for improvement can be identified and costed with increased accuracy,’ said Cairns. ‘Without a mechanism for linking resources to specific activities and business processes, it would be difficult for councils to demonstrate that they are achieving best value.’

The guide says councils will find that ABC assists best value by providing improved and detailed financial information, benchmarking to aid improvement, ensuring more informed decision-making about resources and service provision, and enhancing performance management and business-planning.

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