Cost Management and Control in Government

Part I

Stage I Cost Use

Making Cost Informed Decisions

Introduction

Anybody who has written a check mistakenly thinks they understand cost. Perhaps this is a good example of the saying “a little knowledge is a dangerous thing,” because cost measurement can be a rich and complex endeavor. Accounting systems are good at recording transactions, and compulsory financial statements usually represent a standardized aggregation. Cost analysis, however, must isolate the relevant cost elements appropriate to a defined point of view, scope, and frequency.¹ This is generally not a standardized process but one that must be done with skill, understanding, and sound judgment.

Cost benefit analysis is arguably the most simplistic value-adding product of managerial ...