Basic Report

  
  
    
   The purpose of this study is to build a costing system in order to estimate the costs of objects such as government activities and programs (services). It is very important that costs of programs (services) are linked to their output in terms of financial performance management.
   In fact, the current budgetary accounting of local governments is not designed to pursue appropriate cost information on providing public services (programs). In other words the current budgeting and accounting system lacks the framework of a cost system with regard to public activities, so government programs and services are not linked to the costs consumed.
   In order to meet this purpose, the study covers the general and broad perspectives of the costing system in the public sector, mainly focusing on estimating the total resource costs used to providing public services (programs).
   In the process, the study reviews the theoretical background of costing systems: definition of program, cost objects, cost center, direct and indirect cost assignment and so forth. Also the reality and the problems of the current local budgeting and accounting systems with regard to costing of public services are examined.
   Then, based on the analytical results of the current budgeting and accounting system, a practical alternative for costing public activities is studied after reviewing a case study on traffic programs.
   The costing system process in the public sector generally consists of the following five steps:
   (1) Step 1: Investigation of basic materials
   The first step focuses on collecting and examining basic materials like the structure of the department, budgeting and settlement documents, activities by public officials, etc.
  
   (2) Step 2: Choice of cost objects
   Choose cost objects based on the materiality and degree of separation of the department's activities
  
   (3) Step 3: Identification of direct and indirect cost
   Identify costs associated with the primary activities and distinguish between direct and indirect costs based on the relationship of the cost and the cost object. For example, direct costs have a directly traceable relationship with the cost object, including payroll costs, materials, etc. Indirect costs include indirect labor, supplies, depreciation of fixed assets, etc.
  
   (4) Step 4: Collection and assignment of indirect costs
   Assign indirect costs to activities (programs) according to a selected cost driver such as the number of working hours, and the workload of activities.
  
   (5) Step 5: Estimation of total costs by cost object
   Estimate individual project (activity) costs by adding direct costs to indirect costs, and then estimate the total cost of the government program by summing up the cost of all projects (activities).