Cost Accounting in Brazil's Public Sector: Importance, Use, and Level of Deployment

Introduction

PSA (Public Sector Accounting) has undergone significant changes since 2000, many of which originated from the reform process of NPM (New Public Management). These changes aimed to increase the efficiency and effectiveness of the public sector, making it more transparent, its information more accessible, and optimising the use of public resources. Furthermore, the recent economic crisis in public finances has led countries to rethink the relationship between public revenue and expenditure, and to adjust their budgets according to public spending consistency relative to the collected revenue.

The reforms implemented in public sector accounting aimed to overcome the limitations of the bureaucratic model and to achieve a more efficient use of public resources (Rossi, Aversano, & Christiaens, 2014). For this reason, cost accounting gained relevance, as it can provide improvement within the management sector that lacks performance measurement systems, or has severe difficulties in this regard. As Brusca and Montesinos (2016) describe, the lack of cost accounting in many countries limits the information gathering for this purpose (performance analysis).

The reform process of public accounting was the reason for several recent research studies, such as the those carried out by Rossi, Cohen, Caperchione and Brusca (2016), Jorge, Jesus and Laureano (2016), and Legenkova (2016). The implementation of management accounting was incorporated into this set of changes, constituting one of the NPM focuses, as presented by Goddard (2005) and Van-Peursem and Eggleton (2015). Many of these studies were born out of the advantages of implementing management accounting or cost-centred information, which may serve to qualify budget allocation and financial resources, outsourcing decisions, service costing, accountability comparisons, and performance evaluations, among others (Arnaboldi & Lapsley, 2009).

The scope of research in management accounting concerning the public sector is still wide, and there is still a need for empirical studies. In fact, previous research mainly focused on the process of standards adoption, harmonisation, and application of accounting by competence. On the other hand, studies concerning cost accounting are highly connected to the application of a costing method in specific cases, as stated by Arnaboldi and Lapsley (2003) and Valderrama and Sanchez (2006).

According to Orelli, Padovani and Katsikas (2016), there are several factors responsible for the modernisation of management accounting, but additional evidence is still needed. There is a theoretical gap, similar to that stated by Tucker and Schaltegger (2016), in research that focuses on the importance and use of information, as well as inputs and outputs of cost accounting in the government sector, as pointed out by Geiger and Ittner (1996) and Gomes, Fernandes and Carvalho (2015).

In the case of Brazil, the Federal Accounting Council (FAC) published Brazilian accounting standards to be applied to the public sector—BASAPS, including the standard 16.11, which established and made it mandatory to implement cost accounting into the Brazilian public sector It happens that the process of implementing cost accounting in Brazil has few empirical studies. Studies like those conducted by Rosa, Silva and Soares (2015), Lovato, Oliveira, Andruski, and Catapan (2016), and Padrones, Santos, and Colares (2017), concluded a short adoption of cost accounting into the public sector - CAPS.