Managerial Cost Accounting

1. Managerial Cost Accounting Presented byJohn Brewer

2. Office of the Chief Financial Officer 1 Definition Managerial Cost Accounting (MCA) involves accumulating and analyzing both financial and non-financial data to determine the costs of achieving performance goals, delivering programs, and pursuing other activities.

3. Office of the Chief Financial Officer 2 Statement of Federal Financial Accounting Standards (SFFAS) #4 SFFAS #4 “MCA Concepts…” sets five standards - Accumulate and report the costs of activities regularly for management information purposes, Establish responsibility segments, report the costs of segment outputs, and calculate the unit cost of each output, Determine and report the full costs of government goods and services, including direct and indirect costs, Recognize the costs of goods and services provided by other federal entities, Use appropriate costing methodologies to accumulate and assign costs to outputs. SFFAS 4 five standards: Accumulate and report the costs of activities regularly for management information purposes Establish responsibility segments, and measure and report the costs of segment outputs, and calculate the unit cost of each output Determine and report the full costs of government goods and services, including direct and indirect costs Recognize costs of goods and services provided by other federal entities Use costing methodologies or cost finding techniques most appropriate to the segment's operating environment to accumulate and assign costs to outputs. SFFAS 4 five standards: Accumulate and report the costs of activities regularly for management information purposes Establish responsibility segments, and measure and report the costs of segment outputs, and calculate the unit cost of each output Determine and report the full costs of government goods and services, including direct and indirect costs Recognize costs of goods and services provided by other federal entities Use costing methodologies or cost finding techniques most appropriate to the segment's operating environment to accumulate and assign costs to outputs.

4. Office of the Chief Financial Officer 3 Status at USDA GAO audit on “Managerial Cost Accounting Practices: …” cited USDA for needed improvements OIG Financial Statement Audit of 2006 found USDA non-compliant with the CFO Act of 1990 as it relates to Managerial Cost Accounting Survey conducted to determine MCA practices GAO audit GAO-06-1002R “Managerial Cost Accounting Practices: …” stated that …USDA has not shown strong leadership to promote, guide and monitor Managerial Cost Accounting (MCA) implementation”. In addition, the OIG found USDA to be non-compliant with CFO Act of 1990 as it relates to MCA in the consolidated Financial Statement Audit report for FY 2006 In 2007 OCFO commissioned this survey of all mission areas and agencies to determine the current status cost accounting efforts and of their MCA systems. Although USDA has been utilizing MCA to a great extent, the Departments needed to demonstrate how MCA is currently being used and understand what more can be done to increase and enhance its use.GAO audit GAO-06-1002R “Managerial Cost Accounting Practices: …” stated that …USDA has not shown strong leadership to promote, guide and monitor Managerial Cost Accounting (MCA) implementation”. In addition, the OIG found USDA to be non-compliant with CFO Act of 1990 as it relates to MCA in the consolidated Financial Statement Audit report for FY 2006 In 2007 OCFO commissioned this survey of all mission areas and agencies to determine the current status cost accounting efforts and of their MCA systems. Although USDA has been utilizing MCA to a great extent, the Departments needed to demonstrate how MCA is currently being used and understand what more can be done to increase and enhance its use.

5. Office of the Chief Financial Officer 4 SFFAS #30 Inter-Entity CostFull Cost Provision Effective October 1, 2008, SFFAS #30 requires full implementation of the inter-entity cost provision in the SFFAS #4. Each reporting entity’s full cost should incorporate cost of goods and services received from other entities. The entity providing the goods and services must provide the receiving entity with the full cost of such goods and services either through billing or other advice. This is the most important slide for you to take away.This is the most important slide for you to take away.

6. Office of the Chief Financial Officer 5 Recommendations Identify best practices/best practitioners Clarify and provide standard guidelines for using cost information Implement these managerial cost accounting practices into the new financial accounting system (FMMI) Identify best practices/best practitioners and share that information with members of the Department’s Managerial Cost Accounting Group. We are sharing a couple of best practices at this FMT. I will be followed by Don Stonecipher of FSA and there will be a breakout session conducted by the ITS team. I encourage you to see their cost accounting system. Clarify and provide standard guidelines for management accountability for using cost information in decision making and management performance plans related to cost accounting responsibilities With the FMMI Implementation underway, take the opportunity to improve managerial cost accounting Identify best practices/best practitioners and share that information with members of the Department’s Managerial Cost Accounting Group. We are sharing a couple of best practices at this FMT. I will be followed by Don Stonecipher of FSA and there will be a breakout session conducted by the ITS team. I encourage you to see their cost accounting system. Clarify and provide standard guidelines for management accountability for using cost information in decision making and management performance plans related to cost accounting responsibilities With the FMMI Implementation underway, take the opportunity to improve managerial cost accounting