The contribution of cost accounting to the setting of tariffs and prices in the local administration in Portugal

Abstract

Considering the lack of resources that characterizes the management of public entities, it becomes increasingly important to adopt an appropriate control of the efficiency and effectiveness in the use of those resources. Therefore, the municipalities are facing the need to implement adequate cost accounting systems in order to determine the working costs and the costs of goods and services, to justify tariffs and prices, as well as to obtain reliable information for the manager’s decision-making. This article examines whether the Portuguese municipalities and municipal services have already implemented a cost accounting system in accordance with the rules established by the accounting plan applicable to these entities and discusses the importance of the information supplied by this accounting area for the setting of tariffs and prices. A questionnaire was sent to 93 institutions and 40 answers were received – a 43% reply rate. The article concludes that only 40% of the researched entities have a system of cost measurement, but do not comply with the established rules. The difficulties of practical implementation and the scarcity of human resources are the main reasons for that.

Key words: cost accounting, setting of tariffs and price, Portuguese local administration.