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The Influence of New Public Management Practices on Product Costing and Service Pricing Decisions in Dutch Municipalities
Author(s) -
Groot Tom,
Budding Tjerk
Publication year - 2004
Publication title -
financial accountability and management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.661
H-Index - 44
eISSN - 1468-0408
pISSN - 0267-4424
DOI - 10.1111/j.1468-0408.2004.00202.x
Subject(s) - decentralization , restructuring , revenue , business , product (mathematics) , activity based costing , management accounting , service (business) , accounting , public sector , cost accounting , accountability , economics , public economics , finance , marketing , geometry , mathematics , economy , political science , law , market economy
New Public Management reforms are aimed at improving effectiveness and efficiency of performance by a great variety of different organisational, managerial and accounting reforms. In the last decade, a great number of the 572 Dutch municipalities have been implementing some NPM reforms, most notably decentralisation of responsibilities to lower organisational levels and restructuring of the budget and financial reports into a product based format. This study comprises a survey among 114 municipalities to assess the relationship between NPM reforms and municipalities’ decisions on costing and pricing of their services. As expected, decentralised municipalities monitor more strictly the degree in which costs are covered by revenues. Moreover, municipalities applying product budgeting systems use more sophisticated cost accounting methods in calculating full product costs of services. Given the fact that decentralisation may help municipalities to make operational managers more accountable for performance and that product budgeting systems enhance cost consciousness among municipal managers, we expect NPM measures to contribute to lower prices for services rendered to citizens. The results show that the two NPM measures do not have any relation with price setting for garbage collection. However, the NPM decentralisation measure is significantly related to higher prices for contracting marriages. In this paper we try to come up with some alternative explanations for these unexpected findings.