Ten top ACT bureaucrats met at Commonwealth Club yesterday to hear a top private-sector financial guru tell them how to get better results with public money.
The meeting came the day after the Federal Auditor-General said that the Commonwealth Government was getting worse financial advice than the average company.
Bart Vogel, from Deloitte, Touche and Tohmatsu accountants and management consultants told the ACT bureaucrats that “”salami slicing” was a silly way to control costs.
“”Salami slicing” is where a percentage cut is made across the board.
“”That way you are guaranteed to cut 2 or 5 per cent, or whatever, off your most important activities,” he said.
Traditional accounting was still necessary, but something else was needed, he said.
Traditional accounting was about financial control, not about financial decision-making. It looked at quantity and compared it with the past and looked at whether it was regular. It was based around standards, and best summed up by the question: “”Am I meeting budget?”
Activity-based costing was based on quality judgments, and best summed up by the question: “”Am I spending on the right things?”
Traditional accounting put things under line-item headings like salaries, travel expenses, stationery, fuel etc. Activity-based accounting put them under things like: advertising, training, market research, landscaping, cleaning, attending management-guru sessions etc. The bottom line was the same. But armed with activity costs it was easier for managers to put priorities on activities and cut the least important. It would also let them make better decisions about any activities that should be privatised (or “”out-sourced” to use Mr Vogel’s jargon).
It also enabled better comparisons with other departments or similar departments in other states or overseas.
Senior public servants from the Departments of Chief Minister, Treasury, Urban Services, Attorney-General’s, Housing and Community Services Bureau and the Canberra Institute of Technology attended. No-one from the Audit office was there.