The dog kennel I made at the weekend cost about 30 bucks, a huge saving on the $210 job at the pet store … or so I smugly thought.
Most of it came from bits of packing timber lying around The Canberra Times after the installation of the new press. The nails were left over from when I built a deck a decade ago, and the insulation and ceiling liner was left over from the garage conversion half a decade ago.
The insulation was necessary because an ACT building regulation requires a four-star energy rating for all new construction. Like all good building regulations, it has nothing to do with the requirements of the occupant … a samoyed with enough hair to insulate himself. Indeed, one of Sir Douglas Mawson’s dogs was a samoyed and his dogs stayed outside kennel-less in Antarctica. This samoyed, incidentally, has been called Mawson, after the great explorer, and predictably enough, his kennel is called Mawson’s Hut.
Unlike the real hut, this is one is carpeted with off-cut given to me by a bloke at Endeavour Carpets. (I’m not usually into John Laws-style plugs, but this bloke didn’t know who I was and was being genuine generous, so deserves some credit).
The paint came at half price from stack of tins marked “”Tint Rejects” at BBC. This happens when the colour chart doesn’t meet expectations … presumably the mud green I got for the kennel was not suitable for someone’s bathroom.
The only other thing to buy was some fibre-glass corrugated sheet for the roof. Total cost by the end of the weekend … 30 bucks. That, at least, was until the true accounting nature of this construction was pointed out.
You see, in the ACT we have gone on to full accrual accounting from the beginning of this financial year. It is not good enough to just add up the actual cost a tin of paint and bit of fibro and bang out a bottom-line historic cost. Accrual accounting, beloved of the private sector and now infecting the public sector, requires the real cost to be added up. That way, no-one gets a hidden subsidy and there are no distortions in the marketplace.
The kennel is a classic example.
Take the nails, insulation and ceiling liner, for example. The historic cost from the kennel’s viewpoint is zero. They were lying about the yard doing nothing. But this is typical of historic-cost accountants of the old public-sector school. Next time some nails, insulation or ceiling liner are needed … to improve the wine cellar, for example … they will have to be paid for at full cost because they will no longer be lying around the yard. Accrual accounting requires, quite properly, for this lost future potential to be quantified … say, $25.
Wear and tear on tools have to be added. Also the kennel occupies part of what was a vegetable garden and the loss of future years’ vegetables go into the accrual accountant’s books. Say, $10 and $50.
You can see what is happening here. The accrual accountants are exposing the hidden cost shifting from the Household Sector to the Kennel Sector. Under historic-cost accounting this has been going on for far too long, much to the detriment of the Household Sector.
Then there are labour costs. The Kennel Sector should be charged six hours labour at $25 an hour, because in that time I could be freelance writing, or doing other things around the house which will now require a tradesman to do. This is called opportunity cost.
Then we have to add the cost of band-aids (it is impossible to make a kennel without shedding blood), a sweat-shirt ruined by mud-green paint (it is impossible to paint anything, ever, without destroying at least one garment), and a lost screwdriver. The screwdriver is probably under the kennel … unless I attempt to move the kennel, in which case it most certainly won’t be under the kennel, but somewhere else.
Say, $40.
So we have a net transfer from the Household Sector to the Kennel Sector of $305. If we accept the vegie patch ($50) was gone anyway, it is $255, which comes in at $45 more than the pet-shop kennel.
See where the accrual accounting is taking us? The kennel project should have been contracted out; it should have been privatised. And the Household Sector would have been better off by $45.
Indeed, if you take accrual accounting the full distance, it is obvious the whole Kennel Sector should be contacted out … feeding, walking, kennelling, the whole thing.
But, but, but . . . .
Isn’t the kennel from the pet shop and fragile chipboard thing made in China that will not last long? And what about the enjoyment and satisfaction of creating something at home? And don’t pets give people better health and longer life? Shouldn’t that be costed, too?
Possibly, but there’s nothing in the index of my copy of Accrual Accounting in the Public Sector under “”People, Well-being of”. We’ll just have to bear the historic cost of that.