IMA Study Proposes Changes in Federal Costing to Improve Government Decisions

Marc Gerrone
(201) 474-1502

Taylor Fenske
Stern Strategy Group
(908) 325-3866

Montvale, N.J., March 26, 2018 – Costing for internal management decision-making by the federal government could be improved with a new approach to understanding resources, processes and, ultimately, costs, according to a new report by IMA® (Institute of Management Accountants).

Developed with input from IMA’s Strategic Cost Management Task Force, the report outlines how and why federal executives and managers should use IMA’s Conceptual Framework for Managerial Costing (CFMC), the first comprehensive accounting framework focused purely on creating cost information for decision support and optimization.

“There is a significant opportunity for the federal government to better their use of cost information to make better management decisions,” said Larry R. White, CMA, CFM, CPA, CGFM, and co-author of the report. “This paper delves into the shortcomings of the current federal approach and how the CFMC can be applied to more effectively serve taxpayers.”

For several decades, advances in financial accounting, reporting, and audit have not yielded improvements in the federal government’s ability to optimize their resources, the report finds. A primary weakness in the current federal approach is that the official audited report of cost data is not used for decision-making or planning. Furthermore, federal systems are focused on reporting compliance rather than decision optimization.

Key recommendations
The report defines the principles, concepts and constraints associated with creating cost information for internal decision support. It makes the case for applying the IMA CFMC to the internal decision-making of managers in government operations with the following recommendations:

  • The federal government should go beyond the standards in Statement of Federal Financial Accounting Standards Four and require causal modeling to ensure that agencies use correct information for decision-making.
  • The federal government should prescribe an analytical doctrine for decision-making information that departs from financial reporting and compliance regulations and places dominance on causality.
  • Federal financial and resource management doctrine needs to emphasize capacity management and optimization rather than expenditure control.
  • Budget protocols should be reoriented to causal cost, resource, and operational information.

To read the full report, visit here.

About IMA® (Institute of Management Accountants)
IMA®, named 2017 Professional Body of the Year by The Accountant/International Accounting Bulletin, is one of the largest and most respected associations focused exclusively on advancing the management accounting profession. Globally, IMA supports the profession through research, the CMA® (Certified Management Accountant) program, continuing education, networking, and advocacy of the highest ethical business practices. IMA has a global network of more than 100,000 members in 140 countries and 300 professional and student chapters Headquartered in Montvale, N.J., USA, IMA provides localized services through its four global regions: The Americas, Asia/Pacific, Europe, and Middle East/India. For more information about IMA, please visit

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