The implementation of activity-based costing in the Accountant General`s Department in Malaysia

Abstract

The idea of public sector reforms is rooted in the concept of new public management (NPM). In this concept, the adoption of private sector management techniques in the public sector context is among the important mechanisms to increase the efficiency of the organization. Hence, this research aims to provide a useful insight into the process of implementing on of these private sector management techniques, namely the activity-based costing (ABC) system, in a public sector organization setting. In addition, this study attempts to provide insights on the critical factors that influence the success of the ABC implementation process. This study also examines the usefulness of the ABC system and the challenges faced in the process of implementing this system. Using a single case study approach, this research uses semi-structured interviews, documents review and a self-developed questionnaire survey to gain an understanding of the ABC implementation process and issues pertaining to its implementation in a single public sector organization in Malaysia, namely the Accountant General’s Department of Malaysia (AGD). The findings reveal that the ABC information derived from the ABC system has limited use. Besides, the process of implementing the ABC system in the AGD faces several challenges and difficulties in respect to the technical and behavioural issues. This study makes a contribution to the empirical literature on the application of the NPM mechanism, particularly the adoption of a private sector management technique in the context of a public sector organization in a developing country. Apart from its contribution to the literature in this area, this study provides valuable insights for government agencies that will enable them to gain an understanding about the ABC implementation in the context of public sector organizations.