A Proposal to Emphasize: Managerial Cost Accounting in the Department of Defense1

Managerial cost accounting is the tool business managers use to understand the costs embedded in the business processes they use. Managerial cost accounting is not being employed in any systemic way in the Defense Department, either because it's not being performed at all (the usual case in appropriated activities) or, in the activities where basic cost-accounting systems do exist (such as DoD's Working Capital Fund activities), the results aren't being regularly used at line-management levels to identify process changes or influence budget submissions. The reason that situation exists is because budgets and budget execution are what the DoD runs on, meaning that budget execution is what managers care about. Because object classes already must be specified whenever obligations are made, it would make sense to let managers expand the set of object classes defined in budgetary accounting and use those object classes as the cost objects to support managerial obligation accounting across the Department.