Making Cost Data Work for Public Financial Management

IMF Working Papers, August 8, 2025

Source details

This paper examines the role of cost accounting in public financial management, focusing on budget credibility, performance-based budgeting, public procurement, and corruption detection.
Despite demonstrated benefits, cost accounting remains underutilized in the public sector due to implementation constraints.
The working paper proposes the adoption of automated cost accounting systems to streamline processes, reduce operational costs, and support complex data analyses.
It further emphasizes the need for interoperability between government financial systems and administrative records to enhance the granularity of costing indicators.
The paper also explores machine learning as a method to support budgetary decision-making with cost accounting data.
ByLorena Rivero del Paso, Chloe Cho, Ramon Narvaez Terron
August 8, 2025

Cost accounting can strengthen:
- Budget credibility
- Performance-based budgeting
- Public procurement processes
- Corruption detection
Implementation constraints are a primary barrier to wider use of cost accounting in the public sector.
Automated cost accounting offers potential to:
- Streamline processes
- Reduce operational costs
- Support complex data analyses
Interoperability between government financial systems and administrative records is essential to enhance the granularity of costing indicators.
Machine learning can be used to support budgetary decision-making using cost accounting data.

Adopt automated cost accounting systems to:
- Streamline financial management processes
- Reduce operational costs
- Enable complex data analyses needed for PFM improvements
Prioritize interoperability between government financial systems and administrative records to:
- Enhance the granularity of costing indicators
- Improve linkage between expenditures and administrative outcomes
Explore and pilot machine learning applications to:
- Support budgetary decision-making
- Enable anomaly detection and other analytical uses of cost accounting data

Subject: Budget planning and preparation, Expenditure, Fiscal accounting and reporting, Performance-based budgeting, Public financial management (PFM)
Keywords: Anomaly detection, Automation, Budget credibility, Budget planning and preparation, Cost accounting, cost accounting data, cost data, Digital transformation, Digitalization, Financial Management Information Systems, Fiscal accounting and reporting, Global, GovTech, Interoperability, Machine learning, machine learning algorithm, Performance budgeting, Performance-based budgeting, Procurement

Working Paper No. 2025/159