The Influence of New Public Management Practices on Product Costing and Service Pricing Decisions in Dutch Municipalities

Abstract

New Public Management reforms are aimed at improving effectiveness and efficiency of performance by a great variety of different organisational, managerial and accounting reforms. In the last decade, a great number of the 572 Dutch municipalities have been implementing some NPM reforms, most notably decentralisation of responsibilities to lower organisational levels and restructuring of the budget and financial reports into a product based format. This study comprises a survey among 114 municipalities to assess the relationship between NPM reforms and municipalities’ decisions on costing and pricing of their services. As expected, decentralised municipalities monitor more strictly the degree in which costs are covered by revenues. Moreover, municipalities applying product budgeting systems use more sophisticated cost accounting methods in calculating full product costs of services. Given the fact that decentralisation may help municipalities to make operational managers more accountable for performance and that product budgeting systems enhance cost consciousness among municipal managers, we expect NPM measures to contribute to lower prices for services rendered to citizens. The results show that the two NPM measures do not have any relation with price setting for garbage collection. However, the NPM decentralisation measure is significantly related to higher prices for contracting marriages. In this paper we try to come up with some alternative explanations for these unexpected findings.

Accountability, environmental uncertainty and government performance: evidence from Dutch municipalities

“…This results from the multidimensional character of New Public Management as well as from the findings in previous research that in the Netherlands NPM reforms appear not to be implemented by municipalities as a package (e.g. Groot and Budding, 2003). Second, the choice of the departments in this study limits the extent to which the results of this study can be generalized.…”

“…These developments were stimulated by spending cuts, national legislation and the Policy and Management Instruments (PMI) project. 1 However, from previous research we know that there are great differences among the municipalities with respect to the level of implementation of these changes (Groot and Budding, 2003). Furthermore, ter Bogt and van Helden (2000) have shown that there is a wide gap between formal accounting changes and their actual application.…”

Fiscal Consolidation Across Government Levels - Part 1. How Much, What Policies?

“…Structural reforms, which raise competition between several service providers, could strengthen the case for a wider application of user charges. More generally, user charges are best applied in a framework where providers are competing with each other, where SCG budgets report service revenues and costs in a transparent way and where citizens have some control over the level and structure of charges (Groot and Budding, 2004). In the following, two policy areas are reviewed, where a wider application of user fees could help fiscal consolidation.…”

Market Mechanisms in Public Service Provision

“…For some services such as health care, where consumers are unsure about actual needs and where user fees could induce a spiral of supply-induced demand, SCG may have to set limits on the right of providers to define user fee levels. More generally, some country evidence suggests that user fees are best applied in a framework where providers are competing with each other, where SCG budgets report service revenues and costs in a transparent way and where citizens have some control over fees (Groot and Budding, 2004).…”

“…Many fiscal equalisation arrangements do not include user fees into the sub-central revenue base, so SCG have some incentives to replace taxes by fees (Groot and Budding, 2004). …”