Application of activity based-costing in selected public service delivery organizations in Tanzania

This study aimed to explore the challenges of applying activity based costing for strategic decision making in government public organizations despite its usefulness in resource allocation. This was a descriptive cross sectional study in which both qualitative and quantitative research approach was employed. A total of 92 respondents from operational departments in Ministry of Land, Housing and Human settlements, Kinondoni, Temeke and Ilala municipal councils were randomly selected to participate into the study. Both primary and secondary data was collected, analyzed and presented into frequencies, percents, mean and standard deviations and multiple linear regressions was used to test hypotheses. Findings of the study have revealed that some of the government operational departments rely on traditional accounting systems except for few departments which use activity based costing models during budgeting of the government expenditure. However, the results findings have found ineffective application of costing models on resource allocation, utilization and service delivery due to poor utilization of technical, human and organizational factors. Furthermore, it was found that lack of technology, lack of central government support, presence of bureaucracy in decision making, lack of prioritization of ABC model as on of the financial control tool, failure in determination of the true cost of the service and the process for service provision were identified to be major challenges for application of ABC in government organizations. Based on the presented findings it can be concluded that government organizations have adopted activity based costing models only on budget division integrated into MTEF strategies which is used in public resource allocation and prioritization of the public expenditure but this is very weak as the revenue collections still rely on traditional costing models which do not offer sufficient and reliable information on financial basis and hence hinder proper decision making among leaders. Also political leaders have not considered activity based costing models as part of their technical tool for making financial decisions. Hence it was recommended that central government political leaders should support implementation of the activity based costing models to all operational departments of the government organizations based on the existing resources in terms of technology and capacity.