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Tax software programs allow individuals and business owners with little to no tax knowledge to accurately file their tax returns, get their maximum owed refund, and avoid IRS audits.“Online tax software is great for people who don’t have overly complex taxes to file,” says Jacob Dayan, Esq., CEO and Co-Founder of Community Tax. “These services will perform just as well if you were to go in to personally file your taxes with a tax professional most of the time.”The Best Tax Software Programs of 2021:TurboTax: Best OverallH&R Block: Runner-Up, Best OverallTaxSlayer: Best ValueCredit Karma: Best Free Tax SoftwareJackson Hewitt: Best SupportTaxAct: Best Accuracy GuaranteeTurboTax: Best Overall:TurboTax was developed in 1984 by Intuit, the company behind the popular suite of Quicken accounting software. Today it is the most widely used tax software available. We chose it as the best overall due to its ease of use, live support options, and purpose-based pricing.TurboTax makes it easy for first-time or inexperienced tax filers to get started. Users are first asked to choose their situation, like “I want to maximize deductions and credits,” “I have a job and received a W-2,” etc. This helps TurboTax determine which pricing plan is right for the user. The software then uses plain-language questions to walk users through every part of the tax filing process and includes quick explanations of confusing terms or processes.H&R Block: Runner-Up, Best Overall:Founded in 1955, H&R Block has grown to become the most recognized tax preparation firm for small businesses. The company operates over 12,000 offices worldwide as well as online tax preparation, payroll, and business consulting services. We chose it as our runner-up because it offers most of the same online services as TurboTax with a slightly less intuitive interface but at a lower cost.H&R Block offers practically everything that TurboTax does for a little less. Users get a similar interface that walks them through the tax preparation process, pop-up explanations, and the ability to have a return reviewed by an accountant for an extra fee. Unlike TurboTax, however, users can also go to a brick-and-mortar H&R Block office to talk to an expert in person.TaxSlayer: Best ValueFounded in the 1960s, Georgia-based tax preparation company, Rhodes-Murphy & Co., launched an online tax preparation service for tax preparers and accountants called TaxSlayer in the early 1990s. Today, the company employs around 200 individuals and files over 10 million tax returns each year. We chose it as the best value because it offers the lowest, comprehensive, DIY tax filing plans of any of the companies we reviewed.TaxSlayer offers a simple interface like most of the providers we reviewed. Users just start by entering their tax situation (or importing last year’s tax return), entering their income, or importing a W-2, and the software gets to work finding the best deductions. On-screen explanations aren’t as comprehensive as those of TaxSlayer’s competitors, but users can access phone and email tech support.Credit Karma: Best Free Tax SoftwareCreated in 2007 to provide consumers with free credit scores and reports, Credit Karma began offering free online tax filing in 2016. We chose it as the best free tax software because it offers truly free tax filing services for both simple and complex returns.Like its competitors, Credit Karma lets users import a previous return from other software and a photo of a W-2 and then walks them through the rest of the process using a series of questions and prompts.Credit Karma claims to offer more filing options than its competitors’ free versions, including filing for mortgage interest, property tax, and student loan interest deductions. The software doesn’t support every type of form, however. Individuals filing in multiple states or who receive funds from a trust or estate need to look elsewhere.Jackson Hewitt: Best SupportAnother offering of American entrepreneur John Hewitt, Jackson Hewitt was founded in 1982 and has become the second-largest tax preparation service in the United States. In 2014, it began offering online tax preparation and filing services. We chose it for the best support because it offers extensive online help and a variety of professional assistance options.On the surface, Jackson Hewitt doesn’t appear to offer anything different than any of the other software we reviewed. It lets users import a W-2 and tax returns filed with Jackson Hewitt (but not its competitors) and then walks them through the filing process through a series of questions with explanatory popups.TaxAct: Best Accuracy GuaranteeTaxAct was created in 1998 to offer affordable digital and download tax preparation services to individuals and small businesses. Since 2000, the company has helped electronically file over 65 million federal returns. We chose it as the best accuracy guarantee because it offers the most reimbursement for any difference in liability or refund of any provider we reviewed.TaxAct offers nothing new feature-wise than most other tax software programs. Users can import W-2 forms as well as previous returns from other software and then use an online help wizard to answer questions and file their return. TaxAct also offers a downloadable version of its software for Mac and PC computers for those who don’t want to prepare their taxes online.Finally, it was important for us to find software that offered generous accuracy and maximum benefit guarantees. While nothing can replace the personal expertise of an experienced accountant or tax professional, tax software companies willing to back up their products with real dollars is the next best thing.

This is explained, in detail, within an entire chapter of my 900 page book, “Municipal Accounting for Developing Countries” downloadable, free of charge, from the World Bank Website at:http://documents.worldbank.org/curated/en/515141468186878405/pdf/9975.pdfHere is that explanation:COSTING AND BUDGETARY CONTROLDuring the previous four chapters, we studied the procedures used by an authority in drawing up its budget, collecting budgeted income, incurring budgeted expenditure and accounting for its activities. We have seen how an authority may compare its actual income and expenditure against budgeted figures through a proper system of analysis.Not unnaturally, we have concentrated upon the financial aspects of budgeting and accounting. We have regarded the budget as divided into various “appropriations” or “allocations” of money to be spent on various approved services. The Chief Financial Officer, working in close co-operation with other departmental heads, must account for these sums to the authority and ensure that the various items in the budget are not exceeded. This accountability of officials for public funds administered by them is fundamental to almost every type of public activity, whether administered by central government, regional and local authorities or public boards.However, this is only a part of the full story. Accountability is not the same as efficiency. Appropriation (vote) control, preventing the overspending of budgeted funds, falls considerably short of budgetary control, which is designed to promote the most efficient use of limited public funds. An item in a budget for (say) “repairs and maintenance of buildings” may total €1,000. If the actual amount spent during the period is €950, there has been proper accountability or vote control. But if only one third of the intended work, covered by the €1,000 estimate, has been carried out, it indicates a lack of efficiency in spending the €950. There will have been sound accountability for stewardship but less efficient accountability for performance.If a businessman is less efficient than his competitors he may well be driven out of business. Their costs of production are lower than his and they can afford to sell at a lower price. A commercial organization must therefore keep a detailed watch upon its costs through some system of costing, however rudimentary.A public authority is different from a commercial undertaking in two major respects:(a) it normally has a monopoly of the services it provides; and(b) it normally has power to raise funds from taxation.Thus, the incentives to efficiency through competition and profit-making do not exist. It is an unfortunate fact that inefficiency can so easily be passed on to the public in the form of higher charges, increased taxes and poorer services. It is therefore most important for a public authority to attempt to set high standards of efficiency and to see that they are maintained, by keeping a watch over the detailed costs of carrying out its services.A budget can be defined as: “The financial interpretation of a plan to give effect to the policies of management”. A budget is a plan of work, rather than a plan for spending money. The authority will lay down its policies, the officers will prepare plans to put them into operation and the Chief Financial officer will produce a budget expressing these plans in terms of money - the common measure of value.Budgetary control can be defined as: “The establishment of a budget to relate the responsibilities of officials to the requirements of a policy. The continuous comparison of actual results with estimated results will ensure proper execution of policy decisions or provide a basis for their revision”.The budget expresses (in financial terms) what the authority requires to be done during a period of time. Budgetary control is necessary to make sure that as far as possible the instructions of policy-makers are carried out by the officials. Where it is not possible to adhere to budgeted plans the policy-makers must be informed and asked for revised instructions.A good system of budgetary control should be effective as it would:(a) define the objectives of the authority as a whole concerning services, charges and taxation;(b) define the objectives to be achieved by various departments and services;(c) show the extent to which actual results have exceeded or failed to reach the defined objectives;(d) show the size of and the reasons for the variations from the budget to enable remedial action to be taken;(e) assist in securing the most efficient use of the factors of production (labor, materials and equipment);(f) assist in providing common standards of efficiency among the various activities of the authority;(g) provide a basis for future policy and, if necessary, revision of current policy;(h) facilitate centralised control over decentralised activities; and(i) facilitate adjustment of the authority’s activities as a result of changes in economic conditions. These may arise from seasonal or political factors or trade cycles.The close comparison of actual results with budgeted results will require a detailed analysis and explanation of the financial accounts - in other words a costing system.Comparison of actual costs with estimated costs will permit:(a) corrective action affecting expenditure and income where the budget standard has not been achieved;(b) investigation of cases where the budget has been exceeded by an appreciable margin; and(c) adjustment of the budget to correct errors in its compilation and to allow for changing circumstances.These requirements necessitate costs being kept with a high degree of detail.ELEMENTS OF COSTThe study of economics shows us that production is made up of three “factors of production” – labor, land (including raw materials) and capital. The economist defines the factors as they affect the community in general.The accountant follows a somewhat similar pattern but defines his elements of cost as they relate to a particular activity. He includes within his definition of “materials” any manufactured goods purchased from another supplier. Even though they may be the product of earlier labor, capital and raw materials, they are (for a particular costed activity) merely materials. In the same way, for a particular activity, labor may be combined with capital and materials (e.g. driver, lorry and petrol) to perform “services”.The accountant therefore defines his elements of cost as:labor·materialsservices.These elements of cost are normally related to expenditure of money and are usually classified as follows:Direct IndirectWages WagesMaterials MaterialsExpenses ExpensesDirect costs are those which can easily be related to a particular activity. For example in a road repair job the direct costs would include the wages of the road-workers, the cost of materials such as tarmac or paving stones and the hire of transport and plant.Indirect costs are those which, though necessary, cannot be easily related to a particular activity. Continuing the example of road repairs, indirect costs would include the wages (or salaries) of the foreman, engineering staff, wages clerk, stores clerk and so on, together with stationery for timesheets, payrolls and stores ledgers and expenses of the highways depot. It is often the practice to refer to the direct expenses collectively as “prime cost” and indirect expenses as “overheads”.It is not always possible to distinguish clearly between direct and indirect costs. Indeed, the same item may be either direct or indirect depending upon the circumstances. For example the salary of the storekeeper is clearly an indirect cost of road repairs - but it is a direct cost when the costs of the stores depot are being considered. Sometimes the scale of operations will determine whether costs are direct or indirect. For example, in a small authority, the salary of a works foreman would be an indirect cost. A large authority might have a separate foreman for each gang (or each service). Thus his salary could be a direct charge to the work upon which his gang is engaged, or to the service for which he is responsible.Direct costs can normally be allocated through the expenditure analysis system to the appropriate jobs or services. Indirect costs, on the other hand, are normally charged to holding accounts to be re-allocated, (often somewhat arbitrarily) to jobs or services.Costs are incurred when the “factors of production” are used or used up – not as they are paid for. For example, if a workman is employed on a particular activity for 8 hours, costs have been incurred equal to 8 hours of his time at his gross hourly rate of pay, plus any appropriate overheads, even though he may not be paid his wages until the end of the month. Conversely materials purchased for stores do not become costs until they are issued to a job.We have already seen in the chapter on “sundry creditors” that all direct materials and expenses must be reckoned as part of costs, even though payment takes place in a subsequent accounting period.Costs can also be classified as follows:variable costssemi-variable costsfixed costs.Once again, the division is somewhat arbitrary but, in general, variable costs are those which vary directly with the volume of activity whereas fixed costs are not affected by such changes. Semi-variable costs tend to vary with the volume of activity but not in direct proportion. Direct wages and materials are variable expenses, because for example, (at maximum efficiency) twice as many men and twice as much material will be needed for twice the quantity of work. At the other end of the scale the salary of the engineer or the rent of the offices are fixed expenses because they would not vary with different levels of activity in the works department.Semi-variable expenses usually comprise a combination of fixed and variable expenses, such as in the operation of machinery, where, up to a point, excess (unused) capacity may exist. For example if workmen were laying concrete, an increase of (say) 10% in the area to be laid would tend to require a 10% increase in direct labor and materials (i.e. variable expenses). If the mechanical concrete-mixer were capable of producing more concrete it would require more petrol, but the operator’s wages and the standing charges (e.g. depreciation) would remain fixed.The operation of the mixer would therefore be a semi-variable expense. Fixed and variable expenses can only be thus classified in what economists call the “short run”, where there are limited variations in the volume of activity. In the “long run” all costs tend to be variable. For example, a doubling of output in laying concrete would probably require two mechanical mixers. Furthermore, if a local authority of a certain size required the services of a town engineer and a deputy it would not be unreasonable to expect a town of twice the size to require the services of a more highly paid town engineer and deputy together with perhaps two assistant town engineers, though there would tend to be certain “economies of scale”.The division of costs into “direct” and “indirect” components draws attention to the fact that the “prime cost” of a job or service is only a part of the full cost. Administrative and other overheads may add a considerable amount to prime cost, before the full cost is arrived at. The division into “fixed” and “variable” costs is important in marginal costing.JOB COSTINGJob costing is used where items of prime cost are traceable to specific jobs. A “job” may be regarded as a unit of work which can be clearly distinguished from another unit, whether of the same type of work or of a different type.This form of costing can often be used for such work as house building, housing repairs, road repairs and rechargeable works. For example:“Construction of a three-bedroom house on plot 55 Tanu Drive”;“Repairs to the ceiling in kitchen of No 37 Church Road”;“Reconstruction and resurfacing of Riverside Road from National Bank to the junction with Nakiwogo Lane”; and“Repair leaking water service to plot 345 High View (rechargeable to Mr. B. Juma)”These can all be described as “jobs”. The prime costs can be allocated to each job separately through the expenditure analysis system and the various overheads can also be apportioned. Although some of the costs may be apportioned on an arbitrary basis it will be possible in each case to state a definite and final cost for each job. We can say “Job A cost X currency units”.PROCESS COSTINGWhere the items of prime cost cannot be traced to specific jobs, process costing is used. This system is used where a continuous service is being performed (such as road sweeping or refuse collection) or a particular commodity is being continuously produced (such as water or electricity).Process costing has little significance unless related to periods of time and volume of output. For example, the cost of a refuse collection service or a water undertaking could be related to a week, month or financial year. The costs of the refuse collection service could be further related to the number of premises served and those of the water undertaking to the number of gallons supplied.With job costing it is possible to say, for example, that the cost of connecting No 85 Elgon Avenue to the public water supply was € 485.35. Process costing will not tell us the cost of supplying a particular 300 gallons of water to No 85 Elgon Avenue because these costs are lost in the volume of general production and distribution.Costs of providing continuous services can, however, be broken down to deal with separate processes. For example, we can distinguish the separate costs for refuse collection from those for refuse disposal or distinguish among the costs of (say) gathering and collection, storage, pumping, filtration, treatment and distribution of water.UNIT COSTINGUnit costing is an extension of the system of process costing whereby the costs of an activity are related to units of production or other appropriate units to give an average cost per unit. For example unit costs could be calculated for a refuse collection service on the basis of “cost per bin emptied” or “cost per unit of premises”. A water undertaking could be “costed” on the basis of “cost per thousand gallons pumped”.Sometimes a composite unit must be used. For example the costs of a hospital may be expressed in terms of a “patient/day”, or the cost of a transport undertaking in terms of a “passenger/mile”. The calculation of a unit cost for any service is made according to the simple formula:Total cost of process or service = Unit cost * Number of unitsUnit costs are important in fixing charges for services. It is easy to fix individual charges to consumers where the service can be job-costed (e.g. a water connection). Where the service is process-costed, the unit charge will be related to the unit cost of producing the service. The minimum unit charge to recover full costs will be equal to unit cost.The calculation of unit costs enables comparisons to be made with:(a) unit costs of budgeted performance;(b) unit costs of past performances; and(c) unit costs of similar services performed elsewhere (e.g. by another authority).Each of these comparisons can provide a means of measuring relative efficiency but care must be taken to ensure that costs and cost units are strictly comparable or that allowance has been made for known differing circumstances. In particular, comparisons with other authorities should be made with caution, as circumstances of operating a service may be vastly different from place to place.Care must be taken in selecting an appropriate unit, otherwise the value of unit costs is considerably diminished. The unit should be easily ascertainable with a high degree of accuracy, preferably from information in the authority’s own records. It should also be strictly relevant. For example it would be absurd to express expenditure on road repairs as a unit cost per vehicle using the roads or per vehicle registered. In the first case, accurate information could not easily be defined or obtained and in the second case there is little relationship between the factors. Similarly in a water undertaking, care should be exercised in making direct comparisons between unit costs of water pumped and unit price per thousand gallons supplied because this fails to allow for wastage of water between waterworks and consumer.Unit costs prepared for publication and comparison with other authorities must cover full costs including overheads, which necessitates the full allocation of central administrative charges. However, when unit costs are used for purposes of internal financial control it is often useful to compare those based on prime costs only. This will direct attention to those items of cost which can be closely controlled (i.e. variable costs), without clouding the issue by the inclusion of overheads, which are usually apportioned arbitrarily.STANDARD COSTINGAs we have already seen, budgetary control is based upon:(a) setting of standards;(b) measurement of actual performance;(c) ascertaining the amount and cause of variance; and(d) taking corrective action where necessary.In budgetary control these principles are applied to the authority as a whole or to its various departments. In standard costing they are applied to individual operations or processes. For example the budget for housing repairs may be analysed and controlled under headings of labor, materials, transport and various overheads. A system of standard costing will ensure that individual jobs (e.g. repairs to bathroom wall at 15 Church Road) and individual processes (e.g. painting a batch of houses) are controlled in detail.A complete system of standard costing can be quite complicated to operate but its basic principles are simple. Actual costs of jobs or processes are compared with standard costs which are calculated in advance. The standard costs are estimated of what a job or process should cost and are calculated by relating a specification of labor and materials to given wages rates and prices. Overheads are then added to give full standard costs. Comparisons of actual costs and standard costs should be made in a way which will reveal not only the amount of variations but also the reasons for them.Variations in material costs can arise principally through:(a) usage variances – where different quantities of materials are used than were estimated for; and(b) price variances – where prices paid for materials are different from those upon which estimates were based.Variations in direct labor costs can also arise through:(a) efficiency variances – where work is done at a different standard of efficiency than was allowed for; and(b) wage rates variances – where wage rates are different from those upon which estimates were based.Control over usage of materials and labor efficiency should be made the responsibility of foreman and supervisors, whereas variations in prices and wage rates can be regarded as being outside their control. The calculation of standards of performance must, of course, be the duty of technical officers, not accountants. Co-operation between technical and finance departments is essential for it should result in improved standards of efficiency and economy.Standard costs should be based upon realistic assessments of what is possible under normal working conditions. They should not be based on the ideal conditions of hypothetical maximum efficiency. If they were, no one would take them seriously and there would be considerable variation between standard costs and actual costs.MARGINAL COSTINGMarginal cost can be said to be the cost of adding a single unit of activity to those already being performed, or the saving in cost of subtracting a single unit of activity from those already being performed.Marginal costing is particularly concerned with the capacity of an authority to meet steadily increasing demands upon its services. Where a service is being operated below the full capacity of its capital equipment, the marginal costs of additional activity will be much lower than unit costs (i.e. average costs). Unit costs cover fixed costs and variable costs, whereas marginal costs cover increases and decreases only in variable costs. This is because a small change in activity does not affect fixed costs which have already been incurred.For example the unit costs of a refuse collection service would cover labor, operation and depreciation of vehicles and supervision. The marginal cost of emptying an additional bin along a route already covered by the vehicle would be the additional cost of labor only - the additional costs of stopping and starting the vehicle and of carrying the extra load would be negligible and the additional supervision costs would probably be nil. However, where excess capacity is gradually being absorbed by expansion of the services there is eventually a saturation point in the use of existing capital equipment. Beyond this point, the marginal cost of further expansion of the service will exceed unit cost by a considerable amount.In the above example of the refuse collection service, it will be seen that a point will eventually be reached where the vehicle can carry no more. At this point, the emptying of an additional bin will require the services of another vehicle, causing a heavy increase in fixed costs for operation and depreciation. Once the new vehicle is in operation it will require the services of a driver and a loading gang. As the service is further expanded within the new available capacity marginal costs will once more be lower than unit costs.The massive increase in fixed costs which can arise as a result of a marginal increase in activity is a problem often faced by local and public authorities, particularly in developing countries, where demand for services is rapidly expanding but supply of capital finance is severely limited. One aspect of marginal costing concerns the additional costs to the authority of making decisions based upon alternative choices.Suppose that the hourly rate for running (say) a grader belonging to the authority’s central transport and plant pool is € 27.50 whereas the charge made by an outside plant hire firm is € 25. Faced with these alternative charges against votes under his control, the highways superintendent might well be tempted to hire a grader from outside, rather than indent for one from the Council’s plant pool. This must be permitted only if the plant in the pool is being fully utilized on other work. This is because fixed expenses (e.g. depreciation, garaging, wages of drivers, license and insurance) are being incurred, whether the Council’s plant is being used or not.In deciding whether or not to hire the plant from an outside contractor the rate for council vehicles should be calculated on marginal costs (e.g. petrol, oil and general maintenance). This should then be compared with the all-inclusive rate for outside hire. Only in the unlikely event of the contractor’s overall rate being less than the marginal rate for Council vehicles would it pay to hire from outside. From a purely practical viewpoint it would be foolish to use hired plant when the Council’s own plant was standing idle.However, comparison of the two rates might well be the cause of an investigation into the efficiency of the Council’s plant pool. If the difference in costs persisted, it might be necessary to effect a re-organization or even, perhaps, to close down the pool. A likely discovery might be that the pool had more plant than it required, and much idle time was pushing up the hourly rate of charge. The above example illustrates that in the short run, decisions must be based upon comparison of marginal costs to the authority as a whole rather than upon comparison of total costs to individual jobs or departments.In the long run, however, a comparison of total costs may reveal a need for greater centralization or decentralization of operations depending upon the circumstances. The relatively high overhead costs of operating a central department must be more than offset by eventual savings in the overhead costs of departments no longer performing the services. The efficiency of central departments depends upon what economists call “division of labor” (i.e. specialization) and “economies of scale”. Unless a central department is relatively large and its services are fully employed, these economies may not materialize. Indeed, if plant can be obtained from outside contractors at lower unit prices than those of council vehicles, it suggests strongly that the work should be done on contract by the private sector and not by council workers at all.LABOR OVERHEADSWe have so far assumed that all wages paid to workers can be allocated direct to particular jobs or processes. However, not all wages paid result in direct productive work, and there are also certain expenses which must be incurred beyond the amount of gross wages paid. These are known as labor overheads. Payments made to workers which are not directly related to work done include:(a) sick pay;(b) idle time (bad weather, traveling); and(c) holiday pay.Other expenses incurred which may relate to employment of labor included:(a) personnel insurance;(b) supervision (i.e. foremen);(c) pension fund contributions;(d) medical expenses; and(e) housing subsidies (i.e. full economic cost, less rents).Sick pay relates to the payment to a worker of all or part of his wages whilst he is unable to work, through injury or illness. Idle time represents wages paid to workers whilst they are in the employment of the authority, but are prevented from working, perhaps because of bad weather or because the workers are traveling to or from a job.Holiday pay represents payments made to workers for public holidays and annual “holidays with pay”. Personnel insurance represents premiums paid to cover personal accident and other employers’ liabilities. Supervision covers the wages and other expenses (e.g. car allowances) of foreman and supervisors who may be responsible for a large number of jobs or may supervise a large number of staff.Pension fund contributions have already been mentioned, but as well as the normal “employers’ contribution”, an employing authority may sometimes have to pay a “deficiency contribution” into a pension fund. This is an amount paid into a pension fund to meet future deficiencies. A deficiency in this sense is not a book-keeping deficiency but is the estimated amount by which a pension fund will be unable to meet future calls upon its resources to pay pensions to contributors who have not yet started to draw them.These estimated deficiencies sometimes arise through changes in money values and in expectations of life. They are calculated, not by accountants, but by experts in life insurance statistics known as “actuaries”.Medical benefits and housing subsidies arise as a result of special conditions of service: alternatively a housing allowance may be paid instead of a housing subsidy. Sometimes the above expenses are charged direct to special heads in the accounts but where a single labor force is employed upon a number of jobs or processes, accurate costing is not possible by this method. Where a detailed costing system is in operation, the labor overheads will be charged initially to a “holding account” and re-allocated to jobs and processes by apportionment, usually as a percentage of direct wages.Sick pay, idle time, holiday pay and supervisor’s pay will be debited to the holding account and credited to the wages control account through the wages journal.The other expenses will be debited to the holding account and credited to the cash book (or to the creditors’ control account) through the expenditure journal (or creditors’ list). The overheads will then be charged to the actual jobs or processes by applying a percentage to the direct wages charged to those activities. This is known as “overhead recovery”.As with vehicle running expenses the overhead recovery must take place during the financial year, whereas actual overheads are not known until the year end. This necessitates overheads being recovered on an estimated basis and will almost certainly leave a debit or credit balance on the holding account at the year end. As with vehicles, this balance can be disposed of in several ways. The simplest and least accurate method is to debit (or credit) the difference to a single head in the revenue account. Making supplementary allocation involves extra work but will result in a more accurate recovery of all expenses incurred during the year. If the balance is carried forward it must be taken into account in fixing the rate of recovery for the following year recognizing that accountancy is a continuous process and that the work of an authority is not confined within individual financial years.It is not unusual to have separate holding accounts for each department. The overheads are then recovered in proportion to the direct wages paid to workers of that department only.To illustrate the above principles, assume that the works department of a Municipal Council incurred the following labor expenses during 20_4.Estimate (€)Actual (€)Gross WagesDirect Labor2 Foremen815,00018,000813,46018,320Provident FundDirect Labor2 Foremen62,5001,00062,440920Other ExpensesPersonnel InsuranceCar Allowances (Foremen)Pension Fund (Deficiency)Medical ExpensesHousing AllowancesTOTAL (Cash and Creditors)6,0002,50025,4003,2007,30044,4005,8802,62025,4002,9807,48044,360GRAND TOTAL940,900939,500Assume that labor costs are required for the various jobs (or processes) carried out by the department during the year. Refer to these jobs (or processes) as A, B, C, D, E, etc. Direct wages and the Council’s Provident (Pension) Fund contribution will be charged to various activities through the wages journal analysis. Other expenses will be charged out as overheads in proportion to the direct charges.The estimated allocation of wages might be calculated as follows:€Total Gross Pay and Pension Fund 896,500Deduct Foremen: €Gross Pay 18,000Provident Fund 1,000 19,000877,500Deduct Holiday Pay (say 2 weeksannual leave plus I week of publicholiday) [€ 877,500 x 3/52] 50,625Deduct Sick Pay (say I week perperson) [€ 877,500 x 1/52] 16,875 67,500810,000Deduct Idle Time (say 10%) 81,000Net Wages Charged Direct 729,000Of the estimated employee expenditure of € 940,900, only € 729,000 will be charged directly to jobs through the wages journal. The remaining € 211,900 will be charged as Labor Overheads. However, the overhead expenses are just as much a part of the costs of jobs as the direct wages. They must be allocated from the holding account to the jobs, in proportion to direct wages. The “labor overhead recovery rate”, as it is called, is expressed as a percentage, calculated as follows:Total Expenditure = Direct Expenditure + OverheadsOverheads x 100 = Recovery RateDirect Expenditure€ 211.900 x 100 = 29.06721%729,000Because of using estimates, at this stage, the overheads can be recovered from jobs at the rate of 29% of direct wages. Recovery will take place continually during the year by debits to the individual expenditure accounts and credits to the holding account. At the end of the year, however, € 939,500 represents the total estimated expenditure incurred on labor during the year. A glance at the actual expenditure accounts, however, may shows that the labor cost charged to jobs totals only € 933,728 – a difference of € 5,772. The “under-recovery” of € 5,772 arises because whereas a recovery rate of 29% was used the actual recovery rate should have been:Overheads x 100Direct Expenditure€ 215,680 x 100 = 29.79746%723,820The € 5,772 therefore represents 0.79746% of € 723,820. If this small balance is carried forward to 20_5, the provisional labor costs will become the final costs. If a supplementary allocation is made, the provisional costs will be adjusted, so that the final cost (i.e. expenditure charged to jobs) now totals € 939,500. This is equal to total expenditure incurred in the financial accounts.It would not be unreasonable to question the necessity for having two separate allocations of overheads. Why not make a single allocation at the end of the year? The answer to this question is the key to costing and budgetary control.If supervisors are to be able to exercise cost control, the costing information (though approximate) must be presented to them promptly. Costs presented to supervisors within 24 hours (even if slightly inaccurate) can form the basis of remedial action where necessary. On the other hand, costs which are accurate to the last cent are relatively useless, if they take weeks to produce. In practice periodical adjustments of the percentage are made during the year. In the above example the provisional cost of (say) Job A was € 7,998 whereas final cost was € 8,047, an error of € 49.Expressed as a percentage the margin of error on all jobs is:€ 5,772 x 100 = 0.61%939,500This is quite an acceptable margin for day-to-day control. Had the estimates been slightly different, a recovery rate of 30% might have been used. This would have resulted in an “over-recovery,” but with a smaller margin of error.Some accountants may question the logic of basing overhead recovery in proportion to direct wages paid. It might be suggested for example that recovery should be based upon man-hours, or that the foremen’s car allowances should be recovered on a mileage basis. These are, in theory, valid arguments and it is not asserted that the method used in this section is necessarily the most logical. However, it is found from experience to be the most convenient and straightforward method in the absence of special factors, requiring different treatment. When making comparisons with the sometimes more sophisticated methods used in industry and commerce, it must be remembered that the cost heads over which apportionment is made are far more numerous in public authorities than in many commercial businesses.STORES OVERHEADSWe have seen earlier that materials passing through the stores are charged to jobs at cost or at prices closely related to purchase costs (e.g. standard prices). This, however, ignores the cost to the authority of storing and issuing the materials. Such costs will include:(a) capital charges on stores buildings (e.g. depreciation or debt charges);(b) wages of storekeepers (including labor overheads);(c) costs of heating, ventilating, lighting and cleaning the stores;(d) stationery;(e) repairs to the buildings;(f) rates (property taxes);(g) furniture and fittings;(h) protective clothing;(i) insurance (i.e. fire, burglary etc); and(j) deficiencies on stocktaking (less surpluses).To ensure that individual jobs or processes bear a proportion of overhead costs relating to stores, these costs will be initially debited to an overhead holding account, and recovered from cost centers in proportion to the value of stores issued to each job. A complete statement of stores expenses might show a total of (say): € 20, 127. Assume the net value of stores issues to be € 122,920. The stores overhead recovery rate will therefore be:Stores Overheads x 100Net Issues20,127 x 100 = 16.3741%122,920Assume that a stores requisition note shows that € 155 has been charged to “water connections”. In addition to the direct charge, an additional sum, of € 25.38, will be debited (charged) to water connections for stores overheads (€ 155 x 16.3741%).For simplicity, the recovery has been shown as having been made at the end of the year. In practice, it might well be made on an estimated basis (say 16%) during the year, any balance being carried forward or dealt with as a supplementary allocation in the same way as for wages overheads.As with wages, recovery of overheads in proportion to prime cost is the most convenient (rather than the most logical) method. In theory, a case could be made out for recovering overheads in proportion to weight, number of units, number of requisition notes and so on, but in practice this could involve a great deal of extra clerical work.LIGHT PLANT AND TOOLSEarlier was studied how to deal with the expenses of operation of vehicles and other mechanical plant. In addition to these, the employees of an authority will use different types of tools and equipment which cannot be charged out on a mileage or time basis. Such equipment ranges from hand-mowers and wheelbarrows to shovels and pick-axes.In theory, the cost of using such equipment during a period is the amount by which the stock has deteriorated or worn out, after allowing for new purchases and scrap-values. If the stock of tools were counted and valued at the end of each year a statement of depreciation (or deterioration through use) could be prepared rather on the lines of a cormmercial trading account. For example:€Opening Stock 8,468Add Purchases during year 3,824€ 12,292Deduct Sales of Scrapped Equipment 156Closing Stock 8,340 8,496Net Depreciation 3,796One difficulty with the above method is how to value the closing stock. To value the equipment at cost would be wrong in principle, because most of it would be partly worn out. Two methods are possible:(a) obtain an estimated valuation from a technical officer; or,(b) value unused equipment (if any) at cost, and used equipment at (say) 50% of cost, thus roughly equating the value of equipment which is almost new with the value of that which is almost worn out.Either of these methods is somewhat arbitrary and there is a great deal to be said for treating the annual cost of light plant and tools as the annual replacement cost. In other words the cost of light plant and tools charged in the accounts for a particular year is the net cost of purchases of new equipment less sales of scrapped equipment (if any).The use of tools is an expense connected with labor and the cost of light plant and tools can be recovered from cost heads in proportion to direct wages. Many accountants would regard the cost as a part of labor overheads, but there are sometimes good reasons for recording them separately.ADMINISTRATIVE OVERHEADSOne important group of costs incurred in running a service is that of administrative overheads. These expenses include salaries, office accommodation, printing, stationery, postages, telephones, insurance, subscriptions, staff training and general office expenses.Where these are incurred in running particular services or departments they are known as departmental establishment charges[2]. Where they cannot be charged against a particular service but relate to the authority as a whole they are known as central establishment charges. Thus, the salary and office expenses of a Chief Education Officer are departmental establishment charges, relating to the education service, whereas similar expenses of the Chief Financial Officer are central establishment charges, because finance is common to all services.The most usual sources of central establishment charges are the so-called “Central Departments” of the Chief Executive Officer, Chief Financial Officer, Chief Engineer, Chief Legal Officer and Chief Architect. Staff in these departments provides the administrative, professional and technical skills required by all the other departments of the authority. Sometimes there are other central departments dealing with such matters as planning, property valuation, purchasing, stores, establishment, organization and methods, printing and transport.The extent of centralization depends upon the size and administrative structure of the authority concerned. In a very large authority, each centralized function may warrant a separate department with its own chief officer. In authorities of more moderate size, the functions may still be centralized but without separate departments. For example, property valuation, purchasing, stores and establishment may be under the control of the Chief Financial Officer; or establishment, organization & management and printing under the Chief Executive Officer; or yet again, planning, stores and transport under the Engineer.How are administrative overheads to be charged in the accounts? It is usual for all expenses relating to a particular service to be charged under the appropriate service, division of service or sub-division of service head. For example, the salary of the market superintendent will be charged under “markets”, and the salary of the chief of police under “police”. Sometimes a department may be responsible for several services. In these cases, the general salaries and expenses will be charged against a department without being allocated to services.For example, the works department may be responsible for highways, water, sewerage; housing repairs and so on. The salaries and office expenses of the chief engineer (or works superintendent) and his staff may be charged to a separate division of service “works department”. Similarly the health department may be responsible for inspection, clinics, street markets, ambulances and so on. The salaries and office expenses of the chief medical officer (or medical superintendent) and his staff will be charged to a separate division of service “health department”. The extent to which central establishment charges are allocated to services and the extent to which departmental establishment charges (including a share of central establishment charges) are allocated to specific jobs or processes will depend upon the purpose for which costs are required. It is often found that not nearly enough attention is given to the effect of overheads on the full costs of services. However, it must be admitted that the more detailed the allocation of overheads over jobs and services, the more arbitrary it is likely to be.Where the full cost of a service is required, for the purpose of fixing charges, or for making grant claims, it is essential that these costs include both departmental and central establishment charges. Even where charges are not fixed on an economic basis, the presentation of full inclusive costs will draw proper attention to the extent to which the service is subsidized.Where costs of a service are being produced for the purpose of comparison with other authorities, perhaps through unit costs, central establishment charges are often omitted. This is to avoid fluctuations caused by different systems of apportionment as between one authority and another. There is often sound argument for producing costs on this basis, provided it is recognized that the costs are not full costs, because of the exclusion of central establishment charges. Another problem which must be watched is that one authority may have centralized services (thus omitted from costs) which another performs at departmental level (thus included in costs).A good example might be where the health service of one authority is housed in separate offices, whereas that of another authority shares (say) the town hall (central municipal headquarters) with other departments.When calculating individual job costs for rechargeable works, it is essential that a share of overhead expenses is included in the costs. Sometimes it is possible to make apportionments on a fairly scientific basis. At other times one is restricted to adding “a reasonable percentage” (say 5%) to prime costs and works overheads, to allow for administrative overheads[3].Where costs are being calculated for the purposes of budgetary control over individual services or jobs there is often a case for omitting administrative overheads altogether. There will probably be easier comparison between prime costs and prime cost estimates (with or without works overheads) than between total costs and total cost estimates. In the latter case the issue can often be clouded by the arbitrary nature of apportionment of administrative overheads.Detailed methods of apportionment of administrative overheads (including central establishment charges) vary greatly. However one should recognize them just as much as an integral part of the costs of services as prime costs and works overheads. Where administrative overheads are recovered by an arbitrary percentage, for rechargeable works or otherwise, the percentage is normally applied to the grand total of all other costs (i.e. wages, materials, transport, labor overheads, stores overheads etc).The accountant must maintain a flexible attitude towards administrative overheads, dealing with them as the circumstances require. It is sometimes difficult to decide whether a particular expense is “operational” or “administrative”. For example the chief medical officer will almost certainly be working in an administrative capacity and he will have clerical staff to assist him. But what happens when (say) assistant medical officers attend clinics to deal with patients, as well as carrying out administrative work?One item of expenditure which requires particular mention is that of debt charges[4]. These form just as much a part of the cost of running a service as do salaries. Yet often we find, where accounting techniques are not fully developed, that debt charges are grouped together in a single lump sum in the accounts, as though they were a separate service. Debt charges should always be charged in the operating account of the service to which they relate, otherwise an important element of cost is permanently overlooked. The same applies to renewals fund contributions and other capital recovery costs.ACTIVITY BASED COSTING AND ACTIVITY BASED BUDGETING[5]Many costing systems in use during the latter part of the twentieth century were derived from – and adaptations of – systems that originated for activities that were industrial in nature. These relied heavily upon the use of the kind of labor associated with “sweat and toil.” Indeed, the earlier references to Alexei Stakhanov, the (1935) Soviet coalminer, were very much from that era. However, as the world approached the twenty-first century, much heavy industrial work gave way to increased uses of information. This was to provide increasing assistance to commercial and public activities for it own inherent improvements. But, it also provided the technology to enhance the use of capital equipment. This, of course, has facilitated – at least for many workers – a much more pleasant and safer industrial environment.However, it was also realized that, because of the much greater role of information and advanced technology in the delivery of goods and services, office work was no longer just a supplement to the activities of heavy industries. Office work had, instead, become the location of many of the prime cost centers. Concurrently, it was increasingly asserted that the only phenomena that can really be measured – from a cost perspective – are activities. This has been referred to in the general text. Consequently, whether always given the special name or not, cost accounting is increasingly directed at computing the costs of activities. These are, indeed, the basic components of public service delivery.VEHICLES AND PLANT ANALYSISThe majority of local authorities operate vehicles, such as vans, tipper lorries (trucks) and refuse vehicles. Many will also operate various forms of mechanical equipment, usually referred to as plant, such as graders, dozers, excavators and motor mowers.Accurate accounting for the operation of vehicles and plant is more complex than accounting for the employment of staff. In the first place, payment of staff is directly related to work done (eg a day’s pay for a day’s work) whereas payments for operating vehicles and plant are made in a haphazard way. License duty may be paid in January, insurance premium paid in May, petrol purchased every day or so, maintenance carried out monthly and so on. Secondly, there are only two direct expenses connected with employment of staff - gross pay and employer’s contributions, whereas there are many direct expenses connected with vehicle and plant operation as follows:(a) license duty;(b) insurance premium;(c) depreciation (or the equivalent);(d) garaging;(e) wages of driver;(f) major repairs;(g) routine maintenance;(h) fuel (petrol or diesel);(i) lubricants;(j) spares and tires; and(k) capital financing expenses (depreciation and interest).To illustrate the difficulties which can arise, let us take an example. Suppose you are employed as a clerk for one month at an agreed monthly rate of pay. At the end of the month you can go to your employer and collect the exact cost of your services, one month’s pay, (say) € 500. Now, suppose you have a small car and you agree to drive it on a day trip to a town 20 miles away to collect a parcel for your employer. He agrees in advance to pay the “full actual cost” of the journey. How would you calculate the cost? You might begin your journey by putting (say) 2 gallons of petrol in the tank at (say) € 5 per gallon, charging this € 10 to your employer as the cost of the journey – but there must be approximately one gallon still in your tank as you know that your car does roughly 40 miles to the gallon: so you charge for 1 gallon (€ 5) – but this is not exact, because it might (on this trip) do 38.65 miles to the gallon or 41.2 miles to the gallon. Then, reflecting further, you realize that every 4,000 miles you pay € 100 for servicing the car - so you decide to charge a proportion of this cost € 100 x 40) = € 4,000 to your employer.Even now you have not covered the full cost, because you cannot anticipate (for example) that a new set of sparking plugs will be required at the next service. You have not yet charged a proportion of the license, insurance premium, depreciation or garage costs – so you add these up to (say) € 1,825 and divide by the number of days in the year to give a daily rate of € 5, which you add to the charge. Even this is not accurate, because if you used the car for a total of only 73 days a year the daily rate should be € 25.Suppose you have an accident on the journey, which involves uninsured repairs expenditure of € 400. Do you charge the whole of this to your employer or spread it over all the journeys in the year (or in five years). Finally, does your employer consider the payment of (say) € 215 for your day’s work as part of the cost of the journey (driver’s wages) or part of your ordinary pay as his clerk. You might say he would pay it anyhow, but what if you did the journey for an extra day’s pay on your day off, or he had to employ another clerk to do your work for the day? Although the above example is simple, it illustrates most of the difficulties which will be encountered by a local government authority in calculating and estimating the running costs of vehicles and plant: in particular the following points connected with costing:(a) the full economic cost of an activity is often different from what is at first apparent; and(b) it is impossible to calculate exact or “actual” costs, making it necessary to calculate what are known as “ascertained” costs, which are accurate only within defined limits.The nearest approach to exact allocation of vehicle or plant expenses occurs where a particular group of vehicles or plant is used exclusively on one service. A good example for a municipal council might be the “Refuse Collection” service, which will use specially designed refuse vehicles, not generally suitable for other work. The expenditure analysis for this service will include a head for “Transport” and sub-heads for “petrol”, “oil”, “tires”, “licenses”, “insurance”, “repairs”, “contributions to renewals funds” etc.Payments for any of these items will be allocated directly from the invoices through the expenditure journal. Wages of drivers will, in this case, usually be allocated under “Employees - wages” rather than “Transport”. Even here, a share of the cost of garaging or depot expenses may have to be apportioned to the “Refuse Collection” service from a holding account. Also, if the vehicle is used for any other purpose (e.g. hired out to another authority), a cost will have to be calculated as shown later.What happens when, for example, the works department operates a number of vehicles and plant which are used from time to time on a wide variety of services, including rechargeable works. Let us suppose that a municipal council has vehicles and plant in its works department as follows:5 cwt vans 21-ton lorries (trucks) 43-ton lorries (trucks) 3mechanical graders 2The vehicles and plant will be regarded as “pooled” and all expenses relating to their operation will be charged from invoices and sundry creditors to a “Transport and Heavy Plant - Holding Account”. Separate cost accounts will be kept for each vehicle or group of vehicles.When a vehicle is required by a department or service, the officer responsible will prepare a vehicle requisition and send it to the transport officer in the works department. The requisition will show:(a) the approximate time for which the vehicle is required;(b) the job or service upon which it will be used; and(c) the type and size of the required vehicle.The driver of the vehicle will normally be provided by the works department and he will be supplied with a log-sheet or log-book in which he will record details of each journey as follows:(a) date;(b) starting time;(c) finishing time;(d) job or service;(e) code number (if appropriate);(f) number of miles; and(g) number of hours.At the end of each week or month, the log-sheet for each vehicle will be totaled to show the miles run and hours worked on each job. The charge for the use of the vehicle will then usually be worked out in one of two ways:(a) multiplying the miles run by a fixed rate per mile; or(b) multiplying the hours worked by a fixed rate per hour.When the calculations have been made for each vehicle a “transport and plant” abstract (or journal) will be drawn up to show the number of hours worked and the rate of charge at which they will be computed.The analysis information column will be posted to the appropriate expenditure accounts. There will usually be a (subjective) classification: “Use of transport and heavy plant” under each service. Suppose the grand total to be € 7,625. This will be credited to the holding account. The rate of charge should be fixed so that all expenditure originally charged during the year to the holding account is eventually re-charged to the various expenditure accounts. If the total cost of the transport pool of a municipal council for 2003 was € 456,460 the various items making up this total would be charged to the holding account. Depending upon the system of capital accounting in use, transfers of renewals fund contributions or depreciation might be included in place of cash payments for debt charges. In practice, such an ideal situation would rarely be achieved, because the rates of charge must be fixed well in advance of costs being incurred and must therefore be based on estimates. The estimated costs will be drawn up for each group of vehicles of the same type, and a common rate of charge fixed for all vehicles of that type. Though the costs of individual vehicles may be kept separately in cost accounts it is not usual to charge a separate rate for each vehicle.One problem which arises is whether to use mileage rates or hourly rates of charge. Mileage rates are more likely to be employed where distance is an important factor. For example, mileage rates will often be used for transport of stores in rural areas and running of ambulances. On the other hand, where distances are relatively short and there is a considerable amount of standing time, hourly rates will be used. This will apply particularly to such services as refuse collection and road repairs where a great deal of loading and unloading is done.On balance, experience favors the use of hourly rates for local authority work. It encourages departments to make more efficient use of vehicles by keeping them running, because supervisors know that budgets under their control are being charged with hourly rates, whether vehicles are working to full capacity or not. By contrast, where mileage rates are used, the services of an expensive vehicle and driver can be tied up in mere “waiting around”, yet no costs are charged to the department using (or rather failing to make use of) the vehicle, unless actual journeys are run.Another method, perhaps more scientific, would be to charge running expenses (e.g. petrol (gasoline) on a mileage basis and fixed charges (e.g. license duty) on an hourly basis, thus giving a “composite” rate. This method would involve more clerical work than the other two and it is doubtful whether this would be justified. For example, for a set of transport vehicles, the computations might show that:If mileage rates were used, each mile would be charged out at € 1.35 per mile.If hourly rates were used, each hour of use would be charged out at € 8 per hour.If composite rates were used, each mile would be charged out at € 0.50 per mile and each hour worked (standing or running time) at € 5 per hour.When the actual expenses and the actual number of running hours are known at the end of the year there will inevitably be differences from the estimates. Thus, there will be a balance on the holding account, because more (or less) than the full costs will have been recharged to (or recovered from) services.Balances on holding accounts can be dealt with in several ways. The simplest (and also the least accurate) method is to debit under-recoveries and to credit over-recoveries to one special head in the revenue account. This method is sometimes loosely referred to as “writing the balance off to revenue”. The second method (where permissible) would be to transfer over-recoveries to the credit of (say) a “Vehicles and Plant Renewals Fund.” It is less likely that under-recoveries would be debited to this fund.The third method would be to carry the balance forward to the holding account for the following year. Over-recoveries would be credit balances and under-recoveries would be debit balances, necessitating possible adjustments in the charging-out rates for the new year. Fourthly, the under-recoveries could be debited, or over-recoveries credited, to the expenditure accounts which have borne the original charges by making supplementary reallocations. The rates of charge for vehicles should be fixed by the Chief Financial Officer after consulting the appropriate technical officers (e.g. transport officers) about estimated costs, estimated running time and estimated mileage.The aim should be to recover actual running costs. It is not, as is sometimes thought, to build up a large credit balance on the holding account. Sometimes, where works department officers are allowed to fix vehicle rates without consulting the Chief Financial Officer, inflated rates of charge are used. The works department officer then suggests that his vehicles are running at a “profit!” This, of course, is nonsense, and defeats the purpose of accurate cost accounting.Sometimes, especially when dealing with heavy plant, such as graders, daily rates of charge are fixed, instead of hourly rates. Whether the wages of vehicle drivers (or plant operators) are included in the costs and charged out in the hourly, daily or mileage rate is a matter to be decided by the Chief Financial Officer.Where vehicles are used on a single service or where heavy overtime at enhanced rates of pay is involved, it is more usual to charge the wages of drivers as “Employees – wages” directly from expenditure or wages records. This would apply, for example, to the “Refuse Collection” service. Here, anomalies would be created if the pay of loaders were charged to “wages” and the pay of drivers to “transport,” particularly as drivers may also assist with loading.Where vehicles are pooled, and used on many jobs, it is more usual to charge the wages of drivers to the holding account. The charging-out rate will then be calculated for a vehicle and driver operating as a single unit.Where heavy plant is used, the charge may include the operator’s wages where he spends all his time operating the plant. However, some plant (such as a tar-sprayer or tarmac machine) is operated by a team of workers and it would seem more reasonable in this case to charge all labor costs to “wages”.Although we have referred above to a “holding” account it can also be called a “control” account, and sometimes even a “suspense” account.Annex 2Introduction of Accrual Accounting (and Budgeting) inRussiaExamples of Detailed Accrual Accounting TransactionsAccrual Accounting (1)Credit Cash Receipts to an Income Analysis•All cash receipts receive an income code.•Cash receipts are analyzed by these codes.•Cash receipts are posted to income, asset or liability accounts (manually or by computer).•Postings are proved, independently, against cash records.Accrual Accounting (2)Credit Specific Capital Grant to Capital Financing Reserve[1] Extracted and adapted from “Municipal Accounting for Developing Countries” by David C. Jones [©1984, The Chartered Institute of Public Finance and Accountancy and The World Bank][2] The principles shown in this Annex are just as valid today as when the book from which they are taken was first published. However, just as with other budgeting and accounting terminology, cost accounting terms go in and out of fashion! Thus, “establishment charges” is earlier terminology, still used by some today, to reflect the expenditures that were incurred in the “establishment” of an entity. The use of the term “administrative overheads” has (at least, for now) become more common. However, as Shakespeare said “A rose by any other name smells just as sweet.” He probably was not referring to the administrative overheads for a sewage disposal works![3] It is understood that a similar method is to be used in Russia for the computation of education grants, by adding a standard percentage to the expenditure on “teachers’ salaries.”[4] As indicated elsewhere, “debt (loan) charges” have been (and, often, still are) used as surrogates for the more accurate “interest and depreciation” costs that are used under full accrual accounting. They continue to be referred to, here, because they are part of modified accrual accounting systems. These are still likely to be the most commonly-used systems for public sector entities, into the foreseeable future.[5] This was not in the original text, because at the time of its writing the concept was neither known nor used, on any widespread scale. However, it has particular relevance to the concern of administrative overheads, a very common component of public sector cost measurement.