Management accounting helps Valle d'Aosta leaders make more-informed decisions
Valle d'Aosta – home of the Italian slopes of Mont Blanc, Monte Rosa and the Matterhorn – is a semi-autonomous region of 74 townships whose leaders use SAS for management accounting and financial management.
INVA, an in-house company, manages the region's IT services, support, implementations and infrastructure. In the following Q&A, Fabio Centoz, INVA's Area Manager for Application Domains, shares insights on Valle d'Aosta's accounting and financial projects.
What motivated your management accounting project?
The project stems from the desire for a more advanced system of management accounting to support financial accounting. Like all such instruments, the financial accounting system was intended to monitor expenses and to ensure that the authorization processes complied with the rules of public accounting.
Our objective was to produce a tool that would not be restricted to bureaucratic control of expenditures, but would allow administrators to analyze the costs by type and destination. And we wanted to do so without expensive interventions to the current system in terms of labor and cost.
What knowledge is required for management accounting?
While traditional accounting ultimately ensures that expenditures are incurred only by those who are authorized and within their purview, management accounting allows the policymakers and administrators to be aware of the details of the cost components that are associated with providing a particular service or achieving a given objective.
Awareness of the cost drivers in terms of personnel, property, consulting, and product or service acquisition may then be translated into process optimization and cost containment. As an example, identifying potential operational inefficiencies in the allocation of resources for a specific service is the first step in planning actions for improvement, either regarding the individual cost components or the service as a whole.
How long did it take for the solution to become operational?
(Less than a year into the operational phase), the region’s President and the management structures were able to have complete visibility on the total expenditures and the cost structures, by individual component, by cost center and by service provided. In other words, we had visibility on the entire value chain involved in the pursuit of every individual objective.
How is it structured?
A critically important phase was the identification of the feeder systems from which to pull the data, which includes the liquidations performed by the administration, the costs associated with personnel or the costs associated with real estate.
The information flows are routed to a data warehouse and prepared for what can be called the heart of the solution, which is SAS® Financial Management. This processes the data and, on the basis of predefined allocation rules, provides for the compilation of the income statement by cost center.
What are the factors for success?
SAS Financial Management, in addition to being the driver of the solution, significantly contributed to the success of the project. The true success factor was actually the possibility of integrating the analytical components in the existing organizational and application infrastructure, at a low cost and in a short time.
Just think that, after the actions were taken with the feeder systems to acquire the data, we obtained the first results in only six months, setting up an extremely high number of allocation rules, due to the range of the authorities typical of an autonomous region.
I must say that, from this point of view, coordination with the recipient structure was critical, primarily the Local Management Authorities, which performed the vital rule collection and sharing activities.
Can the solution act as a tool to support decision-making?
Absolutely, yes. Today the regional administration can have a detailed account of the costs and their composition and can take steps intended either to optimize the processes, for example, reallocating skills or better defining the action parameters, or to eliminate potential areas of inefficiency.
Furthermore, the project was not initiated experimentally only on a limited number of expenditure categories, but rather immediately involved all the administration's facilities. In this manner, as soon as it became operational, it was able to provide complete and significant results in support of political and strategic decision-making.
Is further development planned?
The next step is to introduce elements to evaluate operational performance. To this end, two possible avenues for development have been identified: the definition of budgets, in such a way as to measure the results against precise and shared objectives, and benchmarking to perform analyses and comparisons between the costs. For example, the availability of an indicator like the unit cost of the administrative practices can provide useful information regarding the comparative functioning of the facilities.
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