This paper explores the purchaser-provider (PP) split in the municipal sector and how it is supported by cost accounting practices. The theoretical framework of this interpretative case study draws on the theory of management control and recognises that control systems may exhibit differing degrees of formality and be used for cooperation or compliance. We find that cost accounting techniques are widely used as a tool in local government budgeting, being based on the idea that resources can be allocated on the basis of cost of service production.

The interviewed proponents of the informal PP model stressed the efficiency and low bureaucratic cost of their way of organising, which was complemented by the use of sophisticated cost accounting methods. In more formal PP solutions, having clearly separate purchaser and provider parties seemed to bring about a certain coerciveness in the use of cost accounting numbers, especially since in public organisations, the provider party cannot always hide their cost structure from the purchaser, limiting the competition/quasi-market use of such models.