After studying this chapter you should understand:

  • The various roles that accountants can play in the management of governmental and other not-for-profit organizations
  • How program budgets overcome the limitations of traditional object classification budgets
  • The need for, and characteristics of, sound operational objectives
  • The risks of establishing explicit organizational objectives
  • The ways in which program budgets link expenditures to objectives
  • The advantages and disadvantages of program budgets
  • Why it is important for organizations to develop and report measures of service efforts and accomplishments
  • The special problems that governments and not-for-profits face in planning and budgeting their capital expenditures and how they can address them

Conventional, business-type management accounting focuses mainly on maximizing net inflow of cash. The aims of governments and not-for-profit organizations, of course, go well beyond maximizing cash flow. The central messages of this chapter are that organizations must be managed to achieve their goals that are unrelated to cash flows (operational objectives) and that all phases of the management cycle must be linked to this end. The term operational objectives is used herein to signify specific sought-after results. Whenever possible, operational objectives should be both quantifiable and measurable. They should ...

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