SOLUTION MANUAL
FINANCIAL MANAGEMENT FOR PUBLIC HEALTH
AND NOT FOR PROFIT ORGANIZATIONS
, Instructor’s Manual for Financial Management for Public, Health, and Not-for-Profit Organizations1,
2E
INTRODUCTION
Chapter 1 TO
FINANCIAL
Questions for Discussion
1-1. Financial Management Is The Subset Of Management That Focuses On Generating
Financial Information That Can Improve Decisions. The Decisions Are
Oriented Toward Achieving The Various Goals Of The
Organization While Maintaining A Satisfactory Financial Situation. Financial
Management Encompasses The Broad Areas Of Accounting And Finance.
1-2. In Proprietary, Or For-Profit, Organizations, An Underlying Goal Is To Maximize
The Wealth Of The Owners Of The Organization.
1-3. In Public Service Organizations, Decisions Are Oriented Toward Achieving
The Various Goals Of The Organization While Maintaining A
Satisfactory Financial Situation.
1-4. Accounting Is A System For Keeping Track Of The Financial Status Of An Organization
And The Financial Results Of Its Activities. It Has Often Been Referred To As
The Language Of Business. The Vocabulary Used By Accounting Is The Language Of
Nonbusiness Organizations As Well.
1-5. Accounting Is Subdivided Into Two Major Areas: Managerial Accounting And Financial
Accounting. Managerial Accounting Relates To Generating Any Financial
Information That Managers Can Use To Improve The Future Results
Of The Organization. This Includes Techniques Designed To Generate Any
Financial Data That Might Help Managers Make More Effective Decisions.
Major Aspects Of Managerial Accounting Relate To Making Financial Plans For The
Organization, Implementing Those Plans, And Then Working To Ensure That
The Plans Are Achieved. Some Examples Of Managerial Accounting Include
Preparing Annual Operating Budgets, Generating Information For Use In
Making Major Investment Decisions, And Providing The
Data Needed To Decide Whether To Buy Or Lease A Major Piece Of
Equipment. Financial Accounting Provides Retrospective Information. As Events That
Have Financial Implications Occur They Are Recorded By The Financial Accounting
System. From Time To Time (Usually Monthly, Quarterly, Or Annually), The
Recorded Data Are
,Summarized And Reported To Interested Users. The Users Include Both
Internal Managers AndPeople Outside The Organization. Those
Outsiders Include Those Who Have Lent Or Might Lend Money To The
Organization (Creditors), Those Who Might Sell Things To TheOrganization (Called
Suppliers Or Vendors), And Other Interested Parties. These
Interested Parties May Include Those With A Particular Interest In Public
Service Organizations, Such As Regulators, Legislators, And Citizens.
Financial Reports Provide Information On The Financial Status Of The
Organization At A Specific Point In Time, As Well As Reporting The Past Results Of The
Organization‘S Operations (I.E., How Well It Has Done From A Financial Viewpoint).
,Chapter 3: Additional Budgeting Concepts 3-2
1-6. Finance Focuses On The Alternative Sources And Uses Of The Organization‘S Financial
Resources. Obtaining Funds When Needed From Appropriate Sources And The
Deployment Of Resources Within The Organization Fall Under This
Heading. In Addition, Finance Involves The Financial Markets (Such As Stock
And Bond Markets) That Provide A Means To Generating Funds For Organizations.
1-7. Yes. Achieving The Goals Of The Organization Requires Financial Planning.
Financial Management Provides Information For Managers To Use In Making Their
Decisions. It Helps Managers By Providing Information On The Likely Financial
Impact Of Each Proposed Alternative. It Also Provides Information About Financial
Stability, Efficiency, And Effectiveness.
1-8. Clearly, We Might Expect Some Public Service Organizations That Are
Proprietary, Such As Some Hospitals, To Earn Profits. But What About Other Public
Service Organizations Such As Charities? They Should Make A Profit As Well. Profits
Provide A Safety Margin Against Unexpected Costs, Provide Resources To Replace
Buildings And Equipment, And To Expand And Improve Services.
1-9. Federal Government (See Text Figure 1-1)
Individual Income Taxes
Social Insurance Taxes
Corporate Income Tax
State And Local Government (See Text Figure 1-4)
Sales And Gross Receipts Tax
Federal Government
Property Taxes
Individual Income Taxes
Health Sector (See Text Figure 1-6)
Private Insurance
Medicare
Medicaid
Other Government Programs
Not-For-Profit Sector (See Text)
Private Payments For Goods And Services
Government Payments For Goods And Services
Donations
1-10. Federal Government Spending Exceeded $6 Trillion In 2020 And State And Local
, Finkler, Financial Management for Public, Health, and Not-for-Profit Organizations 7e
Government Spending Was More Than $3 Trillion In 2018. In Contrast© , Tchqe Pgr d
Q e sps , 2w0a2s3
Q q
$21 Trillion In 2020. For More Up To Date Information, Examine The Statistical
Tables Of The Most Recent Economic Report Of The President, Which Is Available
Online.
1-11. The Reported Surplus Includes Both On And Off Budget Items. Social Security Taxes
Represent An Off Budget Item That Until Recently Raised More Revenue Than
Was Spent On Social Security Payments.
The Surplus In This Area Offset Other Government Losses, And Even Resulted In An
Overall Surplus For The Federal Government. This Is No Longer The Case, And, Over
Time, Trust Fund Resources Will Be Used Up To Provide Benefits. As The Federal
Government Will Not Have Access To The Excess Resources From Social Security, It Will
Have To Borrow And Increase The Total Level Of Federal Debt, Unless Revenues Or
Spending Are Changed.
1-12. Sometimes Gifts Come With Strings Attached. If The Conditions Of The Gift Create A
Burden That The Organization Does Not Want To Accept, Or Somehow Requires The
Organization To Work In Opposition To Its Mission, It Might Turn Down The Gift.
1-13. The World Bank Has Defined Ngos As "Private Organizations That Pursue
Activities To Relieve Suffering, Promote The Interests Of The Poor, Protect
The Environment, Provide Basic Social Services, Or Undertake Community
Development" (World Bank Operational Directive 14.70). Ngos Are Quite Similar To
The Not-For-Profit Organizations. They Are Primarily Mission-Focused
Rather Than Profit- Focused. Ngos Fall Into Three Main Categories:
Community-Based, National, And International.
,Chapter 3: Additional Budgeting Concepts 3-4
PLANNING
Chapter 2 FOR
SUCCESS:
Questionsfor Discussion
2-1. Planning Helps The Organization By Causing Its Employees To Think Ahead And
Anticipate Change. This Is Done By Establishing Specific Goals And Objectives,
Communicating Those Objectives To The Individuals Who Must Achieve Them,
Forecasting Future Events, Developing Alternatives, Selecting From Among
Alternatives, And Coordinating Activities. The Activities Are Summarized In A Document
Called A Budget. The Budget Describes What We Hope To Achieve And The Resources
That Will Be Used To Carry Out The Organization‘S Activities.
2-2. The Organization‘S Mission Represents Its Reason For Existence. For Public,
Health, And Not-For- Profit Organizations, Finances Often Become A Means
To An End, Rather Than The End Itself. This Mission Cannot Solely Be Making
Profits. Financial Management Must Help Balance The Focus On Profit With The
Public Service Elements Of The Organization‘S Mission.
© CQ Press, 2023
2-3. Strategic Plans Translate The Mission Of The Organization Into An Approach Or Set
Of Approaches That Will Be Used To Accomplish The Mission,
And A Broad Set Of Goals That Need To Be Attained To
Achieve The Mission. Strategic Plans Set The Organization‘S Long-Term Direction.
They Often Do Not
, Finkler, Financial Management for Public, Health, and Not-for-Profit Organizations 7e
Have Specific Financial Targets. However, They Set The Stage For The Specific,
Detailed Budgets That
Will Be Established To Achieve The Organization‘S Goals.
2-4. Whereas The Strategic Plan Establishes Goals, The Long-Range Plan Considers How To
Achieve Those Goals. Long-Range Plans Establish The Major Activities That Will
Have To Be Carried Out In The Coming Three To Five Years. This Process
Links The Strategic Plan To The Day-To-Day Activities Of The Organization.
Organizations That Do Not Prepare A Long-Range Plan Are Often Condemned To
Only Sustain Current Activities, At Best.
2-5. Budgets Establish The Amount Of Resources That Are Available
For Specific Activities. However, Budgets Do Not Merely Limit The Resources
That Can Be Spent. They Represent The Detailed Plan That Supports The
Organization‘S Efforts To Achieve Its Mission, And Help The Organization
Determine And Achieve Its Goals And Objectives. The Budgeting Process Is
One Of Exploring Possibilities. Organizations Determine What Things They Can
And Cannot Do. They Examine Alternatives And Choose Those
That Are Likely To Yield The Best Results. They Become Attuned To Possible
Problems And Can Work To Find Solutions. Budgeting Forces Managers To Think
Ahead, To Have Clear Expectations Against Which To Measure Performance, And
To Coordinate The Activities Of The Organization So That Everyone Is Working
Toward A Common Purpose.
Budgets Are Also Used To Control Results. That Is, Budgets Not Only
Create Plans, But They Are Also Used To Help Accomplish
Those Plans. This Is Done By Comparing Actual Results To The Budget. Looking At
Results, We Can Assess What Needs To Be Corrected. How Good A Job Did The
Organization‘S Management Do? How Well Did The
Organization Itself Do? In Order To Evaluate Performance, One Must
Have A Standard Or Benchmark To Compare With Actual Results. The Budget
Establishes The Organization‘S Expectations.
2-6. An Organization May Consider Undertaking An Activity That Was Not Planned For
When The Annual Budget Was Prepared. At Any Time An Organization Can
Prepare A Special Budget For A Specific Purpose. Appropriate Approval Should Be
Obtained Before Implementing The Budget.
2-7. An Organization‘S Budgets Are Often Organized Into A Strategic Plan,
Long-Range Plan, Master Budget, And Special Purpose Budgets.
2-8. Budgets Present Specific, Measurable Goals. An Individual Is Much More Likely To
Work Efficiently If There Is A Target To Shoot For, Assuming That The Target Is
,Chapter 3: Additional Budgeting Concepts 3-6
Not Unrealistic.
2-9. Most Employees Would Prefer Salaries That Are Substantially Larger Than T©HecAqmporeusnst, S2023
q q
They Are Currently Receiving. Organizations Lack The Revenues To Pay For Those
Raises. Most Managers Would Like More Office Space With New Furniture
And Remodeled Facilities. They Would Certainly Like More Staff To Carry Out
Existing Functions.
Organizations Must Make Choices Concerning How To Spend Their Limited Resources.
2-10. Depending On The Specific Organization, The Volume Of Services Provided May
Have Plunged Or Soared. This Would Have Resulted In Substantially More Or Less
Revenues Than Expected. If Revenues Plunged, Then We Would Have Had
More Staff Than Needed, Without The Resources To Pay
That Staff. We May Have Found Ourselves Unexpectly Unable To Pay Rent On Our
Facilities. Even If Revenues Were Up, We May Have Been Faced With Soaring Costs
For Items In Short Supply. A Budget Is A Very Important Tool. However, We
Should Never Assume That It Tells Us Exactly What Will Happen. Managers Need
To Be Flexible, Observe Events That May Cause Actual Events To Differ From The
Budget, And Be Prepared To Act Quickly To Take Mitigating Actions.
2-11. It Is Very Tempting For A Manager To See Significant Variations From The Budget, And
Want To Revise The Budget. Generally Once A Budget Has Been Approved
By The Governing Body Of The Organization We Do Not Go Back And Revise The
Official Budget, Even If We See Significant Variations From The Budget. However, As
A Manager Starts To See That Something Has Happened Which Will Make Results Very
Different From Budgeted Expectations, The Manager Has To Act To Minimize The
Negative Impacts Of The Changes On The Organization. For Example, If You Manage A
Museum, And The Number Of Customers To Your Museum Café Has
Plunged, You Have To Make Adjustments To
Staffing And Food Purchases To Minimize The Losses That You Will Incur. If Revenues
Are Insufficient To Pay Rent, You Have To Negotiate With Your Landlord For A
Moratorium On Rent Payments. If You See That There Is No Way You Can
Cover Even Severely Reduced Costs Given Your Drop In Customer Volume, You Need
To Quickly Gear Up Fund-Raising Activities To Bring In More Donations To Offset
Losses In Sales. The Budget Is Still A Valuable Tool, Because By Comparing
Your Original Expectations To The Actuality You Can Determine Things Such
As How Much Additional Donations You Will Need To Keep The Organization
Afloat.
2-12. The Manager Should Make Sure That It Is In The Staff‘S Best Interests To Do The
Things That Are In The Organization‘S Best Interests. The Key Is To Establish A Means
Of Making The Normally Divergent Desires Of The Organization And Its
, Finkler, Financial Management for Public, Health, and Not-for-Profit Organizations 7e
Employees Become Convergent, Or Congruent. Organizations Often Achieve
Congruence By Setting Up A System Of Incentives.
2-13. Financial Incentives Include Retaining One‘S Job And Receiving Good Raises And
Bonuses. Bonus Systems Have A Variety Of Problems. Some Bonus Systems Reward All
Employees If Spending Is Reduced. This Is Good Unless Workers Can Restrict
Volume, Thus Reducing The Number Of Units Of Service Provided In Order To Save
Money. Such Behavior Would Likely Reduce Revenues By A Greater Amount Than
It Would Save Costs. Also, If Everyone Gets A Bonus, Then No One Feels That
Individual Actions Have Much Impact, And Each Individual May Feel That She
Or He Does Not Have To Work Particularly Hard To Reap The Benefits Of The
Bonus. If Bonuses Are Given Only To Some Employees, It May Create
Jealousy And Discontent. It Is Also Possible That It May Create ACompetitive
Environment In A Situation In Which Teamwork Is Needed To Provide Quality Care.
,
FINANCIAL MANAGEMENT FOR PUBLIC HEALTH
AND NOT FOR PROFIT ORGANIZATIONS
, Instructor’s Manual for Financial Management for Public, Health, and Not-for-Profit Organizations1,
2E
INTRODUCTION
Chapter 1 TO
FINANCIAL
Questions for Discussion
1-1. Financial Management Is The Subset Of Management That Focuses On Generating
Financial Information That Can Improve Decisions. The Decisions Are
Oriented Toward Achieving The Various Goals Of The
Organization While Maintaining A Satisfactory Financial Situation. Financial
Management Encompasses The Broad Areas Of Accounting And Finance.
1-2. In Proprietary, Or For-Profit, Organizations, An Underlying Goal Is To Maximize
The Wealth Of The Owners Of The Organization.
1-3. In Public Service Organizations, Decisions Are Oriented Toward Achieving
The Various Goals Of The Organization While Maintaining A
Satisfactory Financial Situation.
1-4. Accounting Is A System For Keeping Track Of The Financial Status Of An Organization
And The Financial Results Of Its Activities. It Has Often Been Referred To As
The Language Of Business. The Vocabulary Used By Accounting Is The Language Of
Nonbusiness Organizations As Well.
1-5. Accounting Is Subdivided Into Two Major Areas: Managerial Accounting And Financial
Accounting. Managerial Accounting Relates To Generating Any Financial
Information That Managers Can Use To Improve The Future Results
Of The Organization. This Includes Techniques Designed To Generate Any
Financial Data That Might Help Managers Make More Effective Decisions.
Major Aspects Of Managerial Accounting Relate To Making Financial Plans For The
Organization, Implementing Those Plans, And Then Working To Ensure That
The Plans Are Achieved. Some Examples Of Managerial Accounting Include
Preparing Annual Operating Budgets, Generating Information For Use In
Making Major Investment Decisions, And Providing The
Data Needed To Decide Whether To Buy Or Lease A Major Piece Of
Equipment. Financial Accounting Provides Retrospective Information. As Events That
Have Financial Implications Occur They Are Recorded By The Financial Accounting
System. From Time To Time (Usually Monthly, Quarterly, Or Annually), The
Recorded Data Are
,Summarized And Reported To Interested Users. The Users Include Both
Internal Managers AndPeople Outside The Organization. Those
Outsiders Include Those Who Have Lent Or Might Lend Money To The
Organization (Creditors), Those Who Might Sell Things To TheOrganization (Called
Suppliers Or Vendors), And Other Interested Parties. These
Interested Parties May Include Those With A Particular Interest In Public
Service Organizations, Such As Regulators, Legislators, And Citizens.
Financial Reports Provide Information On The Financial Status Of The
Organization At A Specific Point In Time, As Well As Reporting The Past Results Of The
Organization‘S Operations (I.E., How Well It Has Done From A Financial Viewpoint).
,Chapter 3: Additional Budgeting Concepts 3-2
1-6. Finance Focuses On The Alternative Sources And Uses Of The Organization‘S Financial
Resources. Obtaining Funds When Needed From Appropriate Sources And The
Deployment Of Resources Within The Organization Fall Under This
Heading. In Addition, Finance Involves The Financial Markets (Such As Stock
And Bond Markets) That Provide A Means To Generating Funds For Organizations.
1-7. Yes. Achieving The Goals Of The Organization Requires Financial Planning.
Financial Management Provides Information For Managers To Use In Making Their
Decisions. It Helps Managers By Providing Information On The Likely Financial
Impact Of Each Proposed Alternative. It Also Provides Information About Financial
Stability, Efficiency, And Effectiveness.
1-8. Clearly, We Might Expect Some Public Service Organizations That Are
Proprietary, Such As Some Hospitals, To Earn Profits. But What About Other Public
Service Organizations Such As Charities? They Should Make A Profit As Well. Profits
Provide A Safety Margin Against Unexpected Costs, Provide Resources To Replace
Buildings And Equipment, And To Expand And Improve Services.
1-9. Federal Government (See Text Figure 1-1)
Individual Income Taxes
Social Insurance Taxes
Corporate Income Tax
State And Local Government (See Text Figure 1-4)
Sales And Gross Receipts Tax
Federal Government
Property Taxes
Individual Income Taxes
Health Sector (See Text Figure 1-6)
Private Insurance
Medicare
Medicaid
Other Government Programs
Not-For-Profit Sector (See Text)
Private Payments For Goods And Services
Government Payments For Goods And Services
Donations
1-10. Federal Government Spending Exceeded $6 Trillion In 2020 And State And Local
, Finkler, Financial Management for Public, Health, and Not-for-Profit Organizations 7e
Government Spending Was More Than $3 Trillion In 2018. In Contrast© , Tchqe Pgr d
Q e sps , 2w0a2s3
Q q
$21 Trillion In 2020. For More Up To Date Information, Examine The Statistical
Tables Of The Most Recent Economic Report Of The President, Which Is Available
Online.
1-11. The Reported Surplus Includes Both On And Off Budget Items. Social Security Taxes
Represent An Off Budget Item That Until Recently Raised More Revenue Than
Was Spent On Social Security Payments.
The Surplus In This Area Offset Other Government Losses, And Even Resulted In An
Overall Surplus For The Federal Government. This Is No Longer The Case, And, Over
Time, Trust Fund Resources Will Be Used Up To Provide Benefits. As The Federal
Government Will Not Have Access To The Excess Resources From Social Security, It Will
Have To Borrow And Increase The Total Level Of Federal Debt, Unless Revenues Or
Spending Are Changed.
1-12. Sometimes Gifts Come With Strings Attached. If The Conditions Of The Gift Create A
Burden That The Organization Does Not Want To Accept, Or Somehow Requires The
Organization To Work In Opposition To Its Mission, It Might Turn Down The Gift.
1-13. The World Bank Has Defined Ngos As "Private Organizations That Pursue
Activities To Relieve Suffering, Promote The Interests Of The Poor, Protect
The Environment, Provide Basic Social Services, Or Undertake Community
Development" (World Bank Operational Directive 14.70). Ngos Are Quite Similar To
The Not-For-Profit Organizations. They Are Primarily Mission-Focused
Rather Than Profit- Focused. Ngos Fall Into Three Main Categories:
Community-Based, National, And International.
,Chapter 3: Additional Budgeting Concepts 3-4
PLANNING
Chapter 2 FOR
SUCCESS:
Questionsfor Discussion
2-1. Planning Helps The Organization By Causing Its Employees To Think Ahead And
Anticipate Change. This Is Done By Establishing Specific Goals And Objectives,
Communicating Those Objectives To The Individuals Who Must Achieve Them,
Forecasting Future Events, Developing Alternatives, Selecting From Among
Alternatives, And Coordinating Activities. The Activities Are Summarized In A Document
Called A Budget. The Budget Describes What We Hope To Achieve And The Resources
That Will Be Used To Carry Out The Organization‘S Activities.
2-2. The Organization‘S Mission Represents Its Reason For Existence. For Public,
Health, And Not-For- Profit Organizations, Finances Often Become A Means
To An End, Rather Than The End Itself. This Mission Cannot Solely Be Making
Profits. Financial Management Must Help Balance The Focus On Profit With The
Public Service Elements Of The Organization‘S Mission.
© CQ Press, 2023
2-3. Strategic Plans Translate The Mission Of The Organization Into An Approach Or Set
Of Approaches That Will Be Used To Accomplish The Mission,
And A Broad Set Of Goals That Need To Be Attained To
Achieve The Mission. Strategic Plans Set The Organization‘S Long-Term Direction.
They Often Do Not
, Finkler, Financial Management for Public, Health, and Not-for-Profit Organizations 7e
Have Specific Financial Targets. However, They Set The Stage For The Specific,
Detailed Budgets That
Will Be Established To Achieve The Organization‘S Goals.
2-4. Whereas The Strategic Plan Establishes Goals, The Long-Range Plan Considers How To
Achieve Those Goals. Long-Range Plans Establish The Major Activities That Will
Have To Be Carried Out In The Coming Three To Five Years. This Process
Links The Strategic Plan To The Day-To-Day Activities Of The Organization.
Organizations That Do Not Prepare A Long-Range Plan Are Often Condemned To
Only Sustain Current Activities, At Best.
2-5. Budgets Establish The Amount Of Resources That Are Available
For Specific Activities. However, Budgets Do Not Merely Limit The Resources
That Can Be Spent. They Represent The Detailed Plan That Supports The
Organization‘S Efforts To Achieve Its Mission, And Help The Organization
Determine And Achieve Its Goals And Objectives. The Budgeting Process Is
One Of Exploring Possibilities. Organizations Determine What Things They Can
And Cannot Do. They Examine Alternatives And Choose Those
That Are Likely To Yield The Best Results. They Become Attuned To Possible
Problems And Can Work To Find Solutions. Budgeting Forces Managers To Think
Ahead, To Have Clear Expectations Against Which To Measure Performance, And
To Coordinate The Activities Of The Organization So That Everyone Is Working
Toward A Common Purpose.
Budgets Are Also Used To Control Results. That Is, Budgets Not Only
Create Plans, But They Are Also Used To Help Accomplish
Those Plans. This Is Done By Comparing Actual Results To The Budget. Looking At
Results, We Can Assess What Needs To Be Corrected. How Good A Job Did The
Organization‘S Management Do? How Well Did The
Organization Itself Do? In Order To Evaluate Performance, One Must
Have A Standard Or Benchmark To Compare With Actual Results. The Budget
Establishes The Organization‘S Expectations.
2-6. An Organization May Consider Undertaking An Activity That Was Not Planned For
When The Annual Budget Was Prepared. At Any Time An Organization Can
Prepare A Special Budget For A Specific Purpose. Appropriate Approval Should Be
Obtained Before Implementing The Budget.
2-7. An Organization‘S Budgets Are Often Organized Into A Strategic Plan,
Long-Range Plan, Master Budget, And Special Purpose Budgets.
2-8. Budgets Present Specific, Measurable Goals. An Individual Is Much More Likely To
Work Efficiently If There Is A Target To Shoot For, Assuming That The Target Is
,Chapter 3: Additional Budgeting Concepts 3-6
Not Unrealistic.
2-9. Most Employees Would Prefer Salaries That Are Substantially Larger Than T©HecAqmporeusnst, S2023
q q
They Are Currently Receiving. Organizations Lack The Revenues To Pay For Those
Raises. Most Managers Would Like More Office Space With New Furniture
And Remodeled Facilities. They Would Certainly Like More Staff To Carry Out
Existing Functions.
Organizations Must Make Choices Concerning How To Spend Their Limited Resources.
2-10. Depending On The Specific Organization, The Volume Of Services Provided May
Have Plunged Or Soared. This Would Have Resulted In Substantially More Or Less
Revenues Than Expected. If Revenues Plunged, Then We Would Have Had
More Staff Than Needed, Without The Resources To Pay
That Staff. We May Have Found Ourselves Unexpectly Unable To Pay Rent On Our
Facilities. Even If Revenues Were Up, We May Have Been Faced With Soaring Costs
For Items In Short Supply. A Budget Is A Very Important Tool. However, We
Should Never Assume That It Tells Us Exactly What Will Happen. Managers Need
To Be Flexible, Observe Events That May Cause Actual Events To Differ From The
Budget, And Be Prepared To Act Quickly To Take Mitigating Actions.
2-11. It Is Very Tempting For A Manager To See Significant Variations From The Budget, And
Want To Revise The Budget. Generally Once A Budget Has Been Approved
By The Governing Body Of The Organization We Do Not Go Back And Revise The
Official Budget, Even If We See Significant Variations From The Budget. However, As
A Manager Starts To See That Something Has Happened Which Will Make Results Very
Different From Budgeted Expectations, The Manager Has To Act To Minimize The
Negative Impacts Of The Changes On The Organization. For Example, If You Manage A
Museum, And The Number Of Customers To Your Museum Café Has
Plunged, You Have To Make Adjustments To
Staffing And Food Purchases To Minimize The Losses That You Will Incur. If Revenues
Are Insufficient To Pay Rent, You Have To Negotiate With Your Landlord For A
Moratorium On Rent Payments. If You See That There Is No Way You Can
Cover Even Severely Reduced Costs Given Your Drop In Customer Volume, You Need
To Quickly Gear Up Fund-Raising Activities To Bring In More Donations To Offset
Losses In Sales. The Budget Is Still A Valuable Tool, Because By Comparing
Your Original Expectations To The Actuality You Can Determine Things Such
As How Much Additional Donations You Will Need To Keep The Organization
Afloat.
2-12. The Manager Should Make Sure That It Is In The Staff‘S Best Interests To Do The
Things That Are In The Organization‘S Best Interests. The Key Is To Establish A Means
Of Making The Normally Divergent Desires Of The Organization And Its
, Finkler, Financial Management for Public, Health, and Not-for-Profit Organizations 7e
Employees Become Convergent, Or Congruent. Organizations Often Achieve
Congruence By Setting Up A System Of Incentives.
2-13. Financial Incentives Include Retaining One‘S Job And Receiving Good Raises And
Bonuses. Bonus Systems Have A Variety Of Problems. Some Bonus Systems Reward All
Employees If Spending Is Reduced. This Is Good Unless Workers Can Restrict
Volume, Thus Reducing The Number Of Units Of Service Provided In Order To Save
Money. Such Behavior Would Likely Reduce Revenues By A Greater Amount Than
It Would Save Costs. Also, If Everyone Gets A Bonus, Then No One Feels That
Individual Actions Have Much Impact, And Each Individual May Feel That She
Or He Does Not Have To Work Particularly Hard To Reap The Benefits Of The
Bonus. If Bonuses Are Given Only To Some Employees, It May Create
Jealousy And Discontent. It Is Also Possible That It May Create ACompetitive
Environment In A Situation In Which Teamwork Is Needed To Provide Quality Care.
,
