Copyright, 1980 Temple University Press; Copyright,
1995 Roger A. Lohmann. All Rights Reserved
In nonprofit organizations, a legal and ethical
responsibility of management to report upon and justify program performance and
achievements.
ACCOUNTABILITY, COMMUNITY
That
aspect of general accountability most concerned with
the effectiveness and legitimacy of an agency and its programs from the
viewpoint of the community.
ACCOUNTABILITY, FISCAL
Direct
legal and ethical obligations for the appropriate use of funds
by an agency to those from whom it receives funds.
ACCOUNTABILITY, INTERNAL
Responsibility
for the appropriate use of shared resources by members of an agency.
The American Institute of Certified Public Accountants
defines accounting as "the art of recording, classifying, and summarizing
in a significant manner in terms of money, transactions and events which are,
in part at least, of a financial character, and interpreting the results
thereof."
Procedures to assure the accuracy of accounting records, safeguard assets and authorize transactions.
ACCOUNTING CYCLE
The regular fiscal period of a non-profit corporation
between closings. Usually one year. (See also budget cycle)
ACCOUNTING RATE OF RETURN
Ratio of the profitability of an investment comparing the profit “returned” or generated compared to the amount invested.
ACCOUNTS PAYABLE
A liability account reflecting total amounts owed by the fund to others.
A sub-fund budget showing balance payable at the beginning
of a fiscal period, expected purchases and payments during the period, and
closing balance of payables.
ACCOUNTS PAYABLE MANAGEMENT
Explicit
development of a management strategy for processing payable accounts.
An asset account reflecting the total amounts owed to the fund.
A sub-fund budget reflecting beginning balances of a fiscal period, expected new receivables and collections,
and expected dosing balances.
ACCOUNTS RECEIVABLE MANAGEMENT
Explicit
development of a management strategy for processing payable accounts.
ACCRUAL ACCOUNTING
An accounting system increasingly common among human service
agencies. Transactions are entered as they are made, which necessitates
distinguishing expenditures and cash disbursements.
Accrual accounting generally results in more accurate statements of an agency's
financial position than does cash accounting.
Total depreciation related to a fixed asset taken over the entire period the asset has been owned.
ADMINISTRATIVE COSTS
Costs that are incurred from the overall direction of
the organization, general record-keeping, business management, budgeting,
general board activities, and related purposes (accepted definition, AICPA'S
Audit ).
A sub-fund budget showing administrative
costs (See also overhead budget.)
Non-profit organization of paid employees together
with one or more funds
and programs.
AICPA
The
American Institute of Certified Public Accountants. AICPA was the first group
to establish accounting standards for nonprofit organizations in 1974. More recently,
the National Accounting Standards Board (NASB) has
become the authoritative standard setter for all major categories of nonprofit
accounting standards.
ALLOCATION
The act
of assigning resources to an entity (agency, budget,
department, program) or group of entities. In complex situations, allocation
decisions can be distinguished from distribution.
AMORTIZATION
Allocation of the cost of an intangible asset over its entire lifetime.
ANNUALIZED COST METHOD
An
approach to comparing capital assets with
differing lifetimes. The net present cost of each alternative is determined and
translated into a periodic payment for each year of the asset’s life to find
the cost/year.
ANNUITY
Any series of payments or receipts in a fixed amount and spaced over a series of equal time periods.
APPRECIATION
An
increase in the value of an asset over time. For
example, real estate owned by an agency may appreciate steadily over the years.
The opposite of depreciation.
A term used for the public (congressional or
legislative) allocation of funds to various entities. It is essentially
synonymous with budget making in this context, since
anticipated expenditures are frequently the basis on which appropriations are
made (although this need not be so).
APPROPRIATIONS SYSTEMS
Public budget systems in which membership is established
by law and participation of members is assumed. (See also base,
increment budget systems. )
An inter-organizational decision system. (See also budget system ).
An accounting term for what is owned or held by an
organization and that has a money value.
A periodic (usually annual) investigation of the
financial statements of an agency to determine the accuracy, fairness and the
degree to which they adhere to standard practices of reporting and recording.
An audit may be internal or external, independent or staff-directed.
AUDIT EXCEPTION
This term is used for items identified in an audit report as violations
of standard accounting practice. These may be technical problems only, or more
serious matters of malfeasance, embezzlement, or other illegalities.
AUDIT REPORT
A
written statement, following a prescribed format, and signed by an authorized
accountant (A CPA or LPA) to indicate that s/ he has examined the records of a
particular entity and finds that the accompanying
financial statements are a true reflection of its financial position.
Accounts receivable from customers, clients or debtors determined to be uncollectible.
BALANCE SHEET
A
financial statement designed to show the overall financial position of an
agency or firm at a given moment. In commercial firms the standard format of
the balance sheet is total assets = total liabilities plus total capital
BALANCED BUDGET
A budget in which the total revenues equal or are in
balance with" total expenditures.
( 1 ) that portion of a budget request to which an agency is assumed by others to have a presumed or
privileged claim; (2) operationally, an amount equal to last year's appropriation.
BENEFIT
That which is gained or increased by an action or
transaction. An addition of something valuable or of resources.
A form of security issued by various levels of
government to generate revenue over and above that raised by taxes. Bonds
typically are used to finance capital construction, or other long-range,
durable operating expenditures
BONDED INDEBTEDNESS-
The degree and amount of an agency S debt
(liabilities) covered by bonds . Ordinarily, in bankruptcy cases, or other liquidation
proceedings, bonded indebtedness is honored prior to all other claims.
BOOKKEEPING
The task
of making entries in accounting records, or "books." A
paraprofessional task usually performed by clerks.
BREAK-EVEN ANALYSIS
A set of
techniques for determining the minimum units of service necessary to recoup the
full cost of the service at the same volume.
BREAK-EVEN POINT
Point at
which income or revenue equals
expenditures.
BREAKING EVEN
The
primary fiscal objective of non-profit organizations. The process of matching
revenues and expenditures in a budget or in operations.
(1) a plan of future or anticipated activities, stated
predominantly in fiscal terms; (2) a document listing words and numbers in
paired sequences to reflect anticipated expenditures by category (and
anticipated income, either implicitly or explicitly) for a given period of
time.
BUDGET, ACCOUNTS
PAYABLE
BUDGET, ACCOUNTS RECEIVABLE
See ACCOUNTS RECEIVABLE BUDGET.
BUDGET, ADMINISTRATIVE COST
See ADMINISTRATIVE COST BUDGET.
BUDGET, CAPITAL IMPROVEMENTS.
See CAPITAL IMPROVEMENTS BUDGET.
BUDGET, CASH
See CASH BUDGET.
BUDGET, COSTS OF DEBT
BUDGET, DEPARTMENTAL
BUDGET, DIRECT LABOR
BUDGET, FUNCTIONAL
BUDGET, INCREMENTAL
BUDGET, INTERNAL
See INTERNAL BUDGET.
BUDGET, LINE-ITEM
BUDGET, MARGINAL
See MARGINAL BUDGET.
BUDGET, OLD YEAR/NEW YEAR
BUDGET, PRODUCTlON
BUDGET, PROFESSIONAL AND PARAPROFESSIONAL SERVICES
See PROFESSIONAL AND PARAPROFESSIONAL. SERVICES BUDGET.
BUDGET, PROGRAM
See PROGRAM BUDGET.
BUDGET, PROGRAM MATRIX
BUDGET, PROJECT
See PROJECT BUDGET.
BUDGET, SOURCES OF REVENUE
See SOURCES OF REVENUE BUDGET.
BUDGET, SUPPLIES
See SUPPLIES BUDGET.
BUDGET, UNIT COST
BUDGET, ZERO-BASED
Process of examining items in a budget, and
constructing or reconstructing budget documents. (See also budget
making.)
A sequence of events usually incorporating a request,
publication, or circulation of criteria or guidelines; deadlines; formal
presentations; budget
analysis ; and decisions. (See also accounting cycle.
)
A fund or set of funds for which a budget is prepared and
organized. One of the oddities of nonprofit financial management is that a
budget entity may or may not be a meaningful program
unit.
Rules for organizing the information contained in budgets. (See also fund budgets, sub-fund budgets,
and supra-fund budgets.)
Textual document detailing policies, goals, principles, performance expectations or other guidelines upon which a budget is based.
BUDGET MAKING
Interpersonal negotiations and decision-making that
convert budget
documents and decisions into authoritative controls over agency operations and
staff performances.
Arena in which the primary focus of decision-making is
on budget making.
BUDGET WORKSHEET
(See consolidated budget worksheet.)
BUDGETARY PROCESS
See budget cycle.
BUDGETING
The
phase of financial management concerned with preparing a de tailed plan for the
future expenditure of organizational funds in a manner designed to coordinate
effort, maximize efficient use of resources, and attain goals. Incorporates budget analysis, and budget making.
BUDGETING, CAPITAL
See Capital Budgeting.
BUDGETING, PROGRAMMING, PLANNING SYSTEM
See Programming-Planning-Budgeting-System
Durable things owned by an organization the lifetime value of which extends longer than the year in which they were acquired.
CAPITAL BUDGET or
CAPITAL IMPROVEMENTS BUDGET.
A plan for the future generation and expenditure of
capita (land, labor, and buildings). It is most likely to be used in human
service agencies in the context of a major construction projectbuilding or
purchasing a new building, constructing a summer camp, etc.or in the purchase
of expensive equipment.
Process of proposing or scheduling the purchase,
construction or acquisition of capital assets
with attention to the justifications and economic or financial implications for
the master budget.
CAPITAL INVESTMENT
A capital asset acquired or of interest principally
because of its potential profitability or revenue generation. See endowment.
CAPITALIZATION
In non-profit settings, a term used loosely for the
process of acquiring assets necessary to begin a program or service. See also seed money or front
money
An accounting system once prevalent among agencies in the voluntary sector.
Transactions are entered in journals only when cash is
actually paid out or taken in. The principal virtue of cash accounting is its
simplicity, although it can badly misstate an agency's financial position.
CASH FLOW
The actual movement of money payments to, through, and
from an agency. This is not to be confused With income and expenditure flow,
which, in an accrual based system, records not only cash but also credit
transactions.
CASH FLOW ANALYSIS
A set of procedures for plotting the patterns of
fluctuation in cash assets
at fixed intervals over an accounting cycle or part
of a cycle.
CATEGORICAL GRANTS
Transfer
payments in consideration of some specific objectives or purposes agreed to by
the grantor and the recipients (grantees). Public assistance, and most other
federal programs, are categorical grants.
Bank deposit with a fixed interest rate and maturity date.
COLLATERAL
Specific asset pledged to a lender as security for a loan.
COMMUNITY
ACCOUNTABILITY
A method of calculating interest in which prior interest earned is added to the principal for computing current interest earned.
CONSOLIDATED BUDGET
WORKSHEET
A budget format for consolidating a number of budget
for different funds into a single, unified agency
perspective.
CONSTITUENCY
Aggregate
of persons and organizations whose support can be depended upon or mobilized
when needed, for example, at key times in the budget cycle.
Legally, an offer and an acceptance. In social work, it
is a general term for an agreement between a worker and client, and in economic
terms, an agreement affecting exchanges of goods and services. In recent years,
the federal government has placed less emphasis on grants and more on performance contracts.
In Break Even Analysis
the amount by which the price exceeds the variable cost.
COST
A term with many nuances of meaning in accounting and
economics. Usually, that which is given up in order to gain an objective. For
most purposes, measured by expenditures or outlays But see
also opportunity cost.
Individual
or organization to whom the organization owes money.
Cash or
other assets easily (and quickly) converted into cash, particularly during the
current year. Short-term or near-term assets.
CURRENT LIABILITY
Obligations
expected to be paid in the current year.
The left side of a ledger account. The term has no
other consistent meaning. A debit represents an increase or a decrease in the
account, depending on its location. (See also credit).
DEBT MANAGEMENT
That aspect of financial management concerned with the
tasks incidental to the processing or handling of an agency's debt.
DECISION-MAKING
Deliberate,
intentional choice, particularly between a range of identified alternatives.
DECISION-MODELS OF BUDGET SYSTEMS
General
or theoretical models of budget systems which focus
primarily upon characteristic or critical decisions. (See incremental
budget; performance budget; program
budget; programming; planning-budgeting
systems; zero-based budget).
DEFICIT
A
financial condition in which expenditures exceed income during a fiscal period. The
ability of nonprofit organizations to sustain
deficits is very limited, and often wholly dependent upon the extent of their reserves.
DEFICIT SPENDING
Expenditures in excess of revenues.
.
DEPOSITS
(I) Money placed in a bank account, and constituting a
claim upon the bank. (2) The act of entering money into a bank account.
DEPOSIT TICKET
A receipt customarily given by banks as evidence of a
deposit. Such receipts should be kept as documentation of journal entries of bank
deposits.
DEPRECIATION
A
decrease in the value of a capital asset ; over time. Ordinarily handled
incrementally, with a standard portion of the full value of the asset
subtracted each year of the useful life of the asset.
DEPRECIATION EXPENSE
Portion
of the original cost of a capital asset allocated as an expense each year.
DIRECT COSTS
COSTS
that vary directly with the output of an agency or program. Also known as
variable costs.
A method of cost allocation in which support center costs are assigned to mission centers.
DIRECT LABOR BUDGET
A SUB-FUND corollary of the UNIT-COST BUDGET that
projects personnel costs of service by identifying the "direct labor"
content of producing a unit of service.
Interest rate used in discounting an asset.
DISCOUNTED CASH FLOW
A method of comparing cash flows in different time periods by discounting all to the present time.
DISCOUNTING
Method for determining the present value (PV) of an investment or cost by subtracting interest that could be earned from a future payment to determine its worth in the present time.
DIS-INTERMEDIATE
Remove an intermediary.
DONOR
The aggregate of persons and organizations that
demonstrate their support for a NON-PROFIT organization through financial
contributions.
DOUBLE-ENTRY BOOKKEEPING
A system of financial record-keeping in which every
transaction is recorded twiceonce as a debit and once as a credit. Typically,
the system of accounts in a double-entry set-up would include ASSETS,
LIABILITIES, FUND-BALANCE (or surplus or capital), INCOME, and EXPENDITURES
categories.
EARMARKINGS
A jargon term for the process of designating REVENUES
for certain specific purposes. (The term itself is traceable to the practices
of livestock sorting pens, in which animals are sorted into different groups
and classes by dye marks on their ears.)
EARNINGS
Money payments to agency employees for work performed.
ECONOMIES OF SCALE
A term used to describe the tendency of certain costs
of producing goods and services to increase less than proportionately with
output. For example, an under-utilized therapist could increase his total
caseload from ten to twentythus effectively doubling his production of service
with no increase in cost.
EFFECTIVENESS
A measure of the achievement or attainment of goals
basic to the determination of efficiency. To the extent that a program fails to
accomplish its objectives, there is little, if any, basis for establishing its
efficiency.
EFFICIENCY
A criterion of performance in the production of goods
and services in which the solution or strategy chosen involves the least
expenditure of resources necessary for goal attainment.
ENTITY
See budget entity.
EQUITY
1) A
principle in taxation that taxes should be levied so that the tax burden is
distributed evenly or fairly among those being taxed. (2) In business, the residual
value of assets after non-shareholder liabilities are satisfied. Since it is
related to the investment and gains of stockholders (of which there ordinarily
are none in human service agencies) the term has little application in this
second sense to our concerns. (See non-distribution
constraint
After the fact, retrospective assessment and critical
analysis of the worthwhileness of program. or service activities.
EXCEPTIONS, PRINCIPLE OF
A list of individual revenue or expenditure items or variances that differ from budget projections by more than a specified amount.
EXPENDITURE
An outlay or commitment of an organization's resources.
Usually recorded in the accountingsystem as a
reduction of assets or as a liability.
EXPENDITURE- CONTROL
One of a
number of possible management control strategies, in which an effort is made to
restrict or eliminate those activities that result in outlays beyond
a determined level.
EXPENDITURE STATEMENT
A
listing of the total expenditures in a given period, usually organized by a
program, function, or other rational scheme. Also known as an expense statement
for non-profit agencies, it may be combined with another statement into a single
statement (sometimes mistakenly called a "budget.")
EXTERNAL AUDIT
An audit
by an outside auditor, usually someone with professional accounting credentials
(a CPA or LPA). Two types of external audits are of greatest interest in the
human servicesindependent audits, required by many state not-for-profit
legislation, and audits by a grantor or funding source.
Charges to clients based upon a fair method of
allocating all outlays
proportionately to all who benefit.
FEASIBILITY STUDIES
Assessment
of the opportunity costs of a proposed solution to a problem.
FEDERATED FUNDING
FEE BUDGET SYSTEM
One of
the major types of budget system in which the primary
concern is with an internal budget that predicts the
effects of fee income on program actions.
FEEDBACK, PRINCIPLE OF
Money payments collected from clients, significant
others and "third party payees. (See also Participation Fees; Flat Rate Fees; Sliding Scale
Fees; Fair-Share-Of-Cost Fees; Third Party Fees.)
F.l.F.O.
First
In, First Out. A system of inventory in which items are circulated so that the
"First In" (the first added to inventory) are also the "First
Out" (the first used).
FINANCE
A
field of knowledge of the alternative sources and uses of organization
resources.
FINANCIAL ACCOUNTING
Information systems suitable for recording, summarizing and reporting financial information, and identify financial events and measure their impact.
The cash budget and capital budget
combined.
FINANCIAL INTERMEDIARIES
Also
known as fiscal intermediaries, or third-party funding. " Private
organizations such as Blue Cross-Blue Shield, for example, act as fiscal
intermediaries in the medicaid program.
In non-profit human service agencies, the subset of
management concerned with control and intentional use of money and other scarce
resources to further organizational goals consistent with law, ethics, and
community standards.
FINANCIAL PLANNING
Preparing
a set of financial decisions for action in the future that are directed at achieving
program goals with special attention to financial means.
FINANCIAL RATIOS
Specific
standardized statements of the relationship between two variables or factors
that are useful for analytic or decision-making purposes.
FISCAL
FISCAL CONTROL
A system
of rules, criteria, understandings, and contracts, designed to exercise control
over the handling of the assets of a fund.
The time period which is the basis of preparing
budgets and financial reports.
FIXED ASSETS
Those assets, such as land or buildings, that are not
ordinarily susceptible to sudden or drastic fluctuations in either quantity or
value.
FIXED CHARGES
A standard or universal fee assessed clients or users
of a service, regardless of other criteria, such as age, sex, "need,"
or ability to pay.
A cost that does not vary, in the short run, with
variations in output. Fixed costs are ordinarily those that will be 'borne by
an agency even when it will not bear outputs.
Charges to clients established at a fixed rate that is
assessed to all who receive similar services.
FLEXIBILITY PRINCIPLE
OF
FLEXIBLE BUDGET
A budget
based on different levels of anticipated activity, e.g., a plan of agency
activity with and without a major demonstration grant.
FLOAT
The
interim from when a check is written (placed in circulation) until it clears
the bank.
FLOATING DEBT
A
short-term (or non-funded) debt, as opposed to a funded debt, which is secured
by bonds or other securities.
See seed money.
The sum of all costs associated with a cost objective. The total of direct
costs and indirect costs.
FUNCTIONAL BUDGET
Expenditure items are categorized by
"functional" categories such as personnel, supplies, or travel.
A fund is an asset or
group of assets, together with associated accountabilities (liabilities and
equities), that are related to an activity or purpose and maintained as an
accounting entity (AICPA definition).
FUND ACCOUNTING
The system of accrual accounting
in which accounting records are maintained by funds. Most governments use this
system. Multi-funded agencies in the human services often maintain a separate
fund for each major grant or funding source.
FUND BUDGETS
Budget documents formulated to guide or assist in fund decisions.
Budgetary decisions affecting a fund as a whole.
FUND DRIVES
See campaigns .
FUNDED DEBT
Long-term
debt secured by bonds or other securities. Generally, for long-term borrowing
-- to construct a new building, etc. A secured or funded debt carries lower
interest and is less expensive than a floating debt.
Administrative process of identifying, soliciting, and
obtaining needed income or revenue through grants, fees,
or other means.
One of three major cost categories in the AICPA
standards. The other two are administrative cost and program cost.
FUNDRAISING AGENT
A staff member, contractor or representative of a
non-profit organization whose responsibility is to engage in fund-raising
activities, especially, grantsmanship, or appeals to large donors, or campaigns.
GENERAL AUTHORIZATION
A standing approval of spending.
GRANTOR AUDIT
The
solicitor general, the office of management and budget, and some grantor
departments in the federal government may conduct periodic audits of agencies.
Also, other grantors may conduct audits of the financial records of recipients.
Unilateral transfer payments from one government,
foundation, or agency to another agency or program, usually y in support of
service delivery or some other activity. Two principle types of grants are
found in the human services
categorical and non-categorical. See also contracts.
GRANTSMANSHIP
A jargon
term for the skills involved in locating money and obtaining it from sources in
the form of grants. A type of fund-raising
activity
HUMAN CAPITAL
A term
used to designate the skills and abilities possessed by persons that perrnit
them to earn an income.
HUMAN SERVICES
Services
and programs directed at contributions to the socialization and development of
persons; social care for those incapable of full autonomy; counseling and
guidance; support of self-help and mutual-aid activities; and the planning,
organizing, financing, evaluation, and dissemination of information about such
activities.
Generally, income is the flow of money or goods to an
individual, firm or agency. It is distinguishable from revenue , which is only the
money portion of income. However. in most non-profit human service usages, the
two terms are usually interchangeable.
INCOME STATEMENT
A basic financial statement designed to list the basic sources of income (or revenue) of an agency. Depending on the purposes of the statement, its audience, etc., listings may be by program, type of income (e.g., fees and grants), and so forth. Since 1974, the AICPA's Audit has endorsed the incorporation of income, or operating statements, into a single generic "statement of support, revenue and expenses, and changes in fund balances." In all likelihood, many agencies will continue to use separate income statements for some time, despite the AICPA position. This new format appears to be a significant technical advance in program budgeting.
An historical method of budget-making in which a base of funding established previously is assumed, and
decisions are addressed to the size of an increment or increase. (Same as
MARGINAL BUDGET.)
INDIRECT COST
Costs
assigned to an object or responsibility center from
support centers not directly involved in the
production or delivery of the object.
INDEPENDENT AUDIT
An audit
made by an accountant or accounting firm !, specializing in such
investigations. Usually a third party. The audit report of an independent audit
may be legally required to be available to the public.
INDIVIDUALITY, PRINCIPLE OF
See principle of individuality;
INPUT-OUTPUT ANALYSIS
A type
of inductive, empirical economics created by Wassily Leontief, in which the
final outputs of goods and services to consumers are related to the
intermediary and initial inputs.
INSURANCE
A
procedure for pooling risks. The most common form is a contract to pay premiums
to a company in exchange for the promise of compensation in the event of
specified circumstances. Social Security is intended to be a type of social
insurance.
An audit made by members of an agency's accounting
staff. Often, a kind of self-study. The work of the public wel&re quality
control staff is an example.
A budget format developed by an organization or department
for internal management use only.
INTERNAL CONTROL
Accounting checks and balances to minimize clerical errors and the possibility of fraud and embezzlement. A combination of administrative and accounting controls.
INTERNAL RATE OF RETURN (IRR)
Discounted
cash flow measurement to determine the rate of return for a specific project or
program.
INVENTORY
Stocks
or stores of goods used as raw materials in production, and of work in progress
and finished goods. In the human services, inventories are ordinarily of two
types
(I)
office supplies and materials, and (2) food, clothing, linen, and other
supplies incidental to feeding or clothing clients, or operating residential
programs.
INVENTORY ANALYSIS
A set of
techniques designed to determine optimum levels of inventories.
INVENTORY CONTROL
Procedures
and rules established to maintain adequate management control over items in
inventory.
INVESTMENT
(I) A
sacrifice of resource in the present followed by subsequent benefits or gains.
(2) An expenditure with the explicit expectation of benefit or gain.
A book of original entries. In journals, every transaction
is recorded when it is completed, if the agency uses accrual accounting, and
when il is paid for or money is received, if the system is cash based.
LEDGER
A book of accounts. Each account in a ledger is
recorded on a separate page, and summarizes a large number of journal entries.
Ledger pages are ordinarily divided in half, the left recording the debits and
the right the credits.
"What is owed." Claims or obligations
against the assets
owned by an entity.
L.l.F.O.
Last In,
First Out. An inventory circulation method in which the items received last go
out first.
A budget format in which program, agency, or fund
entities are summarized as a single entry or "line item." See fund decisions.
Management determined expenditure guidelines
or "credit limits" assigned to subordinates as part of implementation
of a budget program.
Plan that covers a period of time longer than the
current fiscal year.
a.k.a. strategic planning.
MANAGEMENT
Administration. Some sources distinguish
administration from management, usually suggesting that management is the narrower,
more technical aspect of administration. The distinction is, however, a logical
rather than an empirical difference, and is of questionable value.
A decision making approach in which attention is
focused on exceptions, or cases which fall far from the norm or average.
(Conceptually related to the statistical concept of outliers.)
MARGINAL BUDGET
See incremental budget.
The change in the total costs of production resulting from an increase (or decrease) of one unit produced.
MARGINAL COST ANALYSIS
Use of marginal costs to assess the impact of a decision.
MASTER BUDGET
Set of
all the major budgets in an organization or unit, such as the operating budget, long-range budget, capital budget, cash
budget and others.
MATCHING
The
process of linking a set of revenues with other revenues
in a revenue center and/or a set of associated expenditures in a responsibility
center.
MATURITY
Due date, end date or competion date of a loan arrangement.
Thal
part of economics concerned with the study of individual decision
unitsconsumers, households, and firms. The central concept of micro-economics
is the market.
The overall purpose or most general goals of an organization.
Formal,
written statement of the overall purpose or most general goals of an
organization.
Costs
reflecting both fixed costs and variable costs.
MODIFIED CASH BASIS
A set of accounting assumptions by which routine expenditures are recorded on a case basis but capital assets are recorded gradually over the years that they are used.
MORTGAGE
A loan secured by a specific asset.
MULTI-FUNDED AGENCY
Literally,
an agency with more than one fund.
An agency with a number of different revenue sources.
A multi-step cost allocation
approach in which all support centers are
allocated to other support centers and mission centers and then remaining support center costs are allocated to mission centers through
one or more additional steps.
The National Accounting Standards Board.
NET PRESENT COST (NPC)
Aggregate present value
of a series of payments to be made in the future.
NET PRESENT VALUE
(NPV)
Present value of a series of receipts less the present value of a series of related
payments.
NET WORKING CAPITAL
Current assets less current liabilities.
NEXT-BEST ALTERNATIVE
An approach to assessing opportunity
costs that involves comparison with the second choice, or next-best
alternative.
NON-CATEGORICAL GRANTS
Transfer payments, usually between levels of
government, for no specific objective or use. Revenue-sharing is such a grant.
The general rule applied to nonprofit entities which states that
surpluses or "profits" may not legally be distributed to stockholders
or share holders.
Legal entity created by the state, under control of a
board of directors, and forbidden by law to distribute its assets as profits, gains or
dividends. Assets of a nonprofit corporation are, by consensus, subject to the non-distribution constraint
In cost allocation, a responsibility center that does not generate revenues from its activities. See support center.
NOTES PAYABLE
Balance sheet item summarizing loans covered by notes, or contracts-to-pay.
OFF-BUDGET
Revenue or expenditure items not included in the normal federal or state (or other) budget.
OLD YEAR/ NEW YEAR
TABLES
Any Iinancial report showing current items u ith
comparable items from the preceding fiscal period for comparison.
OPERATIONS RESEARCH
An interdisciplinary field in which optimal solutions
to management problems are sought. Critical path analysis, inventory analysis,
linear programming, and program planning and budgeting are among the most
widely known "o.r." techniques. The general model of operations
research is systems analysis.
An approach to measuring cost in terms of the value of
alternatives that must be foregone in order to achieve an objective. See next-best alternative.
Results that an organization is expected to achieve.
OUTLAYS
An approach to measuring cost in which the cost of a
commodity is defined as the expenditure of resources necessary to obtain it.
OUTPUTS
The number of units of service provided.
OUTPUT BUDGETING
Another term for PPBS (Program-Planning-Budgeting
Systems.)
See indirect costs.
OVERHEAD BUDGET
Another term for Administrative Cost Budget. A sub-fund
budget
The cost base divided
by the cost pool.
PARTlClPATlON FEES
Charges to clients based upon the fact of their
participation in a service or activity.
P.A.Y.E.
"Pay As You Earn. " Taxes collected by
regular, periodic payroll deductions.
A capital budgeting
measure that estimates the number of years until the revenues
of a project exceed the expenditures.
PAYROLLTAXES
A tax levied upon employers' wage payments. The
state-federal unemployment compensation system is built upon such a tax.
A budget format and system in which past accomplishments form the
basis for decisions about future resources.
An agreement between two
or more parties than one or more of them will provide a service or perform some
other activity in exchange for some payment or reward from the other(s).
PERSONNEL
The employees of an
organization.
PERSONNEL ADMlNlSTRATlON
The subfield of
administrative science devoted to the personnel or manpower requirements of an
administered organization. It is concerned w ith topics such as job analysis,
work-load analysis, recruitment and selection of employees, career advancement
and planning, and related issues. Affirmative action is largely a personnel
issue.
Program Evaluation and
Review Technique. A "time-budgeting" method useful in programming and
project scheduling and involving many interdependent tasks.
A PERT method using
time-cost data.
PETTY CASH
A fixed-limit amount
of cash fund available to staff members for small, non-routine, or emergency
purchases. All disbursements from such a fund should be supported by petty cash
vouchers and / or receipts. When the petty cash fund is exhausted the totals
should be posted in the appropriate journals (with the vouchers as
documentation and a check for Ihe amount of the vouchers drawn to replenish the
fund). Such a fund saves a larg number of small checks and journal entries.
PHASE OUT
Controlled and
sequential termination of defunded programs.
PLANNED FISCAL REORGANlZATION
Planned and
intentional realignment of fund entities.
PLANT FUNDS
Unexpended grants and appropriations held as cash or
temporary investments for future purchases of plant or equipment, or the amount
of equipment, buildings, and other tangible fixed assets held for use in the
organization's operations.
POLICIES AND PROCEDURES
REVIEW
An internal audit of existing policies and procedures conducted after
budget decisions have been made to assurt conformity between agreements reached
and existing practices.
POST BUDGET CONFERENCES
Meetings to follow up or implement budget decisions A
major feature of post-budget programming.
POSTING
A bookkeeping term to describe the process of (1)
notatlon, or o recording financial transactions in appropriate journals, and
(2) sum marizing, or recording, journal-column totals in appropriate ledger
accounts
PPBS
See PROGRAMMlNG-PLANNlNG-BUDGETlNG
SYSTEMS.;
Value of future receipts or payments discounted to the current period.
One of the principles
of fiscal control in non-profit organizations, in which costs of rule-breaking are
compared to costs of contro necessary to eliminate rule-breaking.
A principle of fiscal
control in non-profit agencies that says that rules must be enforcable
The concept of management
by exceptions applied to the context
of fiscal control.
A principle of fiscal
control that systems of rule should be subject to change, based on information
about their impact.
A principle of fiscal
control that
A principle of fiscal
control in non-profit organizations that says that rules of control must be
tailored to the individual cir cumstances of the organization.
A principle of fiscal
control that states that rules must b meaningful to those who are expected to
comply.
A principle of fiscal
control that states that the goal of service delivery should supercede the
goals of Eiscal control, all othe things being equal.
A principle of fiscal
control concerned with specifi cation of procedures for reporting or discerning
rule violations.
PROBLEM-FREE INTERVAL
Period when a client is
not troubled by a problem fo which assistance is sought.
A budget
format in which sales of goods
during a perio are combined with beginning and ending inventories to determine
necessar production levels.
PRODUCTIVITY
The measure of the "productiveness" of a
factor of production Operationally, the ratio of the amount of input required
to produce a give amount of output.
PRODUCTIVITY, PRINCIPLE
OF
See principle of
productivity.
PROFESSIONAL
AND PARAPROFESSIONAL SERVICES BUDGET
A budget
format listing total costs
of program personnel
Generally, the excess of revenues over expenditures.
In practice, businesses may use a cost of goods sold statement to make an
actual determination of profits.
PROGRAM
An interrelated set of
activities for the production of services.
Process in which
agency and program administrators seek to translate program goals and budget
guidelines into meaningful work routines that will result in the production of
services.
Review of program operations to assess performance effectiveness and goal attainment.
PROGRAM BUDGET
Budget
format that assumes convergence
of a program activities with a FUND.
PROGRAM BUDGETING
A budget system in which decisions are based upon
performance or expectations of integrated programs of
activities.
PROGRAMMING-PLANNING-BUDGETING SYSTEMS
A particular model of program budgeting in which
decisions are zero
sum and based on program units that transcend organizational
boundaries.
A budget format in which items are displayed in rows and
columns by program and some other dimension (most typicall y, common functional
expenditure classifications).
A program budget for a fixed-time program of activities.
PROJECT SCHEDULING
The
process of sequencing the activities of a project. Techniques useful in such
scheduling include Gantt, PERT PERT and PERT-Cost.
PUBLIC DEBT
The total excess of public liabilities over assets.
The largest share of public debt in the United States has been accumulated by
the federal govemment. Most public debt is funded.
PUBLIC EXPENDITURE
Outlays by public agencies for goods and services,
subsidies and grants, and debt service.
PUBLIC FINANCE
A branch of economics concerned with governmental
financial policies and actions, and their impact. Public finance is concerned
with taxation as the most important governmental revenue source, and assessment
of the fiscal impact of public policy. Social welfare finance consists of
elements of public finance, together with voluntary, or non-profit, finance as
these apply to the human services.
PUBLIC SECTOR
That portion of the national economy (or local
economies) consisting of governmental production and consumption.
PURCHASE ORDER
A standardized form (or facsimile) identifying a
purchase and its source, prices, quantities, and other pertinent information.
May be the same as a purchase
requisition.
A request for approval to make a purchase. Includes
the information on the purchase order, as well as the reason a purchase is
necessary, when it is needed, etc. When forms are used, a requisition signed by
an authorized official becomes a purchase order. Many human service
organizations use memos for both purposes.
QUANTITY VARIANCE
Variances in line items resulting from different
levels of input than anticipated.
RATIO ANALYSIS
The analytic protocol for identifying key decision
points in administrative systems, and the identification of a system of
quantitative ratios to monitor changes at those points.
A point at which a particular financial event is determined to have occurred for purposes of recording it in the financial records of an entity.
In cost analysis, the
normal range of anticipated activity of a cost center.
REQUIRED RATE OF RETURN
(RRR)
An interest rate that must be achieved for a capital project to be considered viable. Also called hurdle rate.
RESERVES
Liquid or fixed assets ASSETS in a fund not
committed to program during the current fiscal period.
RESOURCEALLOCATION
Decision
or choice processes in which the administration determines what resources are
available, and to what production and distribution processes they will be
devoted. Budgeting is an important resource allocation process for most hurnan
service agencies.
RESOURCES
The
agents or factors of production used to produce and distribute goods and
services. The term also has a somewhat broader usage in the new political
economy (llchman & Uphoff), where it signifies the agents that produce
outputs, or results.
A point in an organization with some measure of
autonomous decision-making powers. May be a revenue
center or a cost center or a
Frequently used as a synonym for income in human services.
More accurately, the term refers to inflows "earned" by the efforts
or activities of the organization holding a fund to
which the inflows are added. As such, revenues "meter" (measure)
productive activities of an organization in ways which other non-revenue
inflows do not.
REVENUE CENTER
In cost
analysis, a responsibility center that generates
revenue through its normal activity. See also
mission center.
REVENUE VARIANCES
Portion
of the total variance attributable to differences between expected and actual
revenues.
RISK
A
condition in which particular decision or action strategies carry a range of
possible outcomes (including possible negative or undesirable consequences),
none of which can be determined in advance. Operations research has devised a
series of techniques and procedures for estimating and handling risk.
RISK CAPITAL
Long-term
funds invested in activities subject to risk. Also sometimes known as seed money.
Contributions or other REVENUES contributed prior to
the start of a program, especially to finance the initial costs before regular
funding is in place. (Also called front money. )
Time period of one year or less.
SIMPLE INTEREST
A method of computing interest in each period solely on the basis of the original or remaining principal. Specifically, interest payments previously earned are not included or recognized.
SLIDING SCALE FEES
Charges to clients which are adjusted by some meaningful
criterion, such as "ability to pay."
Cost of an activity, output, or program that are borne by
society as a whole. The term is used both technically and euphemistically as a
synonym for the social consequences of economic actions, e.g., the force
leisure of unemployed ghetto youths as a "social cost" of automation.
A listing of dollars and percentage of total revenue
figures by major sources of revenue.
SPECIAL EVENT
A set of activities intended to promote programs, , causes, or ideas
in order to improve relations with the donor constituency,
or in other way improve or expand community accountability
, or increase support.
SPECIAL STUDIES
Cost
analyses, evaluations, and other "one time" analyses con ducted to
resolve specific management problems.
STANDARDS
Criteria
used in evaluation ot performance.
An approach to cost analysis in which support center costs are allocated to every other center that has not yet allocated its costs.
STEP-FIXED COST
Costs that are fixed over smaller ranges of
activity than the relevant range. Also known as step-variable.
STRATEGY
Broad plan for the attainment of mission and objectives.
SUB-FUND BUDGET
A budget detailing part of the projected revenues and
expenditures of a fund.
SUB-FUND DECISIONS
Decisions
affecting only a portion of the assets in a fund.
SUPERVISION
A key
aspect of fiscal control in non-profithuman service
system~
A Budget format detailing expenditures in the supplies
classification.
In cost analysis, a responsibility center not directly related to the mission
or objectives of an organization or program. Not a mission
center.
SUPRA-FUND DECISIONS
Decisions affecting the assets of more than one fund; typically the whole agency.
SWEEP
Arrangements to transfer money into and out of accounts automatically.
TAX
A
mandatory charge required by a government of some element of i economic
environment. Intended to be used as revenue by that government
Excused or not obligated for tax liabilities applying to others. Usually refers to exemption from federal corporate income taxes under Section 501(c)3 of the IRS Code in particular. Such organizations are often also exempt from state income, excise and sales taxes as well.
THIRD-PARTY FEES
Charges to clients for services rendered that are paid
by a "third party" (someone other than the client or the agency
rendering the service)
THIRD-PARTY FUNDING
Fees, or grants or performance
contracts that provide for support of a program by someone other than
those receiving the service.
Recognition of the ability of money to earn interest
and the resulting condition that the further into the future an amount is paid,
the less valuable it is.
TOTAL VARIANCE
Sum of price, quantity and volume variances.
UNCOLLECTABLES
Obligations owed to the organization determined to be
unobtainable and targeted for dismissal or removal from the list of accounts receivable in a process known as “writing
off”.
UNIT-COST BUDGET
Anticipated expenditures are projected in this budget format by a formula of
units of service produced multiplied by the standard cost p~ unit.
VARIABLE COSTS
Costs
that vary with changes in the level of output. Also known as direct
cost. The opposite of fixed cost.
VARIANCE, PRICE
VARIANCE, QUANTITY
VARIANCE, VOLUME
VARIANCE, REVENUE
VENDOR
Purveyor of goods or provider of services to an organization. To vend is to sell to.
Portion of the total variance attributable to changes in the anticipated work load level.
VOLUNTARY FEDERATED DISTRIBUTIONS
A budget system in which agencies that are members of a
common fund-raising group receive proportionate shares
of the funds raised.
A budget system in which decisions are made on
decision packages" that must be justified programatically.
ZERO-BASE BUDGET
Budget format in which proposed expenditures are
organized into "decision packages".
ZERO-SUM BUDGET
Budget format in which no presumption of a BASE is
permitted. 2) An assumption from game theory that for every winner there is an
equal and opposite looser; that wins are offset by losses in equal amount.
THIRD SECTOR
A term now in widespread use to describe the set of organizations
operating outside of government (the state) and business (the market). Also
known as the Independent Sector and the Nonprofit Sector and in Great Britain,
the Netherlands and elsewhere, the Voluntary Sector.
THIRD WAY
A term popularized by British P.M. Tony
Blair, German President Gerhard Schrader, and President Bill Clinton for social
problem solving through means other than government intervention or
marketization. In an earlier period, the welfare state and mixed economies were
perceived as Third Way alternatives between Nazi, Fascist and Communist
totalitarianism on the one hand and free market laissez-faire on the other.
STATISM
Strategies directed at dealing with social problems and concerns
through governmental regulation, service delivery, and other governmental
strategies.
PRIVATIZATION
A term popularized in the 1980s by British PM Margaret Thatcher and
President Ronald Reagan for a strategy directed at reducing the size of
government and replacing what they perceived to be the bloated welfare state.
By its nature, the term is somewhat ambivalent, since both marketization
strategies and contracting with nonprofit organizations may be considered
privatization.
REGULATION
CFO/Chief Financial Officer
The executive responsible for financial oversight. Older titles may
include Accountant, Chief Accountant, Comptroller.
CIO/Chief Information Officer
The executive with principal responsibility for the information
technology and strategy of an organization.