Moreover, during the ten years of the program, professional standards for fire fighters changed. Under the new standards, fire stations must now have better training and fitness facilities, better information technology, and other upgrades that added costs to the projects. By contrast, organizations with mostly indirect costs may not have the ability to enact new enrollment management policies. They must also “manage the step,” but for them the better strategy is to narrow or limit the scope of services, or to find new clients that can lead to more predictable enrollment patterns. In short, managing direct, step-fixed costs is quite different from managing indirect, step-fixed costs.

There is also no Suggested Websites at the end of each chapter which would be very helpful given some of the data presented. Each chapter is unique so it’s difficult to judge whether there is consistency from one chapter to the next. The one consistency from chapter to chapter is that the authors provide a table of learning objectives. I did not notice any inaccuracies; however, there is no reference list anywhere in the textbook (at the end of each chapter or at the end of the textbook).

Case: Summer School

When a driver worked more than 8 hours in a 24 hour period, he/she was paid a 50 percent overtime premium for the additional hours. The facility must also carry $5,000,000 in hazard insurance coverage. Local insurance brokers offer that coverage for $2,500/month. Individual employees must be trained https://quickbooks-payroll.org/ and re-certified at an annual cost of $500 per employee. Water, electricity, wastewater, stormwater, trash collection, telephone, and other utilities are expected to cost $1,750 month. The facility must be certified by the National Adult Day Services Association at a cost of $5,000/year.

As mentioned, sometimes financial statement analysis implies some clear follow-up questions about an organization’s financial operations and overall performance. Ideally, it also suggests some steps that management can take to improve that financial position and performance. It has virtually no current liabilities in its governmental funds, and virtually no long-term The Basic Financial Statements Financial Strategy for Public Managers debt in its proprietary funds. That’s why its near-term solvency and coverage 2 ratios, respectively, are both in the top quartile. That fact is reflected in its comparatively high debt burden and its comparatively low coverage 1 ratio. It also appears that in 2015 OP’s investment in capital assets was comparatively low, despite its comparatively high leverage.

Technique Supports Strategy

Nonetheless, he knew she needed his support and he would be able to use his networks in the business community to solicit additional financial support for PASS. Chang immediately deposited the funds in a checking account and went home to celebrate the holiday with her family, knowing she had an exciting year ahead of her. At the outset, it might seem like the accrual concept breaks down here. How can a non-profit recognize a revenue if the recipients of its services don’t pay for those services? In non-profit accounting, we address this problem by simply drawing a parallel between donations and payments for service. Donors who support a non-profit are, in effect, paying that non-profit to pursue its mission.

• It follows that decreasing an asset will almost always bring about an increase in cash.
• Chapter 3 stands out as particularly useful outside of the context of the book as it has two stand-alone case studies that students can interact with.
• We see a similar dynamic in service areas like flood control, agricultural irrigation, and parks.
• That is, when we recognize a revenue we try to recognize the expense that was incurred to produce that revenue.
• As mentioned, most organizations prepare their cash flow statement according to the indirect method.

Here that relationship between revenues and expenses is clear. It’s important to keep in mind that the balance sheet is a snapshot in time. When an organization’s accounting staff prepare a balance sheet they simply report the balances in each of organization’s main financial accounts on a particular day. Public managers can’t control many of the factors that affect their budgets. Non-profit managers can’t do much to affect the financial health of the foundations that grant them money or individuals who support them through donations.

Book Description

Take a look at your company’s income statement, and note the direct expenses related to the revenue for that period. That said, the vast majority of governments and non-profit organizations continue to practice traditional, incremental, line-item budgeting. Performance budgeting and the “Priorities of Government” approach are not mutually exclusive. Cities like Redmond, WA and Somerville, MA have implemented performance-based budgeting programs that are tightly connected to strategic priorities. In the Somerville model, departments orient their budget requests around outcomes rather than budget inputs or line items. For example, the library system requests its budget in terms of the cost per library patron served, not just in terms of payroll, commodities, equipment, and other line items.

Cash decreases but equipment increases, so the effect on the fundamental equation is zero. This same approach also applies to current assets like supplies and inventory. On the cash basis it will be several weeks before we know those expenses had been incurred and that Treehouse had earned $2,500 in revenue.