1 / 11

Accountability and Control

PA 546 Constantine Hadjilambrinos. Accountability and Control. Lecture 4 September 20, 2005. PA 546 Constantine Hadjilambrinos. Management Control Systems. Responsibility accounting Communicate expectations Track results Use results (performance measures) as feedback

goinsj
Download Presentation

Accountability and Control

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. PA 546 Constantine Hadjilambrinos Accountability and Control Lecture 4 September 20, 2005

  2. PA 546 Constantine Hadjilambrinos Management Control Systems Responsibility accounting • Communicate expectations • Track results • Use results (performance measures) as feedback • Improve performance

  3. PA 546 Constantine Hadjilambrinos Motivation is crucial! **People make things happen** • Be on the lookout for goal divergence (personal vs organizational objectives) • Design incentives and disincentives to minimize goal divergence • Be careful of unintended consequences

  4. PA 546 Constantine Hadjilambrinos Performance Measurement Measure • Private benefits to organization • Benefits to society • Effectiveness • Efficiency • Quality • Quantity

  5. PA 546 Constantine Hadjilambrinos Variance Analysis Results often vary from plan • Why? Understanding reasons will help improve situation in future • Control results in current year • Evaluate performance of units and managers Unfavorable variance (-)Favorable variance (+) Overall / Department / Line-item

  6. PA 546 Constantine Hadjilambrinos Flexible Budgeting • Volume variance: Output of goods and services is higher or lower than anticipated • Price/rate variance: Cost per unit of input resources is different than anticipated • Quantity/use variance: Amount of resources needed per unit of output is different than anticipated

  7. PA 546 Constantine Hadjilambrinos • Aggregation issues Positive and negative variances may cancel each other out One line item may be disproportionate • Exception reporting Every variance needs to be examined by someone People at the top of the organization need to focus on significant variances

  8. PA 546 Constantine Hadjilambrinos Cost Control • Fixed costs: Do not vary with output. Variance cannot be separated into price and quantity components (rent or mortgage payments) Can only be addressed by increasing efficiency • Variable costs: Linked directly to output level (raw materials) Can be adjusted by varying output Can be also addressed by increasing efficiency

  9. PA 546 Constantine Hadjilambrinos Revenue Variances • Also important to understand, keep track of and control • May be more difficult to control than cost variances • Also can be separated into components • Components may not be the same as in costs—no quantity variance

  10. PA 546 Constantine Hadjilambrinos ETHICS Unethical behavior erodes public confidence and trust Code of ethics is useful for drawing clear distinctions between acceptable and unacceptable behavior • Competence—Keep up, know what is legal • Confidentiality • Integrity—Avoid even appearance of conflict of interest • Objectivity

  11. PA 546 Constantine Hadjilambrinos Elements of Effective Control System • Audit trail • Reliable personnel • Separation of functions • Proper authorization • Adequate documentation • Proper procedures • Physical safeguards • Bonding & vacations/rotation • Performance audits • Cost-effectiveness analysis

More Related