4.

expenditures, and future revenue policies, AAA managers must have information on which to evaluate past operations, expenditures, and revenue policies.

External Accountability-Every AAA is responsible to some outside group for the sources and uses of funds: Boards, AoA, SUA, the Internal Revenue Service, and so on. These parties will use accounting data to evaluate the reasonableness of grant requests and to monitor financial status.

An accounting subsystem that meets the first (preeminent) purpose will invariably meet the second, because the information required to fulfill internal requirements is much more detailed than that required by external parties. The accounting subsystem described in this Manual meets both external and internal requirements.

The reporting and monitoring subsystem does not involve the collection of any additional data but, rather, tabulation and analysis of data collected by the other two subsystems. This is perhaps the most important subsystem in FMAS, but without the others it cannot exist.

WHAT IS THE MANAGEMENT ACCOUNT STRUCTURE?

The Management Account Structure (MAS) is the skeleton of the FMAS. It is a set of codes by which each financial transaction is defined according to:

The Funding Title

Functional Cost Center

Location (i.e., AAA direct service site, contractor, subgrantee)
Service Activity

General Ledger Category

Resource Category (Line Item)

The MAS is explained fully in Chapter XII. It has been designed to accommodate the most complex AAA but also works well (and is surprisingly simple once fully understood) in even small agencies. Almost all AAAS will need to use the fund, functional cost center, and general ledger codes. AAAs that elect not to use the location, resource, and activity codes still will find the information in the Manual useful and relevant.

I. OVERVIEW OF PLANNING AND BUDGETING

Every AAA is required to develop an area plan and budget. Both the content of the plan and its structure have a direct bearing on the AAA's ability to: manage program operations; account for and maintain appropriate records; develop timely and accurate reports on the financial status and on program accomplishments; and evaluate the impact of program performance and costs on subsequent year plans. The area plan establishes the directions of AAA programs; it serves as a roadmap and provides an estimate of the cost of "getting there."

Likewise, it contains the baseline (planned) program and financial data against which actual service outcomes and program expenditures can be measured and establishes a framework for establishing a consistent approach to recording, reporting, and analyzing outcome and fiscal data.

Considering the powerful implications of the area plan and budget, it is surprising that planning and budgeting are among the most widely misunderstood and maligned management functions. Accordingly, the objective of this Chapter is threefold:

To present a positive working definition of planning and budgeting and arguments for doing both

To destroy some negative myths about planning and budgeting

To present a program structure that provides a framework for plan

ning, budgeting, and accounting so that plan and actual data can be compared

1. PLANNING AND BUDGETING-WORKING DEFINITIONS

Planning and budgeting is a systematic, ongoing process that specifies expectations about the nature and costs of AAA programs and provides a framework for day-to-day AAA decision-making. More specifically:

Planning-There are as many definitions of planning as there are planners. Regardless of how the definition is worded, however, the intent is the same. To cite a few:

Former Secretary of Defense Robert McNamara: "Planning is a systematic appraisal and formulation of the program objectives and of the actions necessary to achieve them."

Renowned management consultant Peter Drucker: "The continuous process of making present decisions systematically and with the best possible knowledge of their futurity, organizing systematically the efforts needed to carry out these decisions, and measuring the results of these decisions through systematic feedback."

George A. Steiner, author of Top Management Planning: "Process of deciding in advance what is to be done, when it is to be done, how it is to be done, and who is to do it."

Planning identifies the specific needs of the target (elderly) population; organizes these needs into broadly defined service/program categories; formulates service program objectives and implementation strategies and develops the detailed operational plans needed to meet program objectives.

Budgeting-Also systematic and ongoing, budgeting is a process that translates plans into dollars by specifying the levels of person power, materials, and other resources needed to fulfill plan objectives. Budgets express the policies, goals, objectives, and program plans in financial terms, for specific future periods (e.g., quarter, year), for the AAA as a whole and for each subdivision (e.g., funding title, cost center, location-site, subgrant, contractor).

The outputs of the planning and budgeting process-complete program and financial plans (budgets)-provide the baseline against which program progress can be measured and financial status assessed throughout the year.

Thus, planning and budgeting do not exist in a vacuum. The management cycle in Exhibit I-1 shows how the planning and budgeting processes rely on each other and also support and draw from other AAA management processes. For example, the plan is based on information about prior operations and, in turn, will influence future operations. Similarly, the plan is the basis for calculating the budget, and careful review of the budget may necessitate revisions in the plan.

Simply stated, the Exhibit shows that planning and budgeting requires AAA managers to (1) figure out what they want to do, (2) estimate how much money is required to do it and how much will be earned, (3) do it, (4) look at what happened, whether it was satisfactory, and what it means for the future, and (5) begin again. This Manual recommends that planning and budgeting be done separately for each functional cost center and then aggregated for total AAA operations. Depending on the AAA's organizational structure, service delivery strategy, and management philosophy (e.g., responsibility center management) it also may be necessary to budget by location and then to aggregate location plans and budgets to the functional cost center level. The worksheets that illustrate the planning and budgeting concepts discussed in the next few Chapters accommodate planning and budgeting at either or both levels.

(1) Why Bother?

A good plan provides a framework for service delivery and assures that all AAA staff, contract providers, subgrantees, and funding authorities understand where the program is going and how it is getting there. A good plan helps minimize counterproductive and duplicate activity and provides a basis for accountability.