Responsibility Center Budgeting

Under traditional approaches to budgeting in the public sector, operating units often are held responsible only for the management of their direct costs--salaries and wages, materials and supplies, travel, equipment acquisition and maintenance, and so forth. It is assumed that these direct costs are the ones that the units can control. Direct costs can be narrowly or broadly defined; the more narrow the definition, the larger the aggregate amount of indirect costs.

In theory, given a long enough time, all costs are controllable by someone within an organization. For purposes of budgeting, however, controllable costs often are defined as those costs subject to the influence of a given manager of a given program or organizational unit during a given time period. An emergency room supervisor, for example, might exercise significant control over the assigned nursing staff, the use of supplies (and therefore, their costs), maintenance of the facility, and so forth. However, the ER supervisor may have little or no control over the cost of doctors working in the emergency room, or the utility costs that support the running of the emergency room, or the insurance premium costs allocated to this aspect of the hospital's operations.

Noncontrollable costs include all costs that do not meet this test of "significant influence" by a given manager. Thus, costs assigned to the manager of any department may contain both controllable and noncontrollable elements. Although clear distinctions are often difficult to make, every effort should be made to separate these cost components for the purpose of performance evaluation.

Under responsibility center budgeting, all pertinent costs and the revenue to support these costs are assigned to various organizational units--departments, bureaus, and programs--designated as responsibility centers. Responsibility center budgeting seeks to assign accountability to those individuals who have the greatest potential to exercise influence, on a day-to-day basis, over the costs in question. It seeks to determine which individuals in an organization are in the best position to explain why specific outcomes have occurred as a result of allocating resources to support the activities of these units. It is the reporting responsibility of these individuals to explain the outcome regardless of the degree of their control or influence over the results. [21] The chief of police might receive separate reports on the cost of operations of the traffic control division, the vice squad, the detective division, the forensic laboratory, and so forth, so that each unit can be held accountable for its respective area of responsibility.

Costs charged to responsibility centers should be separated between direct and indirect costs. Not all indirect costs are controllable at the responsibility center level. Therefore, these expenses should be further broken down between those that are controllable and those that are noncontrollable at the responsibility center level. A distinction is some times made between a service center--assigned only the direct portion of overhead--and a cost center--fully burdened with indirect costs.

The ability to control costs is a matter of degree. Responsibility center budgeting placing emphasis on specific costs in relation to well-defined areas of responsibility. Units may be able to exercise considerable control over such traditional indirect costs as utilities (use of heat, light, air conditioning), facility maintenance (e.g., custodial services, upkeep of buildings and grounds), and even insurance premiums (e.g., through safety programs). However, long-term effects of such costs as depreciation, long-term lease arrangements, and the like, seldom qualify as controllable costs on the performance report of a specific manager.

To illustrate this point, consider the costs of nursing services in a hospital. The extent to which these costs are controllable at the cost or responsibility center level will depend on the policies of top management regarding intensive care, the lead time available for planning the number of nurses in relation to patient load, the availability of short-term or part-time help, and so on. Some managers may have relatively little control over such cost-influencing factors. Clearly, an item such as depreciation on the hospital building is outside the realm of controllable costs at the responsibility center level.

Responsibility centers have primary responsibility for the management of resources and costs (as well as the broader mission for which these resources and costs are budgeted/allocated). All of the sources of financial support (revenue or income) are attributed to the responsibility centers on some equitable and consistent basis. Costs associated with internal service units (that is, units which do not receive revenue or income from external sources) are either charged to the responsibility centers on a fee for service basis or are recovered from the responsibility centers through some form of assessment.

The Activity-Based Costing (ABC) model, which Cooper and Kaplan developed, re-configures how organizations manage costs by attaching costs to activities--the processes or procedures that cause work to be performed in an organization. [22] Cost management and cost control can then focus on the sources of cost rather than on where the costs are incurred or reported. In this way, the total cost of all traceable activities is based on how much of each activity the product or service consumes, regardless of organizational or functional boundaries. By focusing on the root cause of a cost rather than addressing symptoms, managers can learn how to identify and eliminate waste.

Costs must be traced from the traditional cost accounting structure (which identifies what resources are being used) to the activities that describe what the organization does (which relates why the resource is being consumed--for what purpose). The cost tracing can involve actual (historical) costs or budgeted costs. Some costs can be directly associated with an activity (most labor costs, for example), whereas other costs have to be allocated (such as utilities or rent). Costs of supporting departments are initially accumulated in overhead cost pools and are then allocated to appropriate activities.

The ABC approach is likely to produce a more accurate represent-ation of indirect costs attributable to final cost objectives than using surrogate measures, such as direct labor hours or direct material dollars, as a means for allocating costs to products. The two-stage ABC process identifies activities and focuses on the cost drivers that are the major causal factors behind cost behavior.

Once income/revenue and costs have been fully allocated to the responsibility centers, in all likelihood, there will be some "surpluses" and some "deficits." The deficits or shortfalls between total costs and revenues/income must be covered through some form of subvention--that is, a central allocation to ensure the continued operation of programs existing at the time the new allocation model is implemented. On the other hand, units should be permitted to retain all or a major portion of their "surpluses."

What is the source of the funds used for the subvention? One approach would be to "take funds off the top"--that is, to hold back some portion of the general funds to cover these costs. Another approach is to initiate a surcharge or "assessment" on the expenditure of the resources that have been fully allocated. The revenue collected through this levy could then be reallocated to the responsibility centers, both as subvention to provide a level playing field for those units faced with deficits and to "seed" additional activities that may have organization-wide benefits. A portion of the assessment could also be used to support internal service units.

Project Budgeting

A project budget represents a portion of the total budget of an agency which may be partially funded from external sources (e.g., federal or state agencies, foundations, industry, or other extramural sources). Often project budgets are prepared for more than one fiscal period, and therefore, provision must be made for salary adjustments and for inflationary increases in operating costs. Extramural funding sources may make provision for the recovery of indirect costs, i..e, costs that support more than one activity or program within an agency or organization. These indirect costs must be determined according to the funding guidelines and included in the project budget. The following example may help to illustrate how a project budget can be constructed and adjusted to meet external funding expectations.

The State Public Health Institute (SPHI) has received a grant from the U.S. Public Health Service to develop and promote innovative approaches to the provision of pre-natal health care at the local level. The SPHI has issued a request for proposals (RFP) for two-year pilot projects to be initiated in an urban community or at the county level, serving a more rural population. Maximum funding level for a two-year pilot project has been set by the SPHI at $400,000. It is anticipated that the urban or county health agencies applying for these funds will provide additional support for these pilot projects from local funds.

The Jefferson County Health Department decides to develop a proposal in response to this RFP in conjunction with a pre-natal health care clinic that has been authorized in a section of the county where such public health services have not previously been generally available. To undertake this project, adequate space must be secured, a clinic staff must be hired, trained, and certified, the clinic must be equipped, the programs of the clinic must be publicized, and eligible applicants must be screened and enrolled. In reviewing the planning for the clinic, it is determined that the following operating costs should be included in the proposed project budget: staff salaries and wages, benefits, equipment, materials and supplies for the clinic and for record keeping and other office functions, educational and promotional materials, travel costs, and patient care costs.

Exhibit 13. Preliminary Staff Requirements for Pre-Natal Health Care Clinic

Family Physician Several family practitioners to be used on a part-time, rotating basis. A USPHS physician would be relatively inexpensive for the County and would have malpractice insurance covered by the federal government.
Registered Nurse Assist the physician by providing injections and other treatments. Perform "telephone triage" for patients with medical questions and communicate with labor and delivery units at the hospitals.
Nurse Practitioner Provide maternal support services, such as instruction in symptoms of prenatal problems, growth and development of fetus, nutrition and self care during pregnancy.
Medical Assistant Manage "patient flow;" obtain vital signs, process samples, oversee medical supplies, and package micro-biological samples requiring further laboratory analysis.
Receptionist/Clerical Make and confirm appointments, maintain medical files, and perform other typical clerical duties.
Nutritionist Determine diet requirements for special medical conditions, healthy prenatal diets, and conduct educational programs for expectant mothers.
Social Worker/Health Educator Counsel patients on broader social and health-related issues, including substance abuse avoidance and the availability of other social program support.

Different levels of service (and therefore, different staffing requirements) are possible. More sophisticated equipment (fetal monitors and ultrasound capability) and expanded laboratory facilities would be required, for example, if care is to be provided for high-risk pregnancies. The Clinical Laboratories Improvement Act requires further certification of the laboratory associated with the clinic, and a certified medical technologist would have to be included on the clinic staff.

On the other hand, operating costs could be substantially reduced if the clinic is designed primarily to serve low-risk pregnancies. Under this approach, the primary task of the clinic would be to identify potential problem. High-risk patients would be referred to other facilities (for example, a tertiary care center such as the university hospital). Level 1 lab services would include urinal analysis, tests for strep and capillary glucose, hematocrit, and urine pregnancy test. Blood work could be processed by the County Health Department laboratory. As part of the clinic's program, subsidies will be included for patient transportation to the tertiary center and other patient care costs that may be incurred.

The clinic could be staffed by gynecologists/obstetricians, family physicians, registered nurses, nurse practitioners, medical assistants, nutritionist, social worker, health educator, or some combination of these professionals. Costs would vary significantly in terms of hours of operations, staffing patterns, salaries, and laboratory support costs.

Support staff requirements will vary according to the office practices and procedures that are adopted. Different approach might be adopted for patient record keeping and communication. Transcribing records require more staff time and therefore, are more expensive than hand written charts. However, some malpractice insurance carriers offer discounts if all medical records are typed. Charts can be microfilmed or stored as "hard copy." Answering and referral systems for phone-in questions can also take various forms.

Based on this assessment, preliminary staffing requirements are identified in Exhibit 13.

The first step in preparing a preliminary project budget is to determine the anticipated levels of effort for each of the staff positions and the equivalent salaries and benefit costs. Personnel costs often are the "major driver" of a project budget, and these costs initially should be estimated at optimal staffing levels.

Staff Position Annual Salary Effort Project Salary Benefits @ 29%
Family Physicians $92,920 25% $23,230 $6,737
Nurse Practitioner $40,825 50% $20,413 $5,920
Registered Nurse $41,400 50% $20,700 $6,003
Nutritionist $39,100 25% $9,775 $2,835
Social Worker $46,000 35% $16,100 $4,669
Medical Assistant $22,625 100% $22,625 $6,561
Clerk/Receptionist $18,130 50% $9,065 $2,629
Wages $18,855 100% $18,855 NA
Total $136,892 $35,354

The next step is to determine the operating costs (nonpersonnel costs) considered necessary to support the programs of the clinic.

Supplies & Materials $22,000
Travel $28,000
Other Operating Costs $ 5,700
Patient Care Costs $35,300
Total Operating Costs $91,000

Equipment and computing services complete the direct costs associated with the initial year of the proposed project.

Equipment $26,000
Computing Services $ 1,500

The RFP from the State Public Health Institute permits the recovery of indirect costs on all direct cost items except patient care costs, equipment, and computing services. The indirect cost rate authorized by the State Public Health Institute is 25%. This rate would result in an additional $66,779 in the first year to cover those costs which cannot be identified/charged as direct costs against the project activities.

_____________________________________________________________________________

Exhibit 14. Preliminary Budget for Proposed Pre-natal Health Care Project

Budget Period 1st Year 2nd Year Total
Budget Category Agency Sponsor Total Agency Sponsor Total Agency Sponsor Total
Salaries & Wages
Family Physician $9,292 $13,938 $23,230 $9,757 $14,635 $24,392 $19,049 $28,573 $47,622
Nurse Practitioner 0 $20,413 $20,413 0 $21,433 $21,433 0 $41,846 $41,846
Registered Nurse 0 $20,700 $20,700 0 $21,735 $21,735 0 $42,435 $42,435
Nutritionist 0 $9,775 $9,775 0 $10,264 $10,264 0 $20,039 $20,039
Social Worker 0 $16,100 $16,100 0 $16,905 $16,905 0 $33,005 $33,005
Medical Assistant $11,313 $11,313 $22,625 $12,048 $12,048 $24,096 $23,360 $23,360 $46,721
Clerk Typist 0 $9,065 $9,065 0 $9,654 $9,654 0 $18,719 $18,719
Wages $1,886 $16,970 $18,855 $2,008 $18,073 $20,081 $3,894 $35,042 $39,936
Total Salaries & Wages $22,490 $118,273 $140,763 $23,812 $124,746 $148,559 $46,302 $243,019 $289,321
Employee Benefits@29% $5,975 $29,378 $35,354 $6,323 $30,935 $37,259 $12,299 $60,313 $72,612
Consumable Supplies $9,000 $13,000 $22,000 $9,720 $14,040 $23,760 $18,720 $27,040 $45,760
Travel $14,000 $14,000 $28,000 $15,120 $15,120 $30,240 $29,120 $29,120 $58,240
Other Operating Costs 0 $5,700 $5,700 0 $6,156 $6,156 0 $11,856 $11,856
Consultants* 0 0 0 0 0 0 0 0 0
Patient Care Costs** 0 $35,300 $35,300 0 $35,300 $35,300 0 $70,600 $70,600
Total Operating Costs $23,000 $68,000 $91,000 $24,840 $70,616 $95,456 $47,840 $138,616 $186,456
Equipment** $8,000 $18,000 $26,000 0 0 0 $8,000 $18,000 $26,000
Computing Services** 0 $1,500 $1,500 0 $1,650 $1,650 0 $3,150 $3,150
TOTAL DIRECT COSTS $59,465 $235,150 $294,616 $54,976 $227,948 $282,923 $114,441 $463,098 $577,539
25% of Modified Total Direct Costs $12,866 $53,913 $66,779 $13,744 $47,749 $61,493 $26,610 $101,662 $128,272
Indirect on Subcontacts 0 0 0 0 0 0 0 0 0
INDIRECT COSTS $12,866 $53,913 $66,779 $13,744 $47,749 $61,493 $26,610 $101,662 $128,272
GRAND TOTAL $72,332 $289,063 $361,395 $68,720 $275,697 $344,417 $141,051 $564,760 $705,811

*Indirect Costs applicable on the first $10,000 of each subcontract.

**Not included in the MTDC; 25% indirect cost rate not applicable.

As shown on the preliminary budget, the first year costs for the project effort outlined above amount to $361,395. The RFP requires that the applicant agency cost-share at least 20% of the proposed project costs. Therefore, in the preliminary budget, $72,332 of the $361,395 in anticipated costs for the first year of the proposed project is shown in the agency column.

The second year budget is built on the estimates for the first year by applying appropriate multipliers to the professional and staff salaries and to the various operating costs, much in the same manner as a line-item/object of expenditure budget is prepared. A 5% multiplier was applied to professional salaries; a 6.5% multiplier was used for staff salaries and for wages; operating costs (excluding patient care costs) were advanced by 8%; and support for computing services was increased by 10%. Equipment is a one-time purchase; therefore, no additional funds are requested in the second year of the proposed budget. The second year of the preliminary budget is estimated at $344,417. Therefore, the preliminary budget for the proposed two-year project totals $705,811

The sponsor share of the preliminary budget exceeds the funding level indicated in the RFP by some $164,760. Therefore, further adjustments in the distribution between agency cost-sharing and sponsor participation and/or in the levels of efforts are required if the proposal is to be considered responsive to the RFP.

The first step in adjusting the preliminary budget estimates is increase the agency's cost-sharing commitments. The half-time assignments of the Nurse Practitioner and the Registered Nurse are split between the agency and the sponsor. The proposed sponsor commitment is reduced by $42,140 in salaries, $12,221 in benefits, and $13,590 in indirect costs. The Social Worker is eliminated as a staff position and is replaced by a consultant, saving $13,780 in benefits and indirect costs (a consulting agreement carries indirect cost only on the first $10,000). These adjustments in personnel costs reduce the level of funding requested of the sponsor by $72,870.

In the final proposed budget (Exhibit 15), the cost for consumable materials & supplies is shared on a 50-50 basis. Travel costs are reduced by approximately $20,000 to $38,210 and shared on a 50-50 basis. And the Health Department assumes a portion of the other operating costs ($5,350) in the final budget. These direct cost adjustments also "save" $5,170 in indirect costs recoverable from the sponsor. The Health Department also proposes to cost-share 50% of the $26,000 in the final budget for equipment and assumes all of the costs for computing services ($3,150).

The reductions/adjustments in the preliminary budget estimates result in an overall "savings" of $62,546, as detailed below. The decrease in personal service costs results from the shift of the Social Worker to a consultant and the reduction in wages. The increase in operating costs is a consequence of the addition of the consultant, partially offset by the reduction in travel costs.

Budget Category Preliminary Budget Final Budget Difference
Salaries & Wages $289,321 $251,102 $38,219
Employee Benefits $72,612 $63,040 $9,572
Operating Costs $186,456 $195,270 ($8,814)
Total Direct Costs $577,539 $538,563 $38,976
Indirect Costs $128,272 $104,702 $23,570
Project Costs $705,811 $643,265 $62,546

More importantly, the final project budget shows a two-year request for sponsor support of $399,997 (just under the funding threshold), with agency cost-sharing of $243,267, or 37.8% of total project cost of $643,265. The total direct cost request is $340,718, with $59,279 as indirect cost recoveries.

Exhibit 15. Final Budget for Proposed Pre-natal Health Care Project

Budget Period 1st Year 2nd Year Total
Budget Category Agency Sponsor Total Agency Sponsor Total Agency Sponsor Total
Salaries & Wages
Family Physician $9,292 $13,938 $23,230 $9,757 $14,635 $24,392 $19,049 $28,573 $47,622
Nurse Practitioner $10,206 $10,206 $20,413 $10,717 $10,717 $21,433 $20,923 $20,923 $41,846
Registered Nurse $10,350 $10,350 $20,700 $10,868 $10,868 $21,735 $21,218 $21,218 $42,435
Nutritionist 0 $9,775 $9,775 0 $10,264 $10,264 0 $20,039 $20,039
Medical Assistant $11,313 $11,313 $22,625 $12,048 $12,048 $24,096 $23,360 $23,360 $46,721
Clerk Typist 0 $9,065 $9,065 0 $9,654 $9,654 0 $18,719 $18,719
Wages $12,248 $4,083 $16,330 $13,044 $4,348 $17,391 $25,291 $8,430 $33,721
Total Salaries & Wages $53,408 $68,729 $122,138 $56,432 $72,533 $128,965 $109,840 $141,262 $251,102
Employee Benefits@29% $11,937 $18,748 $30,684 $12,583 $19,774 $32,356 $24,519 $38,521 $63,040
Consumable Supplies $11,000 $11,000 $22,000 $11,880 $11,880 $23,760 $22,880 $22,880 $45,760
Travel 8,250 $8,250 $16,500 $10,855 $10,855 $21,710 $19,105 $19,105 $38,210
Other Operating Costs $2,850 $2,850 $5,700 $2,500 $2,500 $5,000 $5,350 $5,350 $10,700
Consultants* 0 $15,000 $15,000 0 $15,000 $15,000 0 $30,000 $30,000
Patient Care Costs** 0 $35,300 $35,300 0 $35,300 $35,300 0 $70,600 $70,600
Total Operating Costs $22,100 $72,400 $94,500 $25,235 $75,535 $100,770 $47,335 $147,935 $195,270
Equipment** $13,000 $13,000 $26,000 0 0 0 $13,000 $13,000 $26,000
Computing Services** $1,500 0 $1,500 $1,650 0 $1,650 $3,150 0 $3,150
TOTAL DIRECT COSTS $101,945 $172,877 $274,822 $95,900 $167,841 $263,741 $197,845 $340,718 $538,563
25% of Modified Total Direct Costs $21,860 $27,394 $49,255 $23,562 $29,385 $52,948 $45,423 $56,779 $102,202
Indirect on Subcontacts 0 $2,500 $2,500 0 0 0 0 $2,500 $2,500
INDIRECT COSTS $21,860 $29,894 $51,755 $23,562 $29,385 $52,948 $45,423 $59,279 $104,702
GRAND TOTAL $123,805 $202,771 326,577 $119,462 $197,226 $316,689 $243,267 $399,997 $643,265

*Indirect Costs applicable on the first $10,000 of each subcontract.

**Not included in the MTDC; 25% indirect cost rate not applicable.

Summary

A budget is a control mechanism to assure financial integrity, accountability, and legal compliance; a management tool to achieve operating economies and performance efficiencies; and a planning component to assess the overall effectiveness of government programs in meeting public service needs. Financial authority and responsibility can be delegated through the budget process, while appropriate central control can be maintained.

The budget process involves four steps: (1) executive preparation; (2) legislative review, modification, and enactment; (3) budget execution; and (4) post audit and evaluation. A clear and concise picture of both the programs to be carried out and the financial basis to support these activities should be provided in the budget document. A well-constructed budget message, carefully chosen summaries, and the use of tables and charts to explain the proposed program and financial commitments are Important factors in an effective budget presentation. On the basis of public hearings, the governing body may amend the expenditure portion of the budget and the proposed revenue measures and then approve the budget by resolution or by adoption a separate appropriation ordinance.

Steps in budget administration include appropriation, allocation and allotment, expenditure control, and budget adjustment. Budgetary accounting supplies the primary control mechanism for enforcing allot-ment and appropriation limits through periodic internal budget reports. Sufficient information should be maintained to anticipate requirements for budget amendments during the fiscal year.

The traditional role of budgeting since the turn of the century has been fiscal control. The object of expenditure budget serves well the purposes of internal fiscal control by offering two distinct advantages over other budget formats: (1) the close linkage between personnel and other budgetary requirements permits the use of position controls to control the entire budget, and (2) a detailed set of accounts is established through which expenditures can be recorded, controlled, and audited. However, object classifications merely show what is purchased, but not why, that is, the nature of organization's programs and anticipated accomplishments .under those programs.

Performance budgeting sought to strengthen the management aspects of the budget process by focusing on operating economies and performance efficiencies. Three components distinguish performance budgeting from other budgetary approaches: (1) Identification of work programs (2) delineation of performance units; and (3) measurement of performance costs. A performance unit is a team of workers responsible for carrying out a specific task or series of tasks (i.e., a work program). Performance costs are those costs directly associated with carrying out these activities. Performance budgeting sought to strengthen the management aspects of the budget process by focusing on operating economies and performance efficiencies. Workload and unit cost measures provide detailed information useful to operating managers in assessing the efficiency of their programs and organizational units.

Program budgeting combines a planning framework with the basic functions of management and control. A program is a distinct organiza-tion of resources directed toward a specific objective. Program objectives describe how and where specific resources (personnel, equipment, materials, capital expenditures, etc.) will be used. Multi-year program plans often are developed to identify the anticipated outputs of services and facilities according to the program objectives. The extended time horizon of the program budget shifts the decision focus from the one-year budget cycle to a multi-year time frame, thus providing a more comprehensive basis for annual budget deliberations. The focus of program budgeting is on policy analysis and planning. Resources are allocated on the basis of goals, objectives, and strategies. Measures of effectiveness and efficiency are used to evaluate program results (actual performance) in terms of planned performance. The data required to carry out such an evaluation include major elements derived from a cost-managerial accounting system. It may be possible meaningful cost-benefit or cost-effectiveness analyses by interrelating key indices from these measurement sets.

Although zero-base-analysis techniques have received the greatest publicity at the federal and state levels, they may have even more significant potential in application at the local level. The basic objective remains the same--to circumvent the shortcomings of incremental budgeting. Under current applications of ZBB, detailed analyses of programs "to the zero base" have been replaced by the concept of levels of effort.. As with performance budgeting and program budgeting, worth-while components of ZBB are likely to outlast the full-blown approach.

Service level analysis seeks to overcome the shortcomings of incrementalism that characterize traditional budget formats. The identification of budget units is analogous to the specification of cost and responsibility centers under managerial accounting procedures. Decision packages provide a rough parallel to programs and subprograms in the program budget format. By arranging levels of service in descending order of importance and determining a funding cutoff point, the analyst can rank alternative approaches according to their capacity to meet program objectives.

The information input and output requirements of program budgeting and service level analysis differ significantly from those of more traditional budget practices. Contemporary budget formats provide important managerial feedback--soundings, scannings, and evaluations of changing conditions resulting from previous program decisions and actions. Information feed forward is also generated by these budgeting procedures, providing a basis for more informed decisions and actions over a range of time periods, locations, and perspectives. Feed forward information emerges from projections and forecasts; goals, objectives, and targets to be achieved; program analyses and evaluations; and the projection of outcomes and impacts of alternative programs.

Each of these budget formats has obvious strengths and weaknesses. By combining the positive points of each format in a hybrid approach, however, governments and other public organizations should be able to develop budget systems that better serve sound financial management objectives.

Endnotes

[1] James C. Snyder, Financial Planning and Management in Local Government (Lexington, Mass.: Lexington Books--D.C. Heath and Co., 1977), p. 99.

[2] Albert C. Hyde, The Development of Budgeting and Budget Theory: The Threads of Budget Reform in Government Budgeting, Theory, Process, Politics (Pacific Grove, CA.: Brooks/Cole Publishing, 1992), p. 1.

[3] Allen Schick, The Capacity to Budget (Washington, D.C.: Urban Institute, 1990).

[4] Aaron Wildavsky and _______ White, in Hyde, op cit., p. 2.

[5] As quoted in Hyde, op. cit., p. 1.

[6] Allen Schick, "The Road to PPB," in The Stages of Budget Reform in Government Budgeting: Theory, Process, Politics, edited by Albert C. Hyde (_____________: __________, 1995), p. 6.

[7] Donald Axelrod, Budgeting for Modern Government, 2nd edition (New York: St. Martins Press, Inc., 1995), p 7.

[8] Committee on Budgeting of the Municipal Finance Officers Association.

[9] Axelrod, op. cit., pp. 8-9

[10] National Council on Governmental Accounting, Statement 1: Governmental Accounting and Financial Reporting Principles (Chicago: Municipal Financial Officers Association, 1979), p. 14.

[11] Ibid., p. 14

[12] Leo Herbert, Auditing the Performance of Management (Belmont, Calif.: Lifetime Learning Publications, 1979).

[13] U.S., Commission on Organization of the Executive Branch of the Government, Budgeting and Accounting (Washington, D.C.: U.S. Government Printing Office, 1949), p. 8.

[14] David Novick, often credited for the formulation of PPBS, has observed that the concepts of program budgeting "have rather ancient and hoary origins." Large corporations, such as DuPont and General Motors, were applying program budget techniques in the early twenties. For a further discussion of the roots of PPBS, see: David Novick (ed.), Program Budgeting: Program Analysis and the Federal Budget (Cambridge, MA: Harvard University Press, 1967).

[15] Alan Walter Steiss, Public Budgeting and Management (Lexington, MA: Lexington Books-D.C. Heath Co., 1972), pp. 154-155.

[16] Cited in Aaron Wildavsky and Arthur Hammann, "Comprehensive versus Incremental Budgeting in the Department of Agriculture," Administrative Science Quarterly 7 (December 1965), p. 321.

[17] Wildavsky and Hammann, op. cit., p. 321.

[18] Allan Schick, "Putting It All Together," Sunset, Zero-Base Budgeting and Program Evaluation, Proceedings of a Conference on Legislative Oversight (Richmond, Va.: Joint Legislative Audit and Review Commission, 1977), p. 41.

[19] Ibid., p. 17.

[20] Peter F. Drucker, "The Effective Decision," Harvard Business Review, 45 (January-February 1967), p. 95.

[21] Charles T. Horngren, Introduction to Management Accounting, (Englewood Cliffs, NJ: Prentice-Hall, 1978), p. 252.

[22] Robin Cooper and Robert Kaplan, "Activity-Based Costing," Journal of Cost Management (Summer 1988).

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