Focus on Professional Competency: Resource Management Organizational resources, uncertainties, performance, government budget responsibility Review the following definition and elements for the Resource Management competency.13
DEFINITION:
The ability to appreciate the importance of all resources (human, financial, physical, environmental, etc.) is critical for success. Individuals entering the accounting profession should be able to apply management and human resources development theories to human resource issues and organizational problems. Individuals preparing to enter the accounting profession should be able to identify sources of capital, and analyze the impact of participation in the global capital markets.
The definition and elements are reprinted with permission from AICPA; Copyright © 1978–2000 & 2003 by American Institute of Certified Public Accountants. The AICPA’s Core Competency Framework can be accessed at eca.aicpaservices.org.
ELEMENTS FOR THIS COMPETENCY INCLUDE
1. Identifies resources available to an organization
2. Explains why there are uncertainties about the availability and alternative uses of resources
3. Articulates how organizations make decisions to allocate scarce resources, including recognition of both quantitative and qualitative constraints on these decisions (Specific examples include decisions regarding capacity and resource utilization.)
4. Identifies the effects of market forces on organizations’ costs of capital, labor, commodities, etc.
5. Analyzes the implications of an organization’s lack of access to supply sources, financial markets, and intellectual capital (barriers to entry, expansion, or survival)
6. Articulates how resource availability affects the organization’s business functions, processes and administrative procedures
7. Identifies both traditional and nontraditional performance criteria and measurement methods by selecting appropriate success factors and measures of their achievement (see functional competencies)
8. Identifies and addresses the social costs and benefits of business decisions and evaluates the fiduciary performance of public sector and not-for profit management
9. Facilitates analysis of the organization and applies continuous improvement principles to the organization
Level 1 Level 2 Level 3 Level 4
REQUIRED:
A. Focus on competency elements 1 and 3, which address the identification and allocation of an organization’s resources. Answer the following questions:
1. Explain how the budgeting process helps top managers articulate decisions about the use of resources.
2. Explain how a budget identifies the resources available to individual departments within an organization.
B. Focus on competency elements 2 and 4, which address uncertainties about and influences on resource costs. Answer the following questions:
1. Explain why the cost of resources such as labor and direct materials is uncertain. Include the effects of market forces in your discussion.
2. Explain how changes in the price of resources such as labor and direct materials might cause managers to change the way those resources are used.
3. Explain how the issues you discussed in questions 1 and 2 can result in budget variances.
C. Focus on competency elements 7 and 9, which address skills for measuring performance and promoting improvement. Answer the following questions:
1. Explain how budgets can be used to measure organizational performance.
2. Explain how each of the following budget adjustments improves measurement of variances when evaluating the performance for individual managers within an organization:
a. Using flexible budgets to adjust for actual volumes
b. Removing allocated costs
c. Updating costs for anticipated price changes
3. How can the analysis of budget variances lead to continuous improvement in an organization?
D. Focus on competency element 8, which addresses social and fiduciary responsibilities. The federal government and many state and local governments publish a guide to help citizens understand the budgeting process. Perform a search on the Internet to find an example of a citizen’s guide to the budget (consider using a search phrase such as “citizen’s guide to _____ budget,” filling the blank with “federal” or the name of a state, county, or city). Answer the following questions:
1. Why would a government publish a citizen’s guide to the budget?
2. What are the components of the budgeting process described in the citizen’s guide? Explain how the process compares to the budget cycle (Exhibit 10.2) in the textbook.
3. As a citizen, explain how you can use a governmental budget to evaluate the fiduciary performance of the government’s managers.