Management Accounting and the Environment

There are different approaches which help to identify the future goals of Charity organizations and detect the threats. Accountants’ examination of Charity organizations gives useful insights into the nature of the strategy itself. Management accountancy in Charity organizations is normally associated with more rational approaches to reporting.
Perhaps its greatest contribution lies in providing the management accountant strategist a broad framework for analyzing the position of organizations at a particular moment in time. It can also be useful in the development of a number of strategic options which attempt to tackle opportunities and threats, build on corporate strengths and avoid weaknesses. An important consideration is that for most management there is a choice of strategy (Collins, Davies, Weetman, 1992).
The new environment needs the approach based upon the assumption that information is readily available to the accountants and an accurate assessment can be made of its likely impact on organizations. This is not always the case and the entire process is subject to behavioral influences. The so-called rational techniques have been criticized as ‘pseudo-science’. Nonetheless, this is the basic approach used by many researchers (Kirkham, Loft, 1993). In the 1980s the emergence of an increasingly complex and turbulent business environment called for modifications in the rational approach.
The environment plays an important role in charitable organizations because there are more groups for whom the financial records are of potential interest. These groups include paid staff, volunteers, beneficiaries, donors (including grant-making trusts), institutional and corporate funders, government departments, rating authorities, The Charity Commission, the press and the public as well as the Inland Revenue and HM Customs and Excise. As a result of this Charity, Accounts can be subject to more requirements than private sector organizations of equivalent size (Parker, 2001).
In the light of this, it is possible to distinguish three main functions of accountants: the raising of funds or financial management. the contribution of accounting to management control and decision-making. and the function of financial reporting. Accountants in Charitable organizations need to prepare and maintain accounting records. These records must be retained for at least six years (at least three years in the case of charitable companies), and make the accounts available to the public on request.
In charitable organizations accounts can be prepared using one of two bases: receipts and payments basis which consists of an account summarising all money received and paid out by the charity in the year in question, and a statement giving details of its assets and liabilities at the end of the year. "Accruals basis contains a balance sheet showing the charity’s financial position at the end of the year in question, a statement of financial activities (SOFA) during the year and explanatory notes. They, in accountancy terms, should give a "true and fair view" (Sayer, 1998).