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Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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How can knowing the cost per output and cost per outcome ...

Customer Question

How can knowing the cost per output and cost per outcome benefit a human services agency? What is the primary difference between a performance budget and a program budget? Why does a human services agency need to know this information?
Submitted: 9 years ago.
Category: Tax
Expert:  Merlo replied 9 years ago.


The condition of the financial stability and management of the organization is imperative to using cost per output and outcome calculations. Cost per output and outcome calculations can provide insight into a human service organization's financial management plan in order to evaluate whether or not the goals and objectives are being met to provide the services which support the mission. Outputs and outcomes provide the information about the services, how they are implemented, and whether or not they are financially sound to the organization. Divisions of labor, services, and programming can be determined in order to ensure funds are allocated properly. Determinations can be made taking into account fixed and variable costs and how those affect the revenues. Quality of services can also be addressed using outputs and outcomes which determine the level of services and how the quality is affected through an increase in funding or a cutback.

A performance budget allocates money to various programs within an organization and also details the service level on which the budget is predicated. The service level is identified by the use of performance measures. In addition to controlling costs, the primary orientation of the performance budget is that of improving the internal management of the program.

The program budget allocates money to major program areas, focusing on the expected results of services and activities to be carried out. Program areas often utilized by government entities include public safety, public works, human services, leisure services, and general government. The emphasis of program project's is on the attainment of long-term local community goals.

Both the program and performance budget use indicators to measure financial and operational performance, but the budgets have a different focus. A performance budget emphasizes management efficiency, whereas a program budget emphasizes the benefits that the local community gains from municipal expenditures.

Since a human services agency is generally operating on a limited budget and their funding comes primarily from donations, by using the information obtained from the cost per output and cost per outcome analysis, and the performance and program budgets, they can make sure they are getting the maximum results they desire with the funds that are available, and be certain that they are putting their donations to the best use for the groups benefiting from their services.

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