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Parish Meeting ... Cash Accounting ... Accrual Accounting ... Value Accounting
Peter Burgess to AAAAAAAAAA
Dear AAA
I wrote the following in draft a week ago, but decided to review it
'tomorrow'. Now it is a week later. I leave it more or less as it was
a week ago!
I was concerned this morning that I would not express myself in a
coherent manner ... though I now wish I had said something. I was
surprisingly agitated.
The issue that triggered this stress was the fact that the Church
keeps its accounts ... does its financial reporting ... on a cash
basis. I realize that this is what is normally done ... and therefore
why would this bother me.
I have been involved with accountancy and financial report preparation
all my professional life ... and have been engaged in the arguments
about why cash accounting is one of the great mistakes that has been
allowed to perpetuate in the accountancy world, especially at most all
levels of government. Bluntly put, my career went into free fall when
I was identified with this issue during the great financial sector
reform in the former Soviet Union that unleashed one of the great
pillages of all time! USAID. KPMG, World Bank, etc were not amused!
Today, the great debate over the future of the US economy, the US
dollar is going on without the benefit of deep thinking about the
balance sheet of the country, and its underlying organizations ...
like the MTA, for example!
I had not realized that the Church accounts were 'cash accounts' though I
had thought to ask why there was no 'balance sheet' budget being
presented for 2010. All of this had me highly stressed.
The positive aspect of what I wanted to observe was that the money
accounts of the Church only talk about how much money is
disbursed and how much money is mobilized ... which is important, but
certainly not sufficient. The Church does a whole lot that is not in the
money accounts ... but it is not part of the accounting ... the
scorekeeping. What would American football look like if touchdowns did
not count ... it would be thought of as ridiculous! But modern
accounting in organizations like the Church is about as silly. What the
church does for its members and for the wider community is huge. How
huge is difficult to measure, but it is so important, that I argue
that it should be measured, and some way should be found to do it
sensibly. When I had my heart attack and was in the hospital ICU ...
you all (all of y'all) came to visit at all times of the day and
night. What value did that have? The answer is 'enormous' ... but
there is no commonly accepted measure or quantification of how
enormous! Did you send me an invoice? No ... but the fact of no
invoice does not mean it had no value. My story is very personal to me
... but it is, I believe, a story that all sorts of other people in
the Church family have experienced. What is the value of a child being
introduced to the lessons of Jesus? Not inconsequential ... in fact
huge ... and not quantified. The list goes on and on and on.
The value proposition in socio-economic analysis has been totally
displaced by the money metrics, and mostly the profit metric of the
corporate organizations ... which in turn has a role in driving the
stock market price metric. Another metric is GDP growth ... which
drives the stock market price metric.
Where the money metric rules ... human costs are not in the accounts.
Good things get lost.
Until we put value back into the metrics for socio-economic progress
and performance, society will continue to head in a direction that is
likely to have terrible consequences. Money optimization has no
natural limits ... while everything that is real has limits. I could
argue that the only other characteristic of society that has no
natural limits is the spiritual dimension and the Love of God ... if I
remember the sermon this morning ... and of course this is one reason
for great optimism about society if only we can figure out how to have
this metric in play as well as the money metric.
My work with Community Analytics (CA) goes a long way in the direction
of value as well as money. It will be a long time before it is perfect
... but it is a big step in the right direction.
The situation in Haiti is, of course, extremely grave. It is likely
that a version of CA ... some elements of CA if not the whole thing
... will be deployed in Haiti to help to get some accountability for
the resources mobilized. Some people very much want to see CA deployed
but others do not. The idea that the emergency workers do not have any
spare time is valid ... but there are plenty of people getting
'stories' to put on the air. The organizations doing good work must
find a way of getting what they are doing recorded ... in old
fashioned accounting, this was called a journal ... a day book ... and
it was a book of original entry. Money raised for organizations doing
this work is money well raised. Rather little of the money being
raised can be linked with anything of value for the people of Haiti.
Feedback suggests that sales of SUVs are doing well in Haiti ... and
it is likely that profiteering is big. Nothing wrong with high prices
reflecting high costs ... but high prices because some organization
has a monopoly position in the supply chain is another matter. Data
are needed so that people can tell the difference.
I am hearing observations about some of the organizational problems of
WFP and other parts of the UN system. Why are these problems in Haiti
the same problems that were articulated back in the 1980s, 25 years
ago? The data are never collected and organized, and then the UN and
everyone else forgets, and nothing is in place to get them to pay
attention. Accounting and accountability are powerful ... which
explains why nobody wants them.
This has been a bit long ... but the issue goes to the heart of a good
society. It is time to get the scorekeeping right!
Sincerely
Peter
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Peter Burgess
Tr-Ac-Net Inc ... The Transparency and Accountability Network
Community Analytics (CA)
Integrated Malaria Management (IMM)
Microfinance Focus Magazine in New York
website: www.tr-ac-net.org
tel: 917 432 1191 or 212 772 6918 or 212 744 6469
email: peterbnyc@gmail.com
skype: peterburgessnyc
Books: Search Peter Burgess at www.lulu.com
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