There are many challenges facing business entities that reduce the efficiency of using the various available resources, and require proper planning for these resources, especially in the light of what is going in Egypt of circumstances since the beginning of 2011 up till now, with the growing deficit in the public budget, and the decline in quality of public services provided by the government, which reveal the pressing need to real and active support, especially from the civil society organizations as one of the essential supporters for governments of all countries, so as to help in improving the situations regarding the existed circumstances.
Perhaps in the light of the technological developments- approaching imagination in speed - regarding the field of material production and information, a significant increase in costs, particularly the indirect one, the matter requires scientific treatment for good customization, for reducing costs generally without affecting quality requirements, especially with the scarcity and increasing demand of resources, beside ensuring the efficient use of the available resources.
Cost management approach may be suitable for paving the way to the required treatment, through the available management accounting strategic techniques, such as the technique that help effectively in the optimal utilization of the available resources; represented in what the researcher aims to study closely for developing budgets prepared in the non for profit organizations - including civil society ones - with testing its applicability; that is “the Activity Based Budget Technique” (ABB), which may prove the suitability for application in such entities in the light of time being variables mentioned based on that, what is offered by the budget - that has been prepared in a suitable manner - ensures the effectiveness of all what follows its preparation closed to performance, especially since the charities in the mentioned sector is mainly based on donations, subsidies, and grants, beside membership subscriptions, and allows services and aids for notable groups - through several volunteers and unfortunately these groups are increasing day after day under the current circumstances in Egypt.
From the above, the importance of the research and its goal are almost clarified, especially for the testing study being in one of the charities, which are increasing its support to the governmental sector in Egypt, and these associations are neglected - in spite of its importance - either from the government or the researchers, especially in the aspects that increase confidence in it, as good planning, which allows good control and performance evaluation, through relevant techniques, fitting its nature, especially many of these associations are so poor regarding control techniques, add to this, most of it lack the preparation of budgets that help in preventing wastage and optimizing available resources utilization and to link these resources as inputs with the activities’ outputs which consume these resources. This refers to the reasonable probability of the main research postulate, which indicates that “the Activity Based Budget is appropriate as a technique to be applied in civil society organizations and able to realize the connection between available resources, as inputs for their activities, and what is produced by these activities of output in spite of the non application of the Activity-Based Costing Model”.
The title of the research indicates the suitability of adopting the inductive approach for scientific research, through the testing study.
The research limits are represented in:
Testing the feasibility of applying the technique in one of the civil society organizations; (Resala Charity Association) as one of their best, and choosing one of its main activities for implementing the budget preparation steps.
Considering and dealing with other strategic techniques of managerial accounting other than the Activity Based Budget, will be within the research requirements.
The research proved the goodness of the research main postulate. Also, the research clarified the following results:
1) Many of the application elements and pillars regarding the Activity Based Budget Technique are available in a lot of the great size and multi activities’ charities, despite the non application of the Activity Based Costing model , so applying the model is not a requirement for the application of the technique, but it facilitates greatly and exempts from many of the preparation steps needed for application, even though cost control requires that actual costs of the budget period to be measured on the same budget base.
2) There is a need to automate the performance through computerizing the information systems, to ensure the availability and reliability of databases as well as information; financial, administrative, and statistical, to be appropriate for applying the Activity Based Budget, which requires also appropriate training especially for employees of the generations that did not learned the computer as a basic study. Also there is a great need for a clear definition of activities and their analysis, & classifications, so as to ensure safety of applying the technique and assists in the selection of the appropriate cost drivers, which requires a restructuring of the functions and activities - main and supporting - to the possibility of both good classification of Activities’ levels, and pinpointing potential unutilized capacities.
3) The diversity of services provided by charities, influences clearly in the application of the Activity Based Budget in it and in the similar units in its sector, especially with the presence of the supporting and common activities, with high indirect costs proportion regarding total costs, which supports and encourages the application, since the direct costs are minimum in respect of the association main activities which provide services to targeted people, because these direct costs are justified in terms that the youths of volunteers are the ones who are implementing more than 90% of the association's activities, and do not receive any wages for their efforts exerted, as they are donating their efforts in favor of the Association, and as their wages represent implicit costs, if included in total costs, probably we may not advise to apply either the Activity Based Budget Technique or the Activity Based Costing Model, as the proportion of indirect costs will not justify the application.
4) The researcher believes that the nature of the Activity Based Budget which begins calibrating products costs specifically for the activities’ costs, and the inverse nature of the Activity Based Costing Model in terms of determining the cost of activities as a consumer of resources, then determining the cost of products, as well as their metting at the cost drivers point, greatly increases the effectiveness of cost elements control in the light of the actual capacity, and gives accurate and reliable data & information based on the activity regarding the correlated cost of services provided by charities, which helps in decision making and taking, in the context of increasing its effectiveness.
With regard to the recommendations of the research, in addition to what appear through the results, the researcher recommends the following.
1) It is preferable to apply the Activity Based Budget Technique - after the completion of its application pillars - in parallel with the existing technique until it is ascertained the integrity of its application and relevance of the technique, or fulfilling any adjustments that may be required, and here we can dispense the existed technique. It is preferable also to adopt a policy of gradual transition for testing the safety of the technique and its relevance in practice, before applying to other activities of the charity as a whole, and recommending the application in similar charities and the rest of the civil society organizations in case of proving the suitability for application.
2) It is preferable to apply the Activity Based Budget Technique while using computers in performing the entity’s information systems which facilitates the implementation of the technique for saving a lot of time and effort required, through what is provided by the use of computers regarding databases which represents one of the main pillars of application.
3) For the uncertainty conditions that normally occurring, with the lack of the sufficient numbers of volunteers throughout the year - as most of them are school and university students - it is better to split the budget on a quarterly basis, or monthly if possible, which also helps to activate the follow-up and Control functions, as we can develop the activity based budget itself to become an activity based flexible budget (ABFB), where it is to be prepared for more than one level in response to the mentioned variables.
4) Universities, through research centers and councils of Environmental Affairs and Community Service, should participate by a large supportive and influential role in helping civil society organizations to play their part - and in charities particularly - as in the preparation of their budgets according to the new technique, and all what it can offer for supporting these associations until the application is correctly fulfilled. Universities can submit this - especially through faculties of commerce and computers & information technology colleges – through preparing computer programs to facilitate the preparation of the technique in the multi civil society sectors’ organizations, as well as helping in computerizing the information systems and implementing the necessary training programs for the staffs of these non for profit organizations.
The researcher presents the following as proposed future studies:
A suggested electronic model for applying the Activity Based Budget Technique in the non for profit organizations.
Mathematical programming techniques and prioritizing the strategic objectives, as well as realizing optimization in the light of applying the activity based budget technique.
The impact of (ABB) and (BSC) Integration on performance evaluation (with an applied study).
A comparative study between (ABB & PBB, ZBB) to determine the optimal technique for application in governmental sector units.
Costs’ external perspective and costs rationalization, using the strategic management accounting techniques.
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