Inception Cases and Publications CASES Crear vale la Pena: Using Budgets as Management Tools

Crear vale la Pena: Using Budgets as Management Tools  

This case describes the situation experienced in 2002 by Fundación Crear Vale La Pena (Creating is Worthwhile Foundation, CVLP), a non-governmental organization deploying, since 1993, a social program based on art education, artistic production and social organization to promote social and personal development in needy communities. This goal was accomplished through the creation of community centers at poor neighborhoods. These self-managed centers were supported by the foundation, which provided funds, art teachers, teachers’ training specialists and instructors for crafts associated with art-production. Specific workshops were delivered at these community centers managed by neighborhood leaders.

As a result of a sudden revenue drop, CVLP experienced financial distress, and the organization’s executive committee was forced to consider funding alternatives to continue its operations. Financial forecasts (cash flows) and income projections are used to review CVLP’s immediate and future scenarios, showing how budgets may turn into effective decision-making tools.

Students may prepare a financial budget and a statement of revenues and expenses based on the data provided by the case, pondering on the use of this information for organizational strategic planning. The class may discuss the incorporation of management data seldom included in accounting reports prepared for outside stakeholders, like in-kind donations of goods and services used in the same period. This information becomes relevant when organizations want to show donors the true magnitude and quality of their operations.

This case may be used in organizational management courses including the use of economic and financial budgets for decision-making purposes, sensitivity analyses of several scenarios for crisis management and, even, breakeven notions.

It may also be used in management accounting courses for nonprofit organizations, to show the use of financial statements as information tools to analyze revenue and expense composition, to gain a better understanding of how financial metrics reflect revenue and expense projections, to study the impact of new revenues and expenses on net income, etc.

Authors: Maria Cristina Wirth, Luis E. Sanchez

Topics: Crisis communications, economic conditions, fixed costs, variable costs, management controls, nonprofits, revenue growth.

University: Universidad de San Andrés – Argentina

Published in: 2006

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