Case Study for theU.S. Department of Defense.docx

Case Study for the
U.S. Department of Defense
CMGT 573
Introduction:
The origins of the United States Department of Defense can be
traced back to the start of the revolutionary war in 1775, when
the Army, and Navy, and Marine Corps were formed. After the
ratification of the Constitution, the original “War Department”
oversaw the security of our nation, until it was officially
renamed when the Army, Navy, and Air Force creating a unified
force. These are the three main military departments of the
DoD, with the Marine Corps falling under control of the Navy,
and the Coast Guard as part of the Department of Homeland
Security during peace times. Ash Carter is the current Secretary
of Defense under President Obama, and his organizational chart
can be seen below:

Figure 1: Organizational Chart for the DoD
The overall mission of the DoD is “is to provide the
military forces needed to deter war and to protect the security of
the United States.” With active members deployed to more than
140 countries, they strive for success in defeating and deterring
aggression across the globe. To keep order and a common
vision within the different military departments, the DoD has
nine Unified Combatant Commands that are composed of at
least two of the departments: U.S. Northern, Southern, Central,
European, Pacific, Africa, Strategic, Special Operations, and
Transportation commands. (Peforomance.gov) Also, within the
DoD are many different defense agencies, most notably the
Nation Security Agency (NSA) and Missile Defense Agency
(MDA). As you can see, it is quite evident that the DoD is
largest employer in the United States, with approximately
850,000 civilians and over 2.2 million service members. In an
organization of this magnitude there must be specific strategic
goals in place that enable managers to successfully plan for the
future.
PPBE:
Before I go into the Planning, Programming, Budgeting, and
Execution (PPBE) process, I first want to discuss recourse
allocation protocol that DoD must follow because “PPBE is
unique to DoD. The other executive agencies use internal
annual processes to determine required resources. The purpose
of PPBE is to identify mission needs, match needs with resource
requirements, and translate requirements into budget proposals.
The PPBE process produces the DoD portion of the President's
budget.” (DAU) The enactment of funds begins with “the
submission of the President’s budget to Congress” where it is
then debated on and revised by both houses of Congress. After
the new budget is authorized by Congress, it is then sent back to
the President for the official signature or veto causing this
process to be repeated. Once the budget has been approved, the
House and Senate Appropriation Committees meet to “produce

three Acts that provide budget authority for national defense:
the DoD Appropriations Act, the Military Construction, Military
Quality of Life and Veterans Affairs Appropriations Act, and
the Energy and Water Development Appropriations Act.” The
Office of Management and Budget (OMB) is then put in charge
of the Congressional appropriations and released the funds to
the intended agency. Shown below is diagram of the PPBE
process for the DoD.
Figure 2: PPBE Process Diagram
Planning:
The planning phase begins once the White House has issued its
“provisional budget levels (fiscal guidance)” usually around
February, and occurs on a yearly basis. The planning committee
is comprised of the three military departments, Office of the
Secretary of Defense (OSD), Joint Staff, OMB, and the National
Security Council, and their job is to plan accordingly for the
potentials threats to the United States over the next 6-20 years,
and “assess capabilities to counter them, and recommend forces
to defeat them.” (DoD.gov) Then around March 1st, the
Chairman’s Program Recommendation (CPR) is submitted to the
Secretary of Defense for review and eventually the Defense
Planning and Programming Guidance (DPPG) is finalized by the
Unified Commands, military departments, and defense agencies.
This type of planning is from a strategic level, as the top
management looks to translate the aforementioned vision into a
mission statement. The following list is comprised of the
strategic goal and objectives of the DoD for the years 2015-
2018:
1. Defeat our Adversaries, Deter War, and Defend the Nation.
2. Sustain a Ready Force to Meet Mission Needs.
3. Strengthen and Enhance the Health and Effectiveness of the
Total Workforce.
4. Achieve Dominant Capabilities through Innovation and
Technical Excellence.
5. Reform and Reshape the Defense Institution.

Recommendations and Conclusions:
The Department of Defense has a very structured planning
process as seen through their mission statement and list of
strategic goals. From a strategic level, the DoD uses these
goals to layout everything they need to comply with their
mission statement, without constraints. These goals give DoD
representatives a reason to fight for the necessary budget. Then
once the budget has been approved through the political
process, the DoD is guaranteed a certain amount of funding to
act on the priorities from a top level down process. The tactical
and operational levels of planning rely heavily on the strategic
goals of the military because the focus can change during the
transition from wartime to peacetime. I would recommend
limiting the amount of bureaucracy involved with the planning
phase, because I believe it hinders agencies when they have to
change their plans because of politics.
Programming:
After the DPPG has been approved, the programming and
budgeting phases can formally begin. “However, in reality the
departments and agencies start their [Program Objectives
Memorandum and Budget Estimate Submission] POM/BES
development much earlier. Programming is the process that
matches available dollars against a prioritized list of
requirements to develop a five-year resource proposal. It is the
bridge between planning (with broad fiscal guidance) and
budgeting (which meticulously prices each program element).
The POM is a blueprint of each department/agency proposal for
updating the FYDP to reflect resources needed for mission
accomplishment.” (DAU) Front End Assessments (FEAs)
identify the major issues in the upcoming fiscal year that will
affect recourse allocation. Each department individually
conducts a FEA during the late summer months, and remains in
sync with program decision budget process. Once the FEA has
been established and reviewed, each branch then prepares a
Program Objectives Memorandum (POM) based on guidance.
For reviewing purposes, “the CPA, prepared in consultation

with other members of the JCS, the Commanders of the Unified
Commands, and the Defense Intelligence Agency, is the
Chairman's personal assessment of the POMs conformance to
the priorities established in strategic plans and unified
command requirements. It also provides the Chairman an
opportunity to submit alternative program recommendations and
budget proposals.” (DAU) Once the Chairman submits their
alternatives, a 3-Star review group comprised of members of the
Office of the Secretary of Defense(OSD) makes the finals
changes to the recommendations, when it is then presented to
the Secretary of Defense as a series of Recourse Management
Decisions (RMD).
Recommendations and Conclusions
The overall goal of the programming phase is to prioritize
resources for the budget and conduct analyses of alternatives
that help to balance the budget. Organizations like Department
of Defense often budget for a certain amount of money, when in
reality they have to settle for less, and start to set constraints.
The release of documents throughout the process, which can be
clearly seen in the DoD (FEAs, RMDs, POMs, etc.), layout the
resource constraints and begin to distinguish the essential
programs. The constant internal review that is put in place
allows the DoD to analyze alternatives and evaluate tradeoffs
for their different programs in order to determine their
priorities.
Budgeting:
The Department of Defense uses a composite type of
budgeting, known as the Program Planning Budgeting Systems,
which links line item and program budget approaches. When it
comes to approving or rejecting a budget, the President can only
respond with yes or no, and can’t fragment the bill for line item
vetoing. The Under Secretary of Defense (Comptroller) has the
responsibility to review the budgeting estimates put forth by
each department/agency. There are two crucial areas that the
USD is looking to “scrub”, program pricing and program

executability. The importance of the budgeting phase is to
“convert the programmatic view into the format of the
congressional appropriation structure, along with associated
budget justification documents.”(DAU) Now that budget
request has been properly formatted and sent to the President,
“the FYDP is again updated to reflect the President's budget and
becomes the baseline for the next cycle.” At the organizational
level, the DoD uses the previous year’s “budget resolution” as a
baseline for the upcoming fiscal year.
The DoD uses the composite type of budgeting to their
advantage, however, I agree with what Jimmy Carter proposed
in mandating zero-based budgeting for the government. I
believe the DoD along with all other agencies should have to
justify each dollar that they spend because it is coming directly
from my tax dollars. Differing political views or interests
between Congress, the President, and the public demand creates
a difficult environment for passing a budget. It is important to
look at how much the budget would most likely cost from an
unbiased point of view and then if the program phasing, funding
profile, obligation, and outlay rates are within reason.
Budget Execution:
With a defense budget of $585 Billion for FY16, it is essential
for the DoD to implement management controls to monitor their
spending. In the budgeting execution phase, the appropriated
funds for the DoD have been dispersed to the respective
programs that are outlined in the President’s Budget. The funds
are released to organizations within the DoD in the form of
appropriations, that are to be used solely for the intended
purposes. The execution phase is also known as the “real world
application” of the entire PPBE process, and only occurs after
these five events have occurred:
1. The President signs the Authorization and
Appropriations bills passed by the Congress
2. OMB must apportion the appropriations providing
obligation/budget authority

3. The Department of the Treasury must issue a Treasury
Warrant providing cash
4. Program authority must be released by the Under Secretary of
Defense (Comptroller)
5. Finally, all these authorities must be loaded into the Program
Budget Accounting System (PBAS)
Ongoing reviews for the program and budgeting provide senior
leadership with “the effectiveness of current and prior resource
allocations” (DAU) as well as a quantifiable measure for the
output performance of execution. Each branch of the military
provides a “report of programs” (ROPs) to the Comptroller on a
quarterly basis, which provides an update on the state of
spending. The Comptroller then decides what actions need to
be take for reprogramming or transferring funds within
Department of Defense to areas that are in need.
One of the major concerns I have with the budgeting execution
of the Department of Defense is the fact that there is a spending
increase every 4th quarter of the fiscal year. Organizatoins
within the DoD are conservative with the spending throughout
the first three quarters to ensure that they do not run out of
money, and then rush to spend the leftover cash in the final
quarter. Money that is not spent gets returned to the federal
treasury instead of being kept at a program level, which is
another prevalent issue within the government. I would
recommend that the budget be broken down into a quarterly
basis for approval, especially since there are already quarterly
ROPs set in place.
Accounting System:
The DoD relies on “working capital fund” for financing
purposes, and has been directed by the Defense Finance and
Accounting Service (DFAS) since 1991. DFAS provides all of
the funding services to the Department of Defense, and is also
used to control the payments to DoD civilians, service members,
and all of their benefits. Using working capital for funding is
done by “charging its customers for the services it provides

rather than being funded through direct appropriations.”
(dfas.mil) The Program Budget Accounting System (PBAS) is
used at the department level to transfer and distribute fund to
DFAS down to the individual level. There PBAS implements
specific control to set thresholds on the amount of money to be
reprogrammed or prevent overdrawing on the amount
appropriated by Congress. “Transactions are generally recorded
on a budgetary basis, but are required to be reported (in the
financial statements) on an accrual accounting basis. Under the
accrual method, revenues are recognized when earned and
expenses are recognized when a liability has been incurred,
without regard to the actual receipt or payment of cash. Due to
identified financial systems deficiencies, these statements do
not meet the requirements for full accrual based accounting.”
As you can see, the DoD records their transactions on a
budgetary basis rather than the full accrual method that is
required by GAAP. The DoD also turns to the Federal
Accounting Standards and Advisory Board (FASAB) for
guidance and advisory services when areas of concern have
been identified (i.e. timing of R&D funds or reasonable baseline
estimates).
The establishment of the DFAS was a great way to monitor and
streamline operations through a standardization process. As the
world’s largest finance and accounting operation, the DFAS can
be used as a can effective example for other non-profits across
the globe. Since the Department of Defense is a government
organization, they rely on government appropriations to spend
funds, therefore cannot spend money that they don’t physically
have. This makes the accounting process easier than with a for-
profit company because no borrowing of funds is involved.
Since the DoD receives their money from the taxation of
citizens, they are held accountable to the public and critiqued
on their decision making processes. Like other government
entities, the DoD also has to maintain books to ensure that
funds were used for their intended purposes and conduct

individual reports among agencies.
Financial Management Reporting & Auditing:
Mike McCord, the Under Secretary of Defense, is also
known as the Comptroller or Chief Financial Officer (CFO) of
the Department of Defense. He is in charge of advising the
“Secretary of Defense on all budgetary and financial matters,
including the development and execution of the Department’s
annual budget” (Defense.gov) Using the DoD Financial
Management Regulation 7000.14-R as reference, the
Comptroller establishes and enforces the obligatory standards in
order to comply with the requirements of the DoD. Along with
the updated federal regulations, the DoD releases several
different reports, the most important being the FY DoD Agency
Financial Report (AFR)/DoD Performance and Accountability
Report (PAR). This document is published with the annual
budget submission in February, and goes into great detail on the
overall health of finances within the department for the previous
fiscal year. The FY 2015 financial report includes a message
from SECDEF Carter, followed by management’s discussion
and analysis of affairs and the balance sheet, Statement of Net
Cost (Income Statement), Statement of Changes in Net Position
(Cash Flows), and Statement of Budgetary Recourses. In order
to comply with Financial Improvement and Audit Readiness
(FIAR) , the Comptroller hires public accounting firms, such as
Deloitte, to conduct an internal audit before the documents are
released.
The DoD follows the typical format for financial reporting
among government organizations. They release an annual
report that can be compared to a 10-k in the private sector,
which includes the four equivalent statements of finances. This
report is a great way to maintain the books and ensure that
funds were spent on their intended purposes. Instead of a net
profit or loss, the DoD uses the terms surplus or deficit to
assess their overall spending for the year. Just as it is done the
private sector, internal audits are preformed to ensure they

don’t face legal implications for falsifying their documents.
Out of the key aspects of reporting, the DoD is more focused on
asset management rather than profitability or liquidity, simply
because of their not profit nature. Overall, I believe the DoD
provides sufficient financial reporting to the constituents of the
United States.
Performance Management:
The Department of Defense follows the U.S. Office of
Performance Management (OPM) guidelines when assessing the
performance of its employees. This performance based rating is
also known as rating based and an award is granted only if the
employee has been “fully successful” in meeting their
objectives. Directly from the OPM website, “agencies [DoD]
must design their performance-based cash award programs to
reflect meaningful distinctions based on levels of performance
to ensure employees with higher ratings of record receive larger
cash awards.” The money that is set aside for performance
awards is placed into a pool of cash and can be dispersed to the
employee in the form of a lump-sum bonus, percentage increase
of base pay, or both. In regards to new employees, because in
the first two years of employment we can only receive our
“bonus” in the form of a salary increase instead of both a lump
sum and salary increase that is seen by the rest of the work
force. In the end however, this amount seems to even out
because we are given slightly more of percentage increase to
accommodate for the lack of bonus. The performance based
cash awards are a great way for people to continue to move up
in the company each year without actually being promoted to a
higher level position.
The Deputy Secretary of Defense is held responsible for
the performance level of the DoD as the Chief Operating Officer
(COO). Also included in the FY Financial Report is a
performance review in which the COO reviews successes from
the previous year, and tracks performance measures to ensure
that they meet the strategic plan. Through the third quarter of
FY15, it appears that “67 percent of the Department’s quarterly

performance measures were on track to meet the annual goals,
while 33 percent did not meet third quarter targets and are
considered “at risk” of not achieving their annual targets.”
(Defense.gov)
As a current employee of the Department of Defense I can tell
you first hand that the performance appraisal system in place is
very structured and fair to all of its employees. The pool that is
generated and distributed ensures that people do not receive
outlandish bonuses as seen in the private sector that could lead
to jealousy amongst coworkers. However, this can limit the
people that are exceptional performers because there is a cap on
how much money can be dispersed each year. The “slackers”
are truly the ones who could benefit from this because even
though they had a year of poor performance, they only get
slightly less of a raise than the top performers. The incentive to
work hard begins to diminish when you take this inequality into
consideration. The only recommendation that I have is to make
it easier for managers to reward their employees for high levels
of performance without having to jump through all of the hoops
and administrative process of asking for the extra money. If all
of their employees perform at a high level then they should all
be properly compensated for it.
Knowledge Management:
Throughout the Department of Defense, it is crucial for all
of the agencies to share information and that is done with
proper knowledge management. As defined by the DoD
Directive 5015.2, knowledge management ensures that
“information and intellectual capital contained in DoD records
will be managed as national assets. Effective and efficient
management of records provides the information foundation for
decision making at all levels, mission planning and operations,
personnel and veteran services, legal inquiries, business
continuity, and preservation of U.S. history.” (dtic.mil) The
purpose of knowledge management is to ensure that information

is documented and shared within the Department of Defense,
and it is broken down into data, knowledge, and information.
Data management refers to past performance from testing that
has been gleaned from after action reports, which can be applied
to future cross project learning. Knowledge refers to any
actionable information that is based on facts or meaning, and
information is the data that is relevant and has a purpose. All
three together create a sense of wisdom that is necessary for
effective decision making in the DoD.
The DoD does a great job of managing their information for
capturing and using organizational knowledge with the
implementation of wisdom. As the third largest piece of the
U.S. budget, it is clear that the DoD is a vast organization with
a great deal of information. The amount of information from
research and development, testing, production, etc should be
properly utilized by anyone it could help. Most recently, I have
seen in the DoD workforce a large age gap that has caused a
surge of hiring recent college grads, as the older employees
begin to retire. This raises the importance of passing
knowledge from the experienced mentor to the mentee.
However, I have also seen people who are subject matter
experts and are hesitant to share their knowledge with the fear
of being replaced. I believe the DoD should find a way to
better institute a culture of sharing knowledge.
Risk Management:
The future is unpredictable and it is up to the DoD to
prepare for a future condition that takes into consideration the
probability and consequence of an undesired event. Much of
the work done for the Department of Defense is actually done
by government contractors, therefore most of the risk involved
is put on the contractor. This effort is used to address and
mitigate the three most important risk factors to the Defense
Acquisition process: cost, schedule, and performance. In the
chart below you can the Risk Management Process that is a
complete circle and is a never ending process.

Figure 3: Risk Management Process
Starting from the Risk Planning phase, Program Managers (PM)
are required to summarize their approach and planning activities
usually within the Risk, Issue, and Opportunity (RIO)
Management plan. It is important to have a procedure that
documents the risk management process, and applies a criteria
for handling of the individual risks. A sense of traceability is
established bringing together the technical requirements and
overall objectives. Also found in RIO plan are the clearly
defined roles for contractors and governments workers and their
available resources.
Next is the Risk Identification phase where the simple
question “What can go wrong?” is answered by looking at any
proposed plan. The PM “examines each element of the program
to identify risks and their associated future root causes, begin
their documentation, and set the stage for successful risk
management.” (DAU) The early they get a jumpstart on this, the
better for the ultimate success of a program.
In order to properly assess risk, members of the DoD
generate a matrix in the Analysis phase. The likelihood and
severity of an occurrence are given values and placed into a
color coded chart, green for low risk, yellow for moderate risk,
and red for high risk. This process gives a great visual
demonstration of a potential threat and quantify how big the
risk truly is. The “Risk Reporting Matrix” also identifies
consequences on common playing field, through the cost,
schedule, and performance, in order to compare the alternatives.
The most important part of the Risk Handling phase is to
mitigate the threat to an acceptable level of risk. DoD
representatives must be able to explain “what should be done,
when it should be done, who is responsible, and the funding
and/or resources to implement the risk handling plan.”(DAU)
The goal in this phase is the choose whether to accept, avoid, or
transfer most of the risk responsibility onto an outside source
(contractor) leaving the government free of any liability.

The final phase of the Risk Management Process is to
monitor the risk you have identified and chosen to accept. PMs
typically hold technical reviews to implement and track risks, as
well as provide constant updates to their ongoing plans. The
stakeholders involved, which includes soldiers, are kept up to
date with how risks change over time and if the risk handling
options are still successful. In the end, the overall objective of
a risk management plan within the DoD is to ensure that a
program remains on schedule, within budget, and performs at
the expected level.
Risk management is one of the most important management
controls for the DoD, simply because of the products they
develop. What they create is used on battlefield across the
world and is involved in saving lives and taking lives, and
knowing how to choose between the two. That is why the DoD
has such a complex process for weighing the probabilities and
consequences of their actions. The impact of risk to a
program’s cost, schedule, and performance not only affects the
people generating the technology but also the war fighters
themselves, and the quality of product they ultimately receive.
From my research and work experience, I believe the DoD has
done their due diligence in proper risk management, because
you can never too careful when loss of life is involved.
Continuity:
As the largest civilian employer in the nation, the Department
of Defense has a duty to its constituents to keep a steady flow
of operations. According to the DoD Directive 302.26, the DoD
must follow a continuity of government (COG), continuity of
operations (COOP), endure constitutional government (ECG)
and state mission essential function (MEFs). This is crucial in
times of war when emergencies happen every day, and the DoD
has built in succession plans in the event a top leader should
fall. Continuity also remains true in the civilian workforce, as
stated by the Government Publishing Office (GPO): “under the
direction of the President, the Secretary exercises authority,

direction, and control over the Department of Defense. Deputy
Secretary of Defense. The Deputy Secretary of Defense is
delegated full power and authority to act for the Secretary of
Defense and to exercise the powers of the Secretary on any and
all matters for which the Secretary is authorized to act pursuant
to law.” (GPO.gov) The passing of authority occurs in a
sequential fashion, and is made clear to the employees who
should take over power during a time of crisis.
If a disaster should occur at any given base across the
world, there are relocation sites available for every branch of
the military. The DoD has set in place “Allocate adequate
resources to implement the requirements of this Instruction,
ensuring that family readiness services are available to all
Service members and their families regardless of geographic
location or proximity to military installations.”
As a member of the civilian workforce, I witness every day the
implementation of continuity. Whether is when a branch chief
falls ill or has to travel, there is always an email notification
determining the 2nd in line as the “Acting Branch Chief.” We
also have numerous Army bases throughout the D.C. area and
all over the country that can act a temporary duty stations in
case of an emergency. One major recommendation for the DoD
is to find a better form of communication in the workplace. For
security reasons, the DoD computer networks are all hard-wired
Ethernet to prevent hacking. This can be troublesome for
moving throughout the office or if employees had to relocate to
a temporary work station, therefore working from home is not
an option. I know this could be a very difficult task to
implement and a serious threat to our country, but the idea of a
virtual private network (VPN) for government employees would
benefit the flow of operations.
Conclusion:
In conclusion, the Department of Defense represents the
largest employer in the United States, and has successfully
implemented the management controls presented in this case

study. Led by Ash Carter, the DoD has a model PPBE system in
place that clearly defines how they get their money and what it
is going to be spent on for budgeting purposes. There is a great
deal of documentation on the type of accounting they utilize and
how they report their state of finances to the public.
Performance, knowledge, and risk management all play major
roles in the functionality of the organization and how they
operate as a whole. Lastly, continuity provides a steady flow of
operations that ensures business will not be affected in the
event of a crisis.
References
1. https://www.gpo.gov/fdsys/pkg/GOVMAN-1996-05-
31/pdf/GOVMAN-1996-05-31-Pg176.pdf
2. https://www.performance.gov/agency/department-defense
3. http://www.defense.gov/About-DoD
4. http://www.dfas.mil/pressroom/aboutdfas.html
5.
http://comptroller.defense.gov/Portals/45/documents/cfs/fy2000/
06_Section_3_FY2000.pdf
6. http://www.reuters.com/investigates/pentagon/#article/part1
7. http://www.dfas.mil/
8. http://www.dau.mil/
9.
http://comptroller.defense.gov/FinancialManagement/Reports/af
r2013.aspx
10. https://www.opm.gov/policy-data-oversight/performance-
management/performance-management-
cycle/rewarding/approaches-to-calculating-performance-based-
cash-awards/
11. http://www.dtic.mil/whs/directives/infomgt/index.htm
12. http://www.dtic.mil/whs/directives/corres/pdf/501502p.pdf
13. http://www.allgov.com/departments/department-of-
defense/defense-finance-and-accounting-services-
dfas?agencyid=7362

ORGANIZATIONAL CASE STUDIES
CMGT 573 will require that students carry out an organizational
case study as their major assignment/Final for the course. This
is a field research project in which you select a nonprofit or
government organization and collect information about its
management controls, its activities, its structure, its resource
base, the institution it relates to, and its relationships with other
organizations. The following is a description of some issues to
consider when doing an organizational case study. It will give
you an idea of the kinds of information you will have to collect
to conduct your organizational case study.
Organizational Case Studies
The main purpose of this assignment is to give you exposure to
the management controls of an organization and how they
contribute to the success or lack thereof of the organization.
What you must know is that in organizations many things go on
behind the scenes that are absolutely central in shaping its
reputation. Many of these things are easy enough to learn about
if you know to look for them, and if you have a general idea
about the major categories that shape life in organizations.
Most of these categories are familiar to us as members of the
common culture, but it is important to list them and talk about
how to get information that will tell how these elements work in
the particular organization you are working in. What follows is
a list of categories with a brief discussion of how to learn about
them.
Most of the information about organizations listed is actually
available to the public—or ought to be available (some
nonprofit organizations do not like to release financial
information but you can usually get it on your own by going to
one of the following web sites: Internet Nonprofit Center
(organizational profiles of all nonprofits:
http://www.nonprofits.org; Duke University Nonprofit Program
(general information on nonprofits:
http://www.pubpol.duke.edu/courses/pps2805/index.html;
National Charities Information Bureau (for fundraising

charities): http://www.give.org; Guidestar; The Donor’s Guide
to the Nonprofit Universe: http://www.guidestar.org ).
Also, you will find that some information may not be available
for your organization or the questions do not make sense for the
kind of organization you are studying. That’s OK, but you ought
to write a note about why that’s true in the space provided for
information. The way your organization does not fit is
important information. We have culturally ingrained ideas
about how a bureaucracy works and what kinds of
responsibilities employees have. Discovering that the
organization you are studying breaks the rules helps you
understand in a more creative way what’s behind the
stereotypes, and maybe what’s wrong with the “traditional
model.”
The information described below gets complicated and can be
an entire semester project in itself. Do not let the project of
collecting this information swamp or overwhelm you. This is a
learning exercise meant to alert you to the ways that your
immediate work setting relates to a larger organizational system
of services.
Kinds of Organizational Information
· Organizational Demographics. This involves basic information
like the name, location of the organization, the year the
organization was founded (both the local branch and the larger
organization) and the geographic area the organization serves.
This information sometimes gets complicated because an
organization may have a number of branches in different
locations and it may have a number of corporate subdivisions.
The older the organization, the more complicated it is likely to
be. If you are researching an organization more than ten years
old, it would be a good idea to pick up a printed organizational
history if one exists, or to ask someone about the organization’s
history. This is especially helpful if the organization has
changed its name or its location since some information you
pick up later on may refer to these different names and locations
and that will be confusing unless you have the history.

· Hierarchy and organizational form. Specify whether it is a
government or non-profit organization. Some organizations are
legally incorporated or legislatively mandated and they have an
official organizational chart or hierarchy. Get a copy of this
organizational chart, study it, and explain how the unit you are
focusing on fits into the whole.
One way of understanding the hierarchy of your organization is
to learn how its system of governance works. Government
organizations may be very transparent, but non-profits
organizations usually will have a board of directors that legally
“owns” the organization, and understanding who is on this
board and how board members are selected can help a lot in
understanding things the organizations does. (For example, one
reason a private institution may support fraternities is that many
alumni who are fraternity members are on the board and will not
allow changes.) Other times, practices of an organization that
puzzle you may become more sensible if you understand some
principles of governance. Understanding that hospitals have a
formal business board of directors, a doctor’s board, and
contractual arrangements with independent physician groups
(which are private businesses working within the hospital) helps
to explain hospital politics. Understanding that some
organizations make governance decisions by consensus of all
members (a Quaker style nontraditional school in our area,
Alcoholics Anonymous, many religious congregations) helps
you to understand that you need to get away from conventional
managerial or professional thinking to make sense of what you
are seeing.
Each week of class we will cover a different aspect of
management controls. Those same areas of management
controls need to be addressed in your case study. It is
suggested that you pace your case study by addressing each
segment of management controls for your selected organization
the same week as we discuss them in class. This will help to
ensure you cover that area and also keep the case study from
becoming a very difficult project over the last weeks of the

class. Ideally, if you pace yourself, the final week will just be
drawing conclusions and recommendations and putting it into
the final format.
The areas that must be addressed in the case study are:
· Planning – How does the organization use planning as a
management control? How effective is their approach? Are
strategic plans (if existing) connected to tactical plans and
resource allocation plans? How are plans updated and
maintained?
· Budget Systems and programming – What budget system does
the organization use? How does the organization decide how
resources are distributed across the organization?
· Budget process - How does the budget process work in the
organization? What parts of the organization are involved?
· Budget execution – In general, how does the organization
execute its budget? How does it ensure that resources are
available throughout the fiscal year? What reporting does the
organization require internally to monitor the execution of its
budget?
· Accounting – What accounting system(s) does the organization
use? How prominent of a role does accounting play in the
control of the organization?
· Financial management – Discuss the financial management
approach.
· Financial reporting and auditing – What financial reports are
required? How has the organization performed in its latest
reports? What audits do the organization use? Internal audits?
External audits?
· Performance management – How does the organization
approach performance management? Does it cover
organizational performance? Down to what level? Individual
performance? How effective has it been?
· Risk management – Does the organization utilize risk
management? If so, how does it approach risk management?
How effective has it been for the organization?
· Management control decisions – What decisions are made

from annual reports? How often are reports reviewed for
making management decisions?
· Continuity - Does the organization have a continuity or
business continuity plan? Does it address all of the elements of
a good continuity program?
It is important for you to make a real effort to understand what
people do in offices though you may have no daily contact with
them. You can usually gain this understanding by having one or
two people you work with go through the organizational chart.
Ask them to tell you whether they know the people holding the
different positions and ask them to tell what those people are
like and what they seem to do. The people you talk to might not
know and that’s OK (once more, it’s useful information to know
that there are mystery people in the organization.) More likely,
you will find that your informants have feelings about the
people, the work they do, and how these other people affect the
work you are observing. Pay attention to whether your
informants seem to feel ownership of the organization and
investment in its well-being or whether they feel like they are
“just” employees and that they are somewhat distant or
alienated from the center of energy and passion that makes the
organization succeed (or fail).
You may find that the local organization is small, informal, and
relatively democratic, but that it is part of some larger system
or organization. Battering shelters and AIDS organizations, for
example, are closely tied to state-wide associations that
distribute public money for the state government. Churches are
often part of regional church bodies to which they are more or
less closely tied (Catholics are closely tied, Episcopalians less
so, independent bible churches and reform Jewish synagogues
not at all). Some organizations (the YMCA or local branches of
the National Cancer Society) are like fast-food franchises that
are locally owned but that must follow the directives of a
national office. Some public organizations (like the Area
Agency for the Aging—a “quasi-nongovernmental organization
or QUANGO) may look like independent organizations, but

actually they may turn out to be agencies of government with
boards made up of elected officials. We call these connections
“vertical ties” and they may lay down many of the rules people
follow in day-to-day activities.
Other organizations are in charge of networks of organizations,
rather than being subordinate in that sort of system. The United
Way in your community is this sort of organization since it
collects money for the community and then distributes it to
member organizations that depend for survival on that money.
The United Way has a powerful influence on what those
organizations are allowed to do.
The United Way calls attention to another fact about your
organization, that it is likely to be tied in cooperative ways to
other organizations in the local community. For example, a
program for high risk youth we work with receives referrals
from the juvenile court and from ten to fifteen local school
districts, it provides foster care programs and so coordinates
with other foster care agencies, and it recruits volunteers from
local churches. We’ve found that we cannot understand this
organization without understanding these referral systems
because those ties to other organizations set the rules that
govern how the organization we are studying works. This set of
relationships is called the “local interorganizational field”.
Students usually will not be able to make sense of how it works
since it involves the operations of many organizations. Be
aware, however, that every social service agency is likely to
have close ties to between five and twenty other organizations
that shape and influence internal practices.
· Function or Service Industry. Often we refer to service
industries as institutions and we recognize that professional
training and service philosophies change profoundly when we
shift from institution to institution. Think about the differences
between a church, a prison, a hospital, a school, and a public
welfare office, between a minister, a prison guard, a doctor, a
teacher, and a public welfare social worker. Even without
having taken classes related to each of these fields, you know

many things about how these institutions and the professions
that work in them are supposed to be different. If your
organization is not in any of these categories, is there some
other institutional or professional ethos that rules?
One of your important tasks is to learn about the values and
service ethic among the people in your setting. It is a good
thing to think self-consciously about how the service values you
see are those that rule in another setting (one student emergency
medical technician picking up a patient at the hospital reported
how strange it was to have a guard yell as they departed, “let
him die!”) You also need to be aware of the different service
ethics held by different people in your organization. Doctors,
nurses, administrators, and emergency medical technicians in
the emergency have really different ideas about how to treat
patients, how to relate to other staff, and how to exercise
professional knowledge. Coaches and professors on your
campus have really different ideas about what education is
about.
· Structural characteristics. These are related to the question
about hierarchy since when we talk about the “structure” of an
organization we are referring to its subdivision or “division of
labor” as well as to its system of governance and supervision,
which is reflected in the system of hierarchy. The point of this
question is to get you thinking about the size of your
organization, and how that matters. If you are in a small social
service organization this will not seem as important as it will if
you are working in a big community hospital, a high school, a
penitentiary, or a university. (Thinking about your university as
an organization in terms of how its division of labor works is a
really good exercise to help prepare for doing this in your field
research organization.)
Size is important because in big organizations you have many
divisions where people do very different things, and sometimes
those things seem to be in direct opposition to each other. Those
contradictory purposes can tell you a lot about why activities in
a local field setting do not quite seem to achieve the goals and

purposes that they are supposed to be advancing.
Actually, one of the main themes in organizational sociology is
that hidden influences, or latent functions, usually deflect
organizations from carrying out their primary or manifest
functions. As you become more familiar with your field setting,
looking for and describing these latent functions may help you a
lot in feeling that you understand your setting.
· Budgets. Most people get nervous when you start talking about
money, but most organizations are required to produce annual
reports that tell how large their budget is and what they spend
their money on. Some organizations will willingly share with
you audited annual budget reports. Public organizations are
required to report salaries of all employees (figuring out where
this reporting happens can be a challenge...it might be printed
in the newspaper or it might be filed with an office of the state).
All nonprofits with annual budgets over $25,000 are required to
file Form 990 with the Internal Revenue Service and this
information is available on the web as noted above.
In addition to raw budget numbers, you want to pay attention to
how funding is secured to pay for the program you are working
in. Many organizations receive grants from foundations or
government offices to set up and operate programs. You need to
know what the terms of the grant are to understand what the
program is supposed to be doing, and not doing. Often these
funds come with frustrating restrictions attached to them that
create real organizational hardships. It is not fair as a field
observer just to note that a program has certain areas of
ineffectiveness if you do not at the same time note that staff
members are compelled to operate in certain ways.
You also will learn that staff members in many organizations
spend a lot of time worrying about “their funding”. It is worth
recognizing that organizations may operate very differently if
they gain funding by selling a service (what is called “fee for
service”) and thus can operate somewhat like a business, if they
gain money from grants, or if they gain money by running
public appeals and fundraising campaigns. When a grant is

about to run out and there is danger that it will not be renewed,
staff members understandably worry about whether they will
have a job down the road. Volunteers sometimes do important
work helping to do research about where new grant proposals
might be submitted or collecting information the organization
needs to properly complete a grant proposal. Similarly,
volunteers usually play a critical role in fundraising campaigns
whether it be figuring out how to run an event or organizing the
necessary grunt work of stuffing envelopes or ringing doorbells.
You also will find that money issues are handled very
differently in public and private organizations. In public
organizations elected officials have an important role in shaping
program policies, and they in turn often act in response to the
needs and demands of constituents. You may find that the
organization you are working in cannot do certain things
because it would run afoul of the public responsibilities or
political commitments of elected officials. (Our nonprofit
assistance center, organized in partnership with a consortium of
local governments, could not set up a service to advise local
nonprofits about how to combat efforts by those local
governments to tax them.)
Knowing about where money comes from and what budgetary
crises confront members of your organization is among the most
important data you can collect about an organization. It is
important to appreciate, however, that organizations often talk
about money concerns as a way of avoiding other organizational
issues. If members of the board are fighting with each other
over who is going to control decision making, this may come
out as a concern that the organization is spending too much
money. Maybe the challenging group on the board wants to start
new programs, and the power group wants to make its point by
forcing the chief executive office to cut budgets and reduce
services (this is a familiar scenario on many college campuses.)
You might find collecting this small mountain of data on your
organization great fun. Most people will not, sad to say. But by
collecting that information you ought to become a lot more

aware of three things about your field setting.
· First, you will see how your immediate observational setting
fits into a larger system that has three parts: the formal
organization in which you work; the horizontal system in your
community of organizations that link up with and cooperate
with your organization; and the vertical system of regional
funders, regulators, and lobbying organizations that make up
most of the rules and regulations that your supervisors have to
follow.
· Second, you will gain a sense of the culture and ethos of your
organization and how management controls guide and influence
them. As you visit different organizations and as you talk to
classmates and other researchers you will probably come to see
that the particular organization you work in has a culture, a set
of beliefs, and some rituals and traditions that are unique to it.
You also should come to appreciate how professional values
from different fields play into and shape work and life in your
organization and how those professional values would be
different in other institutions. This, actually, is another way of
seeing how your organization fits into the larger world—here
we are talking about how the local organization fits into the
culture of the larger society.
· Finally, you need to recognize that the staff members and
administrators you work with have strategic problems that they
work to solve in their work. It is tempting to see a program or
service as static, unchanging, and written in stone. Hopefully,
you will see how the organizational management controls are
not only affected by changes in strategies and outside
influences, but the controls themselves often are part of the
strategy and influence the many changes within organizations
but as at the least are part of how organizations implement
change.
Your final case study should be able to answer or at least
address all of the following questions:
· How does the organization use planning?
· Does it have a strategic plan?

· Does the strategic plan tie to its resource allocation?
· If so, how?
· How does the organization decide on how to distribute its
resources?
· When resources are tight, what processes do they use to make
the resources fit their priorities?
· What kind of budget system do they use?
· How does the organization ensure its annual resources carry
them through the year?
· Does the organization use risk management?
· If not , how does it view risk?
· If it does, how is risk management applied?
· Does the organization use performance management?
· If so, how is it used?
· What kind of accounting system/measures are used?
· How does it handle financial management and financial
reporting?
· What kind of audits are used?
· What process is used to make management decisions?
· Does the organization have a continuity plan?
· If so, what does their plan address?
Case Study Guidance
The case study is an in-depth research project on a non-profit or
government organization and its management control system.
Your case study should start out with:
· a description of the organization. It should include: name;
size of the organization; when it came into existence; any
history; services and products it provides; the organization’s
mission; constituency it serves; possible how it is governed; and
any other pertinent information that helps the reader understand
who they are and what they do.
· Next it should cover the organizations planning. Describe if
you can its planning philosophy and processes. Does it have a

strategic plan? How many years does it cover? How often is it
updated? What are the vision, goals, and objectives from its
latest strategic plan? Are the organization’s plans linked?
Does the organization rely on its strategic plan for its resource
planning? What other levels of plans does the organization use?
· Next you need to address programming. In other words, how
the organization decides what projects/programs will be funded
and to what level. Does it have an internal organization like an
Investment Review Board to make recommendations? How are
the decisions ultimately made?
· Budgeting is next. What budget system is used – line item;
zero-based; performance; program; or composite (it should fall
into one of those categories even if they call the system by a
different name)? Is there anything interesting or unique about
how the organization budgets?
· Budget execution in general: – does the organization have
spending plans? What is its general approach to how it monitors
spending? Does it have mid year or quarterly reporting? How
is this done – in writing or in presentations?
· What accounting system(s) are used – cash, accrual, modified
accrual, cost, etc? Any interesting information about the
organization’s accounting approach.
· Financial management – any information about how the
organization manages its finances – especially non-profits that
need to balance donations and other sources of revenue against
administrative and operational costs. Does the organization
borrow money and if so how much is it leveraged?
· Financial reporting – basic information on what reports are
required and any information about how the organization does
its reporting. Who in the organization is responsible for the
reports?
· Performance management – how does the organization
manage performance? Is performance a central part of the
organization’s approach?
· What is the organization’s approach to risk? Do they try to
manage it and if so how?

· Does the organization have a business continuity or continuity
of operations plan and program?
· After you have gathered all of the above information you
should assess the information and draw some conclusions. This
section is very important because it demonstrates your
understanding about the information you gathered. Any areas
where there was no information or not done by the organization,
you should make some recommendations for how you think it
should be done in the organization. Also make any other
recommendations for changes you would advise.
If you cover all of these areas you should do well with this
assignment. I hope this information is helpful.

Case Study for theU.S. Department of Defense.docx

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