The value of regularly reviewing the chart of accounts.

• Author: Purcell, Melanie
• Position: [PM.sup.2] Connections: PERFORMANCE MEASUREMENT & MANAGEMENT

Reviewing the chart of accounts is one of the most important exercises involved in a major ERP software implementation. The function is so valuable, it should be done every year--well, not exactly. But almost. Chart of accounts cleanup is onerous only when it has been let slide for several years. Like cleaning out the garage, it's much easier to do a thorough clearing fairly often--every few years--when you've been making a regular effort to keep it reasonably well organized. An up-to-date chart of accounts helps the organization view itself and its resources accurately, making service and resource allocation decisions easier, as well as communication with citizens and officials.

AN INVALUABLE TOOL

Keeping the chart of accounts up to date and in sync with the organization's operating structure remains an essential part of efficient and effective government operations. When evaluating how best to allocate scarce resources among unlimited demands, efficiency is nearly always at the heart of the conversation. Reviewing the chart of accounts focuses attention on how the financial management system, both technological and human resources, serves the organization.

The current chart of accounts reflects:

* Sources and uses of money.

* Accounting structure.

* Organizational structure.

* The evolution and history of the accounting and organizational structure.

* Activities and responsibilities of units within the structures.

There is a certain beauty in a clean chart of accounts that accurately reflects the organizational structure and includes definitive standards for its evolution. It provides guidance and structure for relating new activities to the existing organization (e.g., defining who is going to manage a particular project or grant or who has authority to sign for items in this area). When new programs and grants are initiated, using the chart of accounts and its defined methodologies to determine the accounts, and other parameters for its operations and accounting creates an opportunity for clear communication regarding expectations and authorities. The chart of accounts can and should be an invaluable tool for both financial and programmatic management.

THE UNFORTUNATE REALITY

Instead, the chart of accounts is often merely that must-have programming tool that the information technology department requires for implementing the accounting software. After all, the computer has to know how to sort the data. Otherwise, for daily use, the...