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Building Our Accounting Community AMERICAN ACCOUNTING ASSOCIATION 2008 ANNUAL MEETING Emerging and Innovative Research Sessions Denise Silva Ferreira Juvenal.

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Presentation on theme: "Building Our Accounting Community AMERICAN ACCOUNTING ASSOCIATION 2008 ANNUAL MEETING Emerging and Innovative Research Sessions Denise Silva Ferreira Juvenal."— Presentation transcript:

1 Building Our Accounting Community AMERICAN ACCOUNTING ASSOCIATION 2008 ANNUAL MEETING Emerging and Innovative Research Sessions Denise Silva Ferreira Juvenal Prefeitura da Cidade do Rio de Janeiro Controladoria Geral do Município Brasil – Rio de Janeiro - 2008 Paper: Innovate Research Project of the Analysis of Risk in the Evaluation of Governmental Projects of the Executive.


3 INTRODUCTION In view of the management of the quality in the public services and quarrel of diclosure in the governmental body (collective group), the evaluation of projects becomes necessary due to entailing of the transparency of the countable information by means of the clearness and the attribution of the responsibility of the managers on account of the use of the public resources. Based on this estimated, I will portray the importance of the analysis of risk in the evaluation of governmental projects of the Executive, the analysis of risk in relation to the method of the expenditure for Activities, the Theory of Preference on the basis of the models of decision statistics and the creation of an empirical model of the evaluation of the analysis of risk for the taking of decision for the public institutions.

4 OBJECTIVE The objective of this study is to describe and to elaborate the application of the Theory of Preference for the taking of decision in the public institutions of the Executive of the Prefeitura da Cidade of Rio de Janeiro, in a way that can be used as a tool of taking of decision of evaluation of projects.

5 METHODOLOGY Question of research: How can I apply the Theory of Preference for the taking of decision in the evaluation of projects of the public institutions?

6 METHODOLOGY In this case that, our collection of data had to be restricted and judicious, due to the present time of the subject, therefore I use books, papers, applicable legislation, Internet and, mainly, the professional experience, at last everything that could base my opinion. The analysis of the collected data will allow their development of the necessary interfaces of the use of the Theory of Preference, in a way that on the basis of the use of the decision alternatives is possible to get resulted of occurrence of monetary values of losses or profits in a public institution.

7 ANALYSIS OF THE RISK FOR THE METHOD OF EXPENDITURE FOR ACTIVITIES. The decision problems statistics defined by Mannarino apud Grant and Ireson (1991, 73) referring to the analysis of projects is defined as a comparison between alternatives whose differences are uniforms express in monetary terms and defines the six basic principles of the economic decision, that are described to follow:

8 1st Principle - The decisions are between alternatives, being essential to recognize and to define all clearly the possible alternatives. 2nd Principle - The decisions must be based on the waited consequences of some alternatives. 3rd Principle - Before establishing the procedures for formularization and evaluation of a project the point of view is necessary to establish which one will be adopted in the decision. 4th Principle - The waited consequences must be quantified in order to allow the necessary comparisons. 5th Principle - The differences between the alternatives are only important in the comparison between them, [...] analyzed with care therefore they can not participate of the true differences between the alternatives for the future. 6th Principle - As much how much practicable, separate decisions must be taken separately, in this case that the assets acquired by means of financing are included.

9 THE THEORY OF PREFERENCE - DECISION PROBLEMS STATISTICS FOR THE ANALYSIS OF PROJECTS The classic text of Grant and Ireson in the References assumes that interest tables will be used to perform calculations. Grant and Ireson explain that many methods used to determine rate of return on an investment by considering book values are erroneous and misleading. These methods are popular among the financial crowd, however, since accounts are more familiar to them than engineering economy. Source: J. B. Calvert. Created 6 February 2005. Acess in 04/23/2008

10 One admits that the main characteristics of the use for Activities, are the described ones to follow: In the simple decomposition, the costs for activities are tied with cost objects. Boiverst (1999, 17-30), adapted for the author. In the decomposition for multilevels the resources are appropriate to the activities, later regrouped in centers of activities and, finally, these appropriate ones to cost objects. In the decomposition for processes the cost objects incorporate activities that, they require other activities or resources. The activities are not equivalent to the cost center. The identification of the cost of the activities to objects depends on a relation of cause and effect. The activities correspond to the work made for the manual work on a job, in the case of governmental services. In this case all the costs are changeable variable.

11 MODEL EMPIRIC The Prefeitura da Cidade of Rio de Janeiro has been detaching in its activities related in the development of programs, developed projects and actions guaranteeing one of its human resources and aiming at to take care of to the rules of the Law of valuation. I selected where the biggest investment in this year was made, that, in my in case it was the social area that is composed for: Education, Sports, Health and Social Assistance, Work, Culture, the Agrarian Reformation, Habitation and Social, and that the biggest expense was attributed to the Social Assistance with 46,40 percent of investment and that the Prefeitura da Cidade of Rio de Janeiro, got a percentage in 2005, of 4,37 percent of increase in relation to the year 2004.

12 % Participation63%-37% 53,555,678.57 Budget205,983,379 Tolerance to the risk129,769,528.80(76,213,850.23) Source: Rendering of accounts of Management of 2005 It only considers a case of a project, probability of 63 percent success, or either if it relates only to the values financed for the government. The liquid present value of success (in this in case that the pledged expenditure is mentioned to it that totalizes R$167,343,916.80) is of approximately the $105.42 million and the cost of the investment for third is approximately = $-62 million. The values if relate to the product of the total of the expenditure pledged for the percentage applied for the government and the resource of third 63 and 37 percent, respectively.

13 Source: Rendering of Accounts of Management 2005 ProjectR$ Particip.Prob. ofVPL Risk Politician (%)Success(mR$) 250551,959,00025.2%31.1%52.46-0.89 100742,812,00020.8%16.2%42.81-0.92 101613,608,0006.6%2.0%13.61-0.29 403311,838,3795.7%6.2%11.84-0.25 209310,642,5005.2%0.3%0.48-4.94 40033,898,6091.9%2.0%3.76-0.15 20803,400,0001.7%0.9%1.78-0.82 41252,474,0201.2% 2.22-0.17 40521,796,0360.9%1.0%1.79-0.04 22481,106,4300.5%0.3%0.76-018 PORTFOLIO OF SERVICES - MORE EXCELLENT

14 Individual projects Consolidated Secretariat Number Return VME Risk STDEVReturn VMERisk STDEV 250513.456824.7993.39456.2555 10079.089316.37451.88913.4033 10160.91822.15660.06070.1425 40330.69482.92350.03990.168 20930.28025.21270.01450.2693 40030.07390.56720.00140.0107 20800.0430.87450.00070.0144 41250.02870.31070.00030.0037 40520.01590.18140.00010.0016 22480.00510.189400.0010 Source: Rendering of Accounts of Management 2005.


16 When analyzing the data on the basis of the passed decisions, we verify that it stops to reach 95 percent of tolerance, the Tolerance of the risk of the Cia is in the value of 1.26 negative, what it means, in management of risks, to constitute the acceptable level, normally defined for present criteria and the sum that you feel yourself comfortable in assuming when it is selecting its investments. In other words, you are to lose to try to reach bigger profits. Observing in graph 2, project 1016 is what possesses the biggest risk of the project that is of 321.06. [1] [1]

17 However, to evaluate the excellent level of these projects, I observe that governmental contribution is not adjusted, in view of that, only the projects 2505, 1007, 4033 had reached the 100 percent of efficiency, while they had excessively been between 6 and 9.283%, negative, what it demonstrates to high costs and a budget not adjusted to the reality, therefore it can be certified that the governmental participation is very small.

18 The used budgetary balance is not R$48,203,481.82, that it represents 22.36 percent of the Budgetary Endowment Brought up to date, that is R$215,547,398.66. Confrontation return and risk from 2002 to 2007

19 During the development of this work, it was recognized the relevance of the analysis of risk and control for an analysis of costs for the Method of Expenditure of Activities - ABC, from the strategical and operational budget. Being thus, only analyzing the budget of the Secretariat of Social Assistance, I observe that 22 percent of its total value had not been used the resources, however, we understand that the value used in some projects was not adjusted, therefore to leave of the analysis of the excellent level, I observe that nor all had reached 100 percent of its efficiency of governmental resources exists financings of third that in reality is debts to pay for the Secretariat. CONCLUSION

20 REFERENCES BOISVERT, Hugues. Accounting for Activities. Accounting of Management. Practical Advanced. Contabilidade por Atividades. Contabilidade de Gestão. Práticas Avançadas. São Paulo: Atlas,1999. p. 64 e 65. BRIMSON. James A. Accounting for Activities. Contabilidade por Atividades. São Paulo: Atlas, 1996. FREUND, John E. Freund & SIMON, Gary A. Estatística Aplicada Economia, Adminsitração e Contabilidade. Applied statistics Economy, Administration and ContabilityPorto Alegre: Bookman, 2000. GRATERON, Ivan Ricardo Guevara. Artigo Auditoria de Gestão: Utilização de indicadores no setor público. Auditorship of Management: Use of pointers in the public sector. Publicado no Caderno de Estudos, São Paulo, HORNGREN, Charles T., DATAR, Srikant M., FOSTER, George. Contabilidade de Custos. Uma Abordagem Gerencial. Costs Accouting.11ª ed. São Paulo: Prentice Hall, 2006. JUVENAL, S. F. Denise. 1st Transatlantic Congress Accounting, Auditing, Control, Cost Management and Worldwide Competition e X International Congress of Costs.. A importância da análise de risco na avaliação de projetos governamentais do poder executivo. The importance of the analysis of risk in the evaluation of governmental projects of the executive. Edição no CDROM com 310 artigos. Lyon: I.A.E de Lyon, 2007. KAPLAN, Robert S, ATKINSON, Anthony A., BANKER, Rajiv D.,.YOUNG, S. Mark. Contabilidade Gerencial. Managemente Accouting. São Paulo: Atlas, 2000. KAPLAN, Robert S. e NORTON, David P. A Estratégia em Ação. The Strategy in Action. Balanced Scorecard. 23ª ed. Rio de Janeiro: Elsevier, 1997. LAPPONI Juan Carlos. Modelagem Financeira com Excel. Financial modeling with Excel. Rio de Janeiro: Elsevier, 2003 LAPPONI Juan Carlos. Projetos de Investimento na Empresa. Projects of Investment in the Company. Rio de Janeiro: Elsevier, 2007 MANNARINO, Remo. Introdução à Engenharia Econômica. Introduction to Economic Engineering. Rio de Janeiro: Campus, 1991 MOORE, David. S, McCABE, George P., DUCKWORTH, William M., SCLOVE, Stanley L. A Prática da Estatística Empresarial. The Practical one of the Enterprise Statistics. Como Usar Dados para Tomar Decisões. Rio de Janeiro: LTC, 2006. NEPOMUCENO, F. Tomada de desisão em projetos de riscos na exploração de petróleo. Taking of desisão in projects of risks in the oil exploration. Tese de Doutorado. Campinas, 1997. 243p. (Instituto de Geociências, Departamento de Administração e Política de Recursos Minerais, Universidade Estadual de Campinas). Prestação de Contas do Município do Rio de Janeiro disponível no Diário Oficial do Município de 27/03/06, no site

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