What all employees need to know about an 'unbundled' accounting system.
Management Quarterly › Vol. 39 Nbr. 1, March 1998
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Summary
More and more rural electric cooperatives are adopting an unbundled accounting system as a management tool to create a competitive advantage and comply with regulatory requirements in case of utility restructuring. Cooperatives have traditionally relied on the Federal Energy Regulatory Commission (FERC) accounting system which is intended for external reporting. The unbundled accounting system is a better alternative to the FERC system because it integrates decision making with financial reporting and is based on activity-based costing and activity-based management. It provides more accurate information that enables top management to make better decisions. The success of the unbundled accounting system, however, depends on the commitment and support of every individual within the cooperative including the nonaccounting staff.
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What all employees need to know about an 'unbundled' accounting system.
Rural electric cooperatives have historically used the Federal Energy Regulatory Commission (FERC) accounting system, as modified by the RUS. This system has been used because it is a utility accounting system that is an effective means of reporting to the regulator. It has also been very helpful for preparing annual financial statements that present fairly, in all material respects, the financial condition of the cooperative. Cooperatives can then receive from their auditors the unqualified audit opinion that is essential for business success.
It is important, however, to remember that the historical FERC/RUS system is a financial accounting system; that is, it is intended for external reporting purposes. The concern has always been with satisfying regulators' requirements. The FERC/RUS system was not intended to be a managerial (internal), decision-making system. With greater deregulation and greater competition, however, it is the market place that has to be satisfied. It is im...See the full content of this document
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