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Consider the national nonprofit organization the American Red Cross. Assume you are the regional director of the organization, and you just received the quarterly financial reports. Even though the organization is a nonprofit, assume it is set up as a profit center because it is helpful for the financial reports to show both donations and expenses by each region/location. One particular report shows there is one location in your region that is extremely over budget on nearly every expense item. From a management perspective, can you think of a reason(s) when going over budget might actually be a good thing? As the regional manager, how might you respond to the overages to help the particular location in the future?

A. In this scenario, exceeding budgeted expenses likely means there was a disaster and more assistance was given to the community members. While it is unfortunate for people to be in need, this indicates the services of the organization were needed and the organization could help people during a critical time. The manager might respond by sending financial resources from other locations to help or send a special request to donors to help, noting the organization was there to help during a time of need.

B. The budget overage is likely the result of poor purchasing practices by that location's staff. More centralized purchasing will help to eliminate this problem going forward.

C. Fraud or misapplication of funds might have occurred - a detailed examination of this location's records by your corporate auditors is warranted.

The budget overage is simply a result of poor estimation by the location manager and is not a cause for concern if it is a one-time event.

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