...Introduction and Background of Budget The Capital Budget of the public sector or sometimes also known as Public Budget concerns how the government plans its revenues and expenditures at the Federal level, State level, and Local government level, to carter for the needs of its development programs and projects. In a democratic society, the division of resources between the public and private sectors is roughly determined by the desires of the electorate. But because it’s such a complex and time-consuming task to acquire adequate political information, the electorate is chronically ignorant. Since the Revolutionary War, democratic system of governance has forever been looking for better ways to inform the public and to design more sophisticated techniques for deciding how best to allocate scarce public resources. Despite the good sense it makes to “budget to a plan”, public expenditures are frequently approved based on who supports what, rather than on a clear understanding of what exactly the expenditures will accomplish. Public Budgeting is not about numbers; it is about making Democratic governance work. During the debates leading to the creation of the American Constitution, taxation and public expenditures were one of the driving forces leading to the creation of our peculiar and complex system of separation of powers and checks and balances. Our various state and local democratic constitutions give the executive branch the power to propose a budget and collect taxes, but...
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...billion proposed budget for the forthcoming fiscal, 2012-13, is sized at 18.1 per cent of the country's gross domestic product (GDP) that is projected to do grow at 7.2 per cent during the year. There are challenges and risks, both domestic and external, that do provide some strong reasons for being not much optimistic at this stage about achieving this growth performance. That does not mean that the growth target itself is overambitious. The actual performance of the Bangladesh economy has otherwise been impressive over the past several years in a row, given the comparative picture of other low-income developing countries and the odds and difficulties, both exogenous and endogenous. But even this performance has been considered below the potential of Bangladesh. This is what the economists, analysts, development practitioners and all others, within and outside, have been stating about Bangladesh over the years. The growth rate, however, is not the sole indicator of 'socio-economic development' in its broad sense. But it unquestionably remains to be one of the important criteria for assessing the overall performance of an economy. The quality of growth -- its nature and dimension of inclusiveness, impact on social development indices concerning the state of education, health, nutrition and, thus, human resource development, income-distribution and employment-generation effects, poverty alleviation efforts etc. -- is also a pertinent point for consideration. The budget through its...
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...component in management short and long term planning. At its most basic level, a budget is a plan for owners and managers to achieve their goals for the company. (E, 1999-2005) In the accounting industry, a budget is a financial plan and a list of all planned expenses and revenues. It is all about planning, evaluation, coordinating and communication. By preparing monthly budgets for the company, owners and managers are able to easily identify specifically the variances or the vice versa. Once its identified, managers and owners can then take necessary corrective actions to ensure that future results will be able to conform to the budget. Also, they can also forecast and identify the periods of expected fluctuations of either cash shortages or excess, as well as, profits or loss and plan for necessary actions. Preparing and planning a long term budget (yearly), can help to direct the company to a different direction. In a master budget, owners or managers can make use on one of its functional budgets to make a difference in the overall profit and loss for that year. For example, Apple. The company clearly steered their attention and focus on their marketing budget, setting an increasing advertising budget yearly which was a strategy to increase the sales. Translation: Apple spent less than 1% of sales last year on advertising. And its sales growth has been far outpacing its advertising budget. That has helped it achieve this their results (YCharts Pro Investor Service...
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...Evaluate the problems they have identified from unmonitored costs and budgets (D3) a) Using the budget completed in P6, identify, analyse and evaluate the key costs which were left unmonitored. b) Evaluate which unmonitored cost will lead to (or may not lead) to severe problems for Gordon Brown Ltd. Justify your answer and make three recommendations on how to overcome the problems Inadequate planning: As in most businesses, Gordon Browns budget will involve planning for both short and long term needs of the business. If a business’s financial plans and budgets figures focus only on the short term, then there is a risk that future profit opportunities and real economic realities may be ignored /or not given adequate considerations. Gordon browns business needs to learn from past mistakes and avoid these mistakes in planning for the future. 1. Projections may be overstated. Budgets and projections needs to be realistic and achievable. Business decision makers and investors may be fooled by numbers in the short term, but in the end the company almost always gets hurt. A realistic budget takes gives adequate considerations to the business’ activities, competition, cost and state of the economy. It may lengthen the search for funding and profit, but when the money does arrive, it will be honest money. This helps to ensure that the business does not over-promise and under-deliver its targets. Stakeholders, customers and staff are also encouraged and adequately...
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...Budget: An estimate of income and expenditure for a set period of time. Budget (from french bougette) generally refers to a list of all planned expenses and revenues. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms. The budget of a government is a summary or plan of the intended revenues and expenditures of that government. Budget Preparation A full understanding of the budget planning and preparation system is essential, not just to derive expenditure projections but to be able to advise policymakers on the feasibility and desirability of specific budget proposals, from a macroeconomic or microeconomic perspective. It is much easier to control government expenditures at the "upstream" point of budget preparation than later during the execution of the budget. Thus, fiscal economists and general budget advisors need to know: * what is the framework in which budget decisions are made; * who is responsible for planning and preparing the budget; * what are the basic steps; * what are the typical weaknesses in procedures and how can these be overcome; and * how can changes in budget plans be programmed and targeted? Answers to these questions are set out in the subsections below. Budget planning and preparation are (or should be) at the heart of good public expenditure management. To...
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...be accounted for in a line-item budget. Totals of all expected revenues must equal totals of all expenditures. The line-item budget allows spending to be monitored in relation to amounts allocated but does not provide information that can be used to determine efficiency, effectiveness, productivity, or quality. A business manager, accountant, or bookkeeper typically has responsibility for monitoring a line-item budget. As funds are spent they are accounted for within the established categories. At the end of each month the budget manager calculates the ratio of budget allocated to budget spent in each category to see how it compares to the percentage of the fiscal year that has elapsed. When spending patterns in any one category are out of line with where they should be at that point in the fiscal year, a warning should be sent to the responsible managers and administrators. The Pinetree County Senior Center’s annual budget shown in the following section is an example of a line-item budget. Funding sources frequently require that a budget-justification sheet be attached to the budget. A budget-justification sheet is used to explain how each line item is calculated. A sample budget-justification sheet is illustrated in Table 8.3. Functional Budgeting Moving to the next level of complexity, functional budgeting requires combining program and service data with budget data. With functional budgeting, no longer are simple budget categories the focus of the system...
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...Budget Variance Every hospital faces many challenges, but one of the most difficult challenges is knowing how to manage expenses. When a hospital is planning their budget not only do they have to plan a budget that is beneficial for their staff but also high level care for their patients. With so much in society changing such as technology, increase health care cost, and government restrictions it makes planning the budget very challenging. In order to analyze how expenses are being spent compared to the budget that is allotted for them, budget variances have to be made (accountingtools.com, 2013). These variances have to be extremely well detailed in order to make an accurate budget for the following year. Things that should be taken into consideration when doing a budget variance are variance reports, interpreting the results of variance reports and analyzing these reports based on actual performance, and developing a way to better the budget based on these results. The purpose of this paper is to fully analyze all factors that should be considered for a budget variance for a hospital. The very first step for a budget variance is to develop a variance report (accountingtool.com, 2013). There are various factors that should be analyzed to produce a proper variance report such as how many beds are available, how many patients are seen daily, how much staff is available or working in a specific day, how many supplies will be used, and how much utilities such as electricity...
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...Healthcare Budget HCS 577 Sharon Gomes- Sanders Healthcare Budget Review of the Patton-Fuller community Hospital's 2009 operating budget and 2010 budget assumptions showed the accuracy of the 2010 operating budget projection. The operating budget is the yearly statement of profit and loss for the organization. Healthcare organizations prepare projected operating budgets for the approval of senior management. At the end of the fiscal year, a detailed accounting provides the report for how the company performed. There are effective and ineffective ways to manage the fiscal status of healthcare entities. This paper will take everything into consideration and identify effective and ineffective financial management practices in the health care setting. Healthcare businesses thrive on a foundation of strong fiscal management. There are effective management practices in the creation and monitor of an operational budget. An effective management practice is to link budget development to corporate strategy. When the budget is linked to the overall corporate strategy, managers and employees can get a clearer picture of the company's strategic goals. Capital management aligns an organization's long-range strategic, financial, and related operating plans (Nugent, 2001). Obtaining employee buy in leads to the coordination of support for organizational goals, leading to strong fiscal performance. Effective communication between departments ensures a same page mentality in budget development...
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...Definition:--A flexible budget is a budget that is a function of one or more levels of activity. Thus, the budget depends on one or more measures of activity volume rather than being fixed in amount. Purpose:--The purpose of a flexible budget is to develop an estimate or estimates of cost for one or more levels of activity. Activity levels are typically measured in terms of activity inputs, levels, or outputs. Such a budget is flexible in the sense that it depends upon a specified level of activity volume. Acquisition budgets focus on the costs to be incurred to acquire actual or planned levels of resources. Labor budgets, purchasing plans, and similar budgets are resource acquisition oriented. Activity budgets focus on the resources that should be required to maintain activities at specified levels based on expected or desired levels of efficiency. Production budgets focus on the resources that would be required to produce a specified set of products and services. Like activity budgets, production budgets are necessarily based on assumed levels of efficiency. The idea of a flexible budget is applicable to all three types of budgets. Temporal issues:--Flexible budgets can be used as ex-ante forecasts of total cost for various levels of activity volume. Or they can be used as ex-post standards of the costs that should have been incurred for various levels of activity volume (measured in terms of input, activity, or output levels). Context:--Flexible budgets are used in a...
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...Budget Management Analysis John Thorpe HCS/571 April 13, 2014 Professor: Amy Reed Budget Management and Variance Analysis Healthcare organizations are faced with severe financial pressures resulting in extreme budget cuts. Consequently, nurse managers and financial managers are tasked with the responsibility of doing more with less while maintaining the high quality of care offered to its consumers. To accomplish the aforementioned tasks, managers use budgetary tools to help them focus on controlling cost while running an efficient operation. Budgeting gives managers the tools necessary to ensure the availability of required resources to meet the organization’s goals and objectives, communicate strategies and monitor results (Cleverly, Song & Cleverly, 2007). Finkler, Kovner & Jones (2007) offer that budgeting should be used to make the organization become more effective and efficient. It is not a tool for maintaining the status quo. Organizations use different approaches to introducing the budgetary process. Some organizations take the current year's budget update it for inflation and projected revenue growth. Others take a clean slate approach; compel managers to justify their expenses and staffing needs on an annual basis. Still other organizations forecast revenue and profit and assign expense rates to departments. However, the most effective budget is one that reflects the true financial position of the organization, provides flexibility and monitored...
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...Flexible Budgets ACC/543 November 17, 2014 Differences between Master and Flexible Budgets There are two main differences between the master and the flexible budgets. The two budgets have different uses and they treat volume changes in different manners. The master budget is the official budget that management has decided to go with. It is their planned volumes, expenses, and revenues that were determined for the upcoming year. It is used as the starting point by which benchmarks are measured. It is the best estimate that the business has decided to go with based on the current facts at the time the budget was made. The master budget does not change after it has been put into place so it does not account for changes in volume. Flexible budgets change as estimates in volume change. It takes different levels of volumes and determines what the expected costs and revenues would be based on the rates budgeted in the master budget. Variable costs would remain the same per unit cost as in the master budget. This is important as a manager might think he is coming under budget when compared to the master budget but when compared to a flexible budget based on the new volume, he might be over budget. Fixed costs would also remain the same so the per unit cost for these would change as volume changed. This allows companies to say what their budgeted costs should be based on the new volume. Using spreadsheets, the company can make changes to the flexible...
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...Variance Analysis The many reasons as to why the budget for this month has gone over have many factors involved. For a $5,000 favorable variance on staffing, the department head can state that the company was able to obtain a 25 % discount from a new supplier, which resulted in a savings for the department. Another example would be when you have a $25,000 unfavorable variance in sick time for many employees, the department head would state there was an outbreak earlier in the season and this was not expected, resulting in hourly and sick time expenses that were not anticipated. What we can do, would be to analyze variances by the month, quarter or year. Having budget variances in place can allow at least two sources the things that can be controlled and things that cannot. This time I know that the reason the salaries were higher, we because of the recent storm we had and it cause some staff not to show up for work and other to do overtime. Going forward what we can implement would be an emergency team for weather related issues or natural disaster to ensure that we don’t go over our budget and if we see that we are approaching that then we can implement another plan or process, to help balance it back out like giving comp time or early leave. When uncontrollable factors occur many are often external which then result from occurrences outside of the company such as a natural disasters, which can then throw the budget into a downward spiral. When we have a favorable...
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...the budgeting process and primarily focuses on the planning problems with budgeting. The other advocates abandoning the budget and primarily focuses on the performance evaluation problems with budgeting. This paper provides an overview and research perspective on these two recent developments. We discuss why practitioners have become dissatisfied with budgets, describe the two distinct approaches, place them in a research context, suggest insights that may aid the practitioners, and use the practitioner perspectives to identify fruitful areas for research. INTRODUCTION udgeting is the cornerstone of the management control process in nearly all organizations, but despite its widespread use, it is far from perfect.1 Practitioners express concerns about using budgets for planning and performance evaluation. The practitioners argue that budgets impede the allocation of organizational resources to their best uses and encourage myopic decision making and other dysfunctional budget games. They attribute these problems, in part, to traditional budgeting’s financial, top-down, commandand-control orientation as embedded in annual budget planning and performance evaluation processes (e.g., Schmidt 1992; Bunce et al. 1995; Hope and Fraser 1997, 2000, 2003; Wallander 1999; Ekholm and Wallin 2000; Marcino 2000; Jensen 2001). We demonstrate practitioners’ concerns with budgets by...
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...machinists in the company. He had been with Ferguson & Son for many years and was promoted to supervisor of the machine shop when the company expanded and moved to its present location. The president (Robert Ferguson, Sr.) had often stated that the company’s success was due to the high quality of the work of the machinists like Tom. As a supervisor, Tom stressed the importance of craftsmanship and told his workers that he wanted no sloppy work coming from his department. When Robert Ferguson, Jr. became the plant manager, he directed that monthly performance comparisons be made between actual and budgeted costs for each department. The departmental budgets were intended to encourage the supervisor’s to reduce inefficiencies and to seek cost reduction opportunities. The company controller was instructed to have his staff “tighten” the budget slightly whenever a...
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...Budgeting: A Guide for Small Nonprofit Organizations A free resource provided by the Virginia Society of Certified Public Accountants Budgeting: A Guide for Small Nonprofit Organizations A free resource provided by the Virginia Society of Certified Public Accountants Introduction • Selecting the budget committee • The task of the budget committee • Setting budget priorities and realities — revenues • Setting budget priorities and realities — expenses and costs • When to prepare the budget • A budget for cash flow • A budget for capital expenditures — bought or received • Restricted grants • Changes to the budget • Conclusions Introduction Nonprofit organizations (NPO) wrestle continually with maintaining and improving their operations, especially during today’s uncertain economy. In short, NPOs must constantly strive for sustainability. A well-planned budget will focus on the primary goals and objectives of the organization and provide financial and programmatic adaptability — key ingredients to maximize sustainability. Every volunteer brings to a small NPO the enthusiasm and interest necessary to do a good job. These volunteers are critical to an NPO’s success, because most small NPOs lack the funds necessary to seek and pay for professional guidance in the business world. This guide is written to present the theories and practicalities of budgeting for the small NPO staffed by volunteers, whose expertise do not always correspond...
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