According to Williams and Calabrese, the term budget is ambiguous (Williams and Calabrese, 2013, 2). To me, the term ambiguous can have a negative connotation, meaning obscurity. Today, a myriad of budget theories exist; some divergent, while others homogeneous. Fiscal policy that creates public value is noteworthy. Admirable budgeting processes are transparent, efficient and exist to “eliminate deficits and control unethical legislator behavior” (Williams and Calabrese, 2013, 4). This paper aims to investigate the ambiguity & interpretive theory, as well as develop implications as I assess the correlation, similitudes, and disjoints amongst Williams’ and Calabrese’s suggested budget theories.
Ambiguity & Interpretive (AMB) theory is an example of an anti-analytic process doctrine that denotes early budget theory ideals of “goal setting, measurement, and reporting” (Williams and Calabrese, 2013, 5). I categorize this theory as positive and descriptive since it examines the interrelationships between various sovereign elements. Since this theory lacks formal structure and motive, it is similar to the Garbage Can theory (GC). The GC theory describes the decision making process within an organization that experiences high levels of ambiguity. Ultimately, both theories can be used to describe an organized anarchy. Decision outcomes are deliberated among independent networks, lacking specific problems, a systematic process and tangible optimal goals.
The Ambiguity & Interpretive theory is compatible with Rubin’s Real Time Budgeting (RTB) theory. RTB identifies five semi-autonomous “linked clusters: revenues, process, expenditures, balance, and implementation” (Williams and Calabrese, 2013, 11) that cooperate randomly. Obviously, values of clear communication are neglected, leading to haphazard, inappropriate decision revelations and “real-time adjustments” (Williams and Calabrese, 2013, 12). This interaction affects the budgetary decision making process as well as player’s ability to make appropriate and timely decisions.
Comparably, an alternate prescriptive model of budgeting is the Zero Based Budgeting theory (ZBB), which offers budget techniques and suggestions. Mostly utilized in smaller organizations, ZBB is incompatible with AMB because it is hyper-analytic where efficiency and rationality are primary goals. Key decision makers determine budgetary decision packages based on the prior fiscal year’s statistics. Marginality theory proponents adopt a “means-to-ends” (Williams and Calabrese, 2013, 8) mentality, supporting control performance budgeting measures like line-item restrictions, budget reports and cost-benefit analysis. Like Goodnow, Buck and Cleveland, I am an advocate for a “complete budgetary process” that is rational and fair.
I attended the Saturday Lab 1 session discussing the Denison Specialty Hospital case study. In our session, we had a through discussion into the different budget terminology. I learned about the difference between accrual and cash accounting methods, which is based on the timing of when the revenue and expenses are recognized. I also learned about responsibility centers as an organizational unit under the supervision of a manager, who is responsible for its activities and results. In addition, the manager is accountable for the budget of the department that they head. Therefore, a centralized form of management in developing the budget because it makes easier to because the information for the department budget is located
Mikesell, J. L. (2010). Fiscal administration: Analysis and applications for the public sector (8th ed.: 2010 custom edition). Mason, OH: Cengage Learning
Wayne Swan 2010, ‘Budget Speech 2010-11’ Australian Government. Retrieved May 20th, 2010, from - http://www.budget.gov.au/2010-11/content/speech/html/speech.htm
The Australian Budget is an annually published document which details the Federal Government's plans to affect the level of economic activity, resource allocation, and income distribution through the use of fiscal policy. It describes the framework which the government intends to follow during the next financial year which will result in the attainment of their objectives. The budget is a publication of the government's plans regarding the use of fiscal policy, and is published to parliament and the general public on “budget night”, so as to allow open dissemination about the status of public finances and to promote transparency in Australia's fiscal policy.
For government budgeting to be effective, the process that guides it must be an evolving one. As the government gets bigger, it will most likely destabilize the existing method. Therefore, it must change to keep pace with the demands and growth of the country. The process must be capable of handling the complexity of our nation and its multifaceted needs so it will always need revisions and restructuring to face these new challenges. Its ultimate goal must be to reinforce the government and strengthen the country.
Authors Michael D. Cohen, James G. March and Johan P. Olsen theorized a model of organizational decision making called the Garbage Can Theory developed to explain the way decision-making takes place in organizations that experience high levels of uncertainty, in what is described as organized anarchy. (Ireland, n.d.) As its name suggests, these organizational decisions are a result of random collisions between various elements thrown together with no regimented process or direction. Almost simultaneously within this garbage can model, elements like problems arise within and outside the organization, solutions are being developed with no specific problem in mind, workers are spinning their wheels of productivity with no end goal to work toward and choices or options are generated for no specific problem. (Fioretti & Lomi, 2008) The organization is essentially a dumping ground for the many streams and functions could collide or intersect resulting in decisions almost by accident.
The budget is a method in which to reign-in discretionary spending, and will likely show variances between what costs have been anticipated and what costs are actually incurred. The Budget Process Budgetary planning may differ between organizations. Single-period budgets and rolling budgets have methodologies that provide advantages and disadvantages that may make one budget time frame better than another. A single period may require less time in planning during a fiscal year, but is less accurate than a rolling budget that is continuously planned on a repetitive basis. In either case, budgets are planned in advance in order for a company to operate profitably, and less so to have "actual results equal budgeted results."
Participative Budgeting is the situation in which budgets are designed and set after input from subordinate managers, instead of merely being imposed. The idea behind this sort of budgeting is to assign responsibility to subordinate managers and place a form of personal ownership on the final budget. Nearly two decades of management accounting research has resulted in equivocal findings on the consequences and effects of participative budgeting (Lindquist 1995). Participative budgeting certainly has various advantages, these include the transferral of information from subordinate to superior increased job satisfaction for the subordinate, budgetary responsibility and goal congruence. Its disadvantages include budgetary slack and negative motivation, however it is the conditions in which participative budgeting takes place determines whether the budgeting process is successful. The conditions are dependent on various factors such as the level of participation, level of subordinate influence, the extent to which budgetary slack takes place, volatility, job related information, and the complexity of the budget.
‘Beyond Budgeting is the set of guiding principles that, if followed, will enable an organization to manage its performance and decentralize its decision making process without the need for traditional budgets. Its purpose is to enable the organization to meet the success factors of the information economy (e.g. being adaptive in unpredictable conditions).’
A budget, “according to Siegal and Yacht (2009), is a projection of a financial requirement and the consequences of the plan” (p,89). In other words, a budget if
Line item budgeting categorizes various expenses and places them in list format on a document for budgetary purposes. This type of budgeting is considered the heartbeat of budgeting due to the systematic method by which it controls revenue and expenses, this is made evident when Tyer and Willand (1992), pointed out “Statutory or administrative controls could be imposed on the transfer of funds from one-line item to another, or between broad categories of expenditure.” According to Schick (1971), “line item budgets were attractive to legislative officials because they did not focus explicit attention on substantive policy issues or choices.”
Last week, Congress (finally) passed a budget. The 2-year budget is set to increase the nation’s debt by at least an additional $300 billion over the next two years, but at least there’s a long-term budget. However, not everyone is happy, and rightly so. The bill was passed swiftly, and as with the Affordable Care Act which Pelosi told citizens had to be “passed so we can see what’s in it,” the budget still holds surprises, even for those who voted on it.
Blocher et al (2013), added that at the end of an operating period, managers view the budget plan to interpret any variance between actual and budgeting expenditures and operating outcomes. Under certain circumstances, a firm uses a budget plan, to ensure accurate spending, monitoring costs, and to analyze a subunit’s accomplishment. For example, the government use these tactics when a fiscal year budget has not been approved; which is known as a continued resolution. The lawmakers allocate a portion of funds to sub-agencies in order to remain operational. However, the budget plan allows lawmakers to monitor costs, planning, spending and the sub-agency’s goals for accomplishments.
After using budgetary control techniques in our business, we will definitely learn the skills of excelling because we all know that a budget is based on estimation, it may or may not be true. But continually practising of making a good budget and applying it in the organisation can help the manager learn skills and gain experience for increasing the efficiency in every company,thus meaning that managers will be getting positive approach through budgetary control.
It requires an adequate and sound organizational structure, that is, there must be a definite assignment of responsibility for each function of the enterprise. Budgeting compels all the members of management, from the top to bottom to participate in the establishment of goals and plans. Budgeting compels departmental managers to make plans in harmony with the other departments and of the entire enterprise. Budgeting helps the management to put down in figures what is necessary for a satisfactory performance. Budgeting helps the management to plan for the most economical use of labor, material and capital. Budgeting tends to remove the cloud of uncertainty that exists in many organizations, especially among lower levels of management, relative to basic policies and objectives. Budgeting promotes an understanding among members of management of their co-workers' problems. Budgeting force management to give adequate attention to the effects of general business conditions. Budgeting aids in obtaining bank credit as banks commonly require a projection of future operations and cash flows to support