Both the budget process and budgets themselves can impact management actions, bo

Question

Both the budget process and budgets themselves can impact management actions, both positively and negatively. For instance, a common practice among not-for-profit organizations and government agencies is for management to spend any amounts remaining in a budget at the end of the budget period, a practice often called “use it or lose it.” The view is that if a department manager does not spend the budgeted amount, top management will reduce next year's budget by the amount not spent. To avoid losing budget dollars, department managers often spend all budgeted amounts regardless of the value added to products or services. All of us pay for the costs associated with this budget system.

Write a short report to a local non-for-profit organization or government agency offering a collation to the "use it or lost it" budgeting problem.

Explanation / Answer

To,                                                                                                                                          Date: 21/04/2016

A Local NGO focused on Children Education

Subject: Details of offering a collation to the "use it or lost it" budgeting problem

Dear Sir / Madam

I would like to say that “Use it or lost it” problem has been observed and it has caused loss of funds in less productive work. It has caused loss to society as whole that only hampers to the welfare initiative taken by your organization. Regarding this, I would like to offer a solution so that “Use it or lost it “problem is nipped in the bud.

According to the solution, whole budget for the period is suitably distributed and allocated in small time periods. Each period is reviewed and variance is measured. According to the nature of variance, corrective action is taken and it is reflected in budgetary expenditure of the next small period. Accordingly, budget expenditures go as per the plan and most suitable utilization of budgetary allocation is done to deliver maximum benefits to the concerned community. Overall, it bridges the educational divide and our society become more literate.

Regarding the implementation of the above mentioned solution, my team and I will be readily available to help your organization.

Thanks & Regards

Budget Expert  

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