Slide 1

STRUCTUREIt will be your blueprintIt will (should) dictate how you proceed with most every decision while making the project.In budget structure you need to know the documents inside and out - backwards and forwards.

In the area of master data, hierarchies describe how a public sector organization views the following relationships:

Of its own internal organizationHow the nature of expenditure is structuredHow the pyramid of goals is defined

Multi-Level Budget StructuresInbudgeting, the hierarchy defines the permissible account assignments. In the case ofpostings, hierarchies control the permissible account assignments also. Forreporting, hierarchies enable users to look at the data from many different viewpoints.Forauthorizations, hierarchies explain how an area of responsibility is formed. Multi-Level Budget Structures

STRUCTUREconsist of one to four budget levels that correspond to increasingly more detailed levels of budgeting in the structure.Budget LevelIt is a part of a budget structure.An example of a typical appropriation established under the GAA and setup in the Central Subsidiary Expense structure, is made up of three levels:Level 1: BFY, Appropriation, Fund, Sub FundLevel 2: BFY, Appropriation, Fund, Sub Fund, DepartmentLevel 3: BFY, Appropriation, Fund, Sub Fund, Department, Object Class

The Importance of

Budget is a formal process of communicating top management expectations (vertically and laterally).Employees become aware of their roles in achievement of overall company objectives.

Communication of corporate objectives

Ensures that short-term plans are consistent with long-term plans.Managers are compelled to think ahead and anticipate future challenges.Continuous improvement by eliminating non- value adding activities.

Enhances systematic and logical planning.

Budget ensures goal congruence, promotes teamwork, and eliminates overlapping of activities.Functional activities are harmonized through the Master budget (r/m purchases and production requirements, production and sales volumes, cash inflows and outflows).

CoordinationManagers get to know their limits as authority to commit is established.Departmental heads and individuals take responsibility for achieving their budget.

Clarification of Authority and Responsibility.

Ensures that plans are complied with and deviations are noted and investigated (variance analysis).A company reaps the benefits of central control and at the same time, the benefits of delegation.Serves as a basis for revision of policies.

Control

Serves as a yardstick for measuring and assessing actual performance.Decisions on promotion, recognition, and punishment are usually based of budget achievement.A manager can do self appraisal.

Performance evaluation.

Active participation in setting the budget motivates employees towards achieving the budget.Employees are motivated when their personal interests are closely associated with budget.

Motivation.

Scarce resources are optimally allocated to the most profitable areas.This would be in terms of human resource, raw materials, equipments, money, time and all other attributes.

Resource Allocation