ARTICLE ANALYSIS

Article Analysis

Article Analysis

Author Citation

Sivabalan, P.; Booth, P.; Malmi, T.; Brown, D.A. (2009). “An exploratory study of operational reasons to budget”: Journal of Accounting and Finance: 49(4): p849-871

Outline of the Article

This article presents a critical analysis of the article titled, “An exploratory study of operational reasons to budget”, written by a team of four authors, namely- Prabhu Sivabalan, Peter Booth, Teemu Malmi, and David A. Brown. This article was published in Accounting and Finance Journal.

Budgets are used widely but criticized, mainly for performance evaluation reasons. We find that organizations regard budgets as more important for planning and control than evaluation, thus proposing a rationale for their continued use irrespective of evaluation-based criticisms. This finding is also important, because most extant budget research focuses on evaluation, suggesting a potential disconnect between budget research and practice. We also find that rolling forecasts are used in tandem with the annual budget in most organizations, and for the same reasons. This was unexpected, as coexistence suggests their adoption for different reasons.

Aims and Objectives

The aims and objectives of this article is to highlight operational values and aspects of budget formulation.

Findings

Budgeting involves identifying probable areas of expense for an evaluation and determining the costs associated with those expense areas. A budget for an evaluation typically includes the following: salaries or compensation for the evaluator(s), the clerical staff, and any consultant(s); materials, supplies, and equipment; communications, printing, and reproduction; travel and associated expenses; facilities; overhead and general administrative costs; and miscellaneous or contingency costs.

Beyond creating the budget, the evaluator should review the proposed budget, comparing it against the actual expenditures, on a regular basis and make needed adjustments to avoid overrunning the budget. If adjustments cannot be made, the evaluator should immediately notify the client and important stakeholders. Furthermore, in some evaluations, information on the budget, to-date expenditures, and remaining funds must be communicated to the client on a regular basis. Such requirements are typically presented in the contract for the evaluation.

Organizational budgeting is the process for securing resources and allocating those resources to provide instructional and noninstructional programs that support authority learning. Budgeting is a tool for achieving a Organizational or Organizational 's mission, goals, and objectives. The budget document, a result of the budgeting process, is a policy statement of what is valued.

A public administration model describes budgeting as clusters of decisions: process, revenues, expenditures, balance, and implementation. Decisions about process determine time lines, who the decision makers are, and the level of authority they have. Several theoretical models of budgeting processes occur in the literature. Budgeting models are generally developed/used by the federal level of government first, and then they trickle down for experimentation in the education arena. Budgeting models mostly describe estimating expenditures with little attention paid to revenues. Line item, incremental, and earlier program budgeting models are described as top-down processes with few stakeholders involved in the process. Zero-based budgeting, site-based budgeting, and performance budgeting are more decentralized processes that include many stakeholders with greater ...