BUDGET MODELS AND RESOURCE ALLOCATION ASSIGNMENT

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Jan 9, 2024

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1 Budget Models BUDGET MODELS AND RESOURCE ALLOCATION ASSIGNMENT Amiere I. Martin Liberty University Author Note Amiere I. Martin Department of Higher Education, Liberty University. Correspondence concerning this article should be addressed to Amiere I. Martin Email: aimarti1@liberty.edu

2 Budget Models Abstract In postsecondary education, it is importance to have effective financial planning and resource allocation strategies in place. These strategies play a pivotal role in ensuring the sustainable functioning of educational institutions. In this essay, we will thoroughly examine and analyze the different budget models that are commonly utilized by postsecondary institutions. Additionally, we will delve into the strategies that these institutions employ for resource allocation, ensuring that their financial resources are effectively and efficiently utilized. Furthermore, we will explore the biblical principles that guide the process of financial planning in these institutions. By thoroughly exploring these topics, we aim to gain a comprehensive understanding of the various aspects of budgeting and financial management in postsecondary institutions. According to the Cambridge Dictionary, a budget is essentially a comprehensive plan that outlines the anticipated income and expenditure of an individual or organization. It serves as a strategic tool to determine the amount of money that will be earned and the corresponding amount that can be allocated or utilized. In essence, a budget provides a structured framework to assess financial resources and requirements, enabling individuals or organizations to effectively manage their finances and make informed decisions regarding spending and saving. The budget of an institution within higher education refers to the process of determining how to distribute the planned amount of revenues received in order to support the planned expenditures across the organization for a specific period, typically a fiscal year or the duration of a project. There are numerous public higher education institutions that employ diverse approaches when it comes to distributing their projected revenues in order to fund various expenses across their colleges,

3 Budget Models schools, and administrative units, all with the aim of supporting the overarching mission of the university. Incremental budgeting is a budgeting model that entails making adjustments to the budget by taking into account previous expenditures. This approach involves a systematic and gradual process of modifying the budget to reflect the historical spending patterns and financial performance of an organization. By analyzing past expenses, incremental budgeting allows for informed decision-making and the allocation of resources in a manner that aligns with the organization's financial goals and objectives. The passage from Proverbs 24:3-4 serves as an encouragement to engage in thoughtful planning and diligent efforts towards building. This aligns perfectly with the concept of stability that can be achieved through the practice of incremental budgeting. Incremental budgeting is a widely used budgeting approach that follows a traditional model. Under this method, budget proposals and allocations are determined by taking into account the funding levels of the previous year. This means that any changes or adjustments to the budget are made incrementally, building upon the existing financial framework. This approach is often favored for its simplicity and ease of implementation, as it allows organizations to maintain a certain level of consistency and stability in their budgeting processes. By relying on historical funding levels as a starting point, incremental budgeting provides a baseline for decision-making and resource allocation, while also allowing for some flexibility to accommodate changes in priorities or circumstances. (Navolio, 2023) Overall, incremental budgeting serves as a practical and pragmatic approach to financial planning, providing a familiar framework for organizations to manage their resources effectively. The allocation of funds is limited to only newly generated revenue. Budget cuts are typically implemented as a percentage reduction from an institution's historical budget. These cuts are

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4 Budget Models generally applied uniformly across all areas of the institution, without any specific targeting or prioritization. Zero-Based Budgeting is a budgeting approach that involves initiating the budgeting process from scratch at the beginning of each fiscal year. This particular model necessitates providing valid justifications for every single expense incurred. The passage in Luke 16:10 highlights the importance of being faithful and responsible in even the smallest matters. This concept of faithfulness can be seen as closely aligned with the principles of zero-based budgeting, which requires meticulous planning and attention to detail. Zero-based budgeting is a financial approach that involves resetting the budget each year, thereby requiring every institutional unit to reapply for funding. This method ensures that the budgeting process starts from scratch, without any assumptions or carryovers from the previous year's budget. By doing so, it promotes a thorough evaluation of each unit's funding needs and encourages a more efficient allocation of resources. This implies that units or departments are required to consistently provide justifications for their funding requests on an annual basis. According to Navolio (2023) Zero-based budgets take longer to prepare and may be too aggressive of a strategy. This model requires a lot of time, energy, and communication. It could also disrupt the professional climate of your institution, as some staff and faculty members may perceive zero- based budgets as a threat to their stability or autonomy. (Navolio, 2023) Activity-Based Budgeting is a strategic approach that aims to enhance transparency and accountability by linking budgetary allocations to specific activities. This method ensures that resources are allocated in a way that aligns with the organization's goals and objectives. By tying budgetary decisions to specific activities, it becomes easier to track and measure the effectiveness of each activity, as well as the overall impact on the organization's performance.

5 Budget Models This approach promotes a more efficient and effective use of resources, as it encourages managers to prioritize activities that contribute the most value to the organization. In the book of 1 Corinthians, specifically in chapter 4, verse 2, there is a call for stewards to exhibit faithfulness. This aligns with the principles of responsibility that are emphasized in the practice of activity-based budgeting. Activity-based budgeting is a financial allocation approach that prioritizes the distribution of resources to institutional activities based on their potential to generate higher revenues for the organization. This method aims to identify and support those activities that yield the greatest return on investment, thereby contributing to the overall financial growth and success of the institution. By focusing on activities that have the potential to increase revenues, activity-based budgeting ensures that financial resources are allocated strategically, maximizing the institution's financial gains. Performance-Based Budgeting is a strategic approach that aims to align budget decisions with the overarching goals and desired outcomes of an institution. This approach is rooted in the biblical principle of pressing toward the goal, as mentioned in Philippians 3:14. By adopting Performance-Based Budgeting, institutions can ensure that their financial allocations are directed towards activities and initiatives that are in line with their objectives, ultimately leading to greater effectiveness and success. This particular model places a strong emphasis on the attainment of objectives and desired outcomes that are in alignment with the overarching mission of the institution. In contrast to an activity-based budget, which allocates funds based on the level of revenue-generating activities performed by a unit, a performance-based budget takes into account a broader range of factors. Instead of solely considering revenue potential, a performance-based budget distributes funds based on a set of predetermined outcomes and standards. This approach ensures that funding is not solely tied to the quantity of activities

6 Budget Models undertaken, but also considers the quality and effectiveness of the unit's performance. By focusing on defined outcomes and standards, a performance-based budget encourages units to strive for excellence and achieve specific goals, rather than simply maximizing revenue generation. An effective performance budget serves the purpose of emphasizing the extent to which financial resources are allocated towards the smooth execution of day-to-day operations. Additionally, it offers valuable insights and predictions regarding the likelihood of certain functions and programs yielding favorable outcomes. The Bible offers timeless and invaluable guidance to individuals who adhere to its teachings, particularly in matters pertaining to personal finance. The concept of stewardship is a recurring and prominent theme that is emphasized in various contexts, particularly in the context of the faithful and responsible management of resources. This notion of stewardship is rooted in the teachings of Luke 16:10-12, which underscores the importance of exercising prudence, integrity, and accountability in our roles as stewards. By embracing the principles of stewardship, individuals are encouraged to recognize their duty to diligently and conscientiously oversee and utilize resources, ensuring their preservation and optimal utilization for the betterment of society and the fulfillment of their obligations. The central theme that pervades throughout is that of intelligent and principled management of finances. Financial planning and resource allocation by employing a diverse range of budget models and strategic approaches. The biblical principles of stewardship, contentment, and generosity have long been regarded as invaluable and enduring guides for believers as they navigate the realm of financial planning. These principles, rooted in the teachings of the Bible, provide a solid foundation for individuals seeking to manage their finances in a manner that aligns with their faith and values. Stewardship, as emphasized in the Bible, emphasizes the

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7 Budget Models responsible and wise management of resources entrusted to us by God. It encourages believers to recognize that all possessions and wealth ultimately belong to God, and that we are mere stewards or caretakers of these resources during our time on Earth. This principle calls for a conscientious approach to financial planning, where individuals are encouraged to make wise decisions that honor God and benefit others. Contentment, another biblical principle, teaches believers the importance of finding by ensuring that institutional strategies are aligned with these principles, postsecondary institutions have the opportunity to cultivate responsible financial practices that not only contribute to their long-term sustainability but also aid in the fulfillment of their mission.

8 Budget Models Reference: The holy bible: Containing the old and new testaments translated out of the original tongues and with the former translations diligently compared and revised . (1986). .American Bible Society. Navolio, M. (2023, October 23). 6 alternative budget models for colleges and Universities . Hanover Research. https://www.hanoverresearch.com/insights-blog/6-alternative-budget- models-for-colleges-and-universities/?org=higher-education West, B. (2023). Budget models and methods used in higher education . UKnowledge. https://uknowledge.uky.edu/mpampp_etds/422/