Cases 9-45 should be prepared in a Word document with embedded Excel spreadsheets for relevant calculations and supporting schedules.CASE 9-46Patricia Eklund, controller in the division of social services for the state, recognizes the importance of the budgetary process for planning, control, and motivational purposes. She believes that a properly implemented participative budgetary process for planning purposes and an evaluation procedure will motivate the managers to improve productivity within their particular departments. Based upon this philosophy, Eklund has implemented the following budgetary procedures.An appropriation target figure is given to each department manager. This amount is the maximum funding that each department can expect to receive in the next year.Department managers develop their individual budgets within the following spending constraints as directed by the controller’s staff.◦ Expenditure requests cannot exceed the appropriation target.◦ All fixed expenditures should be included in the budget. Fixed expenditures would include such items as contracts and salaries at current levels. ◦ All government projects directed by higher authority should be included in the budget in their entirety.The controller’s staff consolidates the budget requests from the various departments into a master budget submission for the entire division.Upon final budget approval by the legislature, the controller’s staff allocates the appropriation to the various departments on instructions from the division manager. However, a specified percentage of each department’s appropriation is held back in anticipation of potential budget cuts and special funding needs. The amount and use of this contingency fund are left to the discretion of the division manager.Each department is allowed to adjust its budget when necessary to operate within the reduced appropriation level. However, as stated in the original directive, specific projects authorized by higher authority must remain intact.The final budget is used as the basis of control. Excessive expenditures by account for each department are highlighted on a monthly basis. Department managers are expected to account for all expenditures over budget. Fiscal responsibility is an important factor in the overall performance evaluation of department managers.Eklund believes her policy of allowing the department managers to participate in the budgetary process and then holding them accountable for their performance is essential, especially during times of limited resources. She further believes that the department managers will be positively motivated to increase the efficiency and effectiveness of their departments because they have provided input into the initial budgetary process and are required to justify any unfavorable performances.Required:Describe several operational and behavioral benefits that are generally attributed to a participative budgetary process.Identify at least four deficiencies in Patricia Eklund’s participative policy for planning and performance evaluation purposes. For each deficiency identified, recommend how it can be corrected.

A budget is an important monitoring and controlling tool in various processes. It is very useful in planning the tasks, as it spells out the predetermined standards against which the actual performance should be measured. Budgets can be developed for different tasks, for example, sales, production, cash, and so on. Budgets allow focusing of the efforts of the employees and managers on achieving the standards. As budgets are essentially prepared to serve as the guide by which performance of the employees shall be measured, managers usually depend on inputs from them while formulating the standards. Managers can then develop the budgets keeping in mind the prospective objectives for the ensuing period. Thus, participative budgeting process helps in improving the efficiency of the planning process. Participative budgeting can be extended to different departments of the organization. Therefore, it brings about organization-wide efficiencies and better control. As the details of the expected standards are well communicated to the managers who have the responsibility of implementing the budgets, there is little wastage of time and resources. Managers can direct the employees to perform in the context of the overall objectives as well as departmental objectives as detailed information is available to them.Participative budgeting thus helps in coordination of the efforts of different departments. It removes distrust and unhealthy competition while fostering a healthy mindset to achieve greater efficiency. Therefore, departments do not work at cross purposes and even monitoring of performance can be easier. The other advantage of participative budgeting is in the behavioral outlook of the managers. It creates a sense of ownership in them to achieve performance that meet or exceed the standards. They are able to direct the employees better as they understand how the objectives can be achieved. They also communicate better with the employees as there is clarity of goals on the budgeted performance. It removes unnecessary friction when the performance does not meet the required standards and instead creates a more sympathetic managerial approach by motivating the employees. It also enables managers to look for improving the skills of employees through training and mentoring so that higher efficiency can be achieved.

Answered: Describe several operational and…

Understanding Business

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Cases 9-45 should be prepared in a Word document with embedded Excel spreadsheets for relevant calculations and supporting schedules.

CASE 9-46

Patricia Eklund, controller in the division of social services for the state, recognizes the importance of the budgetary process for planning, control, and motivational purposes. She believes that a properly implemented participative budgetary process for planning purposes and an evaluation procedure will motivate the managers to improve productivity within their particular departments. Based upon this philosophy, Eklund has implemented the following budgetary procedures.

An appropriation target figure is given to each department manager. This amount is the maximum funding that each department can expect to receive in the next year.
Department managers develop their individual budgets within the following spending constraints as directed by the controller’s staff.

◦ Expenditure requests cannot exceed the appropriation target.

◦ All fixed expenditures should be included in the budget. Fixed expenditures would include such items as contracts and salaries at current levels.

◦ All government projects directed by higher authority should be included in the budget in their entirety.

The controller’s staff consolidates the budget requests from the various departments into a master budget submission for the entire division.
Upon final budget approval by the legislature, the controller’s staff allocates the appropriation to the various departments on instructions from the division manager. However, a specified percentage of each department’s appropriation is held back in anticipation of potential budget cuts and special funding needs. The amount and use of this contingency fund are left to the discretion of the division manager.
Each department is allowed to adjust its budget when necessary to operate within the reduced appropriation level. However, as stated in the original directive, specific projects authorized by higher authority must remain intact.
The final budget is used as the basis of control. Excessive expenditures by account for each department are highlighted on a monthly basis. Department managers are expected to account for all expenditures over budget. Fiscal responsibility is an important factor in the overall performance evaluation of department managers.

Eklund believes her policy of allowing the department managers to participate in the budgetary process and then holding them accountable for their performance is essential, especially during times of limited resources. She further believes that the department managers will be positively motivated to increase the efficiency and effectiveness of their departments because they have provided input into the initial budgetary process and are required to justify any unfavorable performances.

Required:

Describe several operational and behavioral benefits that are generally attributed to a participative budgetary process.
Identify at least four deficiencies in Patricia Eklund’s participative policy for planning and performance evaluation purposes. For each deficiency identified, recommend how it can be corrected.

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