Budgeting Memo - Assignment Example

Upon questioning, I learned that people in charge of budgeting and procurement have to spend all of their budgets for fear of losing it the next year. Perhaps you got that idea from government spending which has a totally different setting with a non-government agency such as ours. It is widely known that most government agencies are under pressure to fully expend budgets that are set to expire (Boris Angelov, 2014) I am not happy with this situation because you have the wrong notion of budgeting.

The rush of spending at the end of the fiscal year is only costing the organization unnecessary expenditures and wasteful. Budget is supposed to be an allocation to ensure that there are enough resources to accomplish set of goals. It is defined as an estimation of revenue and expenses over a period of specified time (Investopedia). For instance, if you have budgeted, $30,000 for training of personnel, and at close of the fiscal year, you have spent only $20,000 for the actual training; this does not mean you have to think of ways to spend the balance of the budget.

Necessarily, it should be treated as a savings and be returned to the Treasury. An approved budget does not mean that you have to spend it to zero. We should form the practice of returning balances because as you contribute to our fund balances, you are adding to the health of our company. From now on, the practice of spend all will not be tolerated. Each manager has to explain why there are balances/deficits from the budgeted amount, and if there is a balance, the need to spend it should be rightly justified.

Please be informed that I will not approve expenses not tied up with our goals but will commend managers who are efficient in their surpluses. If you fear of losing your budget for next year, I will propose to our Board of Directors to use Zero budgeting wherein every expenditure is justified, or each spending starts with an assumed value of 0 (Accounting Tools, 2014).