Local Government Or A Non-Profit Organization - Article Example

?  LOCAL GOVERNMENT OR A NON-PROFIT ORGANIZATION Introduction Budgeting is a systematic process that helps an organization to determine how the various services will be provided and financed. In simple words, a budget helps to determine on what basis dollars will be allocated to a particular activity. There is lack of universal theoretical guidance regarding how the process should be carried out but some government or non-profit organizations provide an excellent illustration regarding how the budgeting process should be organized and carried out. One such non-profit organization is a NGO named ‘Save the Children’. Background of the Organization Save the Children is one of the leading autonomous organizations that work in United States and also other parts of the world. The organization is recognized for its commitment to innovation, collaboration and accountability that helps changing the life of millions of children and families in terms of providing food, medical care, education, and other emergency response to natural calamities and disasters. (Fig-1: Save the Children, Financial Information) The primary source of finance of the company is from grants, gifts, and donations. Hence, it is clear that the organization has inherent obligation towards various stakeholders and they are also accountable regarding how their funds should be utilized and how much of the funds so raised from the stakeholders have actually been utilized for the actual goals of organization. The organization has been able to help more than 75 million children during the previous fiscal, surpassing the expectations of many. Given this scenario, it is very important for the budget committee of Save the Children to analyze their requirements in a systematic manner and then prepare a budget which not only keep the objective of the organization into consideration but also act in the best of interest of the stakeholders. Description of Overall Budgetary Cycle Budgeting is a systematic process which requires discipline along with experience and skill to forecast accurate numbers. As mentioned earlier, it is equally important to keep in mind the ultimate goals of the organization while preparing the budget. Hence, budgeting for ‘Save the Children’ is not only about expenditures and allocations made towards children but it is also about sharing the overall budget of the government as government grants constitutes a significant source of finance. From the official website of ‘Save the Children’ it was found that the organization has legal obligation of the government to fulfill rights and its ultimate goals. The budget is proposed by the committee set up by the Board of Trustees and it is based on the internal revenue code defined under section 501(c) (3). It is usually prepared under the supervision of the senior management (Save the Children, 2013, p.1). The budget so prepared by the management must be reviewed by the senior management and further approved by the Board of Trustees in order to be effective or executable. However, under the code of Ethics and Business Conduct of the organization, the senior management holds sufficient approving authority when the consequences of approval is in the best of interest of children, Agency, community or families that the organization it serve. This code will be specifically executed when there arise any conflict of interest regarding allocation of funds (Carnegie Mellon University, 2008, pp.1-2). The Budgeting Process A budget is a planning tool reflecting organizational mission, programs and strategic course of action and has to be approved by the board of directors. Keeping in mind the obligations of the organization towards the society and its stakeholders, the budgeting cycle may be analyzed by breaking the entire cycle into five simple steps. It begins by establishing the need for more expenditure compared to previous year to get better realization of children rights. For instance, as discussed earlier the organization was able to help more than 78 million children in last fiscal, higher than usually budgeted on basis of 74 million children. Thus, it can be expected by the management that it might require additional expenditure during next fiscal on the basis of recent data records and the same would be justified in the sense that such expenditures meets the ultimate objective of organization’s existence. A further insight on this initial step would reveal that it has to prepare a special team gather data from various government and non-government agencies to get the true idea regarding current realization needs. The next step is to uncover the availability of resources for expenditure where it is important to find out the overall budget allocation requirement. This is achieved by inquiring into how the fund flows from relevant departments so as to help the organization to implement various programs. In case for the organization under study, the next step is to analyze whether the government is meeting its obligations by analyzing budget inputs of programs aimed at realizing the overall. Here, it is important to analyze the efficiency of allocation of funds to optimum use of scarce resources. Any geographical inequality in distribution or discrimination towards a particular section of the society should be discouraged and the same is minutely reviewed by the senior management before approval. Generally, budget is allocation by prioritizing basic services like expenditure targeted towards poorest of poor and so on. Expenditures which are of discretionary in nature and may be phased out without affecting goal of organization must be postponed or given least priority. Hence, prioritization will ensure efficiency and effective utilization of funds. After the senior management reviews the proposed budget and the board of trustees approves it, the next step is to implement the budgetary expenditure in current fiscal and analyze whether it is meeting its obligations and objectives. Every program must be carefully analyzed in terms of increase or decrease in cost, quality improvement, discrimination in access to service (if any), any regulatory hurdle, etc. The final step is to review the all the four steps discussed earlier and provide an overall rationale regarding overall budgetary cycle and how effective it is in meeting its obligations, responsibilities and goals. Conclusion Budgeting process refers to determining expenditure needs of the organization in line with its overall objective and long term strategies. It is usually done after assessment of expected expenditure because its relevance is ultimately decided by judging the real expenditure and the proposed allocation in a particular program and also in overall budget (Mikesell, 2010, pp.41-42). Thus, monitoring of budget is also an important part of the whole budgeting process. Budgetary variances between actual and budgeted allocations must be minimized to increase reliability of forecasting. Some of the common causes of budget variances are faulty assumptions, unrealistic expectations, traditional bias, and arithmetic errors by accountant. Budget has to be prepared in a systematic and disciplined manner so that it covers all financial constraints and have proportionate allocation of funds for respective programs. References Carnegie Mellon University. (2008). Budgeting and Planning Process. Retrieved from http://www.cmu.edu/finance/budget/overview/files/budgeting_process_2008.pdf. Mikesell, J. (2010). Fiscal Administration: Analysis and Applications for the Public Sector. United States: Wadsworth, Cengage Learning. Save the Children. (2013). Code of Ethics & Business Conduct. Retrieved from http://www.savethechildren.org/atf/cf/%7B9def2ebe-10ae-432c-9bd0-df91d2eba74a%7D/CODE%20OF%20ETHICS%20AND%20BUSINESS%20CONDUCT%202011.PDF. Save the Children. (2013). Financial Information. Retrieved from http://www.savethechildren.org/site/c.8rKLIXMGIpI4E/b.6229505/k.5C4E/Financial_Information.htm. Read More