Budgetary Control and Monitoring

December 2010

This briefing paper considershow budgets are controlled and monitored. It considers budgets and businessplanning, management accounts, capital programmes, financial regulations,standing orders and virement.

Budgeting is not a purelytechnical process. Too often budgetary control and monitoring becomes overlyfocused on the production of the information with too little time (resources)given to understanding, solving and acting on the problems revealed. Academictheory would consider such concepts as goal congruence, the idea that the goalsof individuals and groups should coincide with the goals and objectives of theorganisation as a whole. This may be easier in the private sector withobjectives such as market share, profits or share value to aim for. The publicsector can be more complicated. Service priorities really do diverge in someways from the finance department.

Business Planning is aboutwhere the organisation wants to go. A business plan is a formal statement of aset of goals, the reasons why they are believed attainable, and the plan forreaching those goals. It may also contain background information about theorganisation or team attempting to reach those goals.

The goals being attempted maybe for-profit or non-profit. For-profit business plans typically focus onfinancial goals. Non-profit and government business plans tend to focus onservice goals. Business plans may also target changes in perception by thecustomer, client, tax-payer, or larger community.

Business plans may beinternally or externally focused. Externally focused plans target goals thatare important to external stakeholders, particularly financial stakeholders,for example, Banks or Building Societies. The business plans of housingassociations are an example of this. They typically have detailed informationabout the organisation attempting to reach the goals. External stake-holders ofnon-profits include donors and the clients of the non-profit's services. Forgovernment agencies, external stakeholders include taxpayers, centralgovernment agencies. An example would be to secure finance, as with a LargeScale Voluntary Transfer (LSVT), where to obtain long-term finance a businessplan with a 30 year (typically) time-frame will be prepared.

Budgetary Control andMonitoring are achieved through linking budgets to business plans, preparingmanagement accounts, having effective financial regulations and standing ordersand allowing appropriate virement to take place. There are also specificrequirements for budgetary control and monitoring in capital programmes. 

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