This briefing paper considers how budgets are controlled and monitored. It considers budgets and business planning, management accounts, capital programmes, financial regulations, standing orders and virement.
Budgeting is not a purely technical process. Too often budgetary control and monitoring becomes overly focused on the production of the information with too little time (resources) given to understanding, solving and acting on the problems revealed. Academic theory would consider such concepts as goal congruence, the idea that the goals of individuals and groups should coincide with the goals and objectives of the organisation as a whole. This may be easier in the private sector with objectives such as market share, profits or share value to aim for. The public sector can be more complicated. Service priorities really do diverge in someways from the finance department.
Business Planning is about where the organisation wants to go. A business plan is a formal statement of a set of goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organisation or team attempting to reach those goals.
The goals being attempted maybe for-profit or non-profit. For-profit business plans typically focus on financial goals. Non-profit and government business plans tend to focus on service goals. Business plans may also target changes in perception by the customer, client, tax-payer, or larger community.
Business plans may be internally or externally focused. Externally focused plans target goals that are important to external stakeholders, particularly financial stakeholders, for example, Banks or Building Societies. The business plans of housing associations are an example of this. They typically have detailed information about the organisation attempting to reach the goals. External stake-holders of non-profits include donors and the clients of the non-profit's services. For government agencies, external stakeholders include taxpayers, central government agencies. An example would be to secure finance, as with a Large Scale Voluntary Transfer (LSVT), where to obtain long-term finance a business plan with a 30 year (typically) time-frame will be prepared.
Budgetary Control and Monitoring are achieved through linking budgets to business plans, preparing management accounts, having effective financial regulations and standing orders and allowing appropriate virement to take place. There are also specific requirements for budgetary control and monitoring in capital programmes.
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