The authorization function of budgets is especially important for government and not-for-profit (NFP) entities, where budgeted amounts often serve both as approvals of planned activities (or programs) and as:

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Budgeted amounts in government and NFP entities often serve as ceilings for expenditures, which means that the authorization function of budgets is especially important to ensure that expenses stay within the approved limits. Budgets may also be used as measures of quality or indicators of performance in some cases, but these functions are not as essential as the role budgets play in controlling spending within government and NFP organizations. Certification of actions and the basis for contract negotiations are not directly related to the authorization function of budgets.

The Authorization Function of Budgets Is Especially Important for Government