Helen Auger has seen the Centicle Group,a not-for-profit,in-home health care organization,grow during the past ten years to a $500 million revenue,multi-state organization.Helen was promoted to her controller position six months ago,after serving capably in several financial accounting positions at the Centicle Group.
At a Budget Review Committee meeting last Friday,several committee members expressed frustration with the pace of the budget development.They described the newly introduced "bottom up" system of participative budgeting as "unwieldy," "slow-paced," and "repetitive." Helen's objective in introducing the participative approach was to involve to a much greater extent lower level supervisors and employees.Helen is meeting with the Budget Review Committee again tomorrow when she plans to explain the advantages of "bottom up" versus "top down" approaches to the budgeting process.
Required: Helen has asked you to help her prepare for tomorrow's meeting by preparing the following:
(a)A 40 -50 word description of participative budgeting,including some basic advantages of this approach to budgeting.
(b)A brief,one-paragraph explanation of the concept of "budget ownership," one of the values that participative ("bottom up")budgeting is said to have.

Question

Quizplus · Accepted Answer

Feedback: (a)Participative ("bottom up")budgeting is an approach to the budgeting process that requires an upward flow of information,goal setting and justification.The primary objective is to get employees to "buy into" the final budget because they are truly involved in its preparation.
Advantages of participative budgeting include:
1.Better data comes from the person who creates the data.
2.People involved in a process feel included.
3.People who help set their own goals are likely to be more motivated to achieve those goals.
4.Better communication links are created through the participative budgeting process.
5.More realistic levels of "slack" are created.
6.A sense of "ownership" develops for those involved in the budgeting process.
(b)"Budget ownership" develops from a sense that "I helped create this." This sense of owning leads to a better attitude,more effective budget preparation,more realistic budget data,and a heightened understanding of the budget and evaluation processes.Although the participative approach requires more initial employee time,the rewards (more realistic budgets,higher employee motivation,and the general sense of really being involved)can more than offset the higher cost and slower pace in budget development.

Helen Auger Has Seen the Centicle Group,a Not-For-Profit,in-Home Health Care