Why is the current budgeting practice inadequate

Assignment Help Accounting Basics

Reference no: EM131931515

Problem

You noticed three budgeting practices for the past 10 years before the retirement of the former Executive Director:

1. Budgeting for the current fiscal year does not get started until February. In the words of retired Executive Director, "how could we start budgeting without having a clear and complete picture of the past fiscal year?" The budget for the current fiscal year is usually approved at the March board meeting.

2. Previous budgets were put together fairly quickly by following these steps: (i) get the financial statements with actual figures from the bookkeeper, (ii) increase each line item by a percentage that approximates the inflation rate, and (iii) round the figures up to the nearest $‘000.

3. The budgets for the past 10 years were prepared solely by the Executive Director. Every year the annual budget was approved by the Board in March, then the Executive Director distributed it to the program managers, and a copy was sent to the bookkeeper.

Question: Why is the current budgeting practice inadequate?

Reference no: EM131931515

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