Learning Objective of the Article:
- What is a budget committee?
- What are the functions and responsibilities of a budget committee?
Budget committee is a group of key management persons who are responsible for overall policy matters relating to the budget program and for coordinating the preparation of the budget.
Functions and Responsibilities:
A standing budget committee will usually be responsible for overall policy matters relating to the budget program and for coordinating the preparation of the budget itself. This committee generally consists of the president; vice president in charge of various functions such as sales, production, and purchasing; and the controller. Difficulties and disputes between segments of the organization in matters relating to the budget are resolved by the budget committee. In addition, the budget committee approves the final budget and receives periodic reports on the progress of the company in attaining budgeted goals.
Disputes can (and do) erupt over budget matters. Because budgets allocate resources, the budgeting process to a large extent determines to which department get more resources, and which get relatively less. Also, the budget sets the benchmarks by which managers and their departments will be at least partially evaluated. therefore, it should not be surprising that managers take the budgeting process very seriously and invest considerable energy and even emotion in ensuring that their interest, and those of their departments, are protected. Because of this, the budgeting process can easily degenerate into an interoffice brawl in which the ultimate goal of working together toward common goals in forgotten.
Running a successful budgeting program that avoids interoffice battles requires considerable interpersonal skills in addition to purely technical skills. But even the best interpersonal skills will fail if, as discussed earlier, top management uses the budget process inappropriately as a club or as a way to find blame.