Difference between financial and budget planning; budget cycle; budget utilisation/ implementation; budget utilisation; management activities during budget utilisation

1. UTILIZATION OF
BUDGET
Nirmala Roberts
India

2. Budget
■ An operational plan expressed in
financial terms for a definite period
usually a year, and based on the
expected income and expenditure.

3. Difference between Financial and
Budget planning
Financial planning Budget
Important tools for creating a stable financial situation,
providing special benefits
Provides a destination/ goal
for the movement, which
enhances the work of the
budget
Handles day to day costs &
expenses, for a forward
movement
Identification of a goal Tool to achieve the goal
Focuses on your entire life Focuses on immediate money
issues
Considers what you can be
with your money
Considers what you do with
your money

4. The Budget Cycle
Preparation &
submission
Execution
Audit and
evaluation
Budget
tracking

5. The Budget cycle…
■ Budget Creation – As per institutional policy and
requirements. It is then submitted for approval.
■ Budget Approval – By designated approvers-
o May approve, reject or put on hold.
o On approval - Budget becomes active and ready for
starting funding activities.
■ Budget Allocation –
o Done by the management/ finance personnel
o Involves distributing funds across the various areas.
o Allocated down a hierarchy OR department-wise

6. …The Budget cycle
■ Budget Utilization – As budget requests and transfers.
o Budget request – Submitted for validation and then
approved .
o Budget transfer - Transferring funds from one
budget to another.
■ Budget Reconciliation- Reviewing transactions,
supporting documentation, and resolving any
discrepancies that are discovered.
■ Budget Tracking – Viewing the budget check book,
cash memos and other expense vouchers showing
transfer of funds.

7. Budget execution (utilization)
■ Making practical and effective use of Budget
■ Implementation of planned budget activities within
the specified period and preparation of a report.
■ The act of carrying out the budgetary plans, programs
and projects in accordance with the strategic plan in
order to attain set goals and objectives.
- K. Mathur and Inayatullah, 1980.

8. Budget Utilization/ implementation
has two main operations…
■ Commitments – Decision taken to use a particular
sum from a specific budgetary line to finance a
specific activity.
■ Payments – The expenditure is authorised and the
sums due are paid after –
o Establishing the contract for the job
o Delivery of the contractual service/
Details of receipt and payments are recorded in ordinal
manner, with supporting documents which are auditable

9. Utilizing a Budget
■ Funds from the budget are committed against the
various domains as decided by the management and
finance committee, and are utilized over a period of
time.
- Eg., In a College of Nursing - For infrastructural
works, equipment and supplies, salaries and
payments ….

10. Budget utilization
■ Funds are withdrawn to execute purchases/ works ...
■ Details of credits and debits are updated periodically
in columns, to track fund utilization.
o The Credit column records the amount added as
receipts (Student fee, other sources of funds)
o The Debit column records budget used for
purchase orders, work orders, event expenditure...
o Details of receipts and payments in the form of
cheques and bills, invoice and credit memos and
filed for later reference and audit

11. Sample Receipts & Payments for Nov 2020

12. Management Activities during
Budget Utilization
■ Verification of budget allotment – Checking whether -
o Expenditure requested is within the approved budget
o Funds are available based on the revenues collected
■ Earmarking of budget allotment and availability -
Setting aside specific amounts from the available funds
for possible future payments
■ Obligating of funds - The act of recognizing specific
amounts from the available funds funds as spent

13. Procuring Library books/Journals
■ Initial procurement – Based on minimum requirement as
per directions by apex body.
o Consider the various subjects – Books and Journals.
Select titles
o Non subject books – Fiction & non fiction
o Contact Book dealers – Call for price quotation
(discounts etc)
o Purchase made from an appropriate dealer

14. Procuring Library books/Journals
■ Subsequent procurement – Based on annual requirement
as projected by teachers, students, librarian – A budget
proposed for the year
■ Books/ Journals are allotted an accession no. and taken
on charge in the Accession Ledger with details of
procurement and costs.
■ Budget also includes provision for maintenance –
Binding of books and journals etc

15. Procuring A.V aids
■ Requirement is projected by the HOI after obtaining
feedback from dept. al heads
■ Budget for the items approved by the finance officer
■ Consider Inventory management techniques like -
o ABC (Always, Better, Control) – Cost of item
o VED (Vital, Essential, Desirable) – Critical service value
o HML (High, Medium, Low) - Turnover
o XYZ (Very little/ Some/ Most variation) – Variability of
demand
o Budget for repairs and AMC
o Other contingencies

16. Salary emolument of
employees
■ Salary is stated by category of employees & with
increments spelled out
■ Budget - fixed accordingly
■ Salary details stated – Basic salary + allowances (risk,
compensatory, house rent, transport..) + Insurance +
any other
■ Mode of salary disbursement – to a Bank as a
consolidated cheque

17. Stipend to the students…
■ The student’s role is normally unpaid or voluntary
■ Stipend - A regular fixed sum of money paid for
services or to meet expenses (scholarship/ internship/
apprenticeship…), but not for work performed.
■ Reflects a complementary benefit
■ It is lower than permanent salary for a similar work,
because of other benefits such as accreditation,
instruction, food and/or accommodation..

18. Balance sheet for year ending 31.3. 2020

20. Budget Audit And Evaluation
■ The final stage of the Budget cycle
■ It examines whether the budgeting process is
operating effectively - The techniques,
procedures, motivation and budget effectiveness.
■ It is an evaluation of the budgeting effort.
■ It detects problems in the budgeting process
■ Conducted every 2 – 3 years by an independent
party and not a budget staff.
■ The budget auditor reports to top management for
appropriate action.