Chapter 8 Flashcards
7-Step Cyclical Budget Process
- planning
- gathering input/feedback
- build consensus
- present final plan
- approve
- implement
- evaluate
Budget process Step 1: Planning
- existing programs have a history on which budgets are based
- new programs do not have a history and must look to similar programs
- align the budget with program goals
- driven by questions about the program
Budget process Step 2: Gather input/feedback
- extension of planning
- essential supplies and services
- survey the staff about budgetary needs and wishes
Budget process Step 3: Build Consensus
- allow staff to contribute input on the final budget
- present budget to a higher level of administration with justifications
Budget process Step 4: Present Final Budget
- presenting the final budget in clear terms
- utilize written and visual justifications as needed
Budget process Step 5: Approval
- higher-level administrators will make final decisions
Budget process Step 6: Implementing the budget
- judicious spending of funds
- avoid spending beyond budget
- have a contingency plan
Budget process Step 7: Evaluation
- closes the feedback loop of the budget cycle and brings the process back to the planning phase
- ensures budget is meeting desired goals
Short-Term Budget
- covers the day-to-day costs of operation
- may be shorter than 1 year
Operational Budget
- included items like salaries, administrative costs, and office operations
Expendable Items
items that cannot be reused (i.e. tape)
Nonexpendable Items
reusable items but still have a predetermined minimum lifespan for replacement
Fixed Expenses
expenses to purchase supplies, equipment, or services that have a known cost
Variable Expenses
varies throughout the budget and may require an estimate to cover the cost
Long-Term Budget
- items that exceed the annual budget
- items that are too expensive for annual budget
- these items are known as capital expenses/outlays
Limited budget
- common in educational settings
- monies managed throughout the year
- end of fiscal year remaining funds are used in other parts of the organization
Rollover Budget
rolls money not spent in one fiscal year over to the next
Line Item Budget
- the budget is separated into various categories
- can be plotted over the course of the fiscal year
- transferring funds may not be allowed
Program Budget
- line item budget with more categories (specific subdivisions of an overall system to have separate accountability)
- allows for greater prioritizing of items in the planning process
- can tie budget directly to goals
Incremental Budget
uses an existing budget and either adds or subtracts a specific percentage based on available funds
Zero-based budget
- require all budget items to be fully justified
- assume that many budgets have excess “fat” built in
- require ranking of budget areas to establish funding priorities
- once established hard to start over
Planning Programming Budget System
- relies heavily on planning and linking expenditures to specific objectives
- designed for large institutions
- look at objectives and select best alternatives
Revenue Center
generates profit
Cost Center
- does not produce profit
- adds to the cost of running an institution
- often vital to the success of a company and has an effect on other revenue-producing areas of the company
Bid
a document provided by a vendor for goods or services you may wish to purchase
Competitive bids
a group of bids (3+) that are collected from vendors to determine best price and value for items you wish to purchase
Lot
a group of items that vendors bid on in a group
Requisition
a written document requesting to purchase specific items from a vendor
Internal Requisition
a written document requesting goods or services from a group or department within your own organization
Purchase order
a formal agreement to purchase items that have been requisitioned
Invitation for bids (IFB)/Request for proposals (RFP)
a formal invitation by an organization to a variety of vendors to supply bids for specific purchases or services
Blanket order or open account
an open purchase that can be used over a period of time for purchases as needed
Shipping
determines how the items will be transported to your location from the vendor
Freight on board (FOB)
used for who pays for shipping and when title to goods transfer
Receiving
act of taking possession of a purchased item
Invoice
a request for payment from the vendor to the purchasing organization
Terms
outline how many days the organization has before they must pay the vendor
Purchasing delegate
an individual authorized by the organization to issue purchase orders on behalf of that department
Specifications
generic description of the items being bid on
Substitutions
the unfortunate act of having one product substituted for the one you requested
