Many medium to large organization have a budget committee, made up of executives from each department, to co-ordinate and review the departmental budgets in relation to the company policies.
However to make budgeting to be successful top management must be involved in the administration of budgets. The chief executive must bear the ultimate responsibility for budgeting. The actual work of budgeting is done by a budget committee. The chief executive should head the budget committee.
Append below the objective/purpose of a budget committee.
The Objective/purpose of a Budget Committee:-
- Reconciles differences of opinion between departmental managers;
- Resolves disputes between managers;
- Give advice to board of directors and chief executive;
- Reviews department budgets and making recommendations;
- Examines periodic reports showing actual performance compared with the budget Significant variances are identified and recommendation made on actions to be taken;
- Develop and examines long term plans;
- Identifies budget objectives;
- Creates a better understanding and awareness among managers of the role of each others deparment;
- Coordination of budgets or budgeting;
- Review external conditions such as economic conditions for the ensuing period; and
- Considers forecasts compiled by departmental managers.