Top-Down Budgeting Methodology

1850 Words Jul 11th, 2018 8 Pages
Top-Down Budgeting Methodology
Top-down budgeting is described as “dominated by top members of the executive branch and the legislative branch. Decisions made by these top ranked actors include such matters as targets for programs or departments. Lower ranked decisions are sharply constrained by these top down decisions. Top-down budgeting may seek to prevent unwanted proposals” (Williams & Calabrese, 2011). Top-down budgeting is widely-used in the government, but also in many organizations (Ljungham). Organizationally, top-down budgeting decision makers are top level executives or senior leaders which determine the budget for lower levels of the organization. As stated, the method commonly goes beyond budgeting to include setting of
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This may result in inaccurate or inappropriate budget decisions for the government or organization.
An Example of Top-Down Budgeting
Almost all United States governments utilizes top-down budgeting. Every year, the Office of Management and Budgeting (OMB) sends a communication to their government agencies with instructions on how to budget for the coming year. In this 70 page document, top-down budgeting is required, and specific instructions are provided for how to manage this process and obtain the necessary information to make budgeting decisions. An example from this document states, “A top-down approach to planning, testing, and documenting internal control over financial reporting would start with the significant agency-wide financial reports and work back to the key processes, controls, and supporting documentation” (OMB). In this document, the senior management team responsible for making budget decisions is given the power to determine the scope of financial reporting, design and methodology. They are also given the flexibility to work with appropriate budgeting documents, as they see fit. In this way, the decision makers putting the budget together is given the permission to call upon other resources to make budget allocations. However, the decision makers may not have the resources to do so, or operate with limited information. As mentioned, top-down budgeting can be used as a way to manage the lower levels of the
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