Reference no: EM132591318

Patricia Eklund, controller in the division of social services for the state, recognizes the importance of the budgetary process for planning, control, and motivational purposes. She believes that a properly implemented participative budgetary process for planning purposes and an evaluation procedure will motivate the managers to improve productivity within their particular departments. Based upon this philosophy, Eklund has implemented the following budgetary procedures.

• An appropriation target figure is given to each department manager. This amount is the maximum funding that each department can expect to receive in the next year.
• Department managers develop their individual budgets within the following spending constraints as directed by the controller's staff.
• Expenditure requests cannot exceed the appropriation target.
• All fixed expenditures should be included in the budget. Fixed expenditures would include such items as contracts and salaries at current levels.
• All government projects directed by higher authority should be included in the budget in their entirety.

Eklund believes her policy of allowing the department managers to participate in the budgetary process and then holding them accountable for their performance is essential, especially during times of limited resources. She further believes that the department managers will be positively motivated to increase the efficiency and effectiveness of their departments because they have provided input into the initial budgetary process and are required to justify any unfavorable performances.

Required:

Question 1. Describe several operational and behavioral benefits that are generally attributed to a participative budgetary process.

Question 2. Identify at least four deficiencies in Patricia Eklund's participative policy for planning and performance evaluation purposes. For each deficiency identified, recommend how it can be corrected.