A comparison of the actual performance with the budget helps in identifying weaknesses and inefficiencies very clearly. This ultimately enables the management to diagnose the problems and to take immediate remedial measures. In the case of an educational institution, the importance of budgetary control is paramount.
Controllability is the degree of influence that a specific manager has over the costs/expenditure/revenue or other items under consideration.
For the successful implementation of a budgetary control system, following pre-requisites need to be fulfilled:
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i. Prepare an organization chart clearly indicating the roles and responsibilities of everyone. For example, at school level, the principals of 3SC and ICSE sections, or the principals of English, Marathi and Hindi media or the vice-principals and supervisors of primary and secondary sections, librarian, laboratory in-charge and so on.
At the college level, this could be principals/ vice-principal’s of arts, science and commerce faculties or junior and senior colleges.
ii. Determine the objectives, policies and plans in clear, unambiguous and specific terms.
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iii. Maintain an efficient system of accounting to record and provide data in line with the budgetary control system.
iv. Entrust the task of budgetary control to a senior person or a committee. Develop a sound organisation to support this person/committee in the development, execution and maintenance of budgetary control system.
v. Develop and maintain an effective communication system and feedback mechanism between different levels and segments of the institution.
vi. Budget should be usually prepared by those who are responsible for performance.
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vii. Budgets should be comprehensive, flexible and realistic.
viii. Budgetary system should have the support of the top management .so as to avoid problems later on.
ix. Keeping a constant watch over the expenditure is an important step in budgetary control.
x. Maintain a progressive record of outstanding liabilities.
xi. Take immediate and firm measures to prevent excessive expenditure not provided for in the budget.
xii. Ensure that the expenditure is necessary and the amount spent, is justified and commensurate with the need.
xiii. Ensure that once the amount is spent, the transaction is immediately entered into the relevant books of accounts.
xiv. Prepare quarterly statement of accounts and maintain a check.
xv. Provide adequate training and education to the people involved in the budgetary system for a smooth operation.
xvi. Carefully analyze variances from budget and deal with it tactfully.
xvii. Identify the causes for such variances and suggest corrective measures.
xviii. Devise a feedback system to judge the actual performance vis’-a-vis’ the budgeted performance. Use this information to receive, scrutinise, revise (if necessary) and approve future budgets.