University Budgetary Slack and Organizational Factors Essay

This essay explores budgetary slack, a condition where budgets underestimate revenue or overestimate expenses. It examines how budgetary slack arises, often due to management practices aimed at achieving targets or presenting a favorable financial picture. The essay details the impact of organizational factors, such as ethics, business strategy, and information asymmetry, on budgetary slack. It discusses how unethical management and strategic decisions influence budget creation, highlighting the potential for both positive and negative consequences. The analysis also covers the role of employee participation in budgeting and the influence of budget emphasis. The essay concludes by emphasizing the ethical considerations and suggesting strategies like zero-base budgeting to mitigate unethical practices and promote accurate budget preparation. The provided references support the findings and analysis within the essay.

Budgetary Slack
Budgetary slack
Management Cost Accounting
Name of the Author-
University Name-

Table of Contents
EXECUTIVE SUMMARY........................................................................................................1
INTRODUCTION......................................................................................................................1
WHAT IS BUDGETARY SLACK ..........................................................................................2
IMPACT OF ORGANIZATIONAL FACTOR ........................................................................2
CONCLUSION..........................................................................................................................2

EXECUTIVE SUMMARY
It is mandatory for every organization to have a pre-plan budget for attaining its goals. In
this report we will discuss about the condition of budgetary slack, which results due to an
inadequate planned budget for a specific goal or project. We will also discuss the impact of
budgetary slack on the image of an organization. The report will show that how the management
of an organization contributed to the creation of budgetary slack. Apart from that the discussion
will also reflect the impact of organizational factors on budgetary slack.

INTRODUCTION
Organization is accompanied with the several set of activities in which various functions
are performed to accomplish long term and short term goals and objectives in long run. In this
report, discussion regarding the budget and associated budgetary slaves are discussed. The
budgeted revenue is lower than the actual and the projected expenses are higher than the real
expenses, than it is considered as a budgetary slack. Budgetary slack is a condition where the
underestimation of revenues and over estimation of the expenses has been done for the
concerned project. It is a situation where management has chances to making their benefits, if
their bonuses and appraisals are linked to the achievement of the budgeted figures. Sometimes it
is intentionally performed by the management for creating their own profits and sometimes it is
happened due to the various influencing factors. The organizational factors have a significant
influence on the budgeted numbers by the management. A Budgetary slack affects the company
in both positive and negative manner. It allows the management to achieve the budgeted goals
easily but it also represents the wrong intentions of company’s management for building their
own benefits. This budgetary slack is determined on the basis of internal and external factors
which might positively and negatively impact the prepared budget within time (Henderson,
2015).
WHAT IS BUDGETARY SLACK?
While preparing the budget for any specific project or goal, the management of an
organization make an over estimation of expenses or under estimation of revenue, so they can
easily meet the budgeted goals. It is an unethical practice if it is intentionally done by the
management personnel to make benefits or to easily get the goals. Sometimes the management of
company performs such kind of practices when they want to show their investors that the
business is beating the estimated/expected budget. Management also opt the way of budgetary
slack when they want to build their image promissory in the eyes of its investors and among their
competitors (Dunk, 2011). The other reason behind creation of a budgetary slack is the method
of budgeting. If the budgeting involves engagement of huge number of employees/staff, it
increases the chances of introducing the budgetary slack (Kempers, Ketting, and Lesco, 2014).
However, it may be occur itself in some cases. When the results to be expected for future are

uncertain, the budgetary slack may occur. This is commonly happened when the planned budget
is related to any new product or project, which has no historical/past data for finding possible
results.
IMPACT OF ORGANIZATIONAL FACTORS
Further we will discuss about the influence of organizational factors on budgeting. There
are several organizational factors such as ethics, business strategy, business achievements,
budgetary participation, budget emphasis, information asymmetry & culture. All these factors
have an impact on budgetary slack. An unethical management system has more chances to have
an intentionally budgetary slack because the managers of that system are much interested in
making their numbers in organization’s achievement. Also the business strategy and
achievements affect the budget of an entity (Kyei, Kwaning, and Francis, 2015). If an entity
pursuing with a sound business strategy then it affects the budgetary slack as the chances to earn
higher revenue will increase. On the other hand in case of asymmetry information, the
company’s superior management lacks the information about the working environment of the
company and is not be able to predict the fair picture of future possibilities and the budgetary
slack may occur. Budget emphasis has two aspects out of which one is low-budget emphasis and
other one is high-budget emphasis (Daems, 2016). In low budget emphasis, the management
rely upon the non-accounting information instead of considering the previous budgets and
results. And in high budget emphasis the superiors emphasises on the pre-defined budget targets.
Including all the discussed factors, budgetary participation is an important factor contributing in
the budgetary slack. It refers to the situation where the participation of a large number of
employees is involved in the budget (Dos Santos, 2015). If company decides the low and high
budget then it will not only hamper the costing of the business but also strengthen the overall
outcomes of the business (Vaidya, 2017). It is analyzed that low and high budget is based on the
undertaken estimation and assumptions. On the other hand, changing business factors also
depends upon the prepared budget.
CONCLUSION
At the end of the discussion we can state that excess revenue to the estimated and lower
expenses from the budgeted expenses is called as budgetary slack. This is a beneficial situation

for the management of an organisation which provide them a chance to earn benefits. It is an
ethical practice if it happened due to the organisational factors but if it is done intentionally by
the management then it will be considered as an unethical exercise. There are several
organizational factors which are contributories to the budgetary slack. To avoid an unethical
budgetary slack company should go for zero base budgeting and provide an incentive for their
management for prepare an accurate budget. This budgetary salves has assisted in identifying the
values and organizational factors.

References
Daems, T., 2016. Slaves and statues: Torture prevention in contemporary Europe. British
Journal of Criminology, 57(3), pp.627-643.
Dos Santos, S.A., 2015. Between left and right: Are descendants of slaves in Brazil still
Black?. Cultural Dynamics, 27(1), pp.63-80.
Dunk, A.S., 2011. Product innovation, budgetary control, and the financial performance of
firms. The British Accounting Review, 43(2), pp.102-111.
Henderson, D.R., 2015. A Philosophical Economist's Case against a Government-Guaranteed
Basic Income. The Independent Review, 19(4), pp.489-502.
Kempers, J., Ketting, E. and Lesco, G., 2014. Cost analysis and exploratory cost-effectiveness of
youth-friendly sexual and reproductive health services in the Republic of Moldova. BMC health
services research, 14(1), p.316.
Kyei, E., Kwaning, O.C. and Francis, D., 2015. Budgets and Budgetary Control as a
Management Tool for Ghana Metropolitan Assemblies. Journal of Finance and
Accounting, 3(5), pp.159-163.
Vaidya, S.D., 2017. Analysis of Revenue Budgets and Budgetary Control Policy. International
Journal of Research, 4(17), pp.2867-2875.