UNDERSTANDING ABOUT BUDGETING

Introduction

Budgeting refers to the process through which different business and non-business organizations forecast and plan for their expected revenues and costs for a specific time period. Different types of budgets are used by different organizations for their planning purposes. Organizations plan for their future and on the strategies that the organizations will use towards achieving their long and short-term goals and objectives. Good planning and budgeting processes are vital in the management of an organization’s finances and, thus, vital for the success of the organization (Melkers & Willoughby, 2005, 184). There are several types of budgets and budgeting methods that are commonly used by individual organizations, depending on the drivers of the elements that constitute the budget. The research’s selected budget is a business budget of the World Health Organization for the year ended 31st December 2019. The selected budget’s duration of time is one year. Thus, its time period of use was between 1st January 2018 to the end of the organization’s accounting period, 31st December 2019.

The report analyzes the key elements, cost and revenue illustrated in the budget, and the drivers to the elements. It also analyzes the budgeting process and method used, the identifying areas that require improvements and critiques to the budget and the budgeting process. An analysis of how the budget is well articulated to the organization’s goals, objectives, and strategies to achieve these goals and objectives is also done in the report.

Analysis

The Budgeting Process

The world health organization uses the bottom-up budgeting approach for enacting its budgets. The departments produce their departmental budgets, which the top management uses to come up with the organization’s budget. Despite the fact that it is the top management that produces the end budget for all organizations, it is the minors in the different departments who formulate the budget. The WHO uses the comparisons of the previous years’ budgets and the actual performance of the organization to come up with the current targets and goals that the organization budget for. World Heath Organization’s budgets differ with accounting basis budget requirements. The organization approves its internal budgets on a modified cash basis, whereas the accounting standards require that approval be done through the full accrual basis.

The world health organization prepares its budget on a biennial basis, which means once every two years. The budgets are approved only for the general fund, and no other funds for which budgets are approved. However, the organization’s financial statements generally cover all its activities. According to a presentation of the selected budget’s information in the organization’s financial statements, all funds are administered concerning the requirements of the IPSAS 24. The actual amounts are presented on a comparable basis to the budget amounts, with timely identifications, and the identification of presentation and entity variations separately. The organization has also presented its budget and financial statements in a manner in which there exist some differences in classification schemes and formats it adopts. The organization uses the comparison statement of the original budget and actual amounts to comparing the final budget amounts to the actual amounts to depict the organization’s performance for the period.

The communication of the budgets is done through reports in the financial statements. The world health organization’s biennial budgets are incorporated into the organization’s financial statements for efficient communication to the investors, donors, and other stakeholders relevant to the organization.

Key Cost Elements in the Budget

The unavoidable costs

The unavoidable costs are costs that are prioritized first. Resource allocation for these costs is done first before any other resources have been allocated to other types of costs. These costs include the payroll costs, which are made up of the salaries paid to employees, wages, cost of benefits, and other payments incurred such as the holiday pay and overtime (Kim, 2015, 26). The key cost drivers to compensation costs are the volume or the number of employees and part-time workers the organization requires to have over a given time period. The organization’s level of human resource motivation also influences the amounts budgeted for payrolls over a specific time period. The emergence of epidemics, for instance, the COVID-19 pandemic, influenced the amount of money allocated for contracting specialists who could help in mitigating and controlling the risk of contracting the disease. Payroll costs are categorized both as fixed and variable costs by the organization.

Another unavoidable cost represented in the selected budget is the facilities and related costs. Facilities and related costs are considered after taking care of the payroll. The organization must pay for the facilities that are used by its employees and workers., whether it means by purchasing the facilities or hiring. These costs include rent, utilities such as electricity and water services, security services, among others. These are a burden to the organization, especially due to its new projects in different countries, such as the implementation of universal health care across the globe. Thus, new projects and the need for new facilities during a particular accounting period act as key cost drivers to facilities and related costs. There are both facilities’ fixed costs and variable costs.

  1. Discretionary Costs

These are cost elements that are funded last, in the case of discretionary costs remaining. They are associated with costs such as those incurred in funding grant programs and other activities aimed at supporting the welfare of powerful stakeholders. They are influenced by the unavoidable costs’ budget. The world health organization categorizes the discretionary costs as variable costs rather than fixed costs, as they are dependent on the number of resources allocated to other costs and the availability of funding.

  1. Indirect Costs

The only indirect cost allocated to the world health organization’s budget is the depreciation and amortization cost. Amortization and depreciation costs are variable costs are dependent on the usage of the organization’s machines and equipment. The volume or number of the machines and equipment also influence the amount of funds allocated to the depreciation and amortization costs. The effectiveness and efficiency of the depreciation and amortization costs depend on the projected machine and equipment use.

The cost Structure

According to the costs allocated in the world health organization’s biennial budget for the years ended 31st December 2019, the organization’s costs are driven by both quality and value. The organization focuses on allocating resources to the activities that create value to its service receivers, at the least cost possible. Despite the organization putting into use two distinct cost structures, it prioritizes value addition, as is a non-profit making organization. Thus, the organization’s management focuses on allocating resources to costs expensed for high value and quality products but requiring the least possible amount of funds.

Key Revenue Elements

The key revenue element illustrated in the budget is funds received from contributions. Contributions are the main source of revenue to the organization and is categorized as assessed and voluntary contributions. Assessed contributions are fixed, as their predictability is easily determined. The voluntary contributions are categorized as variable revenue elements as they are less predictable and vary from time to time depending on the economic situations in donor countries.

Capital Investment Decisions

Financial and capital instruments are recognized when the organization becomes a party to the instruments’ contractual provisions until the time when the rights to receive cash flows from the assets (Emmanuel et al., 2010). They are also recognized when the assets and financial instruments are transferred, and the organization has completed the transfers of all the rewards of ownership and risks. The World health organization categorizes its capital investments into two, bank deposits and financial liabilities and assets at fair value. The expected returns from the capital investments are budgeted on a biennial basis. Capital investment decisions of the WHO are made through the considerations of what value they are going to add to the organizations, as well as the riskiness of the capital instruments. According to a report by WHO, the organization’s management focuses on less risky capital investments, which bear little returns. Thus, the organization avoids involvement in risky investments. This is because it faces zero pressure on profitability as it is a non-profit making intergovernmental organization.

The availability or the unavailability of bank credit is a major factor that impacts organizations’ capital investment decisions (Chen & Kieschnick, 2018, 560). Access to banking finance is essential to any organization because it offers organizations an increased liquidity level. Through credit finances, organizations can finance their activities and meet their short-term or long-term obligations. Similarly, the world health organization, the availability of credit finance, especially from the IMF, influences their capital investment decisions.

Financing

From the world health organization’s selected budget, most of its activities are financed through contributions made by member countries and donations. From the selected budget and financial statements, the organization’s obligations are relatively small compared to its assets. This is important in enhancing good financial decisions so as to maintain the desired liquidity level. To meet the organization’s financial goals and objectives, it maintains a relatively low level of debt as a financial strategy. The establishment of strict budgets is also that the organization uses for ensuring that financial goals and objectives of the organization are achieved within the stipulated timelines. Proper budgeting is usually in line with an organization’s financial goals and objectives (Kim, 2015, 33). The organization’s budget is in line with the organization’s goals of providing and improving health facilities across the world, especially to the disadvantaged communities. This is ascertained by the total amount that was allocated to the fight against diseases. For the 2018-2019 budgeting period, $ 4.5 million was allocated to dealing with health issues in different categories such as communicable and non-communicable diseases, health systems, emergencies, among other health issues.

Cost principles

There are four major cost principles for effective cost allocations (Idreos, 2018, 538), which include reasonability, ability to be allocated, consistency in mode of treatment, and the ability for the allocation to be allowed, allowability. Based on the costs posted in the world health organization’s budget for the period ended 31st December, 2019, the above-mentioned principles were met by the organization’s budgeting team. The allocate costs were reasonable in that they were all in line with the organization’s mission of improving and providing health information across the world. The allocated resources were majorly on diseases, pandemics, emergencies, heath systems and employee compensation, which are all reasonable for an organization dealing with facilitation, enhancement and provision of better health and health information to the world’s population.

All costs incurred through the same manner or for a similar purpose should be treated similarly and consistently over different accounting or budgeting periods. This enhances the efficiency and ease of comparison, evaluation and monitoring. Comparing the costs allocated for the 2018-2019 period with those of the 2016-2017 period, same accounting approaches have ben employed. Thus, it is easy to conduct evaluation and comparative analysis, for information on cost allocation between the two periods. According to Idreos (2018), costs are termed as allowable if they are permitted by the federal regulations and the organization’s internal control. With respect to the main purposes of the world health organization, the budgeted costs are allowed by the internal control regulations and the federal laws and regulations. The allocated costs are also allocable as they are not above the organizations revenues. Thus, the organization is in a position to meet its allocated costs by use of its revenues from contributions and donors.

Cost behaviour

Cost behaviour refers to the likelihood of, and how costs change with respect to the amount of activity by an organization. Variable costs increase with increase in an organization’s activities and decrease when the amount of activities decrease (Al-Ramadan, 2014). The fixed costs do not change with respect to changes in an organizations’ activities, and thus are constant over an accounting period. Other costs are partially fixed and partially variable. These could experience change as result of activity changes. The selected budgets exhibit the three cost behaviours. Costs such as staff costs are partially fixed and partially variable, as they can increase with increase in activity past the projected costs. Depreciation and amortization costs are fixed and remain constant throughout the accounting period, and are not depended much on the organization’s activity. They can however increase or decrease at constant rate, depending on the method used to account for them. The constant increase or decrease isn’t based on the organization’s activity, but on the selected accounting method.

Budgeting, Monitoring and Evaluation

The execution of a budget is done after it has been approved by the associated authorities. This is the stage in the budgeting cycle in which the implementation of what has been indicated in the budget is done. Budgets bear the strategic paths towards achieving the financial goals and objectives of the organization. the activities that power an organization to success require adequate funding, which is allocated through the budgeting process. Thus, the execution of the budget is important for any organization, whether for profit or not-for-profit organization.

After approval, the budget of the world health organization is executed through the different departments and regional divisions across the world. To be able to understand the effectiveness of the budget execution on the organizations road towards achieving its strategic goals, the world health organization monitors and evaluates the budgeting process, as well the efficiency through which the budget has been implemented and followed. Through monitoring and evaluation of the budget, the organization is able to identify the gaps and areas that require improvement in the budget and budgeting process.

The evaluation of the budget execution is done during the periodic reviews of the organization’s activities. The process identifies whether the actual cost and revenue activities are in line with the budgeted amounts. The world health organization uses a comparative statement for comparison and evaluation of the budget execution.

Gaps and Areas That Require Improvement

The gaps and areas within the budgeting process and the budgets are identified through the evaluation process for an organization’s budgets and budgeting process. Fund utilization, money value evaluation and organization’s performance assessment are evaluated to identify weaknesses in the budgeting process.

 


Get Professional Assignment Help Cheaply

Buy Custom Essay

Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?

Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.

Why Choose Our Academic Writing Service?

  • Plagiarism free papers
  • Timely delivery
  • Any deadline
  • Skilled, Experienced Native English Writers
  • Subject-relevant academic writer
  • Adherence to paper instructions
  • Ability to tackle bulk assignments
  • Reasonable prices
  • 24/7 Customer Support
  • Get superb grades consistently
 

Online Academic Help With Different Subjects

Literature

Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.

Finance

Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.

Computer science

Computer science is a tough subject. Fortunately, our computer science experts are up to the match. No need to stress and have sleepless nights. Our academic writers will tackle all your computer science assignments and deliver them on time. Let us handle all your python, java, ruby, JavaScript, php , C+ assignments!

Psychology

While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.

Engineering

Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.

Nursing

In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.

Sociology

Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.

Business

We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!

Statistics

We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.

Law

Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.

What discipline/subjects do you deal in?

We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.

Are your writers competent enough to handle my paper?

Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.

What if I don’t like the paper?

There is a very low likelihood that you won’t like the paper.

Reasons being:

  • When assigning your order, we match the paper’s discipline with the writer’s field/specialization. Since all our writers are graduates, we match the paper’s subject with the field the writer studied. For instance, if it’s a nursing paper, only a nursing graduate and writer will handle it. Furthermore, all our writers have academic writing experience and top-notch research skills.
  • We have a quality assurance that reviews the paper before it gets to you. As such, we ensure that you get a paper that meets the required standard and will most definitely make the grade.

In the event that you don’t like your paper:

  • The writer will revise the paper up to your pleasing. You have unlimited revisions. You simply need to highlight what specifically you don’t like about the paper, and the writer will make the amendments. The paper will be revised until you are satisfied. Revisions are free of charge
  • We will have a different writer write the paper from scratch.
  • Last resort, if the above does not work, we will refund your money.

Will the professor find out I didn’t write the paper myself?

Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.

What if the paper is plagiarized?

We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.

When will I get my paper?

You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.

Will anyone find out that I used your services?

We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.

How our Assignment  Help Service Works

1.      Place an order

You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.

2.      Pay for the order

Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.

3.      Track the progress

You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.

4.      Download the paper

The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.

smile and order essaysmile and order essay PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET A PERFECT SCORE!!!

order custom essay paper