Page 148 - Budgeting for Managers

Budgetary Spending
131
•Expenses only, with authority to reallocate line items as
long as the total budget is not exceeded (a block budg-
et). In this case, the manager of the marketing depart-
ment would have control over $41,000 and could move
money among the three categories or even spend it on
other items, as long as the total expenses did not exceed
$41,000.
•Expenses and salary, with authority to use each budget
as you desire, but no authority to move money from
expenses to salary or from salary to expenses. In this
case, the manager would have control over $196,000.
However, he could spend the $155,000 only on salaries
and the $41,000 only on expenses.
–This budget might operate as a block budget. In that
case, the manager could change the salary structure on
his own authority. He might hire a part-time account
rep, pay him $15,000, and reduce support services to
$15,000 by having all of the account reps do more of
their own support work. He could also reallocate
expense items.
–This budget might operate as a line-item budget for
expenses, for salary, or for both expenses and salary, in
which case the manager could not move funds from
one line to another without authorization.

Make sure that you know what parts of the budget you have
authority over. Also make sure you know what you need to do if
you plan to make changes to your budget. Even if you have the
authority to move funds from one line to another, you may need
to inform accounting in advance in order to do so.
If your organization works by giving line-item budgets, you
may run into difficulty when the budget is adjusted. Most likely,
the budgetary authorities will simply reduce every item by a
percentage. Since some items are fixed costs, that simply won’t
work. You will then need to resubmit a budget with adjusted line
items and the approved total and hope that they are willing to
make the adjustments. If possible, request permission to do this