Collect information about the different types of budgets prepared in your organization or any other organization of your choice and discuss the relevance of these budgets to the organization under consideration.
Answers. A budget is a plan expressed in quantitative, usually monetary term, covering a specific period of time, usually one year. In other words a budget is a systematic plan for the utilization of manpower and material resources.
Businesses use budgets to plan for future activities and to set various goals and objectives within the company. They help the organization set specific expectations which aid in evaluating performance throughout the company. Budgeting helps organizations implement specific strategies to meet goals and objectives. It is important to note that a budget is an estimate and will often need to be adjusted over time.
Budgeting Purposes
Budget affects special libraries in much the same way as budgets affect any organization, including the parent organization of the special library. Typically, budgets serve three major purposes
• planning
• coordinating
• controlling.
Types of Budgets in a Special Library
Lump Sum: Typically, lump sum budgeting involves the allocation by the library’s parent organization’s upper-level management of a “lump sum” of budget resources to the library. Since the lump sum method lacks specific ties to corporate goals and objectives, many library managers prefer other types of budgets. However, lump-sum budgets can be perceived as representing a high-level of flexibility and control within the library itself. Once the lump-sum is allocated, the library management proceeds with lower-level allocations among library programs and services.
Formula Budget: When a special library is funded through the formula budget, the budget allocation is typically tied to a numeric value such as full-time-equivalencies (FTEs), i.e., number of FTEs registered students multiplied by a fixed dollar amount yields the budget for the library. This method is fraught with weaknesses; primarily, the budget total is calculated at a late point in time and intrudes on advance planning – especially for purchases and staffing increases – within the library. Another weakness results from the formula budget’s lack of identification with the parent organization’s goals and objectives.
Another weakness emanates from the unpredictable nature of the budget since the formula is based on variables outside the influence or control of the special library.
Line-Item Budget : The line-item budget represents the most commonly used budgeting method for special libraries. In a line-item budget, each category of activity is afforded its separate appearance. Line-item budgets facilitate low levels of detail for both planning and cost control purposes. Often, the accounting function of the parent organization develops accounts and sub-accounts on a company-wide basis. In that case, the library uses the company accounting scheme.
Among the advantages of line-item budgets are ease of preparation, use as detailed planning vehicle and utility as a means of comparing performance from one fiscal period to another fiscal period.
Program Budget : By its nature, a program budget focuses on the services the library provides to its clients. Therefore, the program budget more readily relates to overall organizational goals and objectives. Its attractiveness is further enhanced by its usefulness when establishing priority for library programs relative to the parent organization. The program budget development is typically an extension of the line-item budget development method.
PROGRAM BUDGET
| | Program # 1 | Program # 2 | Program # 3 | TOTALS |
| Salaries | | | | |
| Materials | | | | |
| Etc. | | | | |
| Etc. | | | | |
| Miscellaneous | | | | |
| TOTALS | | | | |
| % | | | | 100% |
As the model demonstrates, the program budget facilitates comparative analyses among the library’s multiple programs. Others maintain that a program budget produces a document that is easily understood and demonstrates a willingness to make best use of limited resources by minimizing conflict and overlap among projects. A disadvantage associated with the program budget emerges when the adoption of the program budget method forces special library staff members to think along program lines in contrast to the comfort-zone associated with previous budgeting methods. Warner notes that some people can become defensive when required to “…analyze, report and justify how they spend their time.”
Performance Budget
Performance budgets share characteristics with program budgets, but performance budgets focus primarily on what library staff members do or what functions they perform in the library’s service complement. Tasks rather than programs are highlighted. Among the functions displayed within a performance budget are technical services (i.e., cataloging, materials processing); planning (budgeting, automation, employee selection, interviewing, development; patron contact (circulation desk, email & telephone contacts).
Zero-Based Budget
Zero-based budgeting shifts the emphasis from comparing present performance and/or programs to the past or to the current activity. Rather, zero-based budgeting requires that a “clean slate” be the starting point for budget development. Therefore, the emphasis is on what will happen in the future that corresponds to the goals and objectives of the parent organization. This “from scratch” approach is viewed as an appropriate instrument to rank library programs by cost/importance to organizational goals and to identify and eliminate programs that provide minimal value-added. Once the value enhancing activities are identified, then the attendant costs are developed. Accompanying zero-based budgeting is the concept of “decision packages”, a method used to examine each proposed program and rank its merits vis a vis the parent organization’s goals and objectives. Once the top14 ranking programs are identified, a program budget model is typically used to construct the resource details.
Advantages associated with zero-based budgeting include its focus on identifying programs that will further the company’s goals for the future. Reliance on “the way we’ve always done things” violates the basic premise of zero-based budgeting. Most zero-based budgeting advocates maintain that the method promotes innovation, effectiveness and efficiency.
The downside of zero-based budgeting relates to its time-consuming nature. Starting at “zero” implies that all aspects of the library’s operation will undergo examination and justification. Most special libraries indicate that zero-based budgeting also intrudes on dayto- day operational activities such as journal subscription renewals and standing orders.
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