Budgeting Basics – Items Included, Parties Involved, and Comparison of Budget Preparation Strategies

Budgeting Basics – Items Included, Parties Involved, and Comparison of Budget Preparation Strategies

Budgeting is a process through which organizations oversee and prepare income and expense estimates within a given period, mostly annually. An organization’s owners, executives, and managers all need budgeting skills. The ultimate objective of a budgeting process is to avail resources necessary to facilitate teams to execute tasks and attain organizational goals.

Items Included in a Budget

Revenue Estimates

The estimated revenue is the money a business expects to make from selling goods and services. It includes sales forecasts and the cost of products sold or services rendered. If a business is more than one year old, it uses figures from the previous year to estimate. New businesses can refer to similar businesses to estimate their forecasts. Whether a business is new or old, it is important to budget to avoid overestimating a company’s revenue (O’neal-Mcelrath et al., 2019).

Fixed Costs

Fixed costs are the expenses a business incurs regularly, and the amount is the same through different periods. These costs include building rent, internet services bills, insurance premiums, employee salaries, and external accounting services (O’neal-Mcelrath et al., 2019). The business needs to set these costs aside to avoid missing out on payment. Besides, an organization may use fixed costs to measure the business’s health.

One-Time Expenses

One-time expenses are the unexpected one-off costs that an organization may incur. For example, a business may need to purchase broken furniture or replace a damaged laptop. Estimating the number of one-time expenses an entity may need is difficult. However, setting aside some money to cater to these expenses is a good practice.

Parties Involved in Creating Budgets for Criminal Justice Agencies

Local and state governments create budgets for various criminal justice agencies (Leachman et al., 2012). While at it, governments must ensure that these agencies have sufficient resources to perform their responsibilities. One such action to ensure that there are sufficient resources is through the imposition of fines and fees on offenders. These funds are usually reflected in the budget documents of criminal justice agencies.

Comparison of Public and Private Business Budget Preparation Strategies

Budget Preparation

The budget preparation process in private enterprises is strict and systematic. Most private sector organizations prepare budgets once a year. To that end, the executives and managers are responsible for timely preparing budgets. Once the leaders of respective departments prepare their budgets, they must submit the estimates to the top-level management for approval. However, the budget-making process in public organizations is often unstable and surrounded by many partialities. One of the reasons why public enterprise budgets are unstable is because they have to be approved by different arms of government (executive and legislature).

Funding Sources

According to O’neal-Mcelrath et al. (2019), funding sources in public sector organizations include services and fees, such as electricity and traffic charges. Also, taxes from private property and income form a significant portion of public sector funding sources. Another funding source is public debt, whereby the government borrows from citizens and private institutions and is obligated to pay back through bond issuance. Finally, external loans in which a country borrows from other countries also contribute to the public basket. On the other hand, the sources of revenue for private enterprises include profits reinvestment, private equity, and capital by business owners.

The Preferred Sector

I prefer to work in the public sector because it serves more than a business’s and its owner’s interests. Public budgeting affects people from all walks of life. Therefore, I will be more useful working in the public sector to impact communities positively.

Applying Business Budgeting Concepts to the Criminal Justice System

One notable business budgeting concept that could be useful in the public sector is budgetary accountability. Budgetary accountability is the linkage between numbers appearing in budget documents with managers ensuring the estimate is achieved. Poor budget performance in the public sector (criminal justice system) is linked to the lack of accountability.

References

Leachman, M., Chettiar, I. M., & Geare, B. (2012). Improving budget analysis of state criminal justice reforms: A strategy for better outcomes and saving money. Available at SSRN 1991413.

O’neal-Mcelrath, T., Kanter, L., English, L., & Mim Carlson. (2019). Winning grants step by step: the complete workbook for planning, developing, and writing successful proposals. Wiley.

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List the standard items that are included in a budget.
Explain who is involved in the creation of budgets for criminal justice agencies and what their roles are.
Compare public and private business budget preparation strategies, addressing the following questions:
How are budgets prepared?
What are some funding sources?
Which sector would you prefer to budget for? Explain.
How can you apply business budgeting concepts in creating an effective criminal justice agency budget?