Scott Weidner, the controller in the Division of Social Services for the state, recognizes the importance of the budgetary process for planning, control, and motivation. He believes that a properly implemented process of participative budgeting and management by exception will motivate his subordinates to improve productivity within their particular departments.

Based upon this philosophy, Scott has implemented the following budgetary procedures:

1. An appropriation target figure is given to each department manager. This amount rep¬

resents the maximum funding that each department can expect to receive in the next fiscal year.

2. Department managers develop their individual budgets within the following spending constraints as directed by the controller's staff:

a. Requests for spending cannot exceed the appropriated target.

b. All fixed expenditures should be included in the budget. Fixed expenditures in¬

clude such items as contracts and salaries at current levels.

c. All government projects directed by higher authority should be included in the budget in their entirety.

3. The controller's staff consolidates the requests from the various departments into one budget for the entire division.

4. Upon final budget approval by the legislature, the controller's staff allocates the ap¬

propriation to the various departments on instructions from the division manager. How¬

ever, a specified percentage of each department''s appropriation is held back in antici¬

pation of potential budget cuts and special funding needs. The amount and use of this contingency fund is left to the discretion of the division manager.

5. Each department is allowed to adjust its budget when necessary to operate within the reduced appropriation level. However, as stated in the original directive, specific pro¬

jects authorized by higher authority must remain intact.

6. The final budget is used as the basis of control for a management-by-exception form of reporting. Excessive expenditures by account for each department are highlighted on a monthly basis. Department managers are expected to account for all expenditures over budget. Fiscal responsibility is an important factor in the overall performance evalua¬

tion of department managers. Scott believes his policy of allowing the department man¬

agers to participate in the budget process and then holding them accountable for the fi¬

nal budget is essential, especially in times of limited resources. He further believes that the department managers will be motivated to increase the efficiency and effectiveness of their departments because they have provided input into the initial budgetary process and are required to justify any unfavorable performances.

Required:

1. Discuss the advantages and limitations of participative budgeting.

2. Identify deficiencies in Scott Weidner's outline for a budgetary process. Recommend how each deficiency identified can be corrected.