John Travor, the managing director of Global Horison Inc., plans to implement participatory budgeting processes in the next budget cycle as he recognizes its importance for planning, control, and motivation. He believes that a properly implemented process of participative budgeting will motivate the managers within his company to improve productivity within their particular division. Furthermore, the participation will add credibility to the budgeting process and creates greater commitment and accountability toward the budget. However, he feels anxious that participative budgeting will give the managers a chance to introduce budgetary slack into their budgets. The company has been providing bonuses for its managers for achievement of budget targets.

Required:

1. What is budgetary slack? Identify three reasons for budgetary slack

2.Suggest five ways to reduce the problem of budgetary slack. Explain your answer