Creating a budget involves preparation, review, and adoption phases, with large organizations taking longer to prepare. The review phase allows for public input and changes may be made before final adoption. Voting is required for adoption.
Budgets are common financial roadmaps for many types of organizations, from private companies to public organizations or governments. The budget adoption process is typically a formal process by which an organization votes to accept a budget. The process generally varies by organization, although some steps may be similar. In some cases, there may be a preparation, review, and adoption phase. These budget adoption phases allow for the creation of a budget, review by affected parties, and acceptance of the budget by all required individuals.
Creating a budget can be a long and arduous process, depending on the organization. A small private company can prepare a budget from past annual figures in a few weeks. Large companies, government agencies and public municipalities may take much longer to prepare this information. The process reviews past expenses, determines the extra amount needed for growth, and collates them by department and master budget. The final budget goes through the budget adoption process.
The review phase allows more individuals or stakeholders to review the budget. During the preparation phase, only the essential workers needed to create the budget actually see the information. During the budget adoption process, government agencies and public municipalities have requirements to seek public opinion on this information. In many cases, executives often review the budget and then take the information out to the general public for review. This phase allows for comments and changes to the budget if needed.
Between the budget review phase and final adoption, it may be necessary to change some aspects of the budget. If this is necessary, the organization, government agency or public municipality may need to make the changes and undertake another review process. The time spent in this phase may be the second longest among the three phases. This allows input and amendment to create the best budget for the organization, agency or municipality. Private companies may not have as many changes due to a smaller review phase.
The actual adoption of the budget is the final phase of this entire process. After making changes requested by stakeholders, the organization, government agency, or municipality makes the updated budget available for review. This final review is usually shorter and moves into the actual budget adoption phase quickly. After the parties review the amendments and accept them, a vote is required to adopt the budget. Voting usually requires a majority for acceptance, although other rules may exist for the adoption process.
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