This document discusses best practices for budget development. It outlines key factors to consider when developing a budget, including available resources, regulations, scope and quality of services, activity volume, and cost elements. It also provides details on standard budget categories such as personnel, fringe benefits, travel, equipment, supplies, contractual work, and indirect costs. Finally, it recommends best practices like linking the budget to organizational strategy and goals, allocating resources strategically, and developing budgets that can accommodate change.

1. LYCEUM-NORTHWESTERN UNIVERSITY
Institute of Graduate and Professional Studies
Dagupan City, Pangasinan
BUDGET DEVELOPMENT

2. Discussant: Joe Ann DG. Ceñidoza
Professor : Dr. Josefina Bitonio

3. Generally, a Budget identifies the planned
expenditure for a project, programme or portfolio. As
gleaned from the definition, Project Budget is a program
and fiscal document reflecting the costs necessary to
perform the activities of the project. It should be noted
that the budget must be reasonable and tied to the
project objectives and work plan. Further, the budget
should not be prepared until the organization’s policies,
priorities, and plans have been established. Without
clearly stated goals and objectives financial projections
cannot be made nor should budgeting substitute for
planning. Thus, approval of the budget should be
regarded as a commitment on the part of the governing
body and the administration to carry out the policies,
respect the priorities, and support the plans.

4. Since Budgeting is the method
by which an organization translates
the project goals and objectives into
the resources necessary to
accomplish the goals and objectives,
it should involve serious
consideration of many factors, such
as:

5. 1. Available Resources. Analysis of available resources involves
an identification of what is available in terms of funds and
people, including an assessment of human resources, capital
resources, and financial resources. The assessment of the
three areas of resources available strengthens the ability to
achieve the goals and objectives;
2. 2. Regulations. It refers to guidelines and protocols. The
regulations govern programs. The budgeting process must
assess the impact that these regulations will have on the
allocation of resources to the various line items. Regulations
is an essential factor to lessen or eradicate excessive time
forcing expenditures into inappropriate cost categories;

6. 3. Scope, Quality and Method of Service. One of the most
important factors in determining expenditures is the range and
quality of services to be provided. This must include the
methods that will be used to provide the service. Further, the
organization should look at alternative ways of providing the
services as part of the budgeting process rather than just basing
the budget on past expenditures;
4. Volume of Activity. There is a need to analyze the volume of
activity to determine fixed costs and those that are impacted by
an increase or decrease in the funding or level of activity. The
organization must establish a base level at which the project can
be operated. If this level of revenue is not secured, then the
organization will have to either generate additional revenue or
combine the project with another with similar goals; and

7. 5. Cost elements. The organization will need
to determine the types of labor, materials,
equipment, and other cost elements required
to perform the services and the cost for each.

8. In addition to the factors to be considered when planning the
budget, the following questions should also be answered:
1. What is the staff time required to complete the project?
2. Will consultants be needed for the project?
3. What travel is necessary to perform all activities?
4. Will equipment be needed to perform the scope of work?
5. What supplies will be needed by the project?
6. What other costs will be incurred to complete all activities of the
project?

9. Although budget formats and requirements differ
among funding agencies, the following are standards for
the development of most national budgets:
1. Personnel. Personnel refer to people employed in an
organization. The budget for personnel includes the
following:
a. Full-time Staff;
b. Part-time Staff;
c. Number of working hours; and
d. Hourly rate

10. 2. Fringe Benefits which refers to an extra benefit
supplementing an employee’s salary. The fringe benefits
the staff will receive are as follows:
a. Mandatory payroll taxes such as Medicare; and
b. Organizational employee benefits such as health
insurance, life insurance and retirement plans
3. Travel specifically out-of-area travel. There is a need
to identify:
a. The planned out-of-area trips;
b. The cost of airfare;
c. The cost of ground transportation;
d. Lodging; and
e. Meals for each planned trip

11. 4. Equipment which are the necessary items for a
particular purpose
5. Supplies such as:
a. Paper clips, paper, pens, and pencils; and
b. Training supplies
6. Contractual if the project plans to contract with
a company or individual to perform work for the
project

12. 7. Other Additional Costs such as:
a. Facilities used;
b. Rent;
c. Cost of utilities, maintenance services, and minor renovations
if absolutely essential to the project;
d. Telephone cost including planned long distance usage if not
provided through indirect costs;
e. Projected mailings;
f. Copying and printing;
g. Professional services of Consultants that are anticipated
during the project. Included in these additional costs are the
projected number of days of use and the cost per day;
h. Planned local travel including per diem; and
i. Any other items that do not logically fit elsewhere in the
budget

13. 8. Indirect Costs which refers to costs
an organization incurs for common or
joint objectives that cannot be readily
and specifically identified with a
particular grant project or other
institutional activity.

14. After determining the resources necessary to
carry out the proposed project, it is time to begin
researching and gathering the cost estimates for
these resources. A Cost Estimate is the
approximation of the cost of the program,
project, or operation. The cost estimate is the
product of the cost estimating process. To gather
this needed information, an organization’s
Accounting and Purchasing Department can
work together. During this process, good
documentation should be kept as this will be
needed when writing the budget justification.

15. Finally, the best practices in budget development
should be taken into consideration. These are:
1. Link budget development to organization strategy
to give all employees a clearer understanding of the
strategic goals;
2. Design procedure that allocate resources
strategically so that resources are allocated to support
key strategies;

16. 3. Tie incentive to performance measures other than
meeting budget targets because this reinforces the
importance of key strategies and communicates what
results will be rewarded;
4. Link cost management efforts to budgeting in order to
improve the quality of information available to use in
developing budgets;

17. 5. Reduce budget complexity and cycle time in
order to achieve targets in less time, lower
cost and with less disruption; and
6. Develop budgets that accommodate change
in order for the organization to respond
more quickly to threats or opportunities.

19. References
David Dale House, New Lanark, Scotland, Webster’s
Universal Dictionary.
https://sites.ed.gov>aapi>files>2015/08
https://www.inc.com/articles/2000/01/16379.html
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