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What Is Budget Adoption?

Osmand Vitez
Osmand Vitez

Budgets are common financial road maps for many types of organizations, from private companies to public organizations or governments. The budget adoption process is typically a formal process whereby an organization votes on accepting a budget. The process usually varies by organization, though a few 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 necessary individuals.

Creating a budget can be a long and arduous process depending on the organization. A small, private company may be able to prepare a budget from previous annual figures in a few weeks. Large companies, government agencies, and public municipalities can all take much longer to prepare this information. The process reviews previous expenditures, determines the extra amount necessary for growth, and puts them together by department and master budget. The final budget then goes through the budget adoption process.

Businessman giving a thumbs-up
Businessman giving a thumbs-up

The review phase allows more individuals or interested parties to look at 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 to the general public for review. This phase allows for comments and changes to the budget if necessary.

Between the review phase and final budget adoption, it may be necessary to alter some aspects of the budget. If this is necessary, the organization, government agency, or public municipality may need to make the changes and then hold another review process. The time spent on this phase may be the second greatest among the three phases. This allows for input and change in order 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 budget adoption is the final phase for this entire process. After making any changes requested by interested parties, the organization, government agency, or municipality makes the updated budget available for review. This final review is often shorter and will move into the actual budget adoption phase rather quickly. Once the parties review the changes and accept them, a vote is necessary to adopt the budget. The vote often requires a majority for acceptance, though other rules may exist for the adoption process.

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