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Budget Models
Abstract
In postsecondary education, it is importance to have effective financial planning and
resource allocation strategies in place. These strategies play a pivotal role in ensuring the
sustainable functioning of educational institutions. In this essay, we will thoroughly examine and
analyze the different budget models that are commonly utilized by postsecondary institutions.
Additionally, we will delve into the strategies that these institutions employ for resource
allocation, ensuring that their financial resources are effectively and efficiently utilized.
Furthermore, we will explore the biblical principles that guide the process of financial planning
in these institutions. By thoroughly exploring these topics, we aim to gain a comprehensive
understanding of the various aspects of budgeting and financial management in postsecondary
institutions.
According to the Cambridge Dictionary, a budget is essentially a comprehensive plan that
outlines the anticipated income and expenditure of an individual or organization. It serves as a
strategic tool to determine the amount of money that will be earned and the corresponding
amount that can be allocated or utilized. In essence, a budget provides a structured framework to
assess financial resources and requirements, enabling individuals or organizations to effectively
manage their finances and make informed decisions regarding spending and saving. The budget
of an institution within higher education refers to the process of determining how to distribute
the planned amount of revenues received in order to support the planned expenditures across the
organization for a specific period, typically a fiscal year or the duration of a project. There are
numerous public higher education institutions that employ diverse approaches when it comes to
distributing their projected revenues in order to fund various expenses across their colleges,
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Budget Models
schools, and administrative units, all with the aim of supporting the overarching mission of the
university.
Incremental budgeting is a budgeting model that entails making adjustments to the budget
by taking into account previous expenditures. This approach involves a systematic and gradual
process of modifying the budget to reflect the historical spending patterns and financial
performance of an organization. By analyzing past expenses, incremental budgeting allows for
informed decision-making and the allocation of resources in a manner that aligns with the
organization's financial goals and objectives. The passage from Proverbs 24:3-4 serves as an
encouragement to engage in thoughtful planning and diligent efforts towards building. This
aligns perfectly with the concept of stability that can be achieved through the practice of
incremental budgeting. Incremental budgeting is a widely used budgeting approach that follows
a traditional model. Under this method, budget proposals and allocations are determined by
taking into account the funding levels of the previous year. This means that any changes or
adjustments to the budget are made incrementally, building upon the existing financial
framework. This approach is often favored for its simplicity and ease of implementation, as it
allows organizations to maintain a certain level of consistency and stability in their budgeting
processes. By relying on historical funding levels as a starting point, incremental budgeting
provides a baseline for decision-making and resource allocation, while also allowing for some
flexibility to accommodate changes in priorities or circumstances. (Navolio, 2023) Overall,
incremental budgeting serves as a practical and pragmatic approach to financial planning,
providing a familiar framework for organizations to manage their resources effectively. The
allocation of funds is limited to only newly generated revenue. Budget cuts are typically
implemented as a percentage reduction from an institution's historical budget. These cuts are
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Budget Models
generally applied uniformly across all areas of the institution, without any specific targeting or
prioritization.
Zero-Based Budgeting is a budgeting approach that involves initiating the budgeting
process from scratch at the beginning of each fiscal year. This particular model necessitates
providing valid justifications for every single expense incurred. The passage in Luke 16:10
highlights the importance of being faithful and responsible in even the smallest matters. This
concept of faithfulness can be seen as closely aligned with the principles of zero-based
budgeting, which requires meticulous planning and attention to detail. Zero-based budgeting is a
financial approach that involves resetting the budget each year, thereby requiring every
institutional unit to reapply for funding. This method ensures that the budgeting process starts
from scratch, without any assumptions or carryovers from the previous year's budget. By doing
so, it promotes a thorough evaluation of each unit's funding needs and encourages a more
efficient allocation of resources. This implies that units or departments are required to
consistently provide justifications for their funding requests on an annual basis. According to
Navolio (2023) Zero-based budgets take longer to prepare and may be too aggressive of a
strategy. This model requires a lot of time, energy, and communication. It could also disrupt the
professional climate of your institution, as some staff and faculty members may perceive zero-
based budgets as a threat to their stability or autonomy. (Navolio, 2023)
Activity-Based Budgeting is a strategic approach that aims to enhance transparency and
accountability by linking budgetary allocations to specific activities. This method ensures that
resources are allocated in a way that aligns with the organization's goals and objectives. By tying
budgetary decisions to specific activities, it becomes easier to track and measure the
effectiveness of each activity, as well as the overall impact on the organization's performance.
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Budget Models
This approach promotes a more efficient and effective use of resources, as it encourages
managers to prioritize activities that contribute the most value to the organization. In the book of
1 Corinthians, specifically in chapter 4, verse 2, there is a call for stewards to exhibit
faithfulness. This aligns with the principles of responsibility that are emphasized in the practice
of activity-based budgeting. Activity-based budgeting is a financial allocation approach that
prioritizes the distribution of resources to institutional activities based on their potential to
generate higher revenues for the organization. This method aims to identify and support those
activities that yield the greatest return on investment, thereby contributing to the overall financial
growth and success of the institution. By focusing on activities that have the potential to increase
revenues, activity-based budgeting ensures that financial resources are allocated strategically,
maximizing the institution's financial gains.
Performance-Based Budgeting is a strategic approach that aims to align budget decisions
with the overarching goals and desired outcomes of an institution. This approach is rooted in the
biblical principle of pressing toward the goal, as mentioned in Philippians 3:14. By adopting
Performance-Based Budgeting, institutions can ensure that their financial allocations are directed
towards activities and initiatives that are in line with their objectives, ultimately leading to
greater effectiveness and success. This particular model places a strong emphasis on the
attainment of objectives and desired outcomes that are in alignment with the overarching mission
of the institution. In contrast to an activity-based budget, which allocates funds based on the
level of revenue-generating activities performed by a unit, a performance-based budget takes into
account a broader range of factors. Instead of solely considering revenue potential, a
performance-based budget distributes funds based on a set of predetermined outcomes and
standards. This approach ensures that funding is not solely tied to the quantity of activities
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Budget Models
undertaken, but also considers the quality and effectiveness of the unit's performance. By
focusing on defined outcomes and standards, a performance-based budget encourages units to
strive for excellence and achieve specific goals, rather than simply maximizing revenue
generation. An effective performance budget serves the purpose of emphasizing the extent to
which financial resources are allocated towards the smooth execution of day-to-day operations.
Additionally, it offers valuable insights and predictions regarding the likelihood of certain
functions and programs yielding favorable outcomes.
The Bible offers timeless and invaluable guidance to individuals who adhere to its
teachings, particularly in matters pertaining to personal finance. The concept of stewardship is a
recurring and prominent theme that is emphasized in various contexts, particularly in the context
of the faithful and responsible management of resources. This notion of stewardship is rooted in
the teachings of Luke 16:10-12, which underscores the importance of exercising prudence,
integrity, and accountability in our roles as stewards. By embracing the principles of stewardship,
individuals are encouraged to recognize their duty to diligently and conscientiously oversee and
utilize resources, ensuring their preservation and optimal utilization for the betterment of society
and the fulfillment of their obligations. The central theme that pervades throughout is that of
intelligent and principled management of finances.
Financial planning and resource allocation by employing a diverse range of budget
models and strategic approaches. The biblical principles of stewardship, contentment, and
generosity have long been regarded as invaluable and enduring guides for believers as they
navigate the realm of financial planning. These principles, rooted in the teachings of the Bible,
provide a solid foundation for individuals seeking to manage their finances in a manner that
aligns with their faith and values. Stewardship, as emphasized in the Bible, emphasizes the
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Budget Models
responsible and wise management of resources entrusted to us by God. It encourages believers to
recognize that all possessions and wealth ultimately belong to God, and that we are mere
stewards or caretakers of these resources during our time on Earth. This principle calls for a
conscientious approach to financial planning, where individuals are encouraged to make wise
decisions that honor God and benefit others. Contentment, another biblical principle, teaches
believers the importance of finding by ensuring that institutional strategies are aligned with these
principles, postsecondary institutions have the opportunity to cultivate responsible financial
practices that not only contribute to their long-term sustainability but also aid in the fulfillment
of their mission.
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Budget Models
Reference:
The holy bible: Containing the old and new testaments translated out of the original tongues
and with the former translations diligently compared and revised. (1986). .American Bible
Society.
Navolio, M. (2023, October 23). 6 alternative budget models for colleges and Universities.
Hanover Research. https://www.hanoverresearch.com/insights-blog/6-alternative-budget-
models-for-colleges-and-universities/?org=higher-education
West, B. (2023). Budget models and methods used in higher education. UKnowledge.
https://uknowledge.uky.edu/mpampp_etds/422/
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