Question

Financial planning is mandated by legislation to all municipalities. Why financial planning is better than focusing on an annual budget and what are the mechanisms of control of the budget that is available to local governments?

Answer 1

Financial planning is better than focusing upon the annual budget because financial planning is futuristic in nature and financial planning is dependent upon the past trends of the company and the ability of the company to achieve the goals in the long run and these financial planning are often made after consideration of various factors which are affecting the firm. Whereas budget is just a general estimation about the expenses and income of company and budget is a highly quantitative form of statement whereas financial planning will be relating to to qualitative form of assessment of a company's future district projections.

Mechanism of control of budget which are available to the local government should be continuously monitoring the budget and they will be trying to act upon the deviations of the actual figures with the standard figures and they will be trying to reduce the cause of variance in order to arrive at a proper synchronisation of the actual budget with the standard budget.