Columbus Park-Waste Treatment Facility

Columbus Park-waste treatment facility.

Individual case study: 10-1

Executive Summary:

Ann Paxton, manager of the waste treatment facility for the city of Columbus Park, Illinois, is responsible for preparing an annual expense budget for the facility. Her major responsibility is to balance the future expenses with profits. Ann Paxton is concerned that the actual cost may exceed the budget due to the anticipated increase in the waste treatment and growing taxes. Another concern for Ann Paxton is that the controller may reduce the proposed budget by ten percent which will result in costs being higher than the budget.

On the personal side, Ann is also concerned for her promotion and her future with the company. She feels that if the costs incurred are above the budget, she will risk her promotion. Ann Praxton should put the needs of the facility, stakeholders and the community first.

The budgeting process is quite debatable in terms of ethics. Many ethical issues surface in capital budgeting. In case of a waste treatment facility, any ethical issues that arise in budgeting may result in a conflict with the community and stakeholders.

The budgeting process has many complexities that a manger is challenged with. Especially, budget variances have a tremendous impact on the functioning of municipal facilities. The problem facing the manager of the waste treatment facility is that of budget variances. Ann Paxton's anticipates that the amount of waste to be treated in the coming year will increase. She also feels that taxes may grow. The manager has to decide whether it is ethical to submit a budget for an amount higher than the cost.

In this scenario, submitting a budget that exceeds the cost limit is ethical for many reasons. First, it is in the interest of stakeholders and the community. The waste treatment facility should be prepared financially to handle the increase in amount of waste.

Second, it will help the manager to resolve the conflict of the planning and control functions. The waste treatment facility is still at the planning stage of the budgeting process, which means that the municipality has time to absorb the proposed costs and revenues and develop a budget that is more practical and meets the needs of the community.

Overview, Issues and Recommendation:

Budgeting is one of the most difficult tasks assigned to managers. There are multiple financial, accounting, managerial, and ethical considerations involved in the process. Managers have to consider all fixed and variable costs, consider changes in the economic conditions and taxation systems. They have to recommend possible ways to reduce the costs, and ensure that the final budget works for the benefit of all stakeholders.

Ethical issues and conflicts constantly arise in managerial budgeting. As a result, managers may also face the risks of losing their reputation and eventually their jobs. In the case of a waste treatment facility, such ethical conflicts may easily lead to problems with stakeholders and the community. In these facilities, practical and ethical budgeting is important for the well-being of the community and for environmental reasons.

Considering the welfare of the community, it is ethical for the manager to submit a budget for an amount higher than the cost. Although, it is ethical, in this situation, I feel Ann Paxton's budget is much higher than it should be (Refer to Appendix 1).

The underlying