Why do companies require annual budget be spent 100%?

Question

In many companies, there’s this policy which requires awarded budget that must be spent completely once it’s approved. If the annual spend is below the allocated annual amount, there’s a chance next FY you won’t get the requested budget you asked for.

– why do such policy exist?

Isn’t it better to carry over unused expenses to the next FY? Saving expenses expenditure is a bad thing? Such a policy encourages employees to spend extravagantly the remainder amount nearer to FY-end.

In: 196

Answer 1

Money left over is not being used to make more money, and should be allocated to areas that will use the money.