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.
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Let’s say you run the IT department of a company. You had a great year with very few computer upgrades or replacements needed, so you only spent 4/5ths of your budget. Next year your budget gets cut by that 1/5th. Now you have a rough year where everything seems to break, and while you could have covered it with the old budget, you can’t under the new one; and the higher ups have allocated that money elsewhere. Now your stuck trying to make do, and you look bad doing so.
As a result, you waste/use up the remaining budget so it doesn’t get cut next year.
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