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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There is not usually an actual policy.
It’s the fact that if a division shows that it can do the job with less resources then given they will be given less resources in the next budget, because why would it need more? it’s shown it could do the job with less.
By spending the entire budget (even on seemingly stupid stuff) they can argue for the same or larger budget next time.
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