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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You answered your own question, so you don’t get less next year. It will make more sense if you understand it’s not done at the company level, but at an individual department level. If you’re the head of the IT department and you have $100k left over at the end of the fiscal year, the CFO might say “IT saved us $100k, maybe next year they can save us $200k!” and cut your budget accordingly. Now next year you have to replace a server, but you don’t have the money. You go ask for more money and some of your bosses say “well, the head of IT doesn’t manage her money very well, who else we got?”
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