Budget massage is common when senior managers, instead of policing capital spending; merely compare a unit’s spending to its forecast. In this environment, shrewd managers manipulate their budgets, shuffling expenditures between their capital and annual operating budgets, to achieve steady year-to-year capital budgets. This way, they avoid the risk of denied capital spending requests following years when their capital budget goes down. Further, they avoid visits from internal audit. Why? Often, top managers, who do not scrutinize spending detail, send auditors to investigate big or fluctuating requests for capital spending increases. Though the practice is well known, Copeland reminds controllers that one capital-budget game manager’s play is end-loading. For example, at year-end, a dented fender becomes a new delivery truck. When managers realize they are going to under spend an allocation, they start putting in unnecessary expenses to make up the shortfall. Suggests Copeland: “By going to the trouble during the year to query unit managers about small decisions of this sort, senior managers can discourage units from massaging their budgets.”
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