Creating budgets for organizations is a lengthy process that requires the input of multiple departments or review sources. Balancing the needs of the organization or governmental agency with often limited funds necessitates firm decision making and a review of services, departments or programs. An ad hoc budget is a temporary planning budget created for budget committees or groups. This budget is often preliminary and is generally used as a starting point for discussions and adjustments.
Ad hoc budgets may be drafted from prior period budgets, submitted budget proposals or professional financial analysis. The creation process identifies sources of income and required budgetary needs based on contractual or established expense records. Often, these budgets are heavily notated as to how figures were derived and where estimates were used. Ad hoc budgets may be done on a routine basis as part of a yearly budgeting process, or may be requested as needed for project planning needs.
Group-led budgeting processes must have a foundational budget as a starting point. The ad-hoc budget can be used to help individual budget committee members prepare for meetings and discuss topics with their respective departments. The budgets must be available to define the required inflows, outflows and categories that must be present in the final budget. Universities, nonprofit organizations and governmental agencies typically have rules to which all budgets, including ad hoc budgets, must conform.
Ad hoc budgets outline fixed costs, capital costs and variable costs. These cost elements are divided into categories. Revenues and all income sources are also presented by category. The income is a projection of incoming revenue that is calculated from prior income history. The calculation method and assumptions are often included in an ad hoc budget to help committee members understand the strengths and weaknesses of the budget.
An ad hoc budget can be drafted for any period of time, but this is generally dictated by the function it serves. Common budget time lines include a fiscal year for an organization and a project-based time line for special projects.
An ad hoc budget needs supporting documentation for nonstandard formulas and any assumptions used to calculate the financial totals presented. The documentation is essential during budget reviews to help answer questions and drill down into specific categories for further review.