by Joel Burgess

Budgeting, forecasting, and planning are all forms of financial management. The three components are interdependently bound to produce sound budget policy. But each piece has its own independent purpose.

For example, in a session of Congress, the fiscal year starts on October 1, and each session begins and involves budget year (budgeting), out-year ( forecasting), and current year ( planning) analysis.


In the world of budgetary authority – appropriations, authorizations, direct spending, and outlays – budgeting, stealing directly from Aaron Wildavsky and Naomi Caiden, is concerned with “translating financial resources into human purposes.” Budgeting should also be viewed as a prediction or a contract. Budgets can be consensual, conflicting, historical, social, fragmented, simplified, sequential, and repetitive.

Budgeting is conducted annually (for a fiscal year or yearly accounting period). Most budgets have a time horizon of four to five years and are instrumental in determining an organization’s strategic plan and goals. Within this time frame, the budget is also used to develop one-year operating units.

Within the budgetary process lies forecasting and planning.


To forecast, as it relates to budget, is:

–  To calculate or predict some future event or condition, usually as a result of study and analysis of available pertinent data.

–  To indicate or project as likely to occur.

Forecasting is conducted on a monthly basis to make yearly predictions. Forecasting precedes the budget year (usually beginning two years prior) for which it predicts. Economic forecasting that is accurate not only for the months leading up to that budget year but also for the budget year itself, will provide the basis for a more accurate forecast of the budget’s bottom line (the annual deficit or surplus) – hence the interest in the two-year period.

The forecasting process involves formulating problems, obtaining information, implementing methods, evaluating methods, and then using forecasts, allowing for greater budget accuracy to reduce costs.


To plan, is it related to budget, is:

–  To arrange the parts of

–  To devise or project some financial aim.

Planning is the fiscal year in progress. The budgeting plan consists of spending and revenue targets. The aim is to spend according to those targets.

Planning, conducted quarterly, is a budget projection giving an organization a baseline for measuring the effects of proposed changes in budgeting and forecasting. For example, with Congress, planning is based on the most recent budgetary decisions (budgeting) and shows what would happen to the federal budget if no policy changes were made over the projection (forecasting) period.

Planning by an organization does not focus on current variables, but rather on what the currency actually can buy (its volume of activity), thus allowing it to plan as far ahead as the budget runs.

Collectively, budgeting, forecasting, and planning are important because they form the base for strategic planning. Of course, a successfully implemented strategic plan relies on accurate and sound financial performance.


The New Policy of the Budgetary Process (pg. 46-49)

The Office of Management and Budget (

Congressional Budget Office Home Page (