In budget management practice, some departments deliberately understate their initial budgets: they underestimate required expenditures during the preparation phase, and when a budget surplus is forecast during the annual execution, they retroactively submit additional procurement requests that should have been included in the original budget. This practice of "suppressing first and supplementing later" not only distorts the seriousness of budget preparation but also increases uncertainty in the company's capital allocation.

To regulate such behavior, the company urgently needs to establish a standardized process for handling "budget surplus and unlisted expenditure requests." The core objective of this process is to respect legitimate departmental business adjustment needs while preventing opportunistic tendencies in budget preparation, ensuring that every use of surplus funds aligns with the company's overall strategy and financial discipline.

I. Problem Definition and Scope of Application

This policy applies to all expenditure requests made during the annual budget execution that are prompted by a forecast budget surplus and were not listed in the initial annual budget. Such requests typically exhibit the following characteristics:

  • The expenditure item falls under routine departmental operations or known projects but was not reflected in the initial budget;
  • The department foresaw the possibility of this expenditure during budget preparation but chose not to include it in the budget;
  • The expenditure amount exceeds a certain threshold (e.g., a single amount exceeding RMB 50,000, or a cumulative amount exceeding 10% of the department's annual budget).

This policy does not apply to temporary expenditures arising from emergencies, policy changes, or force majeure; such cases should be handled separately through the emergency expenditure approval process.

II. Design Principles for the Approval Process

To ensure fairness and operability, the process design should adhere to the following principles:

  1. Transparent Declaration: The department must clearly explain in the application why the expenditure was not included in the initial budget and provide the decision-making basis or meeting minutes from the budget preparation period.
  2. Strict Review: The finance department should independently assess the reasonableness, necessity, and degree of deviation from budget objectives of the application, and may require the department to provide alternative solutions when necessary.
  3. Tiered Authorization: Different approval levels are set based on the application amount. For example, applications for a single amount not exceeding RMB 100,000 are approved by the Chief Financial Officer; those exceeding RMB 100,000 but not exceeding RMB 500,000 require countersignature by the responsible Vice President; those exceeding RMB 500,000 must be submitted to the company's Budget Committee or Board of Directors for review.
  4. Performance Linkage: For departments that exhibit "deliberately suppressing budgets and then adding expenditures" behavior for two consecutive fiscal years, their budget preparation for the next year will be subject to stricter scrutiny, and their departmental performance scores may be deducted.

III. Specific Operational Process

When a department forecasts a budget surplus for the current year and needs to apply for unlisted expenditures, it should follow the steps below:

Step 1: Submit a Formal Application

The department head must fill out the "Budget Surplus Usage Application Form," including: the name of the expenditure item, amount, expected benefits, reasons for not including it in the initial budget, and a statement of consistency between the expenditure and the company's annual objectives. The application must be accompanied by relevant communication records from the budget preparation period (such as emails or meeting minutes) to prove that it was not concealed after the fact.

Step 2: Preliminary Review by the Finance Department

The finance department must complete the preliminary review within 5 working days of receiving the application. The preliminary review focuses on: verifying the accuracy of the surplus forecast, checking whether the requested item falls under the category of "should have been included in the budget," and assessing whether alternative funding sources exist. If the preliminary review determines that the application constitutes "deliberate budget circumvention," the finance department has the right to reject it directly and record it.

Step 3: Cross-Departmental Review (If Necessary)

For applications involving large amounts or affecting multiple departments, the finance department should organize a review meeting with participation from operations, strategy, legal, and other departments, and produce a written review opinion. The review meeting should be held within 10 working days after the application is submitted.

Step 4: Final Approval and Execution

After approval, the finance department incorporates the approved amount into the current period's budget adjustment and notifies the procurement department to execute. During execution, the department must follow normal procurement procedures and is subject to subsequent audits by the finance department.

IV. Supervision and Feedback Mechanism

To continuously improve the process, the company should establish the following supervision mechanisms:

  • Summarize departmental surplus usage applications and approval results quarterly and report to the Budget Committee;
  • Evaluate the quality of departmental budget preparation annually, using "budget deviation rate" and "surplus supplement rate" as key indicators;
  • Establish an anonymous reporting channel to encourage employees to report dishonest behavior in budget preparation.

Through the above mechanisms, the company can flexibly respond to legitimate business changes while effectively curbing budget gaming behavior, ultimately achieving efficient resource allocation and rigid enforcement of financial discipline.

Note: This policy serves as a framework guideline. Specific implementation rules will be formulated separately by the finance department and implemented after approval by management.