Kuwait Red Crescent Society and Zero Sum budgeting

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Answer 1: The Kuwait Red Crescent Society is a voluntary society based on the motive of providing humanitarian assistance to the society irrespective of any difference. Thus the main purpose is to serve humanity and mankind by giving the medical aid and fulfilling food related requirements. Actually these days the world is observing unrest in many countries. There are conflicts and war like situations in many countries. Thus to preserve humanity in these region Kuwait Red Crescent Society has starting indulging in various relief projects. These projects provide people assistance during the suffering that may occur during the war like situation, conflict and political unrest. Therefore the motive is to serve common people who find it difficult to survive and feed their families during such conditions. (Kuwait Red Crescent Society, 2014)

Moreover the Kuwait Red Crescent Society has been giving assistance on humanitarian ground in the areas affected by natural disaster. This includes the area which gets hit by earthquake and Tsunami. Thus the society gives preference to the humankind relationships and offers it assistance in terms of food, clothing and medicine to the people around the world. (Kuwait Red Crescent Society, 2014)

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The various work of this society includes the followings.

  1. Food and medical assistance in the conflict affected areas in the Middle East.
  2. Food and clothing assistance to the poor people in African continent.
  3. Financial and humanitarian aid to the Tsunami affected areas in the South East Asia especially Indonesia.
  4. Medical assistance to the people affected by political unrest in Algeria, Egypt and Pakistan.

Following is the structure of revenue expected and expenditure for risk management along with the expectations. (Kuwait Red Crescent Society, 2014)

The Structure of Revenue and Expenditure expectations:

Statement of Income or revenue expected.

Indicators

Amount of revenue expected. ( in KWD)

% of Likelihood of funding.

Organization of charity bazaars.

80,000

90%

Al-Zakat house cooperation.

250,000

80%

Donations by private companies.

150,000

60%

Donations by public enterprises.

220,000

40%

Donations by individuals.

100,000

60%

Donations by Major merchants.

125,000

95%

Other direct contributions.

25,000

55%

Pledges.

200,000

90%

Restricted Fund.

1,000,000

50%

Other revenue

50,000

40%

Total revenue expected.

22,000,000

Statement of expenditure for Risk management.

Indicators

Amount of expenses expected. ( in KWD).

% of Likelihood of expenditure.

War victims.

500,000

50%

Prisoners of Wars (POW)

100,000

70%

Tsunami victims.

100,000

60%

Political unrest.

300,000

60%

Food for people.

500,000

90%

Medical welfare.

300,000

100%

First aid.

200,000

100%

Social assistance during political unrest.

100,000

40%

Reserves for other assistance.

50,000

100%

Other expenses

50,000

50%

Total expenses

22,000,000

Net Income

0

Profit after tax

0

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Although the likely hood of expenditure for risk management purpose has been done, but it is expected the problem of such kind should not happen in the first place. That is the natural disaster may not occur with the blessings of almighty. Also the political unrest and conflict comes to an end and the peace is widespread. Thus the above states an expected percentage of Income generation and expenditures expectations during the coming financial year. (Sullivan et al., 2003)

Answer 2: Zero Sum budgeting is a method in which the planning, budgeting and process review is done during the start of the financial year. Thus planning is done to how finance the company, budgeting is done to find out how much to finance is required and finally the process review helps in finding out as to how much the funds been allocated earlier been used wisely. Thus Zero sum budgeting helps estimating the whole funds movement well in advance. This includes all the expenditures that the company will make and the expenditures that are expected. It is to be noted here that all attempts are made to make the income equals to expenditure in the financial year so that a new Zero base finance plan can be executed in the next financial year. (Johnson, 2014)

The various benefits to the public and private institutions for the Zero sum budgeting are as follows.

  1. It helps in efficient allocation of resources.
  2. It helps pre calculations about the finance requirements.
  3. It helps in identifying the needs of the project in the coming financial year.
  4. At the year-end we are able to see a crystal clear statement which will show the equal amount of revenue generated and expenditure made.
  5. No funds are left unused.
  6. All the targets are achieved within the financial year.
  7. Lesser chances of fraud or discrepancy in the financial statements.
  8. Cost effective methods of financing, resource allocation and expenditures are seen.
  9. Budgetary requirements can be identified well in advance.
  10. Clear objectives are defined.
  11. Improved coordination between the management in different department.
  12. Control over expenditures is achieved.
  13. More resources can be found out to meet the budgetary requirements in the coming financial year.
  14. Identification of areas of wastage of funds and other related problems and issues.
  15. Easy to figure out the productivity of labour.
  16. Easier to administer the policies that proves cost effective for the company.

(Accounting tools, 2014)

Thus with the above benefits the private and public organizations both gets benefitted. The public organization finds it easier to allocate the resources it has to get required finance. Also the social service programs started by the government can be fulfilled easily with the pre-defining of the finance that is where it will come from and where it will move. On the other hand, the private organizations will be able to figure out the areas where the wasteful expenditures are made. Also the productivity of employees can be increased. Moreover the productivity of labor and cost effectiveness which are the prime motive of every organization can be achieved. (Bain and Company guide, 2013)

Thus no money is gets wasted or move out to unknown area through the Zero sum budgeting method. This way not only the income but also the expenditures remain in control of the company. The output of the company and productivity or labor can all be measured easily through Zero Sum budgeting. (Johnson, 2014)

Bibliography

Accounting tools, 2014. Zero base budgeting. [Online] Available at: http://www.accountingtools.com/zero-based-budgeting [Accessed 24 February 2014].

Bain and Company guide, 2013. Zero based budgeting. [Online] Available at: http://www.bain.com/publications/articles/management-tools-zero-based-budgeting.aspx [Accessed 24 February 2014].

Johnson, K., 2014. Zero base budgeting. [Online] Available at: http://people.opposingviews.com/zerosum-budgeting-4471.html [Accessed 24 February 2014].

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Kuwait Red Crescent Society, 2014. Welcome to KRCS. [Online] Available at: http://www.krcs.org.kw/en/home.php [Accessed 24 February 2014].

Sullivan, A., Steven, M. & Sheffrin, 2003. Economics: Principles in action. New Jersey: Pearson Prentice Hall.