Controllability, Budget Flexibility and New Model of Budgeting System ∗

How to extend the flexibility of the budget control to adapt for need of strategy management and management control is a difficult and very important problem. The purpose of this paper is to study tentatively this problem based on the extant results of controllability principle and budgeting in management control system of organization. In this paper, three main results are as follows: (1) To disclose that the controllability of an organization is one characteristic of the budgeting systems and the controllability is not impartial and not single personal action. (2) To discuss tentatively an improved budgeting system to improve the several weaknesses of traditional budgeting control that Otley (1999) summarized from the academic and practitioner literatures in order to improve the controllability of strategy management with budget flexibility. (3) To build the new model of flexible budget with three new features: it makes strategy objectives easily achievable and controllable; it makes controllers have a more strategic role; it can balance these multiple goals when they cannot be achieved simultaneously and external conditions are more demanding.