Point Lookout: a free weekly publication of Chaco Canyon Consulting
Volume 3, Issue 20;   May 14, 2003: Budget Shenanigans: Swaps

Budget Shenanigans: Swaps

by

When projects run over budget, managers face a temptation to use creative accounting to address the problem. The budget swap is one technique for making ends meet. It distorts organizational data, and it's just plain unethical.
MX Missile

A test launch of an MX missile on 26 November 2002 by the U.S. Air Force. These missiles have all been decommissioned. One of the launch configurations of this missile was to have been mobile and land-based, though it was never deployed in that manner. The idea was patterned after the "shell game." That is, the number of launch silos was to have been far greater than the number of missiles, which would have made attacking them difficult, because the enemy would not know which silos actually contained missiles. This strategy would have reduced the need to harden them against nuclear attack. It's likely that the plan was abandoned, in part, because of advances in sensor technology that would have made detection of missile movements effective enough to degrade the advantages of this launch configuration.

What happened to MX is an example of the predator/prey pattern. As the predator develops new capabilities, the prey develops new defenses, in an endless cycle. So it is with budget swaps. You might get away with it when the amounts involved are small, but eventually, budget auditors will develop methods of detection.

Photo courtesy U.S. Air Force via Wikimedia.

The meeting ended. Will picked up his pad, stood up, tossed his paper cup into the wastebasket, and stepped through the doorway right behind Janet. But before he could get her attention, Ed got his.

"Will, just one thing to button up — can you stop by my office a minute?" Ed asked.

"Sure," Will replied.

It was a short walk to Ed's office. They stepped in. Ed closed the door quietly. "Just want to give you the charge numbers for this week and next," he began. He handed Will a slip of paper that had two account numbers on it.

"Here they are. Top one's for this week, the other's for next."

"OK," said Will. "That it?"

"Yep. See you."

Will opened the door, went around the corner to his own office, set his pad and the slip of paper on his desk and sat. Odd, he thought. Why the secrecy? And why split the work across two accounts, when it was exactly the same work? He wondered what was going on.

Knowing budgetary
deception techniques
helps you stay out of
the gray area
Will never did find out. Perhaps it was legitimate, but it might have been a "budget swap."

In organizations that track expended effort, people charge their time to various accounts, represented by charge numbers. When "actuals" deviate too far from projections, the manager is often considered to have erred. Managers of overspent (or underspent) accounts are tempted to move charges across accounts to compensate.

In effect, they "swap" money across accounts. Here are just a few forms swaps can take.

Altering time sheets
This approach is less common today, because so many organizations now use electronic time reporting systems. Systems that still use hardcopy are the most vulnerable.
Directed or conspiratorial misreporting
Ed and Will might be a case of directed misreporting. Typically, this requires a level of naiveté or fear on the part of the person who's being directed. Conspiratorial misreporting occurs when all parties are aware that they're reporting false data.
Parking
In Parking, team members are temporarily detached from Project A, and then attached to Project B, which has adequate funding. Once parked, they may continue to do "just a little" work on A — a meeting, or a quick phone call, or more — but they charge all their time to B.
Out and in
When two budgets use the same external vendor for labor, equipment, or materials, the vendor can overcharge one of the budgets, and undercharge the other to compensate. Usually, this requires collaboration between the vendor and the managers. It's much easier to arrange when both budgets are controlled by the same manager.

Managers who use budget swaps to conceal problems do real harm to their organizations. But they harm themselves, too, because of another, less visible swap — their budgets for their integrity. Go to top Top  Next issue: When You Think They've Made Up Their Minds  Next Issue

52 Tips for Leaders of Project-Oriented OrganizationsAre your projects always (or almost always) late and over budget? Are your project teams plagued by turnover, burnout, and high defect rates? Turn your culture around. Read 52 Tips for Leaders of Project-Oriented Organizations, filled with tips and techniques for organizational leaders. Order Now!

For more about budgetary deception in the wider context, check out M. Jensen, "Paying People to Lie: The Truth About the Budgeting Process," European Financial Management, Vol. 9, pp. 379-406, September 2003. Available at SSRN.

Your comments are welcome

Would you like to see your comments posted here? rbrendPtoGuFOkTSMQOzxner@ChacEgGqaylUnkmwIkkwoCanyon.comSend me your comments by email, or by Web form.

About Point Lookout

This article in its entirety was written by a 
          human being. No machine intelligence was involved in any way.Thank you for reading this article. I hope you enjoyed it and found it useful, and that you'll consider recommending it to a friend.

This article in its entirety was written by a human being. No machine intelligence was involved in any way.

Point Lookout is a free weekly email newsletter. Browse the archive of past issues. Subscribe for free.

Support Point Lookout by joining the Friends of Point Lookout, as an individual or as an organization.

Do you face a complex interpersonal situation? Send it in, anonymously if you like, and I'll give you my two cents.

Related articles

More articles on Ethics at Work:

The silhouette of a famous fictional detectiveSome Truths About Lies: I
However ethical you might be, you can't control the ethics of others. Can you tell when someone knowingly tries to mislead you? Here's Part I of a catalog of techniques misleaders use.
A TSA Officer screening a passengerVirtual Termination with Real Respect
When we have to terminate someone who works at a remote site, sometimes there's a temptation to avoid travel — to use email, phone, fax, or something else. They're all bad ideas. Terminating people in person is not only a gesture of respect. It's good business.
The Bill of RightsEthical Influence: I
Influencing others can be difficult. Even more difficult is defining a set of approaches to influencing that almost all of us consider ethical. Here's a framework that makes a good starting point.
The 1934 rally of the Nazi Party in GermanyInfluence and Belief Perseverance
Belief perseverance is the pattern that causes us to cling more tightly to our beliefs when contradictory information arrives. Those who understand belief perseverance can use it to manipulate others.
Left Ventricular Assist Device (LVAD)Full Disclosure
The term "full disclosure" is now a fairly common phrase, especially in news interviews and in film and fiction thrillers involving government employees or attorneys. It also has relevance in the knowledge workplace, and nuances associated with it can affect your credibility.

See also Ethics at Work for more related articles.

Forthcoming issues of Point Lookout

A meeting that's probably a bit too largeComing March 20: Top Ten Ways to Make Meetings More Effective
Meetings are just about everybody's least favorite part of working in organizations. We can do much better if only we take a few simple steps to improve them. The big one: publish the agenda in advance. Here are nine other steps to improve meetings. Available here and by RSS on March 20.
An informal meeting in a loungeAnd on March 27: Allocating Action Items
From time to time in meetings we discover tasks that need doing. We call them "action items." And we use our list of open action items as a guide for tracking the work of the group. How we decide who gets what action item can sometimes affect our success. Available here and by RSS on March 27.

Coaching services

I offer email and telephone coaching at both corporate and individual rates. Contact Rick for details at rbrendPtoGuFOkTSMQOzxner@ChacEgGqaylUnkmwIkkwoCanyon.com or (650) 787-6475, or toll-free in the continental US at (866) 378-5470.

Get the ebook!

Past issues of Point Lookout are available in six ebooks:

Reprinting this article

Are you a writer, editor or publisher on deadline? Are you looking for an article that will get people talking and get compliments flying your way? You can have 500-1000 words in your inbox in one hour. License any article from this Web site. More info

Follow Rick

Send email or subscribe to one of my newsletters Follow me at LinkedIn Follow me at X, or share a post Subscribe to RSS feeds Subscribe to RSS feeds
The message of Point Lookout is unique. Help get the message out. Please donate to help keep Point Lookout available for free to everyone.
Technical Debt for Policymakers BlogMy blog, Technical Debt for Policymakers, offers resources, insights, and conversations of interest to policymakers who are concerned with managing technical debt within their organizations. Get the millstone of technical debt off the neck of your organization!
52 Tips for Leaders of Project-Oriented OrganizationsAre your project teams plagued by turnover, burnout, and high defect rates? Turn your culture around.
Go For It: Sometimes It's Easier If You RunBad boss, long commute, troubling ethical questions, hateful colleague? Learn what we can do when we love the work but not the job.
101 Tips for Effective MeetingsLearn how to make meetings more productive — and more rare.
Ebooks, booklets and tip books on project management, conflict, writing email, effective meetings and more.
Comprehensive collection of all e-books and e-bookletsSave a bundle and even more important save time! Order the Combo Package and download all ebooks and tips books at once.
If your teams don't yet consistently achieve state-of-the-art teamwork, check out this catalog. Help is just a few clicks/taps away!