Modelling of the Risk of Budget Variances of Cost Energy Consumption Using Probabilistic Quantification

Łukasz Kuźmiński, Zdzisław Kes, Veselin Draskovic, Andrzej Gawlik, Marcin Rabe (), Katarzyna Widera, Agnieszka Łopatka and Maciej Śniegowski
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Łukasz Kuźmiński: Department of Process Management, Wroclaw University of Economics and Business, 53-345 Wrocław, Poland
Zdzisław Kes: Department of Process Management, Wroclaw University of Economics and Business, 53-345 Wrocław, Poland
Veselin Draskovic: Faculty of Management, University of Social Sciences, 90-229 Lodz, Poland
Andrzej Gawlik: Faculty of Environmental Management and Agriculture, West Pomeranian University of Technology in Szczecin, 71-494 Szczecin, Poland
Marcin Rabe: Management Institute, University of Szczecin, 70-453 Szczecin, Poland
Katarzyna Widera: Faculty of Economics and Management, Opole University of Technology, 45-758 Opole, Poland
Agnieszka Łopatka: Institute of Economics and Finance, University of Szczecin, 70-453 Szczecin, Poland
Maciej Śniegowski: Doctoral School, University of Szczecin, 70-453 Szczecin, Poland

Energies, 2023, vol. 16, issue 5, 1-16

Abstract: Budgets in organisational units are considered to be traditional management support tools. On the other hand, budgetary control is the essence of control measures, allowing for the increase in the efficiency of an enterprise through appropriate allocation of resources. The methodology used in the analysis of budget variances (obtained as a result of applying budgetary control) undoubtedly influences the management efficiency of almost every organizational unit. The authors indicate a research gap of methodological and application nature in the area of risk measurement in the analysis of budget variances. Therefore, the aim of the article is to create universal and flexible models enabling probabilistic quantification of the risk of budget variance regardless of the nature of the cost, the person budgeting and the budgeting unit. Extreme value theory was used to develop the model. The results of the work are models allowing for the estimation of the limit level of deviation for assumed probabilities and models determining the level of deviation for a given probability level. The application of these models in budgetary control will allow for a synthetic assessment of the degree of budget execution in the company, comparing the quality of budget execution over time as well as between units, defining the limits of materiality of budget variances. For the purpose of model verification, the authors have used budget variances of cost energy consumption, which have been determined on the basis of empirical distributions obtained from data coming from the system of budgetary control implemented at a university located in a larger European city.

Keywords: extreme value theory; budgetary control; methods of budget variance analysis; budget variances cost energy consumption (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
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