Which of the following is a disadvantage of top-down budgeting?

The identification of a lack of local knowledge as a disadvantage of top-down budgeting is accurate. In this budgeting approach, decisions and budgets are typically set by senior management without significant input from lower-level employees who have direct knowledge and experience of local conditions and needs. This can lead to budgets that do not accurately reflect the realities of various departments or projects, resulting in inefficiencies, misallocation of resources, and a lack of buy-in from employees who may feel that their insights and contributions are overlooked.

This practice can hinder the effectiveness of the budget because it may not account for specific challenges or opportunities present within different areas of the organization. As a result, teams may struggle to work within these pre-established budgets, impacting their performance and morale.

In contrast, choices like high staff motivation, increased time for strategic focus, and realistic target setting are generally considered advantages of well-implemented budgeting systems, not disadvantages. High staff motivation is often found in collaborative budgeting environments where employees feel their input matters. An emphasis on strategic focus can also enhance organizational direction and cohesion. Realistic target setting, while sometimes compromised in a top-down approach, is more typically associated with effective budgeting practices that incorporate comprehensive data and insights from various levels within the organization.