DEFINITION of Fudget

Fudget, combining "fudge" and "budget," is a falsified statement of income and expenses. A fudged budget plays loosely with numbers to present a more attractive picture of a financial situation than what currently exists or than what is realistically possible over the budget timeframe. An example of a fudget would be one that shows a balance of income and expenses, when expenses actually exceed income.

BREAKING DOWN Fudget

As a standard practice, budgets are put together in a methodical manner at companies, government bodies, organizations and other entities that take in money and spend it. The budgets are supposed to be realistic, based on historical data and trends and reasonable assumptions. Budgets are reviewed for such sound attributes, modified if necessary, then approved for final submission to the CEO and board level in the case of a corporation, to an agency head in the case of a government body, to the executive director at a non-profit organization, etc. If the entity is a profit-seeking enterprise, the budget should project an excess of income over expenses during an annual period. For a government body or non-profit organization, the goal is to show a balance of income and expenses. Therefore, those preparing budgets feel pressure to please their masters. If less-than-ideal numbers stare them in the face, they may be tempted to fudge them when compiling the budgets.

A scandal involving a fudget occurred in British Columbia, Canada in the late 1990s. Voters who learned that New Democratic Party politicians had falsified their provincial budgets filed a lawsuit to overturn the results of a recent election. They claimed they would have voted differently if they had been given accurate budget information. The voters lost the lawsuit, but established a precedent for future lawsuits.

Politician are much more likely to fudge budgets because, well, they are politicians. Not all, but most are motivated to ascend to or retain power, so fooling around with tax receipt and spending numbers for votes is second nature to them. However, the opposite situation occurs in the private sector, where a majority of budgets are constructed in a responsible manner and a minority in a dishonest way, usually to mask underlying problems with operations.