IntroductionBudgeting is an essential process for all companies. Using the company's current financial data and historical data, a company should be able to predict and plan a budget for the company's future. A budget is defined as “a statement of monetary plans prepared in advance for a future period, usually one year” (Brookson 2000). This budget should be aligned with the company's strategic and operational plans and constitutes the tactical implementation of the company's business plan. Because the corporate budget is controlled by all levels of management in the company, the corporate budget is usually an aggregate collection of departmental budgets. Budgets are used to establish a company's sales forecasts, product pricing, as well as assist in investment planning. Budgets are also used by management for motivation and performance evaluation. A manager's performance evaluation will usually be related to the negotiated compensation plan and will be paid as a bonus in addition to the salary. These incentives are usually based on a percentage of achieving or exceeding budgeted objectives or targets established and controlled by management. Because of management's control of numbers, budgets and set goals are easily manipulated in order to increase manager compensation. When this process occurs, it is known as "gaming" the system. Game System Managers System managers are known to game the system when their personal incentives seem more attractive than the organization's benefits. Gaming the system occurs when an organization's explicit policies and procedures are used that managers believe are obstacles in achieving the organization's goals. “By flexing the... middle part of the paper......reshold which in turn will benefit the company. Works CitedBrookson, Stephen. Essential managers: managing budgets. New York: Dorling Kindersley Publishing, Inc., 2000. Horvath, Peter and Ralf Sauter. “Why Budgeting Fails: A Management System Is Not Enough.” Balanced Scorecard Report, 2004: 3-6.Jensen, Michael C. “Corporate Budgeting Isn't Working: Let's Fix It.” Harvard Business Review, 2001: 94-101.Leone, Marie. “Variable budgets, with a twist.” CFO.com. June 3, 2003. http://www.cfo.com/article.cfm/3009422/1/c_2984786 (accessed March 17, 2010).Rieley, James B. “Are Your Employees Gaming the System?” National Periodic Review, Summer 2000: 1-6.Walker, Kenton B., and Eric N. Johnson. “The effects of a budget-based incentive compensation system on the budgetary behavior of managers and subordinates.” Journal of Management Accounting Research, 1999: 1-28.