There are behavioral issues relating to budgets such as budgetary slack and goal congruence. These behavioral issues become more obvious when subordinates’ actual performance is to be compared with and evaluated against budget performance. Some of the behavioral issues of budgeting are as follows:

Budgetary slack (padding the budget); is one of those behavioral issues, which states that managers consciously include higher expenditures and lower revenues than they actually believe will occur. This provides them to be assessed more successful at the end of the budget period. Budgetary slack also causes lower capacity utilization of resources and may lead labors to make half-hearted efforts to meet the targets (Blocher et al., 2010: 394). As also understood from the information given, the correct answer is A.

The information about the behavioral issues of budgeting taking place in the other options:

Goal congruence; is a term that states the consistency between the objectives of the organization and its subordinates is important to achieve the desired results. A budget that aligns the objectives of the company with those of labors has much more chance of being successful and attaining the goals. The factors explained below are suggested to affect the level of congruence:

1. Authoritative / Participative Budgeting: “Authoritative (imposed) budgeting” is a top-down process of budgeting, in which managers set the goals and communicate to subordinates. However, “participative budgeting” represents a bottom-up approach that involves all levels of people in the company in the budgeting process. Authoritative budgeting is better for decision-making control but does not provide a commitment of subordinates. On the other hand, participative budgeting provides more realistic goals, because subordinates have in-depth knowledge of what can be done in the field. Additionally, they become more motivated and less fearful about reaching the targets. However, management should ensure that the goals determined by employees are in line with the long-term goals of top management.
2. Difficulty of Target to Reach: Assignment of an easy target discourages the employees to pay their best efforts, while a very difficult one prevents managers even to try. Instead, a highly achievable target (about 80/85% of all can achieve) works well for companies.
3. Compensation and Budgeted Performance: By using the difference between actual results and fixed targets as a part of the compensation function, employees can be motivated towards reaching and exceeding the targets determined by management. However, this case may lead managers through budgetary slack to make the performance indicators look better.