Senior managers rely on subordinates' budget information when forming profit expectations, yet subordinates often have incentives to bias this information. Using proprietary panel data on internal profit forecasts, we find that a one-standard-deviation increase in the importance of budget-based performance evaluation is associated with a 14 to 27% downward bias in profit forecasts, suggesting senior managers do not fully undo subordinates' strategic reporting. Budget-based resource allocation is partly associated with an upward bias. Exploratory field interviews with CFOs point to information asymmetries, learning frictions, and relational frictions as reasons biases persist. Consistent with this, downward bias is stronger in firms with bottom-up budgeting, less monitoring, more aggregated budgets, and controllers who act as business partners rather than monitors. Larger forecast errors are associated with lower profitability, higher costs, and reduced senior-manager bonuses. Our findings connect budgeting research with work on management forecasts in financial accounting and managerial expectations in economics.