Summary: Algal blooms are increasing in coastal waters worldwide. The study on the features of algal pollution in water bodies and the ways to eliminate them is of vital importance. Preventing, treating, and monitoring algal blooms can be an unanticipated cost for a water system. To tame algal bloom in a lake, the government provides funds through budget allocation. In this paper, we propose a mathematical model to investigate the effect of budget allocation on the control of algal bloom in a lake. We assume that the growth of budget follows logistic law and also increases in proportion to the algal density in the lake. A part of the budget is utilized for the control of inflow of nutrients, while the remaining is used in the removal of algae from the lake. Our results show that algal bloom can be mitigated from the lake by reducing the inflow rate of nutrients to a very low value, which can be achieved for very high efficacy of budget allocation for the control of nutrients inflow from outside sources. Also, increasing the efficacy of budget allocation for the removal of algae helps to control the algal bloom. Further, more budget should be used on the control of nutrient’s inflow than on the removal of algae, as the presence of nutrients in high concentration will immediately proliferate the growth of algae. Moreover, the combined effects of controlling the inflow of nutrients and removing algae at high rates will result in nutrients and algae-free aquatic environment. Further, we modify the model by considering a discrete time delay involved in the increment of budget due to increased density of algae in the lake. We observe that chaotic oscillations may arise via equilibrium destabilization on increasing the values of time delay. We apply basic tools of nonlinear dynamics such as Poincaré section and maximum Lyapunov exponent to confirm the chaotic behavior of the system.