1.3 OBJECTIVE OF THE STUDY
The primary purpose of this study is four fold. They include the following:
- To determine if budgeting and budgetary control affect the quality of service delivery in government parastatals.
- To determine if there is a connection between the type of budget implemented and their actual performance.
- To determine whether or not budgetary controls as a management tools contribute to the improvement of management efficiency and high productivity.
- To find out the use of the budgetary controls as an appraisal parameter for assessing managers budget.
REVIEW OF RELATED LITERATURE
2.1 BUDGETING – AN OVERVIEW
The success of any organization both government and private, is in its ability to plan, quantify the plan, organize, direct and control its implementation. The relationship between plan and budget is that budget is a quantified plan control is closely involved in planning in the sense that every plan by implication comes with its control procedures. To this extent Morse (1981: pg. 368) states that when all the planning and control topics are fuztapositioned a very dynamic budgeting and performance evaluation cycle appears. The assumption of the cycle starts with the present budget and as the budget period elapses, the actual operational achievements and results are gathered and matched with the present budget in the form of feedback control and performance report. The various levels of controlling managers on receiving these reports burdening on the areas of variation from the responsible managers. The next steps based on these reports managers takes steps to ensure that future plans or budget are enhanced. Budget is a very important managerial model which will no doubt benefit the organization if properly and effectively packaged and operationalized.
DEFINITIONS OF BUDGETS AND BUDGETARY CONTROL
Budget is defined as a quantitative analysis prior to a defined period of time of a policy to be pursued for the period to attain a given objectives (CIMA, 1974). A budget is also defined as a comprehensive and coordinate plan expressed in financial terms for the operations and resources of an enterprises for some specific periods in the future (Fremgem 1973, pg. 144). A budget is a plan of the organization’s manipulations of relevant variables (controllable and uncontrollable) and reduces the impact of uncertainty, it activates the management into influencing the environment in the interest of the organization (Pandey 1985, pg. 556). A budget is a formal plan of action expressed in figures, that specified the objectives and the means of its attainment (Copeland and Dasher, 1978 p.614). Budget is a statement of plan and expected result expressed is numerical terms (Koont et al 1980, pg.3). According to Adeniyi (2001, pg 379) Budgeting is a systematic and formalized approach for performing significant phases of the management planning and control of functions. It is the process of preparing detailed short term corporate plan into action. When monetary values are attached it becomes a budget. Budget are approved prior to the defined period of time usually showing a planned income to be generated and expenditure to be incurred during that period and the capital to be employed to attain a given objectives. To Eneje (2005:142) A budget is a quantitative expression of a plan of action and an aid to coordination and implementation prepared in advanced to a period it relaltes. It can be preparallel for the whole organization or for departments. To Eze (2001:168) Budgeting refers to the formulation of plans for future activity, which lay down carefully determined objectives and programme of activity and provides yardsticks by which deviations from planned achievements can be measured. It is the preparation in advance of the quantitative as well as financial statement to indicate the intention of the management in respect of the various aspect of the business.
According to Eneje (2005:142) Budgetary control highlights the control of plans by comparing actual results against plans by comparing actual results against plans to identify variance upon which corrective action can be placed. According to Eze (2001 pg 168), Budgetary control refers to the principles, procedures and practices of achieving a given objectives through budget and budgets reports. According to Ikpe and Obah (2004:66) Budgeting control is a system of controlling cost through the preparation of budget, coordinating the departments, establishing responsibilities, relating, the responsibilities of the executives to the requirement of the policy. (CIMA, 1975), defines budgetary control as the establishment of departmental budgets relating the responsibilities of the executives to the requirement of the policy and continuously comparing actual with budgeted results either to secure by individual action the objectives of that policy or to provide the basis for its revision. It is the essential feature of budgetary control that the periodic report should be prepared comparing the budget with the actual expenditure and showing the variances between them corrective measures. Budget and actual comaprism statement are more effective when prepared frequently and promptly.
ADMINISTRATION OF BUDGETARY CONTROL
The administration of budgetary control is the responsibility of the budget committee through the budget officer. It is also a common principle that the executive of the organization each have a responsibility for the budget of the particular activity which they control. The function of the budget officer being rather to interpret the guiding decisions of the budget committee and to advise the responsible executive with a view to securing a budget which is compatible with the other sections. It is important to ensure that the scheme budgetary control is properly explained to each person concerned with its operation in the manner more appropriate to defining what is required of that person. During the operation of the scheme, a full liason should be maintained between the budget committee and the executive and persons responsible for the implementation of the departmental policies. The budget committee must ensure that through its officer or liason that periodic statement should be prepared, comparing the budget with the actual expenditure and showing the variances between them. Budget and actual comparism statement are more effective when prepared frequently and promptly and the accounting statement should be organized with this in view. The frequency of this statement as suggested with regard to the period of the budget should be largely determined by the requirement of the person exercising the control. Consideration should also be given to the point at which the cost of frequency of the statement becomes excessive. Normally it is a matter of routine to check that all items of expenditure charged against a persons budget results from the action taken by the person. According to Adeniyi (2001 pg 379); Budgetary control is part of the overall system of responsibility accounting within an organization. It is a system of accounting in which cost and revenues are analyzed in accordance with areas of personal responsibilities so that the performance of the budget holders can be monitored in financial terms, Hence, budget plays an accountability role in governmental and organization and circle. Defining budget with government in mind. Taylor (1992:50) describe budget as a forecast made by individual government and governmental institutions of its 18 expenditure and income for a specific period of time usually not more than one year.
DECISION ON BUDGET AND ACTUAL COMNPARISM STATEMENT
The preparation of budget and actual comparism statement is normally the responsibility of the budget officer and it has been found as an advantageous procedure for the result represented by the budget. In reports comparing capital expenditure budget with actual expenditure, the figures prepared from the normal (accounting records may not be adequate in themself for control purposes. To decide whether further items can be ordered without ultimately overspending the budget, it may be necessary to know, in addition, the value of outstanding orders to items not yet received for which no entries has been made in accounts. Following the careful consideration of the result shown by the budget and actual comparism statement, decisions may be taken as follows:
1.To take corrective actions with regard to expenditure where the budget standard is not yet achieved. 2.To investigate cases where the budget has been exceeded by an appreciable margin and to consider the implication of such results.
3.To adjust the budget.
4.To correct errors made in its compilation.
5.To allow for the introduction of improvements of methods not anticipated in the initial setting of the budget or any other changes.
6.To discard the budget in such cases as where the policy on which the budget is prepared has become impracticable and to substitute a new budget.
TYPES OF BUDGET
Each revenue and expenses activities of an organization can be budgeted. There are several types of special purpose budgets which can be graded in respect of its attributable functions.
i)Time factor – long term and short term budget.
ii)Function factor – sales budget, selling and distribution cost budget, production cost budget, purchase budget, personnel budget, research budget capital budget, office and administration, budget plant utilization budget, cash budget. iii)Flexibility factor – Fixed budget and flexible budget For the purpose of this research work budget are classified as follows:
1.Long term budget,
2.Short term budget
BUDGETING AND BUDGETARY CONTROLS IN GOVERNMENT
Unlike the private sector, the budgeting and budgetary control systems in government is governed a whole lot of regulatory framework, some of which has instruments of controls as systems of authorization of expenditure by warrant, virement, supplementary estimates, authority to incur expenditure, auditing, budget implementation and monitoring process, all of which are aimed at ensuring conformity with budget efficiency, effectiveness and economy. Ikpe and Obah (2003:109) highlighted the following budgetary control systems in government. a)Due Process Certification This is a budgetary control measures aimed at the following:
i)To ensure that “due process” is followed in the award of capital projects contracts.
ii)To reduce cost by scrutinizing every project awarded by the government.
iii)To ensure that funds are no longer diverted to private pockets.
iv)To strictly monitor the capital expenditure.
v)To streamline the approval limits in the award of capital projects.
b)Standardization of Government Accounting This is a reform effort the federal government aimed at standardizing all government accounts at all levels through budgeting standards and reporting procedures.
FINANCIAL AUTHORITIES AND THEIR LEGAL ASPECT
Government businesses whether in the making of policies, programmes, activities or functions, in run in accordance with laid down formalities. This formalities become more rigorous especially in relation to accounting and reporting for the collection and use of government funds which supports the process of governance. The legal formalities in the areas of government accountability and financial control includes established laws, rules, regulations, customs, and accepted norms of behavioural guidelines. The laws in Nigeria in view of the interchanging nature of government between military, and democratically elected 24 governments are of two types. They are the laws made by the military both at the Federal and State levels known as decrees and that made by the elected governments both Federal and State House of Assembly known as Act of parliament. The authority for financial transactions in public sector is derived from the constitution, the finance (control and management) ordinance 1958, and various laws in respect of a number of financial activities such as revenue collection authorization, and incurring of expenditure, central banking, foreign exchange markets, audit etc. The constitution of the Federal Government of Nigeria 1999 as amended till date has a clear picture of the financial rules and regulations of the three tiers of government. These documents are actually an implication of the public finance ordinance of 1958 and the finance (control and management) ordinance 1958 from where they derive their authority. All these documented laws and regulations are aimed at instituting accountability in the collection and management of government finance
THE ROLE OF GOVERNMENT BUDGET FOR ACCOUNTABILITY
In order to really appreciate the important roles of government budget in enhancing economic activities and accountability in the country, these major functions must be looked into:
1.Forecasting A budget is an express provision of the government to generate revenue and apply the same revenue on its economic activities in the coming financial year. This anticipatory nature of budget makes it an important tool of forecasting. The budget is prepared prior to the year, it will be implemented based on the anticipated revenues from various services. In Nigeria shares from oil account and other local taxes. It is a useful tool for forecasting future trends in the economy which is usually for anticipated revenues and expenditures for the coming year.
2.Planning Budget is also a tool for government to plan its policies and programmes and its implementation. Government uses the budget to plan how to generate revenues and the priority projects to be embarked upon in the year with the aim of engineering the economic activities of the economy. It is therefore the qualification of government proposed plans in financial terms for the following accounting of year.
3.Authorization The approval of the yearly appropriation bill is by the national assembly or state assembly is an authorization to the executives to sign and spend public fund as contained in the budget documents and also for a specific project. It is therefore a formal authorization the hands of the executive to acquire resources and undertake a specified activities for the accomplishment of governmental aims and objectives in a given period.
4.Performance and Measurement A budget is a veritable parameter for evaluating the performance of government with respect to the achievement of stated objectives. It serves as a basis for making comparison between the budgeted and the actual for the period. The variance helps to prepare and implement a better budget in the next financial year. This is the most important function of the budget which forms a guide to making a better decisions on plans and priorities in the next financial year. In working on the variance the various responsible government parastatals and agencies are thoroughly evaluated on their performance toward the whole budgeted aims and objectives. The various accountability reports and speeches to both committees of the national or state assemblies and other committees setup by the executives will help in setting up the required standard to achieve the overall governmental aims and objectives.
5.Communication Since the budget contains all policies and programmes which the government plans to execute the following year, it serves as a communication tool between the government through its agencies and the society. It gives a clear picture of the economy in next one year and what to be expected at the end of its implementation. This is why the budget elixirs a lot of interest in the people. It communicates economic direction of the government to the society and provides likely indices to be expected at the end of its implementation. The lack of accountability by the government its agencies and parastatals in the past has led to some degree of aparthy in the budget and budgetary process in Nigeria.
MAJOR TYPES OF BUDGET IN GOVERNMENT
Government’s spending profile and the desired level of economic activity will to a great extent determine the type of budget to be executed by the government in any given period. There are three main types of government budget:
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought budgeting and budgetary control as tools for accountability in government parastatals. ( A case study of Enugu State Housing Development Corporation)
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information budgeting and budgetary control as tools for accountability in government parastatals. ( A case study of Enugu State Housing Development Corporation). 200 staff of Enugu State Housing Development Corporation, Enugu state was selected randomly by the researcher as the population of the study.
Sample and sampling procedure
Sample is the set people or items which constitute part of a given population sampling. Due to large size of the target population, the researcher used the Taro Yamani formula to arrive at the sample population of the study.
1+N (e) 2
= 200 200
1+0.5 = 1.5 = 133.
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
SUMMARY, CONCLUSION AND RECOMMENDATION
It is important to ascertain that the objective of this study was to ascertain budgeting and budgetary control as tools for accountability in government parastatals. ( A case study of Enugu State Housing Development Corporation). In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of budgeting and budgetary control as tools for accountability in government parastatals
This study was on budgeting and budgetary control as tools for accountability in government parastatals. ( A case study of Enugu State Housing Development Corporation). Four objectives were raised which included: To determine if budgeting and budgetary control affect the quality of service delivery in government parastatals, to determine if there is a connection between the type of budget implemented and their actual performance, to determine whether or not budgetary controls as a management tools contribute to the improvement of management efficiency and high productivity and to find out the use of the budgetary controls as an appraisal parameter for assessing managers budget. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of Enugu State Housing Development Corporation. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made directors, administrative staff, senior staff and junior staff were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Having examined in details the uses and importance of budgeting and budgetary controls in the organization and the role the play towards determining the corporate objectives (profit making) one could rightly conclude that it is indispensable to any business organization. If budget is carefully planned and implemented by management, it could lead to decrease in cost and an increase in revenue. Though budgeting and budgetary controls enhance the efficiency of the organization performance, it should be noted that it is not the magic stick that could replace effectively planned and efficiency implemented at all levels, it will become an essential standard in measuring actual performance. This in above all makes budget an essential tool for management accountability
In the light of the findings made earlier, the following recommendations were made:-
1.For budgeting to play a vital role in government parastatals accountability. Top level managers should educate other level managers on the importance of adhering strictly to the budget provisions and implementations. When every staff understands the provisions of the budget its implementation will lead to proper accountability.
2.For actual performance the organization should adopt the techniques that is easy to understand by their managers and staff such as flexible and zero based budgeting techniques. This will make it easy for implementation and reduces cost for actual performance.
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