An Appraisal Of Budgeting As A Tool For Effective Control In The Public Sector Of Nigeria

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An Appraisal Of Budgeting As A Tool For Effective Control In The Public Sector Of Nigeria


Abstract


This study examines an appraisal of budgeting as a tool for effective control in the public sector of Nigeria. Faced with the problem of Budgetary objectives not being realized due to low level of understanding of the budget system by middle and low degree of management personnel. Other problems are lack of stocks and shut dow. The study was guided by the following objectives; To study the relationship between budgeting and managerial planning and control, To understand the consequences of poor budgetary on managerial planning and control, and To examine the role of budgeting in management’s decision making. The study employed descriptive and explanatory design, questionnaires in addition to library research were applied in order to collect data. Primary and secondary data sources were used and data was analyzed using statistical package which was presented in frequency tables and percentage. The respondents under the study were 30 employees of the public sector of Nigeria. The study findings revealed that there is a significant impact [budgeting] has on [managerial planning and control]. Linear regression significant at 0.05 level (2-tailed), 0.00 indicates the significance of interaction between two variables an indication that the significant is under the range of 0.0 and 0.05. Using the above findings, it implied that there is a strong relationship between [budgeting] and [managerial planning and control].

Key recommendations from the study are;

  1. All managers should be well versed in the basic principles of budgeting and control and should take steps to ensure that these principles are well understood and implemented within their organizations
  2. All relevant personnel should be properly trained and knowledgeable about the policies and procedures established by the organization, to ensure that all staff members adhere to established guidelines when handling day-to-day operations and ensure that revenues are managed effectively to maximize profitability and sustainability
  3. In order to ensure long-term sustainability of organization and safeguard its financial viability, it is essential that a robust internal control system be developed and maintained to provide important mechanism for preventing the occurrence of fraud and corruption within the organization as well as for improving efficiency and maximizing profitability
  4. In order to monitor performance and make necessary adjustments as needed, managers should maintain ongoing communication with key stakeholders and to review the performance of various business operations on a regular basis.
  5. During the implementation phase, managers should be responsible in managing the day-to-day activities of the organization.

Chapter One


Introduction

1.1 Background to the Study

The effectiveness and efficiency of the operations of an organisation relies on the control available to management in practically every business organization, there are a variety of activities going on at the same time such as producing, buying, distributing, selling and financing a product. These are interrelated as though they affect the achievement of the organization objectives.

The institution of cost and management accountant (ICMA) defined budget as a financial or quantitative declaration prepared and approved prior to specified period of time of the policy to be pursed throughout the duration for the purpose of achieving a given goals. It might consist of income, expenditure and the employment capital.

Consequently, in order to accomplish these goals or objectives, the organization should economize resources and find the means of accomplishing these objectives. These objectives can just be realized when the property planned use of available resource are controlled and coordinated efficiently. Therefore, a system of managing a business by making projection of the different activities and using a financial to each projection becomes crucial. These forecasts are led by the information and adoption of planned system such as methods in budgeting, variance evaluation and so on.

Budgeting forms part of management tool. It is a conventional method of handling and managing business (Bergstrand and Olue, 1996). Organizations make use of budget to plan and co-ordinate in the following year. To inspire employees, allocate resources and co-ordinate operations within a company has been the main purpose of budgeting. For operation purposes, budget is always quantified in financial terms. It is intended to help with responsibility distribution and used to assess efficiency (Tibby and Lindsay, 2003).

According to Welsch, Planning is the only detailed method to managing so far developed and if used with sophistication and good judgement, there would certainly be provision of framework for executing such essential aspect of scientific management as management by goals, efficient communication, participate management, vibrant control, constant feedback, responsibility accounting, management by exception and the managerial versatility. Budgeting assists administrative officials to create cautious evaluation of all existing operations, thus justifying expansion, eliminating or restricting wrong practice (Musselman and Hughes, 1981).

In the process of planning and control, budgeting involves a distinct pattern of decisions in the organization which are capable of determining its goals, purposes or objectives, and how these objectives are accomplished by developing principal policies. However, the failure to acknowledge the problem concerned and fixing a boundary of investigation creates a challenge for the effective implementation of planning and control. Some organizations only search for narrow ranges of options which they arrive at from their past experience and present situation. Other management degrees also prevent long term planning and budgeting in favour of today’s problem thus making the issue of tomorrow more serious (Steward, 1993).

A budgetary control is explained by lucey, (2002) as a quantitative expression of a strategy prepared in advance of the period to which it relates. Budget might be prepared for the business as a whole, for departments, for functions such as sales and production, or for financial and resources items such as money, capital expenditure, manpower, purchase and so on. The process of preparing and agreeing budgets is a way of equating the general goals of the company into specificed, viable plans of action. It is consequently, germane to state that the degree of significance that is attached in this plan and effort made in controlling the finance vary in organizations. Once the objectives are established, which should be based on the specificed analysis of feasibility within the content of the political and social value the plans will allow it to strive to its attachment.

Often than not when these strategies are taken into operation, conditions prevail which tends to trigger deviation from the plan and corrective steps are constantly required to steer the business back on the right track. The process currently discussed as it is used entailed budget and its control. And to lend support to objective congruence suitable methods ought to be put on particular areas that need special focus thus measurement of budgeted with actual to arrive at the finance cannot be overstressed. A business is claimed to be on the right track if the result of the budgeted estimate is favorable as against the actual. The little that is claimed concerning this project has encompassed all avenues where the subject can help management decision, instead it ought to be viewed as a guide for people business. This course of action will enhance the system of budgeting in managerial planning and control resulting to an optimal performance. Based on the foregoing, this research work shall study an appraisal of budgeting as a tool for effective control in the public sector of Nigeria.


1.2 Statement of the Problem

The growth of the business hinges, or simply put, rests squarely units budgetary control system or methods thus they are considered as an important tool in any business scenario. This study then is aimed at assessing and evaluating the event to which budgetary control has been a device for the growth and global awareness of any organization. Lack of budgets in planning and control has required in the indiscriminate use of fund meant for more feasible activities. Once again, the failure of lots of firms to plan and accomplished budget objectives is traceable to their inability to apply controls in their budget plan system. Budgetary objectives are not realized due to low level of understanding of the budget system by middle and low degree of management personnel. Other problems are lack of stocks and shut down. These and a lot more are a few of the issues of lack of budgeting control.

Additionally, in spite of the presence of budget office and budget monitoring groups in public sector, the preparation and implementation of budget in the public sector is inefficient. It is based on the above that the researcher decided to appraise budgeting as a tool for effective control in the public sector of Nigeria.


1.3 Objectives of the Study

The main objective of this study is to appraise budgeting as a tool for effective control in the public sector of Nigeria. However, the specific objectives are:

  1. To study the relationship between budgeting and managerial planning and control
  2. To understand the consequences of poor budgetary on managerial planning and control
  3. To examine the role of budgeting in management’s decision making

1.4 Research Questions

The following statements will be considered to be the research questions:

  1. What is the relationship between budgeting and managerial planning and control?
  2. Are there any consequences of poor budgetary on managerial planning and control?
  3. What is the role of budgeting in management’s decision making?

1.5 Research Hypotheses

The following statements will be considered to be the research hypotheses for this study:

  1. There is no significant relationship between budgeting and managerial planning and control
  2. There is a significant relationship between budgeting and managerial planning and control

1.6 Significance of the Study

The study will be beneficial to the government as it will help them to understand how the budgetary control is established and also how it affects organizational performance. It leads to a decrease in cost and increase in revenue which in turn leads to profit maximization. The government is on a better position to achieve her goals and execute her projects.

Also, the individuals in the country shall benefit from this study as it will help them to communicate plans between executive and those responsible for their execution. It motivates managers and employees at all levels and serve as standard for measuring performance. A good budgetary performance shows a reflection in the eyes of every person.

Lastly, it will help in the addition of knowledge as basically the aim of every paper and this paper which seeks to ascertain the effectiveness of budget and budgetary control is not an exemption. Readers of this paper will stand a better chance of making contribution to the issue of budget and budgetary control in public sector.


1.7 Scope of the Study

This study will concentrate on Ministry of Works, Lagos. The study will cover the budgetary process and policies of the Ministry and how its performance is influenced and maximized. The study will cover 3 years (2019 – 2022) of the state and ministry of works in particular.


1.8 Limitations of the Study

The limitations of the study include:

  1. Time: The researcher had time constraints in course of the work, because the research was undertaken at the same time as when the course work was going on.
  2. Finance: The high cost of transportation encountered in in getting the required materials for this study.
  3. Research materials refusal of some staff of the establishment to complete the questionnaires given to them and the refusal of some staff of audit themselves for interview for fear of revealing company’s secret limited the research work.

1.9 Definition of Terms

The following are defined in the work:

Budget:

Budget simply means estimate of income and expenditure, which are planned by the organization for a specific future. In Britain, it means the annual statement made to the house of commons by the chancellor of the exchequer, giving details of the government financial plans for the coming year.

Budgeting Control:

This means a system of managing a business by making forecasts of the different activities and applying of financial value to each forecast. Actual performance is subsequently with the estimate.

Control:

Comparing actual results achieved over a period with budget/standard and highlighting deviation from budget or standard into favourable and advise variances.


Chapter Five


Summary of Findings, Conclusion and Recommendations

5.1 Summary of Findings

The first objective of the study was to study the relationship between budgeting and managerial planning and control. Findings from the study revealed that Project Framework of objective, Strategies for achievement, Highlight of financial implication of plan, Definition of resources required for achievement and Strategies for achievement are the relationship between budgeting and managerial planning and control.

The second objective of the study was to understand the consequences of poor budgetary on managerial planning and control. Findings from the study revealed that Project schedule delays, Project cost overrun, sustainability Risk for the organization and Demotivation of team members are the consequences of poor budgetary on managerial planning and control.

The third objective of the study was to examine the role of budgeting in management’s decision making. Findings from the study revealed that Provision of performance evaluation, Provision of organization’s future trajectory evidence, Timely Identification of risk areas and Allocation/Planning for revenues and expenses are the role of budgeting in management’s decision making.


5.2 Conclusion

The paper examines an appraisal of budgeting as a tool for effective control in the public sector of Nigeria. From the responses analysed from the respondents of the public sector of Nigeria, and previous empirical studies on the subject matter, the researcher was able to clearly point out that there is a statistical significant relationship between Budgeting and Managerial planning and control.


5.3 Recommendations

Based on the objectives and findings of the research paper, the following are recommendation from the study:

  1. All managers should be well versed in the basic principles of budgeting and control and should take steps to ensure that these principles are well understood and implemented within their organizations
  2. All relevant personnel should be properly trained and knowledgeable about the policies and procedures established by the organization, to ensure that all staff members adhere to established guidelines when handling day-to-day operations and ensure that revenues are managed effectively to maximize profitability and sustainability
  3. In order to ensure long-term sustainability of organization and safeguard its financial viability, it is essential that a robust internal control system be developed and maintained to provide important mechanism for preventing the occurrence of fraud and corruption within the organization as well as for improving efficiency and maximizing profitability
  4. In order to monitor performance and make necessary adjustments as needed, managers should maintain ongoing communication with key stakeholders and to review the performance of various business operations on a regular basis.
  5. During the implementation phase, managers should be responsible in managing the day-to-day activities of the organization and ensuring that it is performing according to expectations and budgets.

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