Budget And Budgetary Control As A Tool For Effective Decision And Planning In Ministries And Parastatals (A Case Study Of Ministries And Parastatals In Imo State)

Project and Seminar Material for Accountancy / Accounting

Budget And Budgetary Control As A Tool For Effective Decision And Planning In Ministries And Parastatals (A Case Study Of Ministries And Parastatals In Imo State)


Abstract


Budget and budgetary control as a tool for effective decision and planning in ministries and parastatals.

The researcher is prompted into choosing this due to the peculiar nature of the topic budgetary control in ministries and parastatals. In this project work the definition of budget is being known as a techniques their task of planning, coordinating, directing and control in an organization. For a government ministries to achieve their aims budget must be enlisted in Agenda. In carrying out this project work the topic identify the objective, statement of hypothesis, significance of the problem and the limitation of the project work.

This project work is limited to the budget of Imo state government ministry and parastatals. Nevertheless profit oriented organization and parastatals make use of different budget to enable them meet their desire goals. I bid to identify those administrative probelsm personal observations and interview where made and conducted, it was discovered that budget and budgary are the key note of every successful body or organization as a result of policies not being strong enough to beat them to it.

Finally budget enjoys a wide application. They can be used in our private homes where a civil servant who earns and income and plan on it. Also the same thing is applicable to the ministries and parastatals.


Chapter One


Introduction

Budgeting is essentially concerned with planning and can be broadly illustrated by comparing with the routine a ship captain follows on each voyage. Before the voyage, he will plan his route, taking into account such factors as shipping harzards, tides and possible adverse weather forecast. During the voyage he will check on his plans and record and unusual conditions. If necessary, he may even have to leviater from his plan if prevailing circumstances require it. On completion of the voyage he will compare the conditions he encountered with those he expected and use the experience gained in planning similar voyages in the future.

Budgets and budgeting control are two accounting techniques, which top management adopts to achieve its tasks of planning, coordinating, directing and control in an organsiation. Planning is mainly concerned with the establishment of objectives the formulation, evaluation and selection of the policies, strategies factics and actions required to achieve these objectives planning was previously based on historical cost conventions. This process increased the emergency decision which top management had to make because historical cost conventions arenot future oriented; they do not aid planning.

In order to reduce to management emergency decision making processes and thus aid planning, variable budgets were introduced. This is so because managers want to know more than they have done currently in relation to last period performance, they also want to know how they have done currently in relation to their current target performance.

Control on the order hand follows closely after action has been taken. If is a process where by actual performance is compared with targeted budgeted performance any deviations from this target are investigated for an in-depth or positive explanations to be given. Budgetary control is the technique used for this purpose and when it is combined with budget, it becomes part of responsibility accounting the aim of budgetary control is to provide a format basis for monitoring the progress of the organization as whole and of its components parts, towards the achievement of the objectives specified in the planning budgets.

Budgets enjoy a wide application. They can be used in our private homes where a civil servant who earns a monthly income will map out his objectives and plan effectively with what he haste achieve these objectives. Both profit-oriented and non-profit oriented organization apply in all three tiers of government –local, state and federal.

Profit oriented organization use the type of budget that is output and objective oriented to enabl them know how efficient they have been in managing the resources available to them. They therefore use the planning programming budgeting system (PPBS) budgeted expenditure is compared with actual performance achieved. The system is based, not on traditional organizational structure and divisions, but on programmes grouping of activities common objectives.

This is in sharp contract with the type of that is used in non-profit seeking organizations like the local state and federal government agencies. This is the lineitem budgeting system. This method is the tradition the traditional approach to government allocation; it is oriented to expenditure and budget relates mainly to the organizations from which they are prepared not for the purpose for which money is spent.


1.2 Objective of the Study

The purpose of the study is to find how budgets and budgeting control is used as a tool for effective decision and planning in ministries and parastatals in Imo state. Specific components of planning and control process will be empirically test to determine whether the impact is positive or negative.


1.3 Statement of the Problem

Most often budgets and budgetary control research has concentrated greatly on profit- oriented organizations as if research in this area cannot be extended to the non-profit seeking organization, like the state ministries and parastatals, local government councils and churches.

Budgets are attention directing and forward looking financial statement. Budgets tend to ensure goal congruence and eleicit managerial effort, ehich are both wrapped up in motivation. Budget relates objectives and policies to management responsibilities and facilitate accountability and overall control.

In profit seeking organizations, budgetary control provides relevant information relating to what the organization wants to achieve and the measure it would adopt to translate its plan into reality. It is time to direct the searching eyes of budgets and budgetary controls to non-profit seeking organization like the state government ministries and parastatals. There could be no more opportune time than noe in view of the stat government and ever increasing responsibility of catering for the welfare of the teeming population.

  1. How are organizational goals or objectives related to individual or management?
  2. Are there goal congruence and managerial effort, which is conjunction may motivate?
  3. How participatory is their budgetary process.
  4. Do they regard the budget as an authority to spend and a limit not to be exceeded?
  5. How do they explain the deviations arising from the budget?
  6. Do they normally have principal factor ?
  7. Is there a coordinating committee to integrate the efforts of all the functional staff who prepare the budget?
  8. Does top management give its full support to the budget?
  9. Are the budgets based on time horizon?

1.2 Statement of the Hypothesis

The research hypothesis aims at finding a positive or negative of budgets and budgetary control as a tool for effective decision and planningin government ministries and parastatals in Imo state, the following specific hypothesis based on planning and control process is tested empirically.

Planning
  1. HO: The budgets are not related to activities with common objectives and so there is no responsibity accounting.
    HI: The budgets are related to activities with common actives and so there is responsibility accounting.
  2. HO: The staff are not commended for operating to the budget and so there is no motivation.
    HI: The staff are commended for operating according to the budget and so there is motivation.
Control
  1. HO: There is no feedback showing how well bedgets are working out at all levels of the organization structure.
    HI: There is feedback showing how well the budgets are working out at all levels of the organization structure.
  2. HO: There is no investigation of variance from the budget.
    HI: There is investigation of variance from the budget.

1.3 Objective of the Study

The purpose of the study is to find how budgets and budgetary control is used as a tool for effective decision and planning in ministries and parastatals in Imo-state. Specific components of planning and control process will be empirically to determine whether the impact is positive or negative.


1.4 Significance of the Study

We see no more opportune time than now for this study that her resources of the state government are dwindling. The state share of the federation account has been on the decline for some time now and this compled with the ever-increasing government responsibilities of catering for its citizening.

It is therefore imperative to measure the performance of the state government when faced with the above and to know the extend they are influenced by budget and budgetary controls.


1.5 Limitation

In the course of the project work a number of constraints have delayed the smooth progress of the work due to the fact that the project work is coincilding with academic. Most especially frequent lectures do occure when an supposed to see my supervisor.

Money constraint has also delayed the progress of the work. Any project, which involves spending money is usually difficult to accomplish sue to economic crunch. The increase of material like biro and paper used in the writing of the project is also difficult.


1.6 Definition of Terms

Goal Congruence:

This means that the aims and objectives of all the workers in at an organization should be tailored towards achieving the aims and objectives of the organization.

Managerial Effort:

This means the physical and mental exertion made by workers towards a goal

Historical Cost:

This is a cost the has already been incurred and which is not relevant for decision –making purpose.

Budget Surplus:

The means excess budgeted revenue over budgeted expenditure.


Chapter Five


Summary of Findings, Conclusion and Recommendation

5.1 Summary of Finding

This study considered the impact of budgets and budgetary control on the performance of Imo state government, the research topic and the state government was considered appropriate because until now, previous researches on budgets and budgetary control have been concentrated on profit seeking organizations. In addition, there is need to know the state (IMO) government is influenced by budgets.

In order to achieve the purpose of this study, various literatures relevant to the study were consulted and a field study was also employed. The data collected were analysed and the four hypothesis formulated were empirically tested. The study therefore revealed the following:

  1. That there are nine ministries in the state civil services
  2. The staff including middle management and junior staff are not educated on the budget.
  3. Budgets are related to activities with common objectives.
  4. Members of staff are not commended or rewarded for operating according to budgets.
  5. The feedback system in the state is inadequate
  6. Variance occurs in the state’s budget but this variance is not often
  7. The state does not properly investigate the cause of variance in its expenditure budget whenever they occur.
  8. Budget preparations in the state is based on traditional or incremental budget system.
  9. There is a budget committee in the state governments budgetary process.
  10. Budget received top management support in the state.
  11. The state government has budget manual.

Finally apart from the fact, research findings has an implication which shows that all the ministries and extra ministerial departments prepare budgets but that staff generally are not educated on importance of budgets. The lack of budget education makes them see budgets as pressure devives of government, which should be avoided, if possible.

Lack of adequate feedback system is bound to weaken the control measures in the state. This has resulted in improper investigation of variances. This however is a weak process in performance monitoring and budgets development. If members of staff are not commended for operating according to budgets than the motivation to do better in future is dampered.

Finally, the fact that budget preparation are based on the traditional line item syste, implies the following that new programmes have to complete with each other for traditional line item system less of their priority; that control is exercised on budget inputs rather than outputs.

That there is a natural tendency when dealing with inputs to favour existing programmes.

From the forgoing, it means that the budgets are for from reality.


5.2 Conclusion

The conclusion reached in this research study were generated by the result of the analysis carried out on the primary data obtained. It can be seen from the assumption that responses from respondents would be objective, representative and reliable enough for a generalized statement to be made on budgets and budgetary control as tool for effective planning and decision making in ministries and parastatals in Imo state.

Based on the result of the hypothesis empirically tested and the research finding stated, the research therefore conclude the impact of budgets and budgetary controls in the stat in neither positive and negative since two hypothesis were accepted and two were rejected.

However, it is the belief of the research that if the recommendations preferred, positive results can be achieved.


5.3 Recommendations

Despite some negative affect of budget and budgetary controls in the state governments ministries and parastatals, for more positive result can still be achieved if the following recommendations are adopted by government.

Since all ministries and parastatals prepare budgets every staff that have something to do with budgets should be educated on the budgetary should be educated on the budgetary process.

This is most likely to change the age-long Notion of the budgetary process from the chief executives instrument of tenor to the chief executives instrument of welfare for all.

A means of motivating members of staff who operate according to the budget should be devised by government. This will have the dual advantage of boosting their ego and at athe same time persuating others to also operate according to budgets.

An effective system aimed at enhancing the feedback system should be put in place. This will enable reports on the performance of the budget to be received.

Instead of using the line-item system of budgeting. The government should use planning, programming budgeting system (PPBS) which analysis the output of a given programme. In other words, it gives direct companison between the cost of finding and the work performed by an activity. In addition, it exposes programme that are overlapping or contradicting in terms of achieving objectives.

There should be a system according to record performance and offer useful information for future planning and re-appraisal.


Budget And Budgetary Control As A Tool For Effective Decision And Planning In Ministries And Parastatals (A Case Study Of Ministries And Parastatals In Imo State)


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