BUDGET AND BUDGETARY CONTROL AS A TOOL FOR EFFECTIVE DECISION AND PLANNING IN MINISTRIES AND PARASTATALS
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
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 aer 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 eectively 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 eicient 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 oen 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 elicit managerial eort, which 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.
a. How are organizational goals or objectives related to individual or management?
b. Are there goal congruence and managerial eort, which is conjunction may motivate?
c. How participatory is their budgetary process.
d. Do they regard the budget as an authority to spend and a limit not to be exceeded?
e. How do they explain the deviations arising from the budget?
f. Do they normally have principal factor ?
g. Is there a coordinating committee to integrate the eorts of all the functional sta who prepare the budget?
h. Does top management give its full support to the budget?
i. Are the budgets based on time horizon?
1.4 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 planning government ministries and parastatals in Imo state, the following specific hypothesis based on planning and control process is tested empirically.
Planning HO: The budgets are not related to activities with common objectives and so there is no responsibility accounting.
HI: The budgets are related to activities with common actives and so there is responsibility accounting.
2. HO: The sta are not commended for operating to the budget and so there is no motivation.
HI: The sta are commended for operating according to the budget and so there is motivation.
Control
3. HO: There is no feedback showing how well budgets 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. 4. HO: There is no investigation of variance from the budget.
HI: There is investigation of variance from the budget.
1.5 OBJECTIVE OF THE STUDY The purpose of the study is to find how budgets and budgetary control is used as a tool for eective 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.
1.6 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 compiled 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.
1.7 LIMITATION OF THE STUDY
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 conciliating 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.
