THE IMPACT OF POOR BUDGETARY IMPLEMENTATION ON CONSTRUCTION COMPANIES (A STUDY OF SELECTED COMPANIES)

ABSTRACT

The study intends to investigate the impact of poor budgetary implementation in construction companies. The purpose is to specifically identify the major causes of poor budgetary implementation practices in construction companies using megastar technical and Construction Company Ltd, Aleed Construction Company, Anasami Construction Nig Ltd, Sametech Construction and C &C Construction Co. Ltd as case study. It is to determine the impact of poor budgetary implementation in construction companies and offer useful and meaningful suggestions for improving on the identified problems based on the findings. The study was carried out for the five companies. The researcher made use of primary and secondary sources of data. The primary sources with respect to this study include the various management staff of the companies and the account staff of the companies selected. Information obtained from these people were by asking face to face questions and recording their responses, then questionnaires were also administered to them for more response. A statistical approach (yaro yamen) was used in determining both the sample size and the proportion of the sample. Then the researcher used simple percentage and chi-square analysis to analyze the data collected. The study revealed that inadequate or poor budgetary implementation practices are as a result of deviation from the budgetary principles and standards, manipulation of budget by corrupt officials, late release of fund budgeted, etc. Recommendations were made based on the findings. The researcher recommended that there should be timely release of budget so as not to disrupt smooth operations of the companies. There should be an efficient monitoring of how the budget is implemented in the companies. It was also recommended that all employees of the companies should understand how a budget is implemented in the companies. The management of the companies were also advised to motivate employees by encouraging employees through incentives and benefits in order to achieve the objectives of the organization.

CHAPTER ONE

1.1  BACKGROUND OF THE STUDY

            In the traditional sense, the primary purpose of preparing budget is to understand and control costs. Budget preparation is very useful in a project as a planning and controlling tool. Budget could be employed by the company to get priorities among projects competing for limited resources. It enables the company to set the machinery in motion for meeting the interim valuations as when due and also used to justify the  elimination of uneconomic projects as well as the revision of its objectives to meet the demand of a manageable project.

            Results of descriptive/non parametric statistical technique indicate that one of the major problems confronting the construction sector in Nigeria is inadequate managerial control in the form of sound budget planning and control. The primary concern during implementation of budget is to ensure the fulfillment of the financial and economic aspect of budget outlays. The financial tasks include programmed spending of the amounts for the purpose specified and avoiding lapses or a rush of expenditure towards the end of the financial year. Budgetary implementation is the enforcement of the set objectives taking appropriate actions to bring performance in line with planned targets.

1. STATEMENT OF THE PROBLEM

Numerous problems militate against an efficient budgetary implementation. Benneth (1975:23) was of the view that “statute differences or more accurately role conflict between budget staff and line personnel is an important source of unfunctional consequence of a budgetary system. This implies that the basic problem of budgetary implementation arise from differences in the way budget staff and line personnel understand the budgeting system.

Line employees see budgets as merely emphasizing history, being too rigid, unrealistic, unattainable and ambiguous. The budget staff are seen as over-concerned with figures, unconcerned with line problems and cut off by a language of their own (ie presenting complicated format). These problems would affect the effectiveness of budget system directly or indirectly through their effects on communication, motivation and participation.  

Again, under the volatile conditions in which they work, managers often lack up-to-date information on which to base their decisions. There is always a time lag involved in the process of preparing and approving estimates of proposed expenditures in most companies. This time lag matters less in a stable economy where factors affecting budgetary decisions change  slowly. But in the fast changing financial conditions of low income countries, it can make formal budgetary procedures impossible to follow.

Another important problem of budgetary implementation is the unrestricted transfer of funds from one category of expenditure to another. Lewis (1967:208) opined that “the characteristics of the African financial environment and changes that take place after the budget has been approved”. So all these lead to the study of “The Impact of Poor Budgetary Implementation in Construction Companies (A study of Megastar Technical and Construction Company Limited, Aleed Construction Company, Anasami Construction Nig Ltd, Sametech Construction and C & C Construction Co. Ltd).