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 )
This research work is carried out on budget and budgetary control as a tool for decision and planning with special reference to Imo state ministry of Education and National Drug Law Enforcement Agency Imo –state. This topic is chosen because of dearth in the awareness as regards the contribution of budget and budgetary control in the decision and planning of an organizations. However, for the purpose of this work the researcher highlights the purpose an effective budgetary control could serve an organization. Types of budgets, preparation of a budget manual as well as the budgeting concepts with emphasis on the planning programming budgeting system (PPBS) was dealt with extensively in the project work by the researcher. Data were collected from both primary and secondary sources and analysis of the researcher brought out a population size that she used to determine the basis for the information gathered and analyzed. The use of chi-square (X2) helped to further the test of the data gathered and interpreted. The findings of the research was observed by the help of the questionnaires, interview, analysis and hypothesis testing reveals the findings as contain in this research work based on the result of the hypothesis empirically tested, the researcher concluded that budget and budgetary control in Imo state ministry of education and National Drug Law Enforcement Agency Imo state is positive and that effort should be make to educate their staff on the need for implementation of budgetary control system. The researcher also warn strictly that for better result to be achieved in government parastatals the stated recommendation should be adopted.
1.1: GENERAL DESCRIPTION OF THE STUDY
Budgeting is essentially concerned with planning and its implementation of expected income and expenditure for a special period of time. There is need for good planning of the budget in every organization, because any organization that does not plan and implement its budget is expected to encounter a lot of problems. These problem range from mismanagement of limited resources to reckless management habit of not adhering to budgetary control measure.
Budgeting and budgetary control are two accounting techniques which top management adopt to achieve it’s task of planning, co-coordinating, directing and control in an organization. Planning was previously based on historical cost contentiously. This process increased the emergency decision which top management has to make because historical cost conventions are aid future oriented they do not aid planning.
In order to reduce to management’s emergency decision making process and it’s planning variable, budgets were introduced. This is so because managers want to know more than they have done currently in relation to cost period performance. They also want to know how they have done currently in relation to their current targeted performance.
Control on the other hand follows closely after action has taken. It is a process where by actual performance is compared with targeted/budgeted performance any deviation from this target are investigated for an indepth or positive explanation given.
Budgetary control is the techniques used for this purpose and when it is combined with budgeting, it becomes part of reasonability accounting. The aim of budgetary control is to provide a formal basis for monitory the progress of the organization as a whole and of its component part towards that achievement of the objective specified in the planning budgets.
Budgeting enjoy a wide application, they can be used in our private houses, where a civil servant who earns a monthly income will map out his objectives and plans effectively with what he has to achieved. Both profit-oriented and non-profit oriented organization uses budget in their decisions and planning. Profit oriented organization use the type of budget that is output and objective oriented to enable them know how efficient they have been 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 that is used in non-profit seeking organization like the local, state and federal government agencies. This is the line item budgeting system. This method is 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 of which money is spent.
Ibitiye (2007) given that the budget is represented as an authority to spend and as limit not be exceeded, it follows logically that the realization by managers that the budget has top management support will make them believe that they must not exceed the spending limit without authority and where it is exceeded there must be good reasons for that.
Bhatta (2004)., would like us to see the futurist aspect of budgeting through his emphasis on future, in his definition of a budget. He says that a budget it is an estimate by future source of income and expenditure including station of future intentions within a given period of time. The futuristic aspect of budget has its origin from the fact that there is a budget period during which a budget should be prepared in readiness for the next fiscal year.
Budgets fall under the realm of planning. To follow up planning. There should be element of control. Budgetary control is therefore the element of control applied to. Orjih (2001). Budgetary control is used for assigning responsibilities, planning and controlling performance guilding managerial and other activities of the firm towards the achievement of organizational objectives. If control to be effective in any organization. It should pervade targets of performance in sectional, divisional and departmental budgets and also ensure that activities of the organization, good congruence and managerial effort are achieved.
The terminology of the chartered institute of management Accounting (CIMA) also has its definition of budgetary control as the establishment of budgets relating the responsibility of executive to the requirements of a policy and the continuous comparison of actual with budgeted results either to serve by individual action the objectives of that policy or to provide a basis for its revision.
1.2: HISTORY OF CASE STUDY ORGANIZATION
Imo State is one of the 36 states of Nigeria lies in the south eastern of Nigeria. It came into existence in 1976 along with other new states created under the leadership of the late military rule of Nigeria Murtala Muhammad. It is made up of ministries and parastatals which include the ministry of education and National Drug Law Enforcement Agency.
Imo stat ministry of education is located at Block 3, Imo –State secretariat . Port Harcourt Road Owerri while Imo NDLEA office is located at old NRC party office. Aba road Owerri. They have commissioners, permanent secretaries, directors that handles the affairs of the ministry and parastatal.
Ministry of education handles the affairs of education which include primary schools, secondary schools and tertiary institutions in Imo State and report back to the government through it’s commissioner.
The NDLEA handles all cases of smuggling hard drugs such as cocaine, marijuana, heroine etc in the state, their aim is to fight against the import of hard drugs and counterfeits in the state. Report any case such through their director general to the government.
The organization is made up of commissioner, permanent secretary, the director general, directors etc.
1.3: STATEMENT OF THE PROBLEM
The statement of the problem will base on;
1. To what extents are budget being implemented to achieve result in Imo state ministry of education.
2. What are the impacts played by budget in the over all performance of the organizations under study?
3. How can budgets be use to control expenditure on the hand and assist revenue generated on the other hand.
4. What are the problems been encountered in budgeting preparation and implementation.
1.4: OBJECTIVE OF THE STUDY
The purpose of the study is to find out how budget and budgetary control works as an effective tool in decision and planning making in some ministries and parastatals that is Imo state ministry of Education and National Drug Law Enforcement Agency a government established organization in Imo state Nigeria.
- To ascertain the impact played by budgets in the over all performance of the organization under study.
- To ascertain to what extents budgets are implemented for achievement of result in Imo state ministry of Education and National Drug Enforcement Agency.
- To identify how budgets can be used to control expenditure on the hand and assist revenue generation on the other hand
- To identify problem encountered in budgeting preparation and implementation.
- To issue recommendation for improvement
1.5: RELEVANT RESEARCH QUESTION
1. What are the impact played by budgets in the over all performance of the organization under study?
2. To what extents is budget being implemented for achievement of result in Imo state ministry of Education and National Drug law enforcement Agency?
3. How can budgets be used to control expenditure on the hand and assist revenue generation on the other hand?
4. What are problems encountered in budget preparation and implementation in Nigeria Organization.
1.6: STATEMENT OF HYPOTHESIS
In an attempt to examine the problems of budgeting and budgetary control, the following hypothesis can be considered.
Ho: The work of budgeting department has not made significant impact on the performance of the organization.
Hi: The work of budgeting department has made significant impact on the performance of the organization.
Ho; Budget cannot be used as a tool for effective decision and planning in organization
Hi: Budget can be used as a tool for effective decision and planning in organization?
. Ho: There is no continuous comparison between actual and expected budget in the organization.
Hi; There is continuous comparison between actual and expected budget in the organization.
1.7: DELIMITATION (SCOPE) OF THE STUDY
SCOPE: The scope of this project will be restricted to the problem of the budget of the working capital of the organization concerned and not perspective budgetary such as budgets of long term capital.
LIMITATION: This project work is limited by the following factors;
TIME: Because of the academic work load, the researcher was almost finding it difficult to combine class work with this research work as time was not much readily available to enable movement for research materials and also catch –up with class work. Therefore this research is limited by time for proper planning.
b. FINANCE: Financial constrain played another hindering in completing the project work as visitation to sources of vital information were narrows down to the major ones due to lack of fund.
c. DEARTH OF MATERIAL: The needed materials like secondary sources of data in the form of books, magazines, newspapers, government publication, magazine are very scares and sometimes not available for research work.
d. RESPONDENTS ATTITUDE: Most respondents are not willing to let the research questions since there was nothing being given immediately for an exchange. This attitude of secrecy by the respondent constrain this project work.
1. It was assumed that the staff of Imo state ministry of education and National Drug Law enforcement Agency would give all necessary information and assistance needed in this research work.
2. It was assumed that the project supervisor will be of immense assistance to the researcher for successful completion of the research work.
3. It was assumed that the researcher will be able to meet up with the time allocated to this project wok.
4. That the findings of this research work will be generalized to obtain an effective decision and planning in an organization.
1.9: SIGNIFICANCE OF THE STUDY
The significant of this work is not far fetched. This work have been prepared to:
1. To help the Imo state ministry of education and National Drug law enforcement Agency to compare between actual and expected budget in the organization.
2. It also help them to know the impact of budgeting and budgetary control on the performance of government organisation.
3. Finally, these study when concluded, will serve as reference material to student especially to those researching further on this matter.
1.10: DEFINITION OF TERMS
Budgeting Estimate for probable future increase expenditure
Budgetary Act of expenditure
Deviation Turning away o against the formal process.
Variation change in bodily structure or form.
Restricted Keep within limit
Control power to influence or direct.
Maximization To increase
Organization all establishments of government