BUDGET DISCIPLINE AND MANAGEMENT OF FUND (A CASE STUDY OF UGHELLI NORTH LOCAL GOVERNMENT AREA OF DELTA STATE)
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BUDGET DISCIPLINE AND MANAGEMENT OF
FUND
(A CASE STUDY OF UGHELLI NORTH LOCAL
GOVERNMENT AREA OF DELTA STATE)
ABSTRACT
This study is centred
on Budget discipline and Management of local government funds with emphasis on
Ughelli North Local Government Area of Delta State.
Ughelli North Local
Government was particularly chosen because of it natural resources which
include kaolin, sharp sands, crude oil/petroleum and natural gas coupled with
allocation from federation account.
Over the years the
emphasis on Governance has been to deliver the dividend of democracy to the
people at grassroots. Thus, the government both at State and the Federal level
has ensured the adequate allocation of revenue to the Local Government. Be this
as it may, it has been notice or seen that this dividend cannot be delivered in
a place devoid of financial prudence and budgetary discipline.
All through the
project work, we have seen that once there is fiscal discipline, budgetary
implementation and monitoring thrives for the benefit of the citizens
TABLE OF
CONTENTS
Title
Table of
Contents
List of
Tables
Abstract
CHAPTER
ONE
1.1
Background of the
Study
1.2
The People of Ughelli North Local Government Are
1.3
Statement of the Problems
1.4
Objectives of the
Study
1.5
Scope of the
Study
1.6
Significance of the
Study
1.7
Limitations of the
Study
1.8
Research
Methodology
1.9
Definition of the Terms
1.10
References
CHAPTER TWO
2.1
Budget Discipline-An
overview
2.2
Types of
Budgets
2.3
Steps in Planning a Budget
2.4
Procedures in approving a Budget
2.5
Evaluation of Budget Performance
2.6
Uses of
Budgets
2.7
Problems associated with Budget implementations
2.8
Existing Systems in maintaining Budget Discipline
2.9
References
CHAPTER THREE
3.0
Introduction
3.1 Sources of Data
Collection
3.2 Sampled
Areas
3.3 Data Collection
Techniques
3.4 Data
Analysis
CHAPTER FOUR
4.1
Introduction
4.2 Data
Presentation
4.3 Data Analysis and
Interpretation
CHAPTER FIVE
5.1
Introduction
5.2
Conclusion
5.3
Recommendations
Bibliography
CHAPTER ONE
1.1
BACKGROUND OF THE STUDY
According to the
Oxford Advanced learners of contemporary English, “a budget is an official
statement by the government of a country’s income from taxes, etc. and how it
will be spent in a particular period.
T.
Lucey defines a budget as “a plan expressed
in money. It is prepared and approved prior to the budget period and may
show income, expenditure and the capital to be employed. It may be drawn
up showing incremental effects on former budgeted or actual figures or be
compiled by zero-based budgeting.
R. A. Adams sees
a budget as “a future plan of action for the whole organization or a section
thereof. He also defined a budget as a financial and or quantitative
statement prepared and approved prior to a defined period of time of the
policies to be pursued by the organization in order to achieve organizational
goals and objectives.
From the
aforementioned, a budget is, simply put, a plan of how a person, an
organization or government will generate money and spend same within a given
period of time.
Man, as a social
animal who must fend for itself has over the eons learnt the necessity of
planning if he must survive. He (man) up the ante when he began
manufacturing/producing goods. This increased again with the
institutionalization of the government apparatus. When man turned over
his security into a body, it became necessary for this body (government) to provide
a minimal level of security, comfort, education, etc for man. To secure
these services, taxes where imposed and collected and then redistributed.
This called for planning, hence the birth of budgeting in governance.
Since a budget is intent, it means that it could deviate from the proposed
goals. This could be due to various reasons ranging from human, a fall in
revenue generated or poor policy implementation and/or poor fiscal discipline.
In other to avoid this, a budget ought to be and should be backed by in built
checks and regulatory frame work to ensure discipline and policy implementation
be it an individual, corporate bodies or as in this case, governments.
Budget discipline is
akin to budget control. According to R. A. Adams, budgetary control
is “the establishment of budget, relating the responsibility of the executives
to the requirement of the policy and the continuous comparison of actual
performance with budgeted level so as to secure either by individual or
collective action the objectives of such policies or a revision thereof”. From
the above definition, budget discipline means a deliberate attempt of comparing
results/performance with the intended outcome. Thus, corrections or
adjustments could be made to ensure optimal budgetary performance.
Functionally, government has a
responsibility towards its citizens – to provide adequate security, social
amenities and infrastructural development. Consequently, budget
implementation should be devoid of partisan politics and party affiliations and
favouritism/nepotism.
The local government
is the third tier of government (Federal being first and the state government
being second respectively) in Nigeria. It goes without saying that the
state government wields considerable influence over the Local Government
Councils. Be that as it were, the functions of Local Government Councils
are now recognized by the (Fourth schedule) of the Nigeria constitution.
These functions which are not limited to, include the following:
1.
Collection of rates, radio and T.V. licence fees
2.
Naming of roads and numbering of houses.
3.
Registration of deaths, births and marriages
4.
Establishment and maintenance of market stalls, car parks and public
conveniences
5.
Licensing of bicycles, motor-cycles, trucks, cars etc.
6.
Assessment of properties for the purpose of levying tax
7.
Establishment and maintenance of cemeteries, burial grounds and home for the
destitute and infirm.
8.
Construction and maintenance of roads, streets, drains, parks and other public
facilities prescribed by the state legislature.
A Local Government is
controlled by the office of the Governor. The Council submits its budget
to the office of the Governor where it is examined and approved.
The sources of revenue of a Local
Government Council can be grouped into three:
(a)
Statutory: Here the Federal government pays 20% from the Federation
Account direct into the Council direct.
(b)
Permissive sources of income: These include license fees, special rates,
tenement rates etc.
(c)
Incidental sources of Revenue: These include proceeds from economic
project, grants from federal, state governments and international donors,
loans, investment incomes, donations, etc.
While it is not arguable that the
sources of revenue to a local government council are limited, however, it is an
axiomatic fact that much money comes into the councils. The question is:
Do we feel the impact of such monies? One must not lose sight of the fact
that the local council was contrived to bring government closer to the people
so that it (government) can be felt at the grass root level.
In the local
government council, there ought to be a budget office whose function is to
provide budget function, budget implementation and fiscal policies. It is
worthy to note that the budget office has six departments. Four of these
departments are operational departments which consist of Revenue, Expenditure,
Budget Monitoring and Evaluation and Fiscal Polices departments. The
other two are service departments and consists of Administrations
departments. Each of these departments can be sub-divided into divisions
for functional purposes.
It is imperative to
note that all budget systems have three basic tasks:
(a)
Maintaining aggregate fiscal disciplines
(b)
Allocate resources in accord with government priorities
(c)
To promote efficient delivery of services.
It is sad to note
that inspite of these existing structures, when it comes to the nitty gritty of
budgeting and budget implementation, these structures are abandoned and are at
best reduced to center for the collection and collation of budgetary figures!
One thing that is
common in the average Nigerian psyche is the ability to put forward well
intended plans. However, when it comes to execution that is another thing
all together. Consequently, budgets and their presentations are seen as
annual rituals by government officials. We pay lip service to the implementation
of budgetary proposals and thus the populace is the worse for it!
1.2
THE PEOPLE OF UGHELLI NORTH LOCAL GOVERNMENT AREA
Nigeria has (774)
seven hundred and seventy-four Local Government Areas. Following the
creation of Delta State on August 27, 1991 out of the defunct Bendel State by
the Ibrahim Babaginda administration, Ughelli North Local Government Area was
created in 1991 as one of the new local councils.
Ughelli North Local
Government Council is bounded to the East by Isoko North Local Government Council,
to the West by Okpe Local Government Council, to the South by Patani Local
Government Council and to North by Ukwuani Local Government Council.
According to the 1992
population census, Ughelli North Local Government Council has a population
figure of 0.8 million persons. The local council is inhabited by the
Urhobo speaking ethnic group. The headquarter, i.e. administrative
headquarters of this local council in Ughelli town. Other major town in
the Council includes Agbarha-Otor, Evwreni, Orogun, Uwheru, Agbarho and Ewu.
The people engage in
agriculture, hunting and trapping of animals, fishing and local arts and
crafts.
The Local Government
Council is richly endowed with natural resources which include Kaolin, sharp
sands, crude oil/petroleum and natural gas. Because of its natural
endowment, the local council receives huge sums of money from the Federation
Accounts as it is statutorily recommended. For instance in the month of
May 2004, the Local Government Council received a total sum of N66, 730,444.49
as its allocation. If we hold this figure constant, it would translate to
the fact that for the year 2004, the council received the sum of N800,
765,333.88! That is a whooping sum of eight hundred million naira from
the Federation Account alone. If other sources of income – 10% from the
state, internally generated funds, grants in aid and loans, it would run into
billions for a year.
For instance, the budget outline for
the Local Government Council for 2004, 2005, 2006, 2007 and 2008 is shown below.
This is actually in raw figures and not broken down into specifics.
|
YEAR
|
AMOUNT BUDGETED =N=
|
ACTUAL= N=
|
VARIANCE =N=
|
|
2004
|
1,241,362,480.68
|
1,302,362,820.68
|
+61,000,341.00
|
|
2005
|
1,001,468,840.75
|
1,010,532,840.32
|
+9,064,000.04
|
|
2006
|
1,201,580,640.63
|
1,306,432,320.80
|
+104,851,680.17
|
|
2007
|
2,602,100,280.74
|
2,530,807,420.30
|
- 71,292,860.44
|
|
2008
|
2,802,150,480.35
|
2,792,150,480,20
|
-10,000,000.15
|
Table 1:
Budget figures
Source: Council
records
The above budget
estimates are fantastic to say the least. However, one wonders what
happened during the implementation. This is because in five years, the
council expended/budgeted a total sum of N8, 484 billions but what do we have
to show for it?
1.3
STATEMENT OF THE PROBLEMS
In the course of
carrying out this investigative research, the ability to get relevant and
reliable data relating to budgeting and budget implementation in Ughelli North
Local Government Council remained a daunting task. This may not be
unconnected with the fact that people were skeptical as to the use for which
the figures were being asked and also those in possession of such information
would not want to divulge same due to its “classified” nature since it would be
obvious that these figure which were actually bloated would now be in public
domain.
At the present, there
is the urgent need for government to ensure strong fiscal discipline and
spending so as to ensure the fulfillment of her primary purpose. Thus the
budget monitoring and implementation department should ensure that due process
is followed in her activities and same should follow the use of a comprehensive
integrated accounting system, which provides a reliable basis for assessing
payment arrears in the treasury. They should also go out into the field
to monitor projects and filled detailed reports.
However, we know that
the evaluation of performance on specific job indices would be difficult
because of worker attitude. Workers are of the view that the expression
of and personal loyalty to their superiors is more important and is expected of
them than the need for efficient and effective contribution to achieve job or
budget objectives.
The Research problems
which the researcher intends to find out are:
(i)
What strategies or systems can be adopted for performance evaluation in Ughelli
North Local Government Area?
(ii)
What strategies can be adopted to evaluate staff attitude towards jobs in
Ughelli North Local Government Area?
(iii)
How best can the excesses of an Executive Chairman be put in check.
(iv)
How effective is the legislative arm of the Ughelli North Local Government
Area?
(v)
What is the relationship between the Executive and Legislative Like?
(vi)
What other inhibitors are associated with fund management in Ughelli North
Local Government Area?
(vii)
How are funds managed for the benefit of the stakeholders in Ughelli North
Local Government Council?
1.4
OBJECTIVES OF THE STUDY
The
objectives of any research are usually a mirror image of the research questions
and the knowledge gap it intends to fill. The objectives of this study
are as follows:
(i)
To examine the strategies or systems adopted for performance evaluation in
Ughelli North Local Government Area.
(ii)
To examine the strategies adopted for evaluation of staff attitude towards jobs
in Ughelli North Local Government Area.
(iii)
To find and proffer solutions to existing (if any) excesses of the Executive
Chairman.
(iv)
To find out the usefulness of the legislative laws and their implementation.
(v)
To find and proffer solutions to the management of funds in Ughelli North Local
Government Area.
(vi)
To determine if or not a cordial relationship exists between the Executive and
the Legislative arms in Ughelli North Local Government Area.
(vii)
To find and proffer amenable reforms that will strengthen budget implementation
in the Local Government
1.5
SCOPE OF THE STUDY
In any scientific
research, the area under study gives the population. It may not be very
feasible to access the whole population, thus for convenience, a particular
size or number is taken. This number would then be subjected to certain
scientific analysis. This number is termed the sample.
Delta State has
twenty-five (25) local government areas. Ughelli North been created in
1991 has existed for more than eighteen years (18) now. It would be quite
an arduous task to collate all annual budgetary figures of the twenty-five
local councils and subject same to scientific analysis.
In view of the
aforesaid, Ughelli North Local Government Area was chosen and specifically the
years 2004, 2005, 2006, 2007 and 2008 were chosen. This choice was not
based on any scientific approach or parameters but for ease of administration
and to cut cost. On this note, the scope of this study is limited to
analysis carried out on budget discipline and management of funds in Ughelli
North Local Government Area of Delta State. It is pertinent to note that
Ughelli North Local Government Area is an oil (crude oil) producing area.
It receive huge sum from the federation account monthly. But how has
these funds been managed?
1.6
SIGNIFICANCE OF THE STUDY
The relevance of this
study cannot be over-emphasized. It is my candid view that this study
will contribute in no small measure to the existing stock of knowledge on
topics of this nature. It will also be of significance in the following
ways:
(i)
It will assist the local governments in Ughelli North in improving their fiscal
responsibility and to spend her funds towards fulfilling her primary purpose.
(ii)
It will pave ways to detect inefficiency and indiscipline among all
stakeholders.
(iii)
It will proffer corrective measure to be taken to enhance fiscal and budget
implementation discipline.
(iv)
It will also show that government spending is sustainable, create value for
money and direct the local council towards its objectives and priorities.
(v)
It will assist local governments in the future when they (the council) is
preparing for budgeting.
1.7
RESEARCH METHODOLOGY
Since every research
work seeks to find out; and thus offers explanations why certain anomalies
exist. To do this, a well designed strategy of finding out why the
anomalies exist is put in place.
The sample population
is the employees or personnel of the Council; the legislative arms/elected
Councilors and the Executive chairman.
The sources of data
were through primary sources from the sampled population.
Questionnaires were
administered and the responses therefrom were subjected to theoretical analysis
to test the research questions which were put forward and results were obtained
using simple percentage method.
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