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THE
PROBLEM OF BUDGET AND BUDGETARY AS MANAGEMENT TOOL FOR DECISION MAKING
ABSTRACT
The scarcity of human and material resources, the competitive nature and the
uncertainty about future has made both government and most modern business
enterprises to find away of improving upon them performance to achieve
increasing productivity, profitability and reduction on cost. A common
instrument is a good budgets and budgetary control system.
The work was aimed at a study of the
role of budget and budgetary control system, its attendant problems and
remedies. The study also deals on how the state government uses budgetary
control to make decision for effective economic management.
The study observed the inherent
problems on drawbacks in the implementation of the budget and budgetary control
system as follows:
i.
The problem of ensuring involvement of departmental heads.
ii.
Lack of proper understanding of the system by departmental heads.
iii.
Departmental heads pursing individual goods instead of organizations goals.
In conclusion, the following
recommendation were made:
i.
The minimum qualification for those involved in budget preparation should not
be less than HND/B.SC.
ii.
Flexible budgets should not be adopted to take care of fluctuation of the naira
against other foreign currencies.
iii.
Those responsible for budget preparation should undergo training programmes,
seminars and workshop at least one every year.
iv.
Adequate planning and control through budget and budgetary controls will help
greatly the overall performance of government and Nigeria as a whole.
TABLE OF CONTENTS
CHAPTER ONE:
1.0
Introduction
1.1 Purpose of
the study
1.2
Significance of the study
1.3
Scope and limitation of the study
1.4
Definition of terms
CHAPTER TWO:
2.0 Literature
Review
2.1
Definition of budget and budgetary control
2.2
The budget period
2.3
Purpose for preparing budget
2.4
A comprehensive budgetary system
2.5
Merits and demerits of budgetary control
2.6
Human aspects of budgeting and budgetary control
CHAPTER THREE:
3.0 Summary of
findings, conclusion and recommendation
3.1
Discussion of findings
3.2
Conclusion
3.3
Recommendations
Bibliography
CHAPTER ONE
INTRODUCTION:
A successful financial administration
in government and any organization rests on two prerequisite system, namely,
accounting and financial control.
These are the essence of budgeting and
budgetary control. Budding and budgetary control are designable to ensure
that business organizations survive and meet the expectations of
investors. For government, they underline government ability to meet its
responsibility for ensuring stable price level, high level of employment, law
and order, and good balance of payments. In order to achieve economics in
the use of resources or maximize productivity, there is need to plan so as to
help management in decision making.
Budget has been defined in various ways
by different authors and by both private and public entities but the underlying
philosophy and concept remains the same.
Business sectors look at budget as a
quantitative plan of action and policies (usually monetary) prepared and
approved prior to the time which it related.
T. Lucey (1983) ‘Government sector
looks at budget from legal point of view as proposed estimates by revenue and
expenditure within a fiscal year. According to Steamy (1992) government
budgets usually consists of the following features:
1.
A general review of the economy in terms of its performance in the last budget
year.
2.
The estimates, both revenue and expenditure, arranged under recurrent and capital
groupings.
3.
The fiscal monetary and other controls to be introduced by the government.
According to Chartered Institute of
Management Accountant (CIMA), budget is defined as “financial and quantitative
statements prepared and approved prior to a defined period of time of the
policy to be pursued during that period for the purpose of attaining a given
objective. They may involve income, expenditure and employment of
capital. Budget could be said to be a standard with which to measure the
actual achievement of people, departments and firms. On the other hand,
budgeting control has been defined.
However, Chartered Institute of
Management Accountant (CIMA) defined budgetary control as the establishment of
budget relating the responsibilities of executives to the requirement policy,
and the continuous comparison of actual with budgeted results.
Budgetary control is usually operated
with a system of standard costing, because both systems are interrelated at not
interdependent. Budgetary control is thus a system of controlling costs
which includes the preparation of budgets, comparing actual performance with
budgeted and acting upon results to achieve maximum profit and set objectives.
1.1 PURPOSE
OF THE STUDY:
The purpose of this study is to look
critically into relevant areas of budget and budgetary control. Thus, it
is to find out what type of budget and budgetary control are in use in Enugu
State Government, what circumstances warrant their use, investigate whether or
not budgetary control as management of the resources of the state, what extent
this tool is used to enable the State Government take prudent decision that
will helps achieve her objectives. The problems the State Government
encounter during and after the budget process and how to curb these problems.
1.2
SIGNIFICANCE OF THE STUDY:
A successful study of the subject
matter of this research will be of immense advantage to Nigeria as a
whole. This is because, a full analysis of budget and budgetary control,
will enable them to tackle most of their economic problems such as:
1.
The high inflation
2.
High input bills
3.
Devaluation of naira
4.
Huge overseas debts/borrowing
5.
Low survival rate of business
If all these problems were solved,
there will be efficient use of our resources and this country will be worthy of
emulation.
1.3
DEFINITION OF TERMS:
1. BUDGET:
This is defined as a comprehensive and
co-ordinated plans, expressed in financial terms for the operations and
resources of an enterprise for some specific period in future.
2. PLANNING:
Decision making starts with planning
and planning is the process of determining objectives and goals and the future
course of action to attain them.
3. BUDGETING:
Budgeting is the act of preparing a
budget. It is the process of preparing a short and detailed plan of
activities in an organization and converting the strategic long-term plan into
action.
4. BUDGETARY
CONTROL:
Budgetary control is the use of budgets
to plan and control the activities of an enterprise. It involves:
(a)
Setting standards
(b)
Comparing actual performance with standards to identify deviations.
(c)
Initiating actions to correct the deviations.
5. ORGANIZATION:
It means all establishments whether
government or privately owned.
6. BUSINESS:
Is any establishment which has profit motive or maximization as its major
objectives.
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