THE IMPACT OF BUDGET AND BUDGETARY CONTROL IN TERTIARY INSTITUTIONS

(A CASE STUDY OF IMO STATE UNIVERSITY)

 CHAPTER ONE

1.0  INTRODUCTION

Budgeting is essentially concerned with planning. According to Hausen .O. (1990). Dr. Jones discovered, failure of plan, either formally or informally, can lead to financial disaster. Careful planning is vital to the health of any organization. If that is the case, what role does budgeting play in planning and control. Simply put, plans identify objectives and action needed to achieve them.

Budgets are the actions needed to achieve them. Budgets are the quantitative expression of these plans. States in either physical or financial terms or both. Thus a budget is a method for translating terms. As a plan of action budgets can be used to control by comparing actual outcome as they happen with the planned outcomes.

Furthermore, according to Professor Anya O. Anya April 28^th 2006, guarding newspaper, the universities and the challenge of a knowledge is base on the economy (2) the said “we have seen that economic and human development indices presently confirm that Nigeria is a very poor country where otherwise immense resources and potentials have not been realized as a result squander and poor management.

We have dedicated from the above points that planning budgeting and control is very essential in all sphere of endeavor be it public or private sectors. In other words, the necessary uncertainty and complexity in the socio-political economic and public sectors of Nigeria society have been made it very difficult for co-operate entities irrespective of the nature of their business (profit oriented or service oriented) coupled with the changes in social, economic, technological and political system to achieve optimal result without setting proper planned targets. With the trend of failure recently witnessed in the financial sector, arising from factors both internal external organizations and their management should ensure that they had decision about their future.

The concept of economic scarcity of resources implies that economic units including tertiary institutions, parastatals etc must stick to action satisfaction. There may be no reason for government to establishment which the management are no strived to achieve viability for optimal result such establishments should be deliberately abandoned in order to pave way for release for the pursuit of other more economically viable investments.

We should realized that abandonment is a key to innovation but because, it frees the necessary measures and also it stimulates the search for the new ones that will replace the old ones.

However, it is for the sake of avoiding such abandonment that the researcher wanted to find out the impact of budget and budgetary control as technique to managing the business dynamics to evolve long term survival strategies of tertiary institutions.

Budget and budgetary control are two accounting techniques which the bursar in any tertiary institution can adopt in order to achieve it task of planning, co-coordinating, directing and control. Nevertheless, management is about decision-making co-ordination control. The strategies for realizing the set out goals are many but, the collectively have tools in the decision making process of management, that is the accomplishment of goals by utilizing the available resource. It can be said that poor to achieve optimal result is the need for predetermined course of action taken to accomplish set goals.

At macro level, the state represented by those possession of authority often determine the public goals and allocate available resources for their accomplishment where they are elected as in the case of a democratic setting, the process of selling target is participatory. But where the military is in control, the political interest of the ruling class determines the thrust of government policies.

In essence, a plan which is one of the features of budget a comprehensive document containing desirable set goals, chosen course of action methods of accomplishing them as all as their financial implications. Planning is mainly concerned with the feature and is defined as the establishment of objectives, the formulation, evaluation and election of the policies strategies, tactics and action enquired to achieve these objectives, it can be described as he conscious government effort to influence, direct and income cases even control changes in the principal economic variables like educational investment of a country or reign over cause of time. Control on the hand, follows closely after action has been taken. It is a process whereby actual performance is compared with targeted / budgeted performance. Budgeting control is the technique used for his purpose and when it is a combined with budget is becomes part of responsibility accounting.

The aim of budgetary control is to provide a formal a basis for maintaining the progress of the organization as a whole and of its component parts towards the achievement of the objective specified in the panned budget.

Budget enjoy a wider application and virtually human activities require some elements or setting targets through budget even through that alone does not guarantees success. They can be used in our private homes where a civil servant who earns a monthly income will map out his objectives and plan effectively, with that; he has to achieve those of his objectives. Both profit oriented and non-profit oriented organizations, institution of higher learning inductive apply budget in their activities.

The problem of hollow effects in the implementation, which lead to sentimental attachment which may lead to over commitment of funds to projects, may affect performance.

Academic institutions function as a system in which all its units should be intimately unturned ass stimulated in the government financial institutions and financial regulation to avoid in dysfunctional situation that will produce untended consequences.

It is the view of the researchers to highlight the impact which budget and budgetary control as a management technique could have in the budgetary performance of our academic tertiary institutions.

1.1  STATEMENT OF THE PROBLEM

According to Cohn Drury .A. (1987). He stated that the actions that follow managerial decisions normally involve several aspects of the business. When the fail to do this, have is a danger that managers may make decision that they believe are in the best interest of the organization when in fact best interest of the organization when in fact taken together, they are not.

Tertiary institution is a nonprofit making organization in most cases pay little or no attention towards the achievement of any set goal. Give to the fact that they not for profit making purposes, for proper, planning, budgeting and effective control system become an illusion. This has resulted into financial crisis which culminated into inadequate provision of learning infrastructural facilities, delayed / non-payment of salaries, strike actions and lack of commitment to work among staff members.

These institutions also cannot make—up even with the subventions given to them by the government. This has been attributed to various factors prominent among which is the ineffectiveness of budget and budgetary control system in these institutions.

This research work is therefore designed to ascertain the impact of the budget and budgetary control in tertiary institutions through a case study of Imo state university.

1.2  PURPOSE OF THE STUDY

Budget and budgetary control is a tool for management control. As with any other aspect of management, the budget process and budgetary control may or may prove successful in assisting government or individuals to achieve its goals. The use of budget is not a cure all for all organizational problems. It is the purpose of this research work to address the following:

1)                 To avail the application of budget and budgetary control as a management technique in tertiary institution

2)                 To determine the extent to which ill-defined goal would be a conduit pipe for siphoning government resources

3)                 To find out whether budget and budgetary control serve as a control mechanism

4)                 To find out what it takes for budgetary to be effective in management in tertiary institution

5)                 To determine the extent to which budgetary provides.

1.3  OBJECTIVES OF THE STUDY

Budget and budgetary control, is intended to serve the management as a constant reminder of the plan they have adopted. As such, it provides a blue print they can consult from time to time as they work to implement the sense, it serves as a set of general instructions of the department / management and divisional management reflecting them the actions they have agreed to take and to results they have agreed to strive for. In summary of the following, budget and budgetary control has the below mentioned objective:

1)         To force management to anal life of the tertiary institution activities critically and creatively

2)         To direct some of management attention from the present to the future

3)         To enable management to anticipate problems or opportunities in time to deal with them effectively

4)         To reinforce the management motivation to work to achieve the tertiary institution goals and objectives

5)         To give the management a continuing reminder of the actions have decided on

6)         To provide a reference point for control reporting

1.4    RESEARCH QUESTION

He following research question have been formulated to act as a framework for this study, so as to enable the researchers find out the impact of budget and budgeting control in the performance of tertiary institutions.

1)         Can ill-defined goal be use as conduct pipe for siphoning government resources?

2)         Does budget and budgeting control serve as a control mechanism?

3)         Does budgeting require active participation and management commitment?

4)         Does budgeting provide basis for comparison and enhancement of performance

1.5  SCOPE OF THE STUDY

This work will be carried out through the study of impact of budget and budgeting control in tertiary institution, Imo state university. Furthermore, the research will make use of the school library and also visit mar by institution.

The scope of budget and budgetary control is very diverse and broad. Any of budgets which enable an organization to be conducted more efficiently is regarded as budget and budgetary control. Budget is also psychological device to obtain the result or the fix the responsibility and constantly keep conscious check on the level of performance which co-ordinates all the achievement of the tertiary institution.

a)          The master budgets: This is the budget which projects the activities of the organization during the budget period. The master budget outlines the tertiary institution objective and steps for achieving tertiary institution objective and steps for achieving them. It consists of at last three types of budgets (the subsidiary budget to the master budget).

Operating budgets:It usually consists of two parts: A programme budget and a responsibility budget. The programme that the tertiary institution plans to undertake during the year.

b)         The cash budget: This is simply a financial budget detailing the planned cash receipt and payments. It is one of the most important and one of the last to be prepared.

1.6    ASSUMPTIONS OF THE STUDY

Budgeting is about making plans for the future, implement more plan and monitoring activities to see the whether they conform to the plans budgetary control in its totality, organizations budget for a variety of reasons, some of which can be continued as follows:

1)         The research will provide the needs of institutions of higher learning in Imo state university in particular, and Nigeria in general with the knowledge of how to apply budget and budgeting control as a management technique in tertiary institutions

2)         The research will also enable government, the chief financer of education to realize that ill-defined goal by tertiary institution could be a conduct pipe for siphoning government resources

3)         The research work will educate management (principle officers and their sub-ordinate ) on how budget and budgetary control serve as a tool of control

4)         A budget and budgetary control assists delegated of authority and is a powerful delegation of authority in tertiary institution

5)         Furthermore, the research work as well will enable management to realize that there is need for active participation in budgetary in budgeting in tertiary institution

1.7  DELIMITATION OF THE STUDY

Due to time and financial constraint that the research encountered in the process or carrying on this project and also it is very difficult for must staff to release official information to researchers.

The study was also limited as a result o inaccessibility of research materials.

However, the control system in non-profit seeking organization are never as highly developed as in profit oriented organizations because of under organizational goals, dominance by professionals and more difficult measurement standards. Budget will be in effective if it is unnecessarily detailed and complicated.

1.8  DEFINITION OF TERMS

The following terms have been considered necessary to be defined in order to explain their meaning with the content of this work.

Goal congruence:This means that, the aims and objectives of all the workers in an organization should be focus towards achieving the aims and objectives of the organization.

Tertiary institution:The tertiary institution includes all federal and state government owned universities, polytechnic and colleges of education.

Managerial effort:This is the physical and mental exertion made by mangers towards set goals, managerial function like planning, organizing, supervision, co-coordinating etc. these tools and techniques are applied by managers of organization both private and public on managerial effort to solve their business decision problems.

Responsibility accounting:This is based on the recognition of individual areas of responsibility as specified in a firms structure. This implied that cost and revenue are controlled as applicable by using responsibility accounting.

Management:This is also a series of activities that a firm engages it managers to guide, plans and equally handle responsibilities and changes that will be ahead.

Budget: A budget can be defined as a quantitative expression of the operational plans for an organization for a future according period.

BUDGETARY CONTROL:It has been severally defined. J. Batty says “budgetary control in its complete form involves a predetermined plan in financial terms, to cover all phase of business activities and the operation of that plan in such a way that anticipated profit is, as near as possible, achieved.

TEST OF HYPOTHESIS

Ho:  The University does not consider budgeting and        budgetary control useful as a management tools.

Hi:  The University considers budgeting and budgetary       control as useful management tools.

Ho:  The University does not prepare its project for a        specific period of time.

Hi:  The University prepares its budgets for a specific period of time.

Ho:  The Imo state university budget does not calls for      appropriate authorization and approval.

Hi:  The Imo state university budget calls for appropriate   authorization and approval.

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