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, and 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 adviced to motivate employees by encouraging
employees through incentives and benefits in order to achieve the
objectives of the organization.
CHAPTER ONE
1.0 INTRODUCTION
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.
1.2 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 arises 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).
1.3 OBJECTIVES OF THE STUDY
Major objectives of this study is to
investigate the impact of poor budgetary implementation 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 a case study.
The study will specifically:
- Identify the major causes of poor budgetary implementation practices in the companies under study.
- Determine the impact of poor budgetary implementation in construction companies.
- Offer useful and meaningful suggestion for improving on the identified problems based on findings.
1.4 RESEARCH QUESTIONS
The following research questions are formulated for the purpose of the study:
- What are the causes of poor budgetary implementation practices in construction companies?
- To what extent has poor budgetary implementation practices impacted in construction companies?
- How can poor budgetary implementation problems be improved to enhance the viability of construction companies to achieve their desired goals and objectives?
1.5 HYPOTHESIS
In order to solve the problems of poor
budgetary implementation, the study intends to test and prove or
disapprove the following hypothesis
- Ho: There is no significant relationship between poor budgetary implementation and late release of fund by responsible officials in construction companies.
- Ho: Poor budgetary implementations do not hamper the growth of construction companies.
- H0: Poor budgetary implementation problems cannot be improved in construction companies to enhance viability of projects.
1.6 SIGNIFICANCE OF THE STUDY
The result of the study is important for the following reasons:
It is to serve as standpoint from which
business managers could design an effective machinery for budgetary
implementation practices. Enhancing the viability of projects embarked
upon by companies to achieve the desired objectives by improving the
status of the company.
Helping prospective and potential
investors/industrialists to realize the need for adequate budgetary
implementation towards industrial growth. The study will also give
research students and interest groups in future an insight into the
various aspect of budgetary procedures and its impact on the efficient
resource management in companies.
1.7 LIMITATIONS OF THE STUDY
The following limitations are inherent in the study.
Lack of enough available sufficient data,
because most of the vital documents needed for the research from the
company were not completely provided for the researcher.
Poor information management and outdated
materials in our libraries also pose a problem. Also time is another
factor since no research work is exhaustible, the fact is that the time
required for completion of this work is reasonably short.
However, the study has proffered much
efforts to analyze the budgetary implementation procedure based on the
available data taking into consideration the above limitations.
1.8 SCOPE OF THE STUDY
The scope of this study is restricted to
the impact of poor budgetary implementation in construction companies.
The areas especially in focus are the construction industry where
Megaster technical and Construction Company Ltd, Aleed Construction
Company, Anasami Construction Nig Ltd, Sametech Construction and C &
C Construction Co. Ltd has been used as case study. The scope in terms
of respondents include: management and staff of accounts departments of
the various companies for the study. These are people that believed to
provide the required information on the subject matter for the study.
1.9 DEFINITION OF TERMS
Traditional Budgeting: a
short range fiscal management and expenditure control carried out
through assemblage of costs by type of resources, input and by neither
organizational nor functional activities. Norvick (19967:3742)
BUDGET IMPLEMENTATION: The science based
art of regulating the actual to be in parity with the set standard, to
meet the economic demands placed on a business enterprise.
RESPONSIBILITY HOLDER: One appointed to
lead and account for the operational unit of a firm with clear
definition of their areas of responsibility.
BUDGET: A financial or quantitative
statement, prepared prior to a specified accounting period, containing
the plans and policies to be pursued during that period. It is used as
the basis for budgetary control.
MANAGEMENT ACCOUNTING: The techniques
used to collect, process and present financial and quantitative data
within an organization to help effective performance measurement, cost
control, planning, pricing and decision making to take place.
ZERO-BASE BUDGETING (ZBB): Is a
management process that provides for systematic consideration of all
programmes and activities in conjunction with the formulation of budget
requests and programme planning.
BUDGETARY CONTROL: The process by which
financial control is exercised with in an organization. Budgets for
income and expenditure for each function of the organization are
prepared in advance of an accounting period and then compared with
actual performance to establish any variances.
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