1.1 Introduction
Budgeting is the set of the activities of forecasting the financial demands of company in the future (Garisson, etal., 2003). A budget is a comprehensive plan which depicts the information about acquiring and using resource saver a certain period of time. During the Budgeting process the anticipated levels of sales, cash flows and probable costs are assigned by the management (Horngren, 2006). Budgeting serve multiple functions and offer variety of information to the overall operations of business enterprise. Today the important of budget and budgetary control can never be over emphasized. Thus for survival of any oil cooperation, management need to embark on budget to effect proper planning and control. Proper budgeting can never affect efficient plans of an organization without control.
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.
1.2 Background of Study
The increasing complexity of business operation and the ever-changing conditions of the business environment-social, economic, technology and political factors make it increasingly difficult for a company to consistently earn a profit that constitutes a fair return on the capital investment. The internal operation of a firm using financial tools has been a very long time; management has to have a plan of action as a means of monitoring profit and financial control.
Budgeting is the accepted basis for profit, planning and financial control. It has been practice effectively and profitably by many progressive companies who generally regard it not simply as a procedure but as one of the more important of process of management. Budgeting is one of the management tools that force manager to perform according to a given level of expectation.
The process of preparing the budget forces the executive to become better administrator. It puts planning in the first key and budgeting primary attention directing because it helps managers to focus in the operating problem early enough. For effective planning or action, budgeting is usually been as an integral of various plans and providing feedback for the actual result. Budgeting has many purposes.
The primary purpose of budgeting is conducted under favourable conditions, there is no doubt that a firm which budget will tend to perform rather better than a similar one that does not budget. Budgetary control is control technique which when the compares of the planned state of affairs with actually state of affairs and the continuous devising of means of correcting the deviation. It involves the use of available technique such as operational research, computer science and so on, to ensure that the budget is realistic as possible. The budget is without doubt, the most widely used control device in both business and government circle.
The budget is drawn up for control purpose, that is an attempt to control the direction that the firm taking. Indeed, it is used extensively to many people, the word budget is synonymous with control still, and the preparation of budget originates as a part of planning process. Some companies in other to avoid the negative reaction that are many a time associated with the concept of control. Refer to their budgetary controls as either profit plan or profit path. The aim of budgetary control is to provide a formal basis for monitoring the progress of the organization as a whole of its component parts towards toward the achievement of the objectives specified in the planning budget.
Budget planning budget control is part of the overall system or responsibility accounting within an organization. A vast number of organization and company are getting involved in budgeting and budgeting control in Nigeria, and this is taking different forms, but the one that seems to be gaining more recognition is based on the concepts and ideas developed in budgetary control.
Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the effect of budgeting on public sector organizational performance.
1.3 Statement of Problems
Investigation revealed that the challenge in most organizations has posed a threat on the realization of its development and the achievement of its set objectives. This is as a result of fundamental issues of inadequate and improper acquisition, utilization and maintenance of resource. The poor quality and low quantity of product have revealed that the quality of human and material resource put in place in organizations are not up to expectations and has thereby reduced the company productivity.
Financial resource management is neglected and has made most organizations to lose a substantial part of their fund through these enterprises because of Fraudulent act, Indiscriminate financing, Poor management, Lack of zealousness and experienced personnel and Inability to utilized its financial potentials.
1.4 Aim and Objectives of Study
The aim of the study is to investigate the effect of budgeting on public sector organizational performance. In achieving this aim, the following specific objectives were laid out as follows:
- To inspect the effect of budgetary control in order to the organisational performance;
- To assess the perfect policy of the organisational sector for the budgetary control;
- To determine the advantages and the disadvantages of the budgetary control in the performance of a organization; and
- To recommend the correct approach of the organization to control the budget and the economy of Nigeria.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- Are there factors affecting budgetary control on organisational performance?
- What are the pros and the cons of budgetary control in the performance of an organization?
- What policy of the organisational sector is for budgetary control?
- What tools to be adopted in assessing the organization performance in terms its fair return on the capital investment?
- What tools to be employed in comparing organization or actual performance with the planned or future performance and how tools can be implemented a good deviation and control?
- What are the different kinds of recommendations for the correct approach of the organization to control the budget and the economy?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: Budgeting and budgeting control does not ensure rational allocation of resources
- H1: Budgeting and budgeting control ensure rational allocation of resources
Hypothesis Two
- H0: Budgeting and budgeting control does not enhance planning and decision making efficiently
- H1: Budgeting and budgeting control enhances planning and decision making efficiently
Hypothesis Three
- H0: Budgeting and budgeting control is not a motivational factor
- H1: Budgeting and budgeting control is a motivational factor
1.7 Significance of Study
The outcome of this study cannot be overemphasized. These are:
- The study will help in the formulation of corporate policies concerning local government.
- The effectiveness of budgeting on achieving their corporate goals.
- It will reveal how rational allocation of resources can be ensured.
- It will help management to to understand ways in which budgeting could be a powerful tool for planning, control and decision making.
This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.
1.8 Scope of Study
The scope of the research is focused on the effect of budgeting on public sector organizational performance. The researcher intends to cover budgeting and budgeting control as it relates to the private sector and special consideration been given to in the manufacturing or industrial sector.
1.9 Limitations of the Study
During the course of this study, many things militated against its completion, some of which are:
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Research material: availability of research material is a major setback to the scope of the study.
- Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
- Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
1.10 Definition of Terms
Budgeting: This is the process of preparing a summary statement of plans expressed in monetary quantitative terms.
Budget: A budget IS a summary statement of plans expressed in qualitative term
Decision Making: Involve selection from among alternative course of action or most preferred choice out of many alternative
