CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The business field has gone beyond venturing into any activity, project or business without first checking its need, resources needed, resources available, procedures and the possible outcome of the project or business.
In the business world today, organizations have developed a variety of processes and techniques designed to contribute to the planning and control functions. One of the most important and widely used of these processes is budgeting. Budgeting involves the establishment of predetermined goals, the reporting of actual performance results and evaluation of performance in terms of the predetermined goals. Budgetary control systems are universal and have been considered an essential tool for financial planning. The purpose of budgetary control is to provide a forecast of revenues and expenditures this is achieved through constructing a model of how our business might perform financially speaking if certain strategies, events and plans are carried out (Churchill, 2001).
Most firms use budget control as the primary means of corporate internal controls, it provides a comprehensive management platform for efficient and effective allocation of resources. Budgetary controls enable the management team to make plans for the future through implementing those plans and monitoring activities to see whether they conform to the plan, effective implementation of budgetary control is an important guarantee for the effective implementation of budget in the organization (Carr and Joseph, 2000).
Most organizations have adopted broad budgetary control that ensures that the entire budget system is a control system, which it is the formation of a prior, during and after the whole process of control system through the budget preparation, budget evaluation, reward and punishment by monitoring of budget execution. With a narrow budgetary control, an organization can prepare a good budget as a basis for performance management and standards on a regular basis in order to compare actual performance with the budget to analyze differences in the results and take corrective measures, which mainly involves the process of budget implementation, evaluation and control (Hokal and Shaw, 2002).
This study is conducted to provide an insight on “the effectiveness of budget and budgetary control in a non-profit organization using Muritala Muhammed Foundation as a case study”. To achieve the objectives of this study, the paper is divided into five interconnected chapters.
Chapter one deals with the background of the study, statements of the problem, objectives of the study, significance of the study, research questions, research hypothesis, scope and limitations of the study, and definitions of terms.
The next chapter presents the review of relevant literature which include: Historical background of Muritala Muhammed Foundation, concept of budgeting and budget, theoretical framework, typology of budgets for planning and control, features of budgets, advantages of budgeting, types of budget, objectives of budgeting, preparation of budget, determinants of effective budget implementation, budgetary control, budgetary control process, effect of budgetary control on effectiveness of non-profit organization, benefits of budgets and budgetary control, limitations of budgets and budgetary control, and planning programming budgeting.
Chapter three examines the research methodology used in the study which are: introduction, research design, study area, population of the study, sample size and technique, method of data collection, research instruments, reliability and validity of instrument, techniques of data analysis and decision criteria for validation of hypothesis.
Chapter four deals with the presentation, analysis and interpretation of data.
While the final chapter examines the summary of the findings, conclusion, recommendations and bibliography.
1.2 STATEMENT OF PROBLEM
public sector and other non-profit making organization are often noted for inefficiencies and poor management, which is as a result of poor planning through repetitive budgeting. Recent studies in the area of budget and resources allocation have shown lack of proper analysis. There is a general lack of the concept of why we have a budget at all. This issue calls for immediate investigation of budgeting as a tool for resources planning, effective financial management, better decision making, productivity and performance control and to recommend how it can function properly.
1.3 AIMS/OBJECTIVES OF THE STUDY
The objective of the research project is to thoroughly investigate on the effectiveness of budget and budgetary control in a non-profit organization using Muritala Mohammed Foundation as a case study. Other objectives of this study include:
1. Tracing the historical development of Muritala Mohammed Foundation.
2. Examining the concept of budget and budgetary.
3. Identifying the objectives of budget.
4. Identifying the determinants to effective budget implementation.
5. Examining the benefits of budget and budgetary control in Muritala Muhammed Foundation.
6. Identifying the necessity for a Budgetary Control System in Muritala Muhammed Foundation.
7. Assessing the problems associated with the Budgetary Control System in Muritala Muhammed Foundation.
1.4 RESEARCH QUESTIONS
The key objectives of this current study were developed into a set of questions for the research project. As a result, the study addressed the following key research questions:
1. What does the concept budget and budgetary entail?
2. What are the objectives of budget?
3. Are there some determinants to effective budget implementation in organizations?
4. What are the benefits of budget and budgetary control in Muritala Mohammed Foundation?
5. What are the necessities for Budgetary Control System in Muritala Muhammed Foundation?
6. Are there problems associated with the Budgetary Control System in Muritala Muhammed Foundation?
1.5 RESEARCH HYPOTHESES
A hypothesis is a tentative statement which shows causal relationship that exists between two or more variables. Such declared tentative statement is subject to acceptance (confirmation) or rejection, depending on the results that fall out from its empirical verification. (Dode, 2012)
The formulated hypotheses in this research work include:
Hypothesis One
Null Hypothesis:
Ho: Budget and Budgetary control are not the hallmark for effective financial management in a non-profit organization.
Alternate Hypothesis:
Hi: Budget and Budgetary control are the hallmark for effective financial management in a non-profit organization.
Hypothesis Two
Null Hypothesis:
Ho: The use of Budgetary Control System has not helped in the growth of non-profit organization.
Alternate Hypothesis:
Hi: The use of Budgetary Control System has helped in the growth of non-profit organization.
Hypothesis Three
Null Hypothesis:
Ho: Budgetary Control System does not lead to better decision making in a non-profit organization.
Alternate Hypothesis:
Hi: Budgetary Control System leads to better decision making in a non-profit organization.
Hypothesis Four
Null Hypothesis:
Ho: Budgeting and budgetary control does not contribute to the improvement of the management efficiency and high productivity.
Alternate Hypothesis:
Hi: Budgeting and budgetary control contribute to the improvement of the management efficiency and high productivity.
1.6 SCOPE OF THE STUDY
The study provides insight into the effectiveness of budget and budgetary control in a non-profit organization using Muritala Muhammed Foundation, Nigeria as a case study.
The study intends to cover budget and budgetary control as it affect Muritala Muhammed Foundation. It will examine its budgeting control as a measure of attaining better decision making, transparent financial management, and effective and efficient administration.
The study seeks to understand the problems associated with the Budgetary Control System in Muritala Muhammed Foundation and proffer solutions to them.
1.7 SIGNIFICANCE OF THE STUDY
The following are the significance of this study
This study will help to make the organization know exactly where to improve on the Budgetary Control System of the company so as to ascertain when profits and losses are made.
It will enhance the company through the recommendation that will be given, why the account department should be updated in the area of budgeting for easy decision making.
This study will also be of great significance to management of various organizations, companies, accountants, auditors, economists, financial analyst and other users of accounting information, it will give them positive insight about the relevance of Budgetary Control System, its key features, advantages, types etc.
Finally, it will also serve as a back bone and an eye-opener to other scholars and researchers interested in carrying out further research in this domain subsequently, if applied will go to an extent to provide new explanation to the topic.
1.8 LIMITATIONS OF THE STUDY
In the course of this research several factors posed a limitation to its success.
Finance was one of the major factors that played a devastating role in preventing the researcher to use certain approaches and methods in the course of the study. Also, the researcher had a time problem because the available time was share between academic work, domestic responsibilities etc. it was not easy to attain a perfect balance among these activities as such very little time was available for the conduct of this study.
Availability of material were among the limitations encountered by the researcher because The employees are unable to disclose some information about the company which made some difficulty in writing the research work. They refused to give out some information which they considered confidential, hence the bulk of materials used were limited to the ones available that the researcher could assess.
1.9 DEFINITION OF TERMS
• Budget: Is a statement showing how money will be spent over a period of time.
• Effectiveness: Ability to produce the intended or actual result being efficacious and efficient.
• Organization: a group of people or other entities who are cooperating together to achieve an explicit purpose.
• Efficiency: the extent to which time and other things are well used for the intended task.
• Productivity: the rate at which a company produces goods or services, in relation to the amount of materials and number of employees needed.
• Control: to exercise influence over, or to suggest or dictate the way something is being done.
TABLE OF CONTENT
PAGE
TITLE PAGE i
CERTIFICATION ii
DEDICATION iii
ACKNOWLEDGEMENTS iv
ABSTRACT v
RESUME vi
TABLE OF CONTENTS vii - x
CHAPTER ONE: 1
1.0 Introduction 1
1.1 Background of the study 1 - 2
1.2 Statements of the problem 3
1.3 Objectives of the study 3
1.4 Research questions 3 - 4
1.5 Research hypothesis 4 - 5
1.6 Scope of the study 5
1.7 Significance of the study 5 - 6
1.8 Limitations of the study 6
1.9 Definitions of terms 7
CHAPTER TWO: 8
2.0 Literature Review 8
2.1 Introduction 8
2.2 Historical Background of Muritala Muhammed Foundation 8 - 9
2.3 Concept of Budgeting and Budget 9 - 14
2.4 Theoretical Framework 15
2.4.1 Theory of Budgeting 15 - 16
2.4.2 Budgetary Control Model 16 - 17
2.4.3 Accounting Theory in Budgetary Control 17 - 18
2.5 Typology of Budgets for Planning and Control 19 - 20
2.6 Features of Budgets 20
2.7 Types of Budget 20 - 22
2.8 Advantages of Budgeting 22 - 23
2.9 Objectives of Budgeting 23 - 24
2.10 Preparation of Budget 24 - 25
2.11 Determinants to Effective Budget Implementation 26 - 29
2.12 Budgetary Control 29 - 33
2.13 Budgetary Control Process 34
2.14 The Effect of Budgetary Control on Effectiveness of Non-Profit Organizations 35
2.15 Benefits of Budget and Budgetary Control 36 - 37
2.16 Limitations of Budgets and Budgetary Control 37 - 38
2.17 Planning Programming Budgeting System (PPBS) 38 - 40
CHAPTER THREE: RESEARCH METHODOLOGY 41
3.0 Introduction 41
3.1 Research Design 41
3.2 Selection of Data 41
3.3 Collection of Data 42
3.4 Population, Sample and Sampling Procedure 42
3.5 Questionnaire Design 42
3.6 Method of Data Analysis 43
3.7 Decision Criteria for Validation of Hypothesis 43 - 44
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND
INTERPRETATION 45
4.1 Introduction 45
4.2 Data Presentation and Analysis 46 - 55
4.3 Test of Hypothesis 55 - 61
CHAPTER FIVE: SUMMARY, CONCLUSION AND
RECOMMENDATION 62
5.1 Introduction 62
5.2 Summary 62
5.3 Conclusion 63
5.4 Recommendation 63
5.5 Suggestion for Further Studies 63
Bibliography 64 - 70
Appendixes 71 - 74