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1.1 Background to the Study
Planning and control are major activities of management in all organization and
budgets are central to the process of planning and control. Budgeting and
budgetary control both at management and operational level look at the future lay
down what had to be achieved while control checks whether or not the plans are
realized and put into effect corrective measure where deviation or short or short
fall is occurring-Budgeting control is not a new technique. It has a profit as the
motivating force to known how performance increases. Budgetary control is
therefore the system of management control and accounting in which all the
operations are forecasted and planned in advances to the extent possible and the
actual result compared with the forecasted and planned ones.
In brief it is a system to assist management in the allocation of responsibility and
authority, to provide it with aid for making, estimating and planning for the future
and to facilitate the analysis of the between estimated and actual performance.
In order that budgetary control may function effectively, it is necessary that the
concern should develop proper basis of measurement or standard with which to
evaluate the efficiency of operations a system of standard costing.
Beside this, the organization of the concern should be so integrated that all lines of
authority and responsibility are laid, allocated and defined. This is essential since
the system of budgetary control postulate separation of functions and division of
responsibilities and thus requires that the organization shall be in such be planned
in such a manner that everyone from the managing director down to the shop
foreman will have his duties properly defined.
Budgetary control is an important aspect of financial planning and control. If
properly applied it will help in keeping operation and production of good and
service in line with plans. When establishing budgets, standard must be used and it
is this standard that will serve as a yard stick for measuring actual result. This in
effect means that budgetary control system is operated simultaneously with system
of standard costing because both systems are inter-related.
It is important that budgetary control reports are consistent with the assigned
responsibility of each level of the organization and that a budget holder is only
held responsible for their incurrence. Thus, if responsibility accounting is to be
controllable and uncontrollable. Responsibility Accounting is a system of
accounting in which cost and revenue are analyzed in accordance with areas of
personal responsibility accounting. Once the plans for the department have been
agreed and embodied in a budget, the budgetary control process begins.
A well established and fully understood system of budgetary control also
facilitates the application of the principle of management by objective. In that
sense, efforts are made to see that those who would implement the budgets
understand what their goals are, what actions contribute to the achievement of
these goals and when they have been accomplished.
This is objective can only be achieved when both the management and staff
participation and full Co-operation are ensured so that strict adherence to
management policy is achieved. Managers should be made to see that budget are
measure of standard which be seen as a motivational factors.
Budgetary control system serve as a control mechanism which harmonizes both
individual and group objectives with be organization objectives with be
organization objective to ensure Co-operation of management and staff which in
turn bring about utmost success of control.
Brown and Howard (1984) as cited in Mohammed (2011) stressed that
organizational goals or objectives to be achieved there must be an efficient
budgetary control system.
They enumerated the point that budgetary control is not only an accounting excise
but a fool of management at all levels.
The most important of all uses of budgetary control is its motivational aspect that
is bought but by the involvement of lower and middle management with the
preparation of budgets which performance can be judged.
Therefore, for the effective and efficient utilization of an organization resources
and objection for such organization to be achieved, the executives need to fully
understand the essentials of budgetary control.
1.2 Statement of the Problem
Nigeria Public Sector as a whole has not grown remarkably over the years due to
factors such as dummy budgetary control, neglect by the sector from over
dependence on crude oil, collapsing infrastructure among others.
Although, the Nigeria Government maintains that the industry is the main is the
main instrument for rapid growth structural change and self sufficiency, it had
however unwillingly pursued policies which had impaired the performance of
same industry (Akintoye 2008) as cited in (Mohammed 2011). Therefore, the
problems which this write-up identified and aimed at proffering solution to are;
1. Lack of adequate and realistic data for proper budgetary control.
2. Lack of financial planning and control Public sector parastatals.
3. The non-challant attitude being paid to budgetary control in the Public sector.
1.3 Objectives of the Study
The main objective of this study is to look into how the Public sectorcompanies
apply the techniques control in their daily activities and its possible contributions
to the overall performance of the company. For this objective to be realistic,
attention would be paid to the followings;
1. To know how budgetary control can enhance public sector performance.
2. To identify the problem being encountered in the implementation of these
3. To suggest possible solution to problems/challenges on implementation of
4. To identify different human aspect of budgetary control.
1.4 Research Questions
This study intends to provide answers to the following questions:
1. To what extent does human factor affects budgetary control?
2. Is there any problem being encountered as regards budgetary control in
3. It there any significant relationship between budgetary control and public
1.5 Research Hypothesis
In order to answer research question and achieve objectives of the study, the
following research hypothesis were formulated:
Ho: Human factors affects budgetary control in public sectors
Hi: Human factor does not affect budgetary control in public sectors
HoThere is no significant relationship between budgetary control and Public sector
H1: There is significant relationship between budgetary control and Public sector
Ho: Public sector encounters problem as regards budgetary control
Hi: Public sector do not encounter problem as regards budgetary control
1.6 Significance of the Study
The study is necessitated by the need to undertake an in-depth appraisal of
corporate performance and budgetary control in selected Public sector companies
in Nigeria as to gauge their effectiveness. The curiosity and interest of writing this
topic was developed from the heart of the researcher due to problems being
encountered in the organization corporate performance. Therefore, the researcher
has concluded to present a study on ‘‘The effect of budgetary control on the
performance of Public sector companies in Nigerian”
It is therefore of the opinion of the study that the finding of this study shall be
1. It will highlight usage of budgetary control system where the organization
is having problems and suggest ways of solving them.
2. It will communicate the overall objectives of the organization to its
3. It wills assist managers in their effective and efficient planning, controlling
and decision making.
4. It will be used for further studies by other researcher in similar areas.
1.7 Scope of the Study
The scope of this study covers budgetary control and the corporate performance of
some selected Public companies such as. The researcher makes the use of their
annual report from year 2001 to 2011.
1.8 Definition OF Terms
1. Budgetary Control: is any plan by comparing actual result against targeted plans
to identify variances upon which corrective measure could be taken.
2. Budget: is a financial plan that set goals and allocates resources for the coming
3. Budgeting: is the establishment of specific targets of performances and is
followed by executing plans to achieve such desired goals and from time to time
comparing actual with the targets of goals
4. Budgeting System: Budgetary system comprises of two components which are
budget planning and budgetary control.
5. Budget Manual: A budget manual describe in writing the objectives and
procedures of the budget program.
6. Budgetary: A budgetary matter or policy is concerned with the amount of money
that is available to a country or organization, and how it is to be spent.
7. Control: Public sectordevice or mechanism installed or instituted to guide or
regulate the activities or operation of an apparatus, machine, person, or system.
8. Corporate Planning: Is a comprehensive and systematize process of strategic
long-term planning incorporating the resources and capability of an organization
taking the environment into consideration.
9. Controlling: The basic management function of (1) establishing benchmarks or
standards, (2) comparing actual performance against them, and (3) taking corrective
10. Performance: Performance is performing arts, generally comprises an event in
which a performer or group of performers behave in a particular way for another
group of people, the audience. Choral music and ballet are examples. Usually the
performers participate in rehearsals beforehand. Afterwards audience members often
11. Activity Base Budgeting: It involves planning and controlling along the lines of
values adding activities and proceeds.
1.9 Organization of the Study
The research project covered five chapters. Chapter 1 was about the introduction
of the study, the statement of the research problem, research objectives and
research questions of the study and the scope of the study. Chapters 2 dealt with
the literature review and provide information on the areas of study Chapter 3
showed how the research work was designed. It further indicates the method of
sampling of questionnaire, data collection & analysis of data. Chapter 4 was
devoted to research findings of the field of study. Chapter 5 presented the
summary of findings and conclusions to the study.
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