89pages: Budgetary Administration On The Realization Of Council Projects In Cameroon.

CHAPTER ONE

Background To The Study

understanding Budgetary Administration

Budgetary Administration involves the planning, implementation, and oversight of a budget within an organization. It encompasses activities such as setting budgetary goals, allocating resources, monitoring expenditures, and ensuring adherence to financial plans. Budget administration aims to control costs, optimize resource use, and achieve financial objectives. This process includes preparing budget reports, analyzing variances, and making adjustments as needed to stay within budgetary constraints. Effective budget administration helps organizations maintain financial stability and support strategic decision-making.

In the business world today, organizations have developed a variety of processes and techniques designed to ehance Budgetary Administration by 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 Administration 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 Budgetary Administration 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 Administration 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).

Companies are created into environment that is riddled with many restrictions, scarcity of funds economic, political and social instabilities and the general scarcity of resources.The internal control method that will take care of achieving set objectives in the midst of these environmental variables was the brain child of budgetary control.The Budgetary Administration system (as an internal control method) originated in industries to act as a check on the resources employed in the production of goods and services.

These resources have become increasingly unpredictable over the years and have posed a great deal of challenges to corporate managers. Budgeting control therefore came up as a measure of performance of the budget in achieving the goals of management. Put in another form, Budgetary Administration is a planning process which compares actual budget with expected budget. According to Scott (1970), the term Budgetary Administration is applied to the system of management control and accounting in which all operations are forecast and so far as possible planned ahead and the actual results compared with the forecast and planned ones.

The plan of operations is the best that can be devised in the particular circumstances, and reasons and remedies in the actual results. For this to form an effective control in the hands of the management the different figures should as far as possible be forecast by the persons responsible for the achievement. All executives should have planned conditions to aim at and improved upon and the degree to which this is being attained should be regularly brought to their notice.

Taylor and Sharing (1983), wrote that budgetary control working side by side with the accounting system is primarily forward looking, and aims to provide all ranks of management with all instrument for recording plans measuring performance in relation to those plans. It represents therefore, an extension of the managerial function and has been described as the long arm of management.

Budgetary control is the process of developing a spending plan and periodically comparing actual expenditures against that plan to determine if it or the spending patterns need adjustment to stay on track. This process is necessary to control spending and meet various financial goals. Organizations rely heavily on budgetary control to manage their spending activities, and this technique is also used by the public and the private sector as well as private individuals, such as heads of household who want to make sure they live within their means (Dunk, 2009).

Budgetary Administration is a system of management control in which the actual income and spending are compared with planned income and spending, so that the firm can make decisions if plans are being followed and if those plans need to be changed in order to make a profit. Budgetary control is the one of best technique of controlling, management and finance in which every department’s budget is made with estimated data. Then, the management conducts a comparative study of the estimated data with original data and fix the responsibility of employee if variance will not be favorable. Organizations can use budgetary control in forecasting techniques in order to make plan and budget for the future (Epstein and McFarlan, 2011).

The management of the organizations implements budgetary control to prevent losses resulting from theft, fraud and technological malfunction. These instructions also help management to ensure that expenses remain within budgetary limits. The importance of budgetary control is that it can be implemented by three departments in an organization to enhance effective realization. These departments are accounting department, statistical department and management department.

Accounting department provides old data. Statistical department provides the tools and techniques of forecasting like probability, time series other sampling methods. Management department uses both department services to estimate the expenditures and revenue of business under the normal conditions of business (Suberu, 2010).

It’s therefore worthy of note that budgeting and Budgetary Administration is essentially concerned with planning. This involves taking into account the various limiting factors that could possibly inhibit the accomplishment of goals. In the course of executing the plans, these factors are continually being watched for any possible abnormality and where any is encountered; there might be deviations from plans if prevailing circumstances require it. At the end, comparisons will be made between conditions encountered with those expected. The experience gained will be used in further planning.

However, to facilitate effective implementation of budgetary control, the management shouldefine proper Budgetary Administration processes, this is achieved through planning, monitoring and control and evaluation (Carr and Joseph, 2000). Hence, the reason for this research work is to evaluate the effect of budgetary control on the realization of council projects

Statement of The Problem

Budgetary Administration is used by most organizations as a tool for proper management of resources in the organization and its activities. A firm with well formulated budgetary controls easily assigns its managers the responsibility for the use of designated financial resources to achieve their assigned operational objectives. Budget controls provides comparisons of actual results against budget plan. Departures from budget can then be investigated and the reasons for the differences can be divided into controllable and non-controllable factors, this is essential is reducing inefficiencies and poor budget practices leading to efficient allocation of scarce resources (Joshi and Abdulla, 1996)

.Most NGO’s in Kenya have shifted focus to Budgetary Administration as a way of enhancingeffectiveness in their services. Recognizing the role of budget and budgetary controlhas gained attention which has led some organizations to establish departments forimplementation. This has attributed budget monitoring and project implementationcommittees as an integral part of the administrations to most nongovernmentalorganizations in Kenya (NGO’s, 2013).

Despite the interest in budgeting over the years, budgetary control has not seemingly picked up the same steam. This is regrettable given that budgetary control is widely recognized as a key instrument for resource allocation to specific recurrent and development activities (Adongo and Jagongo, 2013). An organization may have a well drafted budget and still fails to attain its objectives.

This could be as a result of several challenges; but in general it suggests an ineffective budgetary control. Poor management as well has been identified by some schools of thought to be the cause of local governments performing below expectation (Ojo, 2009).According to Coker and Adams (2012), finance and prudent management constitute the bedrock of effective functioning of local governments. Ojo (2009) asserts that apart of capital, local governments also need knowledgeable and skilled personnel to manage their usually scarce financial resources. Such personnel are inevitable in carrying out effective budgetary control as a pivotal tool of sound financial management.

Local councils in Cameroon are since 2004 supposed to be autonomous, and are expected to increasingly execute the recurrent and capital projects of the councils much more successfully. Cameroon faces the challenge of running a sound government accounting system that guarantees accountability and transparency (Mukah, 2016). Many local councils are unable to fully or significantly execute their projects effectively, hence unable to attain all their objectives. They fail to satisfy their citizenry at the grassroots despite the fact that they may draft and adopt impressive budgets.

Studies have been done in relation to budgetary control globally and locally: Carolyn, et al. (2007) examined the association between effects of Budgetary Administration on performance using a sample of large US cities Financial Bonds and found that effective level of budgetary control is significantly and positively related to bond rating. Dunk (2007) carried out a study in Europe on budgetary participation and managerial performance in nonprofit making firms and concluded a positive correlation between budgetary participation and managerial performance in nonprofit making organizations.

Epstein and McFarlan (2011) carried out a study in Denmark on measuring efficiency and effectiveness of a nonprofit’s performance, it was found that budgetary control was one of the important tools in achieving efficiency of in nonprofit making organizations Nyambura (2014) determined the effects of budgetary controls on performance of NGOs in Kenya using correlations and regression methods and concluded that there is a low positive relationship between budgetary controls and Performance.

Lambe (2014) indicated that, in his systematic review of Budgeting and Budgetary Control inGovernment Owned Organizations and concluded that budgeting and budgetary control is anindispensable tool to any organization and when carefully planned and implemented by anyorganization (most especially government owned organizations), it can lead to decrease in costand increase in revenue, which in turn leads to maximization of performance.

Zayol (2017) carried out a study on Budgeting and Budgetary control in the public sector using literature review and personal observations as the main source of data and found out that budget and budgetary control has failed because of dependence on federation account, untrained budgetstaff, non-adherence to budgetary control measures, corruption, inflation and political environment.

Nyageng’o (2014) carried out a study to identify determinants to effective budget implementation among local authorities in Kenya. The results of the study revealed that effective budgetary controlled to improved performance of local authorities. Serem (2013) established that there is a weak positive effect of budgetary control on performance of Non-Governmental Organizations in Kenya measured by R square at 14.3%.

Gacheru (2012) in her study of the effects of the budgeting process on budget variance in NGOs in Kenya found out that budget preparation, budgetary control and budget implementation significantly influence budget variance.From the review of past research most studies have concentrated on budgetary control and how it affects organizational performance in both the public and private sectors.

Against these backdrops, the study is determined to fill this gap by trying to establish whether there is any relationship between budgetary control and realization of council projects. To achieve this objective this study attempted to answer the following research question: what is the effect of budgetary control on the realization of council projects. 

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