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Budget Management and Financial Performance of
Catholic Higher Educational Institutions
Dr. Rafael De Padua Mora
Dr. David Cababaro Bueno
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Abstract - The study aims to assess the budgetary controls and perceived financial performance of
higher education institutions in the Diocese of Iba. The descriptive research design and correlation study
were used to establish the relationship between the independent variable (budgetary control) and the
dependent variable (perceived performance) across HEIs. The population of the study covered the four
higher educational institutions. Budgetary control was measured by budgeting and planning, monitoring
and control and analyzing and feedback. The perceived financial performance was measured by
infrastructure development, service delivery and expenditure related activities. The actual financial
performance was measured in terms of the salary range of administrators, instructor and staff.
Permission was obtained from the presidents/ directors of institutions through the head-commission on
higher education. The distribution and retrieval of the instrument were personally done by the
researcher. Data collected were compiled, sorted, edited, classified, coded and analyzed using a
computerized SPSS. For proper budgetary control to be done, programs and plans are the basis for
allocation of financial resources. Also clear result targets need to be set indicating budget outcome goals
and objectives being linked to programs. Building of consensus was not evident to some HEIs by way of
discussing the goals to be met with all stakeholders in decisions of plans and programs vis-a-vis budget.
Budget monitoring in terms of budget reviews is important as it paves way for budget adjustments. It
permits continuous assessment of budget variances in terms of actual against the budgeted so that
reasons for differences between actual and budgeted performance are always given in a budget conference.
Some schools have slightly negative perceptions of not being sure of monitoring and control being
implemented in the institutions. It is important for the financial performance to be communicated to the
stakeholders by the budget officers. This forms the basis of identification of variances or deviations of
actual from the budgeted so that corrective action can be undertaken. Equally the results of analyzing
and feedback divulge significant responses among respondents on the implementation of analyzing and
feedback. Feedback is an important aspect in budgeting that attains quality and standards in
planning, control and leadership as revealed by the HEIs. There was a high level of financial
performance, though above average in HEIs as established by the results on perceived financial
performance where there were significant positive perceptions among the respondents, with a majority
having positive perceptions about the financial performance. Generally, the HEIs show all the activities
intended for the coming year, thus pointing to a budgeting paradigm, which is based on the
establishment of financial performance measures. The most HEIs institutions plan clearly shows how
funding would be appropriated to achieve performance goals. However, some schools do not receive all
the tuition fees as budgeted for. The institutions are faced with challenges to performance budget
implementation among which, lack of credible and useful performance information, difficulty in
achieving consensus on goals and measures because of low levels of participation is the major
drawbacks. Income generating projects undertaken by my institution are limited. The expenditure on
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infrastructure development is moderately adequate. The findings indicate that budgeting and planning,
monitoring and control, analyzing, and feedback as components of budgetary controls were significant
predictors of perceived financial performance among HEIs. The indicators of financial performance of
HEIs relative to salary of administrators, faculty and staff, institutional benefits, educational revenue
and expenses, physical plant, facilities and equipment are in varying degree of adequacy. There are
significant variations on the budgetary controls across HEIs relative to budgeting and planning,
monitoring and control, analyzing and feedback. There are significant variations on the perceived
financial performance across HEIs on the areas of service delivery, and expenditure activities. There
are no significant variations on the perceived financial performance relative to infrastructure
development across HEIs. Empirical results show that budgetary feedback information would have
effects of supervision, control, and encouragement on budgeting managers or finance officers. It implies
further that smooth implementation of budgets, budgetary planning and control need to be done
properly.
Keywords – Budget management, financial performance, HEIs, descriptive-survey design,
documentary analysis, Zambales
INTRODUCTION
Budgetary control is the establishment of budgets relating to the
responsibilities of executives of a policy and the continuous comparison of the
actual with the budgeted results, either to secure by individual action the
objectives of the policy or to provide a basis for its revision.
Budgeting, Control and measuring and reporting, analyzing and
feedback constitute elements of budgetary control (Chandan, 1998). According
to Arora (1995), budgetary control is one of the very important tools of
planning and control. Many organizations fail because of lack of planning, by
planning many problems and dangers are anticipated which the organization
has to face.
Budgeting is concerned with the implementation of the approved
program within the long-range plan. The purpose of a budget system is to
serve the needs of management in respect of the judgments and decisions it is
required to make and to provide a basis for the management functions of
planning and control.
Chief executive officers like the warm feeling they get when they see
the year-end profit forecasts. But they might be anxious about the reliability of
the assumption and the firm’s ability to respond to change. They like the way
they are able to tie operating managers to fix performance contracts (Fixed
Targets reinforced by incentives). But they also know that the process takes too
long and adds too little value.
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Operating managers like knowing where they stand, but they are also
concerned about the time wasted and more importantly, the fixed performance
contracts lead to decision paralysis and cosmetic accounting rather than
decisive action and ethical Reporting (Hope et al, 1995).
A Budget is a detailed plan, which sets out, in money terms, the plans
for income and expenditure in respect of the future period of time. It is
prepared in advance of the time period and is based on the agreed objectives
for that period of time together with the strategy planned to achieve those
objectives (Weetman et al, 1996).
To implement the strategy decisions, a budget committee will be
formed comprising the senior managers who are responsible for designing the
strategy. The budget committee receives the initial budgets from each
functional manager. If the initial budget is based on unrealistic targets, then the
functional manager will be asked to modify the budget within the
organization’s overall targets.
The principal stages of the budgeting process include communicating
the details of objectives and strategy to those responsible for the preparation of
budgets, determining the limiting factor which restricts overall budget
flexibility and forms the focus of the budget cascades, preparing initial budgets,
negotiating budgets with line managers, coordinating and review budgets,
accepting budgets in final form and finally carrying out an on-going review of
budgets.
Budgets are financial blueprints that quantify a firm plan for a future
period. Budgets require management to specify expected sales, cash inflows
and outflows, and costs; and they provide a mechanism for effective planning
and control in organizations (Flamholltz, 1983).
The budget is a standard against which the actual performance can be
compared and measured.
To ensure effective financial management and to avoid uncertainty or
waste of financial resources, budgets and budgeting become vital. Ifidon (1999)
pointed out that a budget is a formalized way of preparing a statement of all
accounts and an allocation of all available financial resources. In other words, a
budget can be described as a policy on which expenditures and income are
based.
Proponents of budgeting argue that budgets have several important
roles. Blocher et al (2002), for instance, argues that budgets help to allocate
resources, coordinate operations and provide a means for performance
measurement. Hilton et al (2002) agrees with this view and claim that the
budget is the most widely used technique for planning and control purposes.
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Clarke and Toal (1999) too, are of the opinion that budgets are still essential
and can, for example, be incorporated as part of the financial component of
the balanced scorecard. Meanwhile, critics of budgets claim that budgets are
bad for business, are no longer adequate and are “fundamentally flawed” as
planning and control mechanism in today’s complex and highly uncertain
business environment (McNally, 2002). Stewart (1990) claims that experts
criticize budgets as being ineffective. According to him, “Budgets, says experts,
control the wrong things, like headcount, and miss the right ones, such as
quality, customer service and even profits”.
Traditionally, budgeting is considered to be one of the most important
management tools to steer the organization, evaluate its performance and
motivate its people. However, criticism of the budgeting process has increased
considerably in the past decade. This has led to an alternative to budgeting
known as “Beyond budgeting”. There are many possibilities, on the scale of
traditional budgeting to beyond budgeting, to modernize the budgeting
process. Beyond –budgeting deserves serious consideration because it enables
an organization to look with a fresh view at its budgeting process, other
planning processes, and organizational structure (Fraser and de Waal, 2001).
The impact of the budgetary process in a group of persons may be
quite different from the impact on the individual within the group.
Participation by individuals will lead to greater group interaction, which will be
a good thing if the individuals value their membership of the group and see the
goals of the group as being collective targets that they all regard as desirable.
Where budgets are used to measure performance, the managers who
set these budgets may be tempted to build in some element of spare resources
that allow a lapse from actual high levels of performance without deviating
from budget targets. This involves overestimating the time required for any
particular task or using the high price of input materials available in the price
list. The use of such bias at a lower level of budget preparation may be
countered by a correspondingly strict attitude at a higher level to compensate
for the built in slack.
Irrespective of the type of the entity, it is almost inevitable that there
will be a political aspect of its management structure. The word Politics here
refers to the power struggle within the organization. It might be a power
struggle in which labor unions seek to impose their will on management. It
might be a power struggle within the board of directors or between divisions of
the enterprise. Whatever its nature, such a power struggle is evidenced in the
budget process where various units of the enterprise are engaged in rivalry over
the formulation of the budget.
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Thus, the budgeting process may be more important as a
manifestation of the political struggle than as an item of financial planning
(Weetman et al, 1996).
Among the key components of the budgeting process and which in
turn affect performance include staff participation and the feedback and
control mechanism.
The management accounting literature advocates participative
budgeting as it provides managers with a sense of belonging (: this is our
Budget”) and increases the possibility that they will make greater attempts to
achieve the organizational budgetary goals. Prior studies on the relationship
between budgeting participation and performance have obtained mixed results.
Stedry (1990) and Cherrington and Cherrington (1993) found that a
participative budgeting approach has a negative impact on performance. In
contrast Merchant (1991), Brownell (1992) and Covaleski et al (2003) found a
positive relationship between budget participation and performance. The more
recent literature, however, appears to advocate a participative approach as it
can be more effective and people may be more inclined to attempt to achieve
budgetary goals if they have been consulted in the budget-setting exercise
(Hilton et al, 2000). Fisher et al, (2000) and Chow et al (1988) suggested that
participation provided opportunities for managers to create budgeting slack,
whereas low participation restricts such opportunities. Budgetary slack is
defined as the amount by which managers intentionally build excess
requirement for resources into the budget or knowingly understate productive
capacity (Young, 1985).
Research has however found that the relationship between
participation and slack is inconsistent. Participative budgeting might have a
different impact on lower level managers than on higher-level managers.
Feelings of lack of control in work situations were more prevalent at lower
organizational levels (Covaleski and Dirsmith, 1986, Semler, 1989). Higherlevel managers can exercise more control over their work situations, because of
their position in the hierarchy, than lower level manager. Frucot and Shearon
(1991), using the locus of control as a moderating factor, found that
hierarchical levels affected the impact of budgetary participation of Mexican
managers.
Other Studies, however, lead one to conclude that, although
participative management is seen as being rather “politically correct” currently,
it may be that its value is situation-specific: there may be some organizations in
which it is not necessarily a major motivational force. According to
Cherrington and Cherington’s (1973) study found that the “top down”
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imposition of budget targets led to higher performance amongst the recipients
as opposed to those managers who, more or less set their own targets. Also,
contrary to current popular belief, the setting of budget targets and budgetary
control does not always lead to autocratic managerial behavior (Decoster and
Fertakis, 1968). Managers can be motivated to respond to such pressures by
exercising their authority in an inclusive, supportive, democratic, participatory
way.
Carried to its logical conclusion, real participation would result in a
“bottom-up” employee empowerment, envisaged by Johnson (1992). Here,
employees at the base of the pyramid would not only have access to detailed
accounting information, but they would be encouraged and facilitated to use
this, together with their knowledge of the fundamentals of the organization, to
progress and grow that organization and ensure maximum efficiency and
effectiveness in meeting its goals. Thus, it can be argued, is a somewhat
Utopian Vision, involving a strong belief in the efficacy of Barnard’s (1938)
assertion that power in any organization is held at its base and that all
employees have sufficient competence and motivation to analyze detailed
accounting information.
The difference between success and failure of an organization can be
partially explained by how well employees are organized and supported, how
well the organization brings out the abilities and talents of its staff (Denton,
1999). It is important that staff will be more receptive of decisions and
objectives of the organization. For this to happen, management has to create
an environment in which there is mutual trust, and a sense of employee
ownership of the business prevails (Denton et al, 1999).
Feedback concerning the degree to which budget goals have been
achieved is another important variable in the budgeting process. Reports
should be issued with sufficient frequency to facilitate adjustments to off-target
operations. When members of an organization do not know the results of their
efforts, they have no indication of success or failure and no incentive for
higher performance (Henderson, 1997). Although Henderson (1997) and Kenis
(1979) mentioned the importance of budgetary feedback and control for
improving managerial performance, they did not investigate how the disclosure
of such information affects other managerial behavior. Sometimes, top
management instructs its unit managers to work towards budget targets but
does not want such managers to know the rationale behind their decisions.
Consequently, these managers can lose direction and uncertainties can be
created. Managers can solve problems only by creating budgetary slack, and
they might use the slack to cover the variance figures. As a result, wastage can
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be created (Lukka, 1988). Feedback on performance, when presented in a
constructive, objective and unbiased manner, has been shown to be quite
important as a motivator in giving reliable estimations in the budgeting process.
Management needs to learn to support rather than control in order to
let people take the initiatives in defining and solving problems.
Employees/Staff on the other hand need to learn to take and accept
responsibility. Management needs to learn to install confidence in the
employees, and back them up when they make mistakes by providing
constructive feedback. Mistakes drive people and organizations to learn
(Heifetz & Laurie 1994).
Perceived budget performance refers to the perceptions or feelings of
respondents in respect to how well or badly the objectives of the organization
are achieved through budget performance, and this would be in respect to the
revenue performance, expenditure performance and value for money
performance.
Management of a business is primarily a function requiring
stewardship, meaning the careful use of resources for the benefit of the
owners. There are two central questions to test the use of resources: How well
did the management make use of the assets to create revenue, and how
carefully did the management control costs so as to maximize the profit
derived from the revenue?
Strictly speaking, the yardstick of budget performance would be
budgeted to actual comparison; this is true even with revenue creation.
Further, budget performance can be tracked from the quality and standard of
budgeted outcomes.
A key measure of success, from the view of shareholders, is the
success of the company in using the funds provided by shareholders to
generate profit or shareholders’ net worth (Weetman, 1996).
In the traditional environment, budgets play a highly important role in
the performance evaluation. Attaining corporate standards are per mounted to
success. In the balanced Scorecard environment, the budget is weighted with
non-financial factors. A performance evaluation, which is frequently tied
directly to bonus compensation, is determined by a more balanced review of
objectives. The goal is to achieve long-term strategic aims rather than
emphasizing short-term budget targets. Performance is tied more closely to
market expectations (Bar sky, 1999).
The primary control objective of budgeting is to set target profit
objectives. Limitations on spending and revenue targets provide the basis for
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profit goals. Budgets are frequently divided into manageable parts; however the
underlying premise is financial control.
Given the concerns regarding traditional approaches to budgeting, it is
interesting to note that research undertaken with regard to the use of such
systems has identified that operations of all sizes appear to place considerable
importance of their traditional budgeting activities (DeFranco, 1997), utilizing
them on a regular basis and viewing them as potentially valuable control tools
(Brown, 1995).
It is suggested that it may be possible to meet the budgetary needs of
the organization (Performance) through adopting “better budgeting”
processes, including for example activity based budgeting (ABB) and zero
Budgeting (ZBB) (Fanning, 1999). However, it is being increasingly argued that
just “tinkering” with an organization’s budgeting system will not be adequate.
Instead, it is suggested that what is really needed is a fundamentally
new approach to such important budgeting purposes as forecasting and
resource allocation, performance measurement and control, and cost
management- an approach which incorporates a range of “alternative steering
mechanisms” that especially promote empowerment, flexibility and knowledge
–sharing (Hope and Fraser, 1997).
Theodore Levitt, the well-known American management guru said, “if
you don’t know where you are going, any road will take you there”. Johnson
(1998) and Drucker (1954), likewise, advocated the use of setting clear,
tangible, verifiable, measurable goals in order to motivate, rather than to
“control”, people. Evidence abounds to show that without quantitative goals,
performance suffers (French et al, 1995).
When budget outcomes bear little resemblances to original plans, the
entire budgeting process loses meaning often with negative consequences for
the poor and programs designed to benefit them (Peters, 2002). Peters further
states that divergence between budgeted and actual expenditure are more
difficult to track, especially over longer periods of time due to substantial
delays in reporting on budget outcomes, which are often due to capacity
constraints, variables dare quality, and changes in data presentation formats
over time.
Peter Druker, the management guru, points out that non-profit
institutions tend not to give priority to performance and results. Yet
performance and results are far more important and far more difficult to
measure and control in the non-profit institution than in a business. Both
government and non-profit sector deliver services without a profit and both
face a similar dilemma and allocate funds based on those results with a bottom
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line to measure them. ”There is no automatic measure to assess successful
outcomes or to determine if they have effectively addressed community needs
(Suzanne & Julie 2003).
Many non-profit organizations survive because of historical
performance or an influential set of benefactors and the ability to raise money.
However, today the pressure to demonstrate how their services transform lives
is increasing beyond just supplying numbers of clients served. Performance
measurement and performance budgeting are currently being used. However,
there is little documentation of the efforts of nongovernmental organizations
on how to measure their performance. Performance based measurement in
non-profit is aimed at promoting systematic assessment of grant recipients,
activities and operations instead of basing funding decisions on anecdotal
evidence of good work in serving clients (Kanter and Summer, 1987). The
importance of doing so has only increased as the non –profit sector has grown
in size and influence, with greater visibility and public scrutiny by different
stakeholders including donors, clients, media and government oversight
agencies (Kearns, 1994).
Building, maintaining and managing a performance based budgeting
system involves layers of complexity (Smith, 1999). Similarly, non-profit
organizations must deal with the complexities of building; maintaining and
managing performance based budgeting systems (Suzanne & Julie, 2003). “The
non-profit organizations start with the performance of their Mission” (Druker,
1992). They do not make money the center of their plans as so many
corporations do.
The process of assessing and evaluating on how effectively and
efficiently people, resources and technology within an organization is referred
to as Performance measurement (Schermerhorn and Chappell, 2000). Used in
the marketing area, effectiveness refers to the extent to which customer
requirements are met, while efficiency is a measure of how economical the
firm’s resources are utilized when providing a given level of customer
satisfaction (Neely, Gregory, Platts, 1995). On the one hand, if they are used in
the management area, effectiveness is an output measure of the task or goal
accomplishment, and efficiency is a measure of the resource cost associated
with goal accomplishment (Schermerhorn and Chappell, 2000).
How well management makes use of the assets to create revenue is
referred to as revenue performance (Weetman, 1996). This serves as a good
measure of budget performance as it determines the variance between the
budgeted revenue and the actual revenue created.
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This refers to how carefully management control costs so as to
maximize the profit derived from the revenue (Weetman, 1996). Expenditure
performance as a yardstick of budget performance would be determined as a
budget to actual expenditure comparison. Variance analysis is an internal
control technique; management puts in place so as to be able to establish the
causes of divergences from the budget. What are most scrutinized are the
unfavorable variances, which take the form of over expenditure as staff try to
achieve objectives.
When staff learns that their expenditures are to be analyzed, care as to
the use of resources in the performance of tasks increases. This is because over
expenditure without good reasons would not pass unpunished. It has to be
noted that you cannot analyze variances without first measuring performance.
Measuring performance includes comparing actual expenditure with the budget
estimates. In doing so, one is able to see instances where the budget was
exceeded showing the unfavorable variances (Glautier and Underdown, 1997).
The control of direct costs through variance analysis is based on the
principles of management by exception and accounting responsibility. These
are important principles because they enable management to focus attention on
critical areas. Management by exception assumes that actual expenditure is in
line with standard costs unless this is contradicted by information showing that
variances are occurring between the budget allowances, based on standard
costs and actual expenditure being recorded in the financial accounting
process. Management by exception concentrates on major problem areas,
which require urgent correction.
With accounting responsibility, responsibility for the control of costs is located
with the manager having the responsibility for cost center costs. If a cost center
under a Manager has higher costs than those of his counterparts, he is asked to
explain. This can lead to early identification of problems. The first sign that
standard costs are not being respected is the appearance of a budget variance
on direct costs.
A budget variance as the difference between the budget estimates for
the output achieved and actual spending on the output achieved, requires
analysis, investigation and correction (Fund and Dev, 1998). The analysis of the
budget variance necessitates splitting up the budget variance into two
components of standard costs, namely the quantity standard and the price
standard. As a result, it is possible to attribute the problem to the occurrence of
excessive usage or excessive price or both.
Budget expenditure variances fall into two categories of unfavorable variances
and favorable variances. The unfavorable variances arise when the standard is
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exceeded by actual expenditure. On the other hand, favorable variances are due
to actual expenditure being less than standard (Hongreen, 1987; Belkaui, 1985).
Management‘s greater concern will be with the unfavorable variances for these
are the ones that show signs of inefficiencies. It should also be noted that
favorable variances could indicate that standards were not set correctly.
Tertiary institutions draw budgets annually, however, there are
inconsistencies in the budgetary implementation, hence failure to stick to the
drawn budgets. This has resulted in failure to meet budgetary obligations in
many of these institutions.
There have been delays in staff salaries, payment of suppliers and
school activities have stalled because of lack of funds, though these activities
were budgeted for. It is imperative therefore to investigate these
inconsistencies and failures in financial performance in tertiary institutions.
OBJECTIVES OF THE STUDY
The study seeks to assess the budgetary controls and perceived
financial performance of higher education institutions in the Diocese of Iba. It
aims to analyze the: (1) the budgetary control processes; (2) the perceived
financial performance among higher educational institutions; (3) the indicators
of financial performance; (4) the variations in the budgetary controls and
perceived financial performance among institutions; and (5) the implications of
the findings towards the improvement of budgetary controls and financial
performance of these institutions.
METHODOLOGY
The researchers used the descriptive-survey design of research. The
population of the study covered the four higher educational institutions such as
Columban College, Inc., Olongapo City; St. Joseph College-Olongapo City;
Magsaysay Memorial College-Zambales and Columban College-Sta. Cruz and
considering administrative officer/ finance officer/ VP-Administration and
Finance and some academic heads. They were chosen purposively since they
were more knowledgeable and capable regarding the present status of their
schools, particularly in analyzing the budgetary controls and perceived financial
performance and other related factors. The primary data were collected using
standardized closed structured questionnaires which were adopted by the
researcher. These questionnaires were self-administered among the
respondents in order to collect the completed responses within a short time
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possible. Budgetary Control was measured by Budgeting and Planning,
Monitoring and Control and Analyzing and Feedback which was subjected to a
5 point anchored Likert scale for Mwabilu et al., 2004. Perceived financial
performance was measured by Infrastructure Development, Service Delivery
and expenditure related activities which were subjected to a modified version
of multi-item, five-Likert scale developed by Melkers and Willoughby (2002) to
suit the study at hand. The actual financial performance was measured in terms
of the salary range of administrators, instructor and staff. This was adopted for
the study of Reyes (2013). Permission was obtained from the presidents/
directors of institutions through the head-commission on higher education.
The participants were informed of the nature and procedures of the study and
the confidentiality was observed. The distribution and retrieval of the
instrument were personally done by the researcher. The data collected was
compiled, sorted, edited, classified, coded and analyzed using a computerized
Statistical package for social sciences known as SPSS 11.0.
RESULTS AND DISCUSSION
1. The Budget Management of Catholic HEIs
The HEIs strongly agree that they always prepare budgets in
preparation for the opening of the school year as shown by the computed
mean of 5.00. Likewise, the internal stakeholders include department and
academic heads are involved in the budget setting process as evidenced by the
computed mean of 5.00. In the planning process, performance indicators are
included in the budgets (4.67), and resource re-allocation is based on the
performance indicators (4.43). Moreover, budgets take into account the three
year development plan (4.38), and the line managers are involved in the
budgeting process (4.62). According to them, they always present the budget to
the members of the BOT for approval (4.75), who are knowledgeable of the
budgeting process (4.75). Accordingly, the budgets are based on the needs
identified by the sections/ departments (4.75), and they have clear result targets
in the budget (4.75) with appropriate resources (4.62). Furthermore, they
believed that planning helps to manage the programs of the institution (4.75).
In planning, they discuss goals to be met with the management (4.75), and the
program activities are clearly indicated (4.75). They strongly agree that
programs and plans are the basis for allocating financial resources and setting
priorities for the coming year at budget conference. They normally identify
high-priority include in the budget before selecting the different options, and
design appropriate programs to accommodate short-term objectives.
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Moreover, planning of the budget activities is done by the departments (4.37),
and the budget priorities are agreed upon in the budget conference (4.37).
However, when collectively taken, they simply agree that all the stakeholders to
the budget are involved (3.80), and they normally publish the budget after
approval (3.45). The overall assessment per HEI on budgeting and planning
are 4.90 (strongly agree) for HEI A; 4.00 (agree) for HEI B; 4.80 (strongly
agree) for HEI C; and 4.70 (strongly agree) for HEI D. Thus, the overall
assessment among HEIs is 4.61, which means strongly agree. This means that
for proper budgetary control to be done, programs and plans are the basis for
allocation of financial resources. Also clear result targets are to be set indicating
budget outcome goals and objectives being linked to programs. Building of
consensus is useful by way of discussing the goals to be met with all
stakeholders since decisions reached here will be based on plans and programs
in the budget. This also goes along way to help identify the type and level of
resources to provide in order to achieve the set objectives and goals. According
to the results presented, there are significant perceptions among the
respondents regarding budgeting and planning in the institutions a signal that
budgeting and planning has been taken root in the institutions. Planning as part
of the budgeting system involves long range planning, strategic planning and
short term planning. Proponents of budgeting, however, argue that budgets
help to allocate resources, coordinate operations and provide a means for
performance measurement. Hilton et al, (2000), agrees with this view that
budgeting is the most widely used technique for planning and control
purposes. Secondly, budget monitoring in terms of budget reviews is important
as it paves way for budget adjustments. It also permits continuous assessment
of budget variances in terms of actual against the budgeted so that reasons for
differences between actual and budgeted performance are always given in a
budget conference. Similarly, results on monitoring and control established
significant negative perceptions among staff by a majority not sure of
monitoring and control being implemented in the institutions. The agreement
of budget priorities is not done in budget conference and neither are budget
reviews which are useful in determining the budget variances done. Besides,
budgets are initiated in two formats: imposed budget and participative budget
(Brownell and McInnes, 1986; Poon et al., 2001). Top-down imposed budget
tends to cause members’ complaints and abrasive reaction, while bottom-up
participative budget tends to gain members’ cooperation (Brownell and
McInnes, 1986). The latter is considered most motivating by scholars but
requires members’ understanding and accepting organizations’ strategies in the
initiating process (Poon et al., 2001). Budgeting targets solely set by top
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management might be too difficult or too loose. On the contrary, if solely set
by subordinates, budgetary slacks could occur and the organization could get
disoriented (Chaney et al.,2002).
Thus, ideally, budgeting control system should be established by all
members or stakeholders, top management proposes the visions of
organization development, whereas subordinates provide information on daily
operation details (Chong and Johnson, 2007). Hence, the implementation
approach of budgets could also affect members’ budgetary perceptions.
The participant HEIs strongly agree that the funding of budget
programs is based on institutions approved budget (4.75); and the BOT
normally checks on the progress as planned (4.37). It means, the performance
is always communicated (4.50). Thus, the perceived level of budget monitoring
and control in my institution is excellent and adequate (4.25). Moreover, there
is clear tracking of program results among the institutions (4.25) by using
books of accounts. However, they agree that they often receive guidelines from
the Department of Finance/ CHED on the budget process (3.87); and the
budgeting process is expedited by use of budget officers (3.67); often hold
budget conferences to review performance (3.80); and the costed activities are
always reviewed by the executive committee (4.05). When considered per HEI,
the computed means are 4.94 (strongly agree) for HEI A; 3.20 (agree) for HEI
B; 4.73 (strongly agree) for HEI C; and 3.90 (agree) to HEI D. Thus, the
overall assessment is 4.19 (agree). Based on the data presented, it appears that
the respondents are aware that financial control and monitoring helps to
ensure efficient and cost-effective program implementation within a system of
accountability, coupled with a constant program implementation for better
budget implementation in accordance with agreed plans. Thus, it is important
for the financial performance to be communicated to the stakeholders by the
budget managers. This forms the basis of identification of variances or
deviations of actual from the budget so that corrective action can be
undertaken. Equally the results of analyzing and feedback divulge significant
negative responses among staff on the implementation of analyzing and
feedback. Budgetary evaluation refers to the degree of how a superior requires
budgetary gap analysis and a bases performance appraisal on budgeting
information (Kenis, 2009). The nature of budgetary evaluation lies in execution
force in controlling budge, where by comparing differences between actual and
budgeting values and further analyzing the causes of these differences, in order
to deal with exception management (Brownell, 2011). On the other hand, the
result of budgeting execution is normally managed to as information for
performance measurement of the responsibility center managers, in order to
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integrate with the incentive compensation system to perform the function of
encouraging employees (Bonner and Sprinkle, 2012). When budgetary
evaluation is more concerned by the organization, it encourages department
managers’ budgetary motivation and employees’ positive attitude to the budget,
because this is relevant to performance measurement of organization members.
When taken collectively per item, the participants strongly agree that
budget performance reports are prepared regularly in my institution (4.50);
budget deviations are reported to the budget committee/top management
(4.50); deviations from the budget targets are frequently reported (4.42); and
the management always takes timely corrective actions when adverse variances
are reported (4.37). However, they simply agree that there is clear reporting of
program results; Follow up of deviations is done; financial performance is
communicated frequently in meetings; deviations from the expected and the
actual /reported results are common; budgets are always balanced; and analysis
of deviations is necessary among institutions. The overall assessment per
school shows variation among 4.76 (strongly agree) for school A; 3.50 (agree)
for school B; 4.60 (strongly agree) for school C; and 3.85 (agree) to school D.
Thus, the overall assessment is 4.17 (agree). Thus, reports may be issued with
sufficient frequency to facilitate adjustments to off-target operations. When
members of an organization do not know the results of their efforts, they have
no indication of success or failure and no incentive for higher performance.
Although Henderson (2007) mentioned the importance of budgetary feedback
and control for improving managerial performance, they did not investigate
how the disclosure of such information affects other managerial behavior.
Sometimes, top management instructs its unit heads to work towards budget
targets but does not want such managers to know the rationale behind their
decisions. Consequently, these department heads can lose direction and
uncertainties can be created. Managers can solve problems only by creating
budgetary slack, and they might use the slack to cover the variance figures. As a
result, wastage can be created (Lukka, 1988). Therefore, feedback on
performance, when presented in a constructive, objective and unbiased
manner, it shows to be quite important as a motivator in giving reliable
estimations in the budgeting process. A majority of respondent had
perceptions that analyzing and the feedback was not done in the institutions.
Most issues regarding financial performance were not always discussed with
other staff in meetings. The monthly financial reports where budget variances
would be reported and corrective action taken were lacking in most
institutions. This points to a general lack of information regarding the financial
performance of the institutions since there were monthly reports drawn and
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discussed. Feedback is an important aspect in budgeting that attains quality and
standards in planning, control and leadership. A finance officer agrees that
feedback is generally positively associated with budget performance by
focusing on employees achieved expected levels of work during a given period.
Thus, budgetary feedback refers to the degree of how a department head
receives the information about budgeting targets fulfillment. If budgets are
utilized to help subordinates set up goals, evaluate operational outcomes, or
uncover activities that call for resources, budgets could be deemed as
facilitating individuals’ and institution’s goals. Budgeting control system helps
to coordinate consistency between individual goal and institutional goal, and
also helps promote the motivation of the department heads for decision
analysis. On the other hand, after the budget process of the current year has
been completely executed, budgetary feedback can be helpful, by appraising
and analyzing yearly budget. Budgetary feedback not only can verify and rectify
the expected performance, but also provide assistance to predict the future
budget. Besides, the higher feedback level of the budgeting control system, the
more positive appraise and expectation the department managers would
express, which would further assist the managers to timely rectify budgetary
slack in planning budget.
2. The Financial Performance of HEIs
The participants strongly agree that the staff receives their salaries and
allowances on time (5.00); the funds for food and its preparation are always
released on time (4.75); they are always paid top-up in addition to the basic
monthly salary (4.50); suppliers are always paid on time (4.25); and the
expenditure on students’ food during school-related activities and its
preparation are genuine (4.75).On the other hand, the respondents only agree
on the adequacy of expenditure on infrastructure development against total
expenditure; achieving the targets within the budgeted period; and the
timeliness of disbursement of finances upon requisition. Thus, the overall
assessment when analyzed per school, respondents from school A gave a rating
of 4.96 (strongly agree); 4.12 (agree) for school B; 4.37 (strongly agree) for
school C; and 4.12 (agree) for school D. Thus, the overall assessment is 4.39
(strongly agree). Perceived budget performance refers to the perceptions or
feelings of respondents in respect to how well or badly the objectives of the
organization are achieved through budget performance, and this would be in
respect to the revenue performance, expenditure performance and value for
money performance. Management of HEIs is primarily a function requiring
stewardship, meaning the careful use of resources for the benefit of the
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owners. Strictly speaking, the yardstick of budget performance would be
budgeted to actual comparison; this is true even with revenue creation.
Furthermore, budget performance can be tracked from the quality and
standard of budgeted outcomes.
The funds budgeted for are always released on time (4.50). Moreover,
the respondents agree that funds for items budgeted for the year has all been
received (4.00); the expenditure on games and sports is adequate (3.50); the
grants were received regularly (4.00); the grants are received in full as per the
budget (4.00); they have adequately taken care of capital expenditure in our
budget (4.50); and the institution’s requirements are financed immediately the
need arises (4.25). However, they moderately receive all the tuition fees as
budgeted for (3.25). When the assessment is considered per school, the
perceived financial performance relative to service delivery is 5.00 (strongly
agree) for school A; 3.50 (agree) for school B; 3.87 ( agree) for school C; and
3.62 (agree) to school D. Thus, the overall computed value is 4.00 (agree).
Various institutions are providing financial assistance through scholarship
grants or through provision of educational equipment and other facilities to
include the Institutional Development Assistance for Accreditation (IDAA) of
CHED. This is a funding assistance to higher educational institutions (HEIs)
applying for voluntary accreditation. The variables for Grants and Donations
include those with established linkage with other institutions that provide
financial assistance as well as training programs to the schools; receives
financial assistance from the government as incorporated in RA#6728
(GASTPE/ESC); aggresive in public information campaign and convince
industries to establish a massive scholarship program not only to students but
also to employees and; (4) the faculty and staff are also seen as significant
sources of financial support for the school. Peter Druker, the management
guru, points out that non-profit institutions tend not to give priority to
performance and results. Yet performance and results are far more important
and far more difficult to measure and control in the non-profit institution than
in a business. Both government and non-profit sector deliver services without a
profit and both face a similar dilemma and allocate funds based on those
results with a bottom line to measure them. ”There is no automatic measure to
assess successful outcomes or to determine if they have effectively addressed
community needs (Suzanne & Julie 2003). Moreover, many non-profit
organizations survive because of historical performance or an influential set of
benefactors and the ability to raise money. However, today the pressure to
demonstrate how their services transform lives is increasing beyond just
supplying numbers of clients served. Performance measurement and
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performance budgeting are currently being used. However, there is little
documentation of the efforts of nongovernmental organizations on how to
measure their performance. Performance based measurement in non-profits is
are aimed at promoting systematic assessment of grant recipients, activities and
operations instead of basing funding decisions on anecdotal evidence of good
work in serving clients (Kanter and Summer, 2007). The importance of doing
so has only increased as the non –profit sector has grown in size and influence,
with greater visibility and public scrutiny by different stakeholders including
donors, clients, media and government oversight agencies (Kearns, 1994).
Building, maintaining and managing a performance based budgeting system
involves layers of complexity (Smith, 1999). Similarly, non-profit organizations
include Catholic HEIs must deal with the complexities of building; maintaining
and managing performance based budgeting systems. “The non-profit
organizations start with the performance of their Mission” (Druker, 1992).
They do not make money the center of their plans as so many corporations do.
There is a high level of financial performance, though above average in the
institutions as established by the results on perceived financial performance
where there were significant positive perceptions among the respondents, with
a majority having positive perceptions about the financial performance. Given
that most of the grants were always received, respondents agreed that the
expenditure of capital and revenue nature whereby most of the developments
seemed good. The level of service delivery is high since most of the
requirements are taken care of in the budget as a result also infrastructure
development is taking root.
The HEIs strongly agree that all the budgeted activities are
implemented as planned for (4.25); the expenditure on instructional materials is
adequate (4.42); and the expenditure on students’ welfare is adequate every
semester (4.50). Furthermore, they agree that thier income generating projects
undertaken by my institution; the expenditure on infrastructure development is
adequate; the expenditure on ICT meets the demands of the changing
environment, which are part of the plan; and the budget expenditure on
maintenance and repairs is adequate. When taken per HEI, the overall
assessment is (4.92), strongly agree for school A; 3.37 (agree) for school B; 4.5
(strongly agree) for school C; and 3.62 (agree) for school D. Thus, the overall
computed mean is 4.10, which means “agree”. According to Gonahasa (1994),
a proper budget should show all the activities to include income generating
projects, instructional materials, infrastructure development, ICT requirements,
students welfare and development as well as expenditures on maintenance and
repairs intended for the coming year, thus pointing to a budgeting paradigm,
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which is based on the establishment of financial performance measures which
measures act as a gauge to most important issues in the situation and how well
it will reflect good financial performance. However, most plans do not exactly
and clearly show how funding would be appropriated to achieve performance
goals. It is actually identifying the objectives without identifying the means for
achieving it.
3. The Indicators of Financial Performance of HEIs
The salaries of administrators from school A range from 18,001–
19,000 (8 administrators); 19,001–20,000 (6) to Over P 20,001 (7
administrators) with a total of 23 administrators. The schools B and C
administrators are receiving a basic pay of over P 20,001; while from school D,
2 administrators are receiving 6,001–7,000; one is receiving 7,001–8,000; one is
receiving 8,001–9,000; seven are receiving 11,001–12,000; one is receiving
15,001–16,000; and one is receiving over P 20,001. For faculty members from
school A, there are 2 who are receiving P12,001 – 13,000; twenty one are
receiving 15,001 – 16,000; three are receiving 17,001 – 18,000; twenty six are
receiving 18,001 – 19,000; four are receiving 19,001 – 20,000;and eleven are
receiving over P 20,001. These salary ranges are based on the current ranking
system of the school A. The majority (21) of the faculty from school B receives
a salary of below P 5,000. The rest is receiving 6,001-10,000, and others are
receiving 14 thousand and over 20 thousand pesos. The majority of the faculty
members of this school or part-time in the institution. Moreover, faculty
members (7) from school C are receiving 15,000-17,000; while 6 faculty
members from school D are receiving 6,000 but not below 5,000. The rest (8)
is receiving 8,000-12,000, while others (2) are receiving more than 15, 000.
Furthermore, the majority (67) of the staffs from school A are receiving a
salary of 9,000-15,000, and the other three are receiving 18,000-19,000. The
staff from school B receives a salary of 13,000-14,000; while the seven staffs
from school C are receiving 8,000-12,000; and the five staffs from school D are
receiving 6,000-12,000. The variable ranges of salaries receive by the
administrators, faculty members and staffs of the HEIs depend on the
currently practiced ranking system in the institution. Other schools do not have
ranking system that’s why some faculty members (others are part-time) and
staffs are just receiving the minimum salary. The workforce of every
educational institution is the fundamental if not the critical assets in its day to
day operations (Reyes, 2013). They must be competent, innovative and more
importantly motivated to carry out the school’s philosophy, vision, mission and
goals. According to PAASCU, “faculty members must possess qualifications of
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preparation, experience and attitudes that contribute to effective learning and
the number must be adequate for the educational program, the school
enrollment and the special needs of the school”.
Most common benefit among HEIs is the uniform allowance. School
A provides 427,199.25 of uniform allowance among academic and nonacademic staffs; while school B provides 17,500.00; school A for 50 per
employee; and 25,000 for school D. Moreover, faculty development budget of
595,512.69 for graduate studies is provided by school A, while 5,000 for school
C. Other schools do not provide a budget for faculty development for graduate
studies. For trainings/ seminars, school A is allocating more than 2 Million
pesos; 50,000.00 for school B; and 2,000 for school C. School D is not
allocating budget for trainings and seminars. For tuition fee discount for
children, only school A (391,457.05), and school D (25,000) are allocated.
Death Benefit is another benefit receives by the family of the employee from
schools (45,391.50); B (10,000.00), and C (1,500). Birthday gift is provided by
schools A (200,000) and C (1,000 per employee); and service award is
amounting to 85,000 (school A); 500 (school B; and 1,000 (school C). No
service award is given to employees of school D. Lastly, only school A is
budgeting 330,000 for the research incentive.
The sources of annual revenues are basically from tuition,
miscellaneous/other fees as well as other related income. School A has the
highest educational revenue and annual net result of the operation; followed by
school C, school D and school B. Annual expenses are classified to discounts/
scholarship provided by the institutions; salaries and benefits for employees;
instructional and academic for effective and efficient teaching and learning;
student welfare and academic activities; administrative expenses; general
expenses; loan payment and capital expenditures. These vary from school to
school relative to the number of students and employees. The process of
assessing and evaluating on how effectively and efficiently people, resources
and technology within an organization is referred to as performance
measurement. If they are used in the management area, effectiveness is an
output measure of the task or goal accomplishment, and efficiency is a measure
of the resource cost associated with goal accomplishment (Schermerhorn and
Chappell, 2000). Further, how well management makes use of the assets to
create revenue is referred to as revenue performance (Weetman, 1996). This
serves as a good measure of budget performance as it determines the variance
between the budgeted revenue and the actual revenue created. The expenditure
performance refers to how carefully management control costs so as to
maximize the profit derived from the revenue (Weetman, 1996). Expenditure
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performance as a yardstick of budget performance would be determined as a
budget to actual expenditure comparison. Variance analysis is an internal
control technique; management puts in place so as to be able to establish the
causes of divergences from the budget. What are mostly scrutinized are the
unfavorable variances, which take the form of over expenditure as staffs try to
achieve objectives. When staffs learn that their expenditures are to be analyzed,
care as to the use of resources in the performance of tasks increases. This is
because over expenditure without good reasons would not pass unpunished. It
has to be noted that you cannot analyze variances without first measuring
performance. Measuring performance includes comparing actual expenditure
with the budget estimates. In doing so, one is able to see instances where the
budget was exceeded showing the unfavorable variances. The control of direct
costs through variance analysis is based on the principles of management by
exception and accounting responsibility. These are important principles
because they enable management to focus attention on critical areas.
Management by exception assumes that actual expenditure is in line with
standard costs unless this is contradicted by information showing that
variances are occurring between the budget allowances, based on standard
costs and actual expenditure being recorded in the financial accounting
process. Management by exception concentrates on major problem areas,
which require urgent correction. With accounting responsibility, responsibility
for the control of costs is located with the manager having the responsibility
for cost center costs. If a cost center under a Manager has higher costs than
those of his counterparts, he is asked to explain. This can lead to early
identification of problems. The first sign that standard costs are not being
respected is the appearance of a budget variance on direct costs. A budget
variance as the difference between the budget estimates for the output
achieved and actual spending on the output achieved, requires analysis,
investigation and correction (Fund and Dev, 1998). The analysis of the budget
variance necessitates splitting up the budget variance into two components of
standard costs, namely the quantity standard and the price standard. As a result,
it is possible to attribute the problem to the occurrence of excessive usage or
excessive price or both. Budget expenditure variances fall into two categories
of unfavorable variances and favorable variances. The unfavorable variances
arise when the standard is exceeded by actual expenditure. On the other hand,
favorable variances are due to actual expenditure being less than standard
(Hongreen, 1987; Belkaui, 1985). Management‘s greater concern will be with
the unfavorable variances for these are the ones that show signs of
inefficiencies.
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The physical plant, facilities and equipments are present among HEIs.
Some of these are classrooms, library, laboratory, student study area, clinic,
guidance and counseling office and rooms, admissions and registration office,
bookstore, canteen, students’ comfort rooms, gymnasium/ social hall,
computer equipment for students’ use, multi-media projector/ LCDs,
overhead projector, and TV monitors. School B does not have students’ study
area. Only school A has bookstore; the school does not have a gymnasium/
social hall; and school C does not possess TV monitor. The minimum
requirement that the physical plant should be adequate for the attainment of
the objectives of the school is important for each HEI. The evaluation
instrument of the Philippine Accrediting Association of Schools, Colleges and
Universities (PAASCU) is included in the Physical Plant criteria the
site/campus,
buildings,
building
services,
classrooms,
auditorium/gymnasium/covered court, canteen, dining room and kitchen clinic
facilities, offices, faculty rooms and others (Reyes, 2013). The offices are
equipped with the basic furniture and fixtures, communication and computer
equipment and access to its clientele. Likewise, the size is adequate and
appropriate for its specific use. For a big College like Columban College, it
has offices for the Directors of the various programs, Chairpersons, Academic
Counseling Rooms, Halls for meetings, gatherings, seminars, trainings, fora and
symposia, faculty room and lounge for each college, hotel and a swimming
pool. The hotel and swimming pool are one of the best features of the College
in terms of physical plant and facilities (Reyes, 2013). The school facilities must
be safe, suitable and adequate for its activities. Also, the provisions of the
National Building Code, Fire Code, Accessibility Law for students with special
needs, sanitation and hygiene standards and other applicable laws must be
adhered to. It is important that these are taken into consideration, especially
that the implementation of the senior high school will entail the use of
additional physical facilities. The evaluation of the present facilities will
somehow gauge the additional resources needed for the program. As per
minimum requirement of the accrediting agencies, the size of standard
classroom is seven meters (7m) by nine meters (9m). This size can
accommodate fifty (50) students; the ratio of a classroom is one (1) for every
fifty (50) students. Every school must provide a space exclusively for library
use of both students and faculty. This area must be easily accessible and must
have an adequate space provision for reading and viewing needs of the
clientele. The minimum requirement however is one (1) library exclusively for
its purpose. A school should have laboratory facilities and equipment adequate
for effective instruction (PAASCU, 2006). Also, the laboratory in basic
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education must be appropriate for courses with laboratory experiments like
General/Integrated Science, Biology, Chemistry and Physics. The limitation of
this survey however is the absence of inventory of laboratory apparatus,
equipment, tools, materials and supplies. Students’ Study Area is being used by
the students not only for studying but for other activities like meetings of the
clubs, organizations and other co-curricular activities that supplement the
academic program. To meet the minimum health services of both students
and employees of the school, clinic facilities must be present in each school for
medical and dental examination. As per PAASCU, the school should concern
itself with the welfare of the individual student and it should direct and assist
the individual in his or her personal and interpersonal relations. The bookstore
in this study is seen as auxiliary service income of the school. The school must
have an adequate food facility to meet the food services of its clientele, and
there should be adequate restrooms and lavatories for both students and staff
and there should be provision for privacy. Gymnasium/ social hall is often
used for Physical Education classes and other student activities. Just like other
facilities of the school, it should be accessible, well ventilated and maintained.
Computer equipment for students’ use should be provided since students are
charged for computer laboratory fee. Moreover, the schools must be equipped
with instructional equipment and materials to facilitate the learning process.
The students must somehow be updated with the latest technology available
for their use. Moreover, the reform agenda for enhancing productivity,
therefore, requires attention to effective teaching, including good instructional
techniques, but also requiring appropriate instructional resources such as
libraries, laboratories, scientific equipment, computers, and internet
accessibility; an appropriate curriculum, including content that is intellectually
challenging, up-to-date, and appropriate to the mission of the institution;
effective learning, including appropriate student time-on-task, as well as the
ability to focus and concentrate; and an efficient managerial and administrative
structure. Such efforts towards efficiency, cost control, and resource generation
can go a long way in helping develop schools solve their resource and quality
related problems.
4. Variations in the Budget Management and Financial Performance
The null hypothesis stating that “there are no significant variations in
the budgetary controls across HEIs” is rejected on the areas of budgeting and
planning, monitoring and control, analyzing and feedback because the
computed F values are greater than the critical F values. Thus, there are
significant variations in the budgetary controls across HEIs relative to
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budgeting and planning, monitoring and control, analyzing and feedback. On
the other hand, the null hypothesis stating that “there are no significant
variations in the perceived financial performance across HEIs” is rejected on
the areas of service delivery, and expenditure activities because the computed F
values are greater than the critical F values. However, on the area of
infrastructure development, the null hypothesis is accepted. Thus, significant
variations on the perceived financial performance are found relative to service
delivery and expenditure activities; but insignificant variations are found on
infrastructure development across HEIs.
5. Implications of the Findings
This study aimed to investigate related factors affecting budgetary
performance of Catholic HEIs in the Diocese of Iba, Zambales, including the
characteristics of budgeting control system and financial performance
perception factors. These findings can be used as references by HEIs in
planning budgeting control system. Empirical results show that budgetary
feedback information would have effects of supervision, control, and
encouragement on budgeting managers or finance officers. Hence, budgetary
feedback will yield positive effect to administrators’ budgetary motivation
(sense of accomplishment and promotion). Besides, department head’s taking
part in budget planning in person indicating that the empowerment intensity of
the organization to budget is high, or that department heads and other
stakeholders will be consulted and the opinions will be taken into consideration
in budget planning. This would further enhance positive and agreeable attitude
of the budgetary participation, and would have a positive effect on budgetary
motivation. However, due to budget planning principles of the institutions is
proposed by department heads, and then distributed in terms of department
performance or employee/ staff number, thus, the intensity of budgetary
participation is not relevant to budgetary slack. In other words, it is not that a
department head who highly participates in budget planning would, therefore,
propose a slacker budget, but he should do it according to overall performance
and department activities. In consequence, the result suggests that budget/
finance officer should take the consistency between organizational objectives/
goals and department strategic objectives/ goals as guidelines of budget
planning, rather than the merely budget achievement ratio of an individual
department. On the other hand, the variations on the budgetary controls and
the perceived financial performance are significant. The budgetary feedback
information about variation of budget execution has power in supervision,
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performance measurement, and control. Budgetary feedback may decrease the
possibility that the department head positively deal with the budgeting system.
Inadequate budgetary controls lead to objectives being unclear and
performed not satisfactorily achieved. This reduces output because
employees/staff do not know or are doubtful about what to do, when and how
to do it. Thus leading to delays in identification of deviations from plans, which
lead to failure in goal achievement and hence poor performance. It implies
further that smooth implementation of budgets, budgetary planning and
control must be done properly. Evaluation of budgetary controls acts as a
process of assessing performance against budget standards and performance
targets with the intent to take corrective action. Only when the budget officer
has positive budgetary attitude, then he is capable of achieving budgeting
functions of financial management, cost control, resource planning, and
performance measurement. Since the achievement ratio of budgeting target is
the basic budgetary performance concerned with the top management, such as
the achievement ratio of the educational cost, revenue, and gross margin.
Therefore, the higher usefulness and relevance the budget has, the more it
helps the institution to accurately assess whether each department fulfill
strategic objectives or requirements. The budgeting control system also helps
department heads in job performance of operational activities. Hence,
budgeting information yielded from high quality budget helps the budget
officer to judge the performance of the past and further increases job
performance through financial management. On the other hand, the fewer
propensities in budgetary slack the budgeting managers have, the more it
represents that the budgeting members would think more about the adequacy
of budgeting targets, in order to prevent a very slack budget.
CONCLUSIONS AND RECOMMENDATIONS
For proper budgetary control to be done, programs and plans are the
basis for allocation of financial resources. Also clear result targets need to be
set indicating budget outcome goals and objectives being linked to programs.
Building of consensus was not evident to some HEIs by way of discussing the
goals to be met with all stakeholders in decisions of plans and programs vis-avis budget. Budget monitoring in terms of budget reviews is important as it
paves way for budget adjustments. It permits continuous assessment of budget
variances in terms of actual against the budgeted so that reasons for differences
between actual and budgeted performance are always given in a budget
conference. Some schools have slightly negative perceptions of not being sure
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of monitoring and control being implemented in the institutions. It is
important for the financial performance to be communicated to the
stakeholders by the budget officers. This forms the basis of identification of
variances or deviations of actual from the budget so that corrective action can
be undertaken. Equally the results on analyzing and feedback divulge
significant responses among respondents on the implementation of analyzing
and feedback. Feedback is an important aspect in budgeting that attains quality
and standards in planning, control and leadership as revealed by the HEIs.
There was a high level of financial performance, though above average in HEIs
as established by the results on perceived financial performance where there
were significant positive perceptions among the respondents, with a majority
having positive perceptions about the financial performance. Generally, the
HEIs show all the activities intended for the coming year, thus pointing to a
budgeting paradigm, which is based on the establishment of financial
performance measures. The most HEIs institutions plan clearly shows how
funding would be appropriated to achieve performance goals. However, some
schools do not receive all the tuition fees as budgeted for. The institutions are
faced with challenges to performance budget implementation among which,
lack of credible and useful performance information, difficulty in achieving
consensus on goals and measures because of low levels of participation is the
major drawbacks. Income generating projects undertaken by my institution are
limited. The expenditure on infrastructure development is moderately
adequate. The findings indicate that budgeting and planning, monitoring and
control, analyzing, and feedback as components of budgetary controls were
significant predictors of perceived financial performance among HEIs. The
indicators of financial performance of HEIs relative to salary of administrators,
faculty and staff, institutional benefits, educational revenue and expenses,
physical plant, facilities and equipment are in varying degree of adequacy.
There are significant variations on the budgetary controls across HEIs relative
to budgeting and planning, monitoring and control, analyzing and feedback.
There are significant variations on the perceived financial performance across
HEIs on the areas of service delivery, and expenditure activities. There are no
significant variations on the perceived financial performance relative to
infrastructure development across HEIs. Empirical results show that budgetary
feedback information would have effects of supervision, control, and
encouragement on budgeting managers or finance officers. It implies further
that smooth implementation of budgets, budgetary planning and control need
to be done properly.
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The higher administration of HEIs should promote budgetary controls
among the employees through continuing involvement of stakeholders. There
is a need for the integration of budgetary controls knowledge within the
curriculum to enhance perceptions of the implementation of budgetary
controls which is at stake in the institutions. There is a need for a sensitization
drive through training, workshops, seminars and meetings on the values of
implementation of budgeting and planning, monitoring and control and
analyzing and feedback. The BOT should focus attention on important points
in the implementation process of the budgetary controls and adequately
monitor the institutions financial performance vis-à-vis budget formulation and
implementation. The CHED should provide HEIs with the guidelines for the
setting of goals, objectives, programs designs and formulation of performance
measures. The use of a book must be taken up for purposes of monitoring and
control financial performance in the HEIs. The HEIs need to adopt the
bottom – top approach to allow effective participation by all levels of
management in the decision making processes, which requires comprehensive
planning and approval framework consistent with processes for budget
construction. The performance reports should be made quarterly to enhance
feedback which is useful for disseminating financial performance information
within the institutions. The level of feedback and level of participation of
stakeholders needs to be upheld and strengthened in order to have an effective
and efficient budgeting process. There is a need for regular or periodic
meetings to provide intentional feedback on budgeting in terms of quarterly
budget performance indicating budget changes, revenue and expenditure
performance and budget revisions to the beneficiary units/ departments with
detailed explanations of variances from plans and recommended controls to
manage budgets better in the next quarter. It should be mandatory that
budgeting process for the different units /departments are conducted in a
workshop / unit meeting was set so as to enhance participation of all the staff
in the respective budgeting units and a requirement for all participating staff to
endorse on their unit’s budget document as evidence of their participation.
These would be enforced by a change in the budgeting guidelines or policy.
The future research should attempt to investigate other factors other than
budgetary control components that affect the perceived financial performance
in the institutions.
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