LAGOS STATE UNIVERSITY MPA
TITLE PAGE
AN ASSESSMENT OF EFFECTIVENESS OF
BUDGETARY CONTROL SYSTEM IN PUBLIC
SECTOR ORGANISATIONS. A CASE STUDY
OF LAGOS STATE WATER CORPORATION,
IJORA.
A THESIS PROPOSAL FOR MPA IN PUBLIC
ADMINISTRATION
BY
MODUPE ADENIRAN
MATRIC NO.: XXXX XXXXX
APRIL 2023
DECLARATION
This research project is the original work of MODUPE ADENIRAN
(MATRIC NO: XXXXXXXXX). It has not been presented for examination
in any other University.
MODUPE ADENIRAN
Signature …………………………… Date …………………….
ii
CERTIFICATION
This is to certify that this research work was carried out by MODUPE
ADENIRAN (MATRIC NO: XXXXXXXXXX) and was supervised and
approved by us as part of the requirements for the award of Master of Public
Administration (MPA) in the Faculty of Management Science, Lagos State
University, Ojo, Lagos State, Nigeria.
MODUPE ADENIRAN ----------------------- Date--------------------(Researcher)
PROF SYLVESTER OLUBANJI FAJONYOMI --------------------------(Project Supervisor)
Date---------------------
iii
DEDICATION
iv
ACKNOWLEDGEMENT
v
ABSTRACT
This study investigated the effectiveness of budgetary control system in
public sector organisations with particular reference to Lagos State Water
Corporation. Based on primary data, the study answered three questions and
tested three hypothesis. The primary data was collected from 142 respondents
who were personnel of Lagos State Water Corporation. The collected data
were collated and analysed to provide to provide descriptive statistics while
Statistical Package for Social Sciences (SPSS) was utilised in testing
hypothesis of the study. Based on the analysis, it was found that budgetary
control has effect on public sector performance; there is relationship between
budgetary control and cost reduction in the public sector; there is relationship
between budgetary control and accountability in the public sector. The study
concluded that the success or failure of any organization or business concern
depends greatly on its ability to integrate available resources, whether human
or material, and combine them in the most efficient and productive manner
through budgeting. Recommendations from the study included that the
activities of the various departments in government organisations should be
planned and coordinated very well to ensure that the departments are in
harmony so that the effective budget will be achieved; orientation, seminars
and workshops on budgeting and budgetary system should be emphasized to
those involved in the budget preparation; and budget committees should
vi
function well to make sure that proper budgeting is applied and in effective
way.
Key Words:
Budgetary control system, Public Sector, Accountability, cost reduction
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TABLE OF CONTENTS
TITLE PAGE ....................................................................................................................... i
DECLARATION ................................................................................................................ii
CERTIFICATION ............................................................................................................ iii
DEDICATION ................................................................................................................... iv
ACKNOWLEDGEMENT .................................................................................................. v
ABSTRACT ...................................................................................................................... vi
TABLE OF CONTENTS ............................................................................................... viii
CHAPTER ONE ................................................................................................................. 1
INTRODUCTION .............................................................................................................. 1
1.1 Background to the Study ........................................................................................... 1
1.2 Statement of the Problem ................................................................................................ 3
1.3 Objectives of the study.............................................................................................. 4
1.4 Research Questions ................................................................................................. 4
1.5 Research Hypotheses ................................................................................................ 5
1.6 Significance of the study ......................................................................................... 5
1.7 Scope and limitations of the Study ........................................................................... 6
1.8 Operational Definition of Terms ......................................................................... 7
CHAPTER TWO .............................................................................................................. 10
REVIEW OF RELATED LITERATURE ........................................................................ 10
2.1
Introduction ........................................................................................................ 10
2.2
Conceptual Framework ...................................................................................... 10
2.1.1
Concept of Budget .......................................................................................... 10
2.2.2
Concept of Budgetary Control ....................................................................... 23
2.2.3
Operationalizing Budgetary Control .............................................................. 30
2.2.4
Planning, Programming, Budgeting System (PPBS) in the Public Sector ..... 31
2.2.5
Public Sector Budget Cycle ............................................................................ 37
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2.2.6
2.3
The Concept of Public Sector ......................................................................... 39
Theoretical Framework ...................................................................................... 43
2.3.1
Theory of Zero-Base Budgeting ..................................................................... 43
2.3.2
The Theory of Management by Objectives .................................................... 49
2.3.4
Application of MBO to Budget Control Cycle .............................................. 54
2.4
Empirical Review ............................................................................................... 55
CHAPTER THREE .......................................................................................................... 60
RESEARCH METHODS ................................................................................................. 60
Introduction ................................................................................................................... 60
3.1
Research Design ................................................................................................. 60
3.2
Area of Study ..................................................................................................... 61
3.3
Population of the Study ...................................................................................... 61
3.4
Sample and Sampling Method ........................................................................... 61
3.5
Method of Data Collection ................................................................................. 62
3.6
Research Instrument ........................................................................................... 63
3.7
Validation of the Research Instrument............................................................... 63
3.8
Reliability of Research Instrument .................................................................... 64
3.9
Method of Data Analysis ................................................................................... 64
CHAPTER FOUR ............................................................................................................ 65
DATA PRESENTATION, RESULTS AND DISCUSSIONS ......................................... 65
4.1
Data Presentation ............................................................................................... 65
4.2
Testing of Hypothesis ........................................................................................ 78
4.3
Discussion of Findings ....................................................................................... 81
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS ............. 85
5.1
Introduction ........................................................................................................ 85
5.2
Summary of Findings ......................................................................................... 85
5.3
Conclusion ......................................................................................................... 87
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5.4
Recommendations .............................................................................................. 88
5.5
Limitations of the Study..................................................................................... 88
5.6
Suggestions for Further Research ...................................................................... 89
REFERENCES ................................................................................................................. 90
APPENDIX 1: LETTER TO RESPONDENTS ............................................................... 98
APPENDIX 2: RESEARCH QUESTIONNAIRE ........................................................ 99
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CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The relevance of cost management in public sector organisations, in a State like
Lagos with fast growing population calls for budgeting and control for effectiveness
and efficient delivery of quality service delivery to the citizenry (Olaniyan and
Efuntade, 2020). In view of high operating cost, there the need for public sector
organisations to do a realistic budgeting and planning for the income and expenses
of the organization taking cognizance of its long term goals and objectives.
Budgeting is indispensable and has long been considered as a necessary tool in
managing an organisations, particularly public sector organisation (Olurankinse and
Oloruntoba, 2017). Budgeting serves as a tool for financial planning as well as a
vehicle through which the actions of the different parts of an organization can be
brought together and reconciled into a common plan (Imo and Des-Wosu, 2018). All
organizations whether public or private - social, political or industrial make plans
for the future (Geletaw, 2018). A well prepared budget provides management with
a planned programme to enhance achievement of continual growth or ensuring the
survival of the organization including management of risks in making investment
(Godfrey, 2017). Budgeting therefore is an essential element which is vital to
management accounting for the benefit all aspects, departments and units of
1
organisation if it is understood and properly utilized (Ibrahim, Shettima, Mustapha,
Yusuf, Ibrahim, 2018).
The success and failure of any organization or business concern depends to a large
extent on its ability to integrate available resources – human, material or combined
in the most efficient and productive manner (Ijaiya, Sanni, Olabisi and Dolapo,
2018). The Nigerian socio-political environment is complex, volatile and dynamic
and the ever increasing call for quality service delivery to the citizenry makes
budgeting an inevitable tool for public sector success (Lambe, Lawal and Okoli,
2015).
Budges can be used as the parameter to measure the actual achievement of people,
ministries departments, and agencies (Isaac, Lawal and Okoli, 2015). Resources are
scarce and proper application of budget ensures that efficient allocation of resources
towards high productivity. According to Lewis and Hildreth (2013), budgets are
indispensable in a large modern organisation as the benefit that accrue from
budgeting is much greater than the cost involved. It ensures that actual results are
positively or negatively correlated with the overall financial and policy objectives of
the organization (Omolehinwa, 2016). Given the outcry for quality services delivery
in Lagos State relative to its fast growing population, this study assesses the
effectiveness of budgetary control system in public sector organisations with
particular reference to Lagos State Water Corporation in Ijora.
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1.2 Statement of the Problem
Budgetary control is one of the essential functions of every public sector organization
as their survival and growth depends on effective budgetary control measures. This
implies that if budgets are effectively designed and implemented, an organization is
more likely to achieve its goals and objectives (Zayol, 2017). There are rampant
incidences of public sector organisations outspending their annual income
allocations far before the end of the fiscal year which point to the fact that these
organization may not be making use of appropriate budgetary control in
management of their operational costs (Samuelsson, 2016). Many public sector
organisations spend huge resources in developing a comprehensive budgetary
documents targeted at guiding their cost management but thereafter abandon the
budget document in the course of their operations. According to Oladipo and
Efuntade (2020), public sector profligacy stems from non-compliance to budgetary
planning and control where proper budgets have been documented. This implies that
the day-to-day decisions as to how to distribute limited financial and non-financial
resources for operational needs both recurrent and capital are taken without
reference to documented costs for line items in each overall operational undertaking
(Onho and Zayol, 2017). Also budget analysis and feedback about budgetary
problems are continuously ignored which, in some cases, arise from inadequate
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and/or untimely data on budgetary control feedbacks (Imo and Des-Wosu, 2018). It
is against this scenario that the researcher is motivated to assess effectiveness of
budgetary control system in public sector organisations.
1.3 Objectives of the study
The main purpose of this study is to establish the relationship between budgetary
control and performance of public sector in Lagos State. The specific objectives of
the study are to:
i.
Assess the effectiveness of budgetary control on public sector performance
ii.
Examine the relationship between budgetary control and cost reduction in the
public sector
iii.
Evaluate the relationship between budgetary control and accountability in the
public sector.
1.4 Research Questions
The study will be guided by the following research questions:
i.
Does budgetary control have effect on public sector performance?
ii.
Is there relationship between budgetary control and cost reduction in the
public sector?
4
iii.
Is there relationship between budgetary control and accountability in the
public sector?
1.5 Research Hypotheses
Based on the objectives of the study objectives and research questions the following
hypotheses are formulated to enhance the study:
H01: Budgetary control has no effect on public sector performance
H02: There is no relationship between budgetary control and cost reduction in the
public sector
H03: There is no relationship between budgetary control and accountability in the
public sector.
1.6 Significance of the study
The study will enhance cost reduction and improvement of service delivery in Lagos
State and improve financial planning, management performance, decision making
and performance in Government Ministries, Departments and Agencies (MDAs).
The research will reduce waste of resources and bring a positive impact on in service
delivery of qualitative services to the local citizenry. It will help in the provision of
clearer picture of daily activities of fund management while contributing to the
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attainment of realistic budget and budgetary procedures in Public sectors in Lagos
State. The outcome of the study will help widen public sector financial management
and resource allocation and control. Operating staff will also be informed on how
they can improve their operations through the use of budgets as guides. The research
report will also serve as a reference material to students of accounting and other
business studies especially those in public sector administration. It will provide
ample information to public sector treasurers and external auditors on how resources
of public sector are allocated and managed. Finally, this study will highlight the
factors that lead to poor budget implementation which cause failures towards
attaining goal and objectives. The study will also enhance audit planning and
highlight the control mechanisms required for a successful budget implementation.
1.7 Scope and limitations of the Study
This study will centered on the effect of budgeting control on public sector
organizations with particular reference to Lagos State Water Corporation in Ijora.
Respondents on the study will be selected from Lagos State Water Corporation in
Ijora. The study is limited by the difficulty in obtaining data from the management
of Lagos State Water Corporation owing to fear of disclosing their confidential
information, respondents bias in filling and returning the questionnaires, and time
frame for the research work.
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1.8 Operational Definition of Terms
Accountability
Accountability is an assurance that an individual or an organization will be evaluated
on their financial performance or budgeting or behaviour related to something for
which they are responsible. Corporate accountability involves being answerable to
all stakeholders of the organization for all actions and results.
Auditing
Audit is the examination or inspection of various books of accounts by an auditor
followed by physical checking of inventory to make sure that all departments are
following documented system of recording transactions. It is done to ascertain the
accuracy of financial statements provided by the organisation.
Forecasting
Forecasting is the procedures and techniques for predicting condition or event that
are expected to prevail in the future.
Budgeting
Budgeting is the process whereby the plans of an organisation are translated into an
itemized, authorized and systematic plan of operation for a given period expressed
in terms of amount of money.
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Budget
This is defined as a future plan of action for the whole organization or a section
thereof expressed in monetary terms.
Budgetary Control
This is the establishment of budget relating to the responsibility of the executives to
the requirement of the policy and the continuous comparison of actual performance
with budgeted level so as to secure either by individual or collective action the
objectives of such policies.
Public sector
Public sector refers to a ministry, department, agency or parastatal in any arm of
government be it Federal, State or Local.
Productivity
The rate at which goods and services are produced compared with the resources –
time, money, human capital and material needed to produce them.
Performance
The accomplishment of a given task measured against preset known standards of
accuracy, completeness, cost, and speed. In contract, performance is deemed to be
8
the fulfillment of an obligation in a manner that releases the performer from all
liabilities under the contract.
Planning
Planning is the activity where the manager analyses present conditions to determine
ways of reaching a desired future state.
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CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1
Introduction
This chapter deals with the review of literature considered to be important to this
study. The literature review is discussed under the following sub-headings:
 Introduction
 Conceptual Framework
 Theoretical Framework
 Empirical Framework
2.2
Conceptual Framework
2.1.1 Concept of Budget
The Chartered Institute of Management Accountants, England, defines a budget as
"a financial and/or quantitative statement, prepared and approved prior to a defined
period of time of the policy to be pursued during that period for the purpose of
attaining a given objective." According to Brown and Howard (2013), a budget is a
predetermined statement of managerial policy during the given period which
provides a standard for comparison with the results actually achieved. A budget is a
set of interlinked plans that quantitatively describe an entity's projected future
10
operations (Mutungi, 2017). It is used as a yardstick against which to measure actual
operating results for the allocation of funding and as a plan for future operations. It
is a plan that outlines an organization's financial and operational goals. So a budget
may be thought of as an action plan (Mukah, 2016).
Accounting Solutions (2013) defines a budget as a quantitative expression of a
featured plan which is stated in terms of monetary. It is clearly defined for a
particular period of time and have a limit. A budget includes aspects on which a
business firm or a company sees to improve upon. It may include various
departments or seen the whole firm as one. The budget is made up by a team of
decision makers who analyze the expenses and revenue of the firm and also studies
the past expense and revenue of the firm (Alade, Owabumoye and Olowookere,
2020).
After making much research work, then the decision makers come up with an
appropriate budget which foresees the needs and wants of the firm under tight cost
and expenditure. A budget includes planned volume sales and the revenue attached
to that, the costs and expenses, liabilities, assets, resource quantities ad cash flows
(Olaoye and Ogunmakin, 2014).
The budget is like an expression which expresses the main strategic plans of the
business operations comprising of the organizations, activities, events and units
which can be measured in a measurable terms. In simpler words, a budget is basically
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the total sum of money which is carefully allocated for a very specific motive and
the overall summary of these intended expenditures is taken along in consideration.
The proposals are set and charges are made for how to meet them efficiently (Usman,
Yusufari, Hamza and Abdullahi, 2016).
In the opinion of Creative Commerce (2015), a budget is an instrument of
management used as an aid in the planning, programming and control of business
activity (Siyanbola, 2013). A budget may be defined as a financial and/or
quantitative statement, prepared and approved prior to a defined period of time, of
the policy to be pursued during that period for the purpose of attaining a given
objective. It may include income, expenditure and employment of capital.
Onduso (2013) sees budget as a plan in an organization expressed in monetary terms
and subject to the constraints imposed by the participants and the environments,
indicating how the available resources of the organization may be utilized in order
to achieve whatever the objectives of the organization. According to Brown and
Omolaye (2015), it is a predetermined statement of management policy during a
given period which provides a standard for comparison with results actually
achieved. Also, Buyers and Holmes defined budget as a financial and/or quantitative
statement prepared and approved prior to be pursued during that period for the
purpose of attaining a given objective. In the opinion of Omeje, Ibeogu, Abah, Edeh
and Nkwede (2019), it is a comprehensive plan expressed in financial terms by
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which an operating programme is effective for a given period of time (usually one
year) including estimates of the services, activities and projects comprising the
programme, resultant expenditure requirement and the resources usable for their
support.
Nickson (2017) posits that budgeting is the only comprehensive approach to
managing an organization and if utilized with sophistication and good judgment, the
objectives of the organizations can be achieved. Budget recognizes fully, the
dominant role of managers and provides a framework for implementing the
fundamental aspects of scientific management as Management by Objectives
(MBO), effective communication, participative management, dynamic control,
continuous feedback, responsibility accounting, management by exception and
management flexibility.
It is the view of Yakubu (2011) that as political documents, budget allocates scarce
resources among competing social and economic needs. As managerial documents,
budgets specify the wants and means for providing for government services. By
establishing the cost for various programmes they set up the criteria by which public
sector programmes are to be review and evaluated. Budget has become the main
instrument by which organisations attempt to manage economic growth and
development (Matthew, 2014). Budget becomes accounting instruments by which
officials are held accountable for what the organisation does and does not manage
13
to accomplish (Ibid). Public Budget preparation is one of the most tedious tasks of
public sector. The preparation process for the annual budget involved a great deal of
energy, time and expense. Hence, it is important that the methods of preparing
budgets for the public sector is properly followed. Therefore, a good budget may be
characterized with the following attributes (Matthew, 2014):
 Participation - It involves as many people as possible in drawing up a budget
 Comprehensiveness - It embraces the whole organization
 Standards - It is based on established standards of performance
 Flexibility - It gives room for changing circumstances
 Feedback - It constantly monitors performance; and
 Analysis of Cost and Revenue - Allows cost and revenue analysis on the
basis of product lines, departments or cost centres.
Creative Commerce (2015) notes that as the business scenario is wider these days,
the preparation of budgets must be done with certain objectives to be fulfilled in due
course of time. These objectives of budgeting depend upon the two key factors such
as the type of budget being produced and the type of the organisation for which the
budget is prepared. The major objectives according to Marcormick (2017) include:
 Planning - Managers are required to produce detailed plans to enable the
implementation of the long term or strategic plan. The annual budgeting
process encourages managers to plan for future operations, refine existing
14
strategic plans and consider how they can respond to changing circumstances.
This encourages managers to anticipate problems before they arise and
ensures reasoned decision making. Without this incentive the pressures of day
to day operations may tempt managers not to plan for future operations and
hasty decisions based on expediency rather than reasoned judgment will be
minimised.
 Co-ordination - Budgeting facilitates consolidation and co-ordination and
allows the actions of the different parts of the organisation to be brought into
a common plan. It also compels managers to examine the relationship between
the different parts of an organisation when making decisions and in assists in
identifying and resolving conflicts. Examples of the type of conflicts which
could arise in a manufacturing setting for example would be between a
purchasing manager who buys in bulk to obtain large discounts, a production
manager who wishes to avoid large stock levels and an accountant who is
concerned about the impact on the business’s cash resources. Budgeting aims
to reconcile these differences.
 Communication - All managers within the organisation must have a clear
understanding of the role which they are required to play in ensuring
budgetary compliance. This ensures that the most appropriate individuals are
made accountable for budget implementation. Senior management can also
15
use budgets to communicate corporate objectives downwards and ensure that
other employees understand them and co-ordinate their activities to attain
them. The act of preparation as well as the budget itself will also improve
communication. Participation in budget setting relates to the extent that
subordinates are able to influence the figures incorporated in their targets.
Participation is often referred to as bottom-up budget setting whereas a nonparticipatory approach whereby subordinates have little influence on the
target setting process is sometimes called top-down budget setting.
 Motivation - Budgets can also provide a motivation for managers to perform
in line with organisational objectives. It therefore sets a standard which under
circumstances managers may be motivated to achieve. It is important,
however, that managers are involved in the budget setting process and that
budgets are used as a tool to assist them in managing their departments. With
‘top-down’ approaches there is a risk that dysfunctional motivational will
occur.
 Control - Managers can also use budgets to control the activities for which
they are responsible. Analyses of variances allow managers to identify those
costs which do not conform to the long term plan and therefore may require
alteration. By investigating the reasons for budget deviations managers may
also be able to identify inefficiencies. The budget forms the basis of a
16
controlling mechanism for the various resources of an organisation which is
achieved by comparing the resource measured to the end of a given period
with that which was expected. This approach can be used for all measurable
resources and activities within the organisation – not just those which are
directly financial. Budgetary control highlights variations from the expected
in order that management can take remedial action to ensure that the policy
objectives set in the budget can be met. It is a constant monitoring process and
requires continual updating and amendment of the budget through operational
feedback. This also allows for performance against objectives or targets to be
measured.
 Evaluation - Budgeting can also be used as an effective management tool. It
provides an important mechanism for informing managers as to how well they
are performing in meeting targets they have previously helped to set and an
employee's ability to meet agree targets is used is many organisations to
determine promotions and bonuses. In this circumstance budgets will
therefore influence human behaviour.
On the basis of holistic organisational management, Creative Commerce (2015)
argues that budgets can be categoriesd as functional and master budgets. A
functional budget focuses on the day-to-day operations of the organisation and caters
for operations such as:
17
 Sales Budget - Sales Budget - Sales Budget generally forms the fundamental
basis on which all other budgets are built. The budget is based on projected
sales to be achieved in a budget period. The Sales Manager is directly
responsible for the preparation and execution of this budget. He usually takes
various organisational and environmental factors into consideration while
preparing the sales budget. It is desirable to break up the entire sales budget
on the basis of different products, time periods and sales areas or territories.
 Production Budget - This budget provides an estimate of the total volume of
production distributed product-wise with the scheduling of operations by
days, weeks and months, and a forecast of the inventory of finished products.
Generally, the production budget is based on the sales budget. The
responsibility for the overall production budget lies with Works Manager and
that of departmental production budgets with departmental works managers.
Production budget may be expressed in physical or financial terms or both in
relation to production. The production budgets attempt to answer the
following questions:
o What is to be produced?
o When it is to be produced?
o How it is to be produced?
o Where it is to be produced?
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The production budget envisages the production programme for achieving the
sales target. It serves as a basis for preparation of related cost budgets, e.g.,
materials cost budget, labour cost budget, etc. It also facilitates the preparation
of a cash budget. The production budget is prepared after taking into
consideration several factors like; inventory policies, sales requirements,
production stability, plant capacity, availability of materials and labour, time
taken in production process, etc.
 The direct materials budget - The direct materials' budget has two
components, (i) materials requirement, budget, and (ii) materials procurement
or purchase budget. The former deals with the total quantity of materials
required during the budget period, while the later deals with the materials to
be acquired from the Market during the budget period. Materials to be
acquired are estimated after taking into account the losing rind the opening
inventories and the materials for which orders have already been placed.
 Direct Labour Budget - Direct labour budget like direct materials budget
may be divided into two categories such as direct labour requirement budget
and direct labour procurement budget. The former deals with the total direct
labour requirement in terms of quantity or/and value, while the latter states
the additional direct workers to be recruited.
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 Factory Overheads Budget - Factory or manufacturing overheads include
the cost of indirect material, indirect labour and indirect expenses.
Manufacturing overheads may be classified into (i) Fixed Overheads i.e.
which tend to remain constant irrespective of change in the volume of output,
(ii) Variable Overheads i.e. which tend to vary with the output, and (iii) Semivariable Overheads i.e. which are partly variable and partly fixed. The
manufacturing overheads budget will provide an estimate of these overheads
to be incurred during the budget period. Fixed manufacturing overheads can
be estimated on the basis of the past information and knowledge of any
changes which may occur during the ensuing budget period. Variable
overheads are estimated after considering the scheduled production and
operating conditions in the budget period.
 Administrative Overheads Budget - This budget covers the administrative
expenses including the salaries of administrative and managerial staff. A
careful analysis of the needs of all administrative departments of the enterprise
is necessary. The minimum requirements for the efficient operation of each
department can be estimated on the basis of costs for the previous years, and
after a study of the plans and responsibilities of each administrative
department for the budget period. The budget for the entire administrative
20
function is obtained by integrating the separate budgets of all administrative
departments.
 Selling and Distribution Overheads Budget - This budget includes all
expenses relating to selling, advertising, delivery of goods to customers, etc.
It is better if such costs are analyzed according to products, types of
customers, territories and the sales departments. The responsibility for the
preparation of this budget rests with the executives of the sales department.
There must be a relationship of selling expenses with the volume of sales
expected and an effort should be made to control the costs of distribution. The
preparation of the budget would depend on analysis of the market situation by
the management, advertising policies, research programmes and the fixed and
variable elements.
 Cash Budget - Planning cash and controlling its use are important tasks. If
the future cash flows are not properly anticipated, it is likely that idle cash
balances may be created which may result into unnecessary losses. It may also
result in cash deficits and consequent problems. The financial manager
should, therefore, plan the needs and uses. Budget is a useful device for this
purpose. The cash budget is a summary of the firm's expected cash inflows
and outflows over a particular period of time. In other words a cash budget
helps the management in determining the future cash needs of the firm;
21
planning for financing of those needs; and exercising control over cash and
liquidity of the firm. The overall objective of a cash budget is to enable the
firm to meet all its commitments in time and at the same time prevent
accumulation at any time of unnecessary large cash balances with it.
 Master Budget - The Master or final budget is a summary budget, which
incorporates all functional budgets in a capsule form. It sets out the plan of
operations for all departments in considerable detail for the budget period. The
budget may take the form of a Profit and Loss Account and a Balance Sheet
as at the end of the budget period. The Master budget requires the approval of
the Budget Committee before it is put into operation. It may happen,
sometimes, that a number of master budgets have to be prepared before the
final one is agree upon. The budget generally contains details regarding sales
(net), production costs, cash position, and key account balances (e.g. debtors,
fixed assets, bills payable, etc.). It also shows the gross and net profits and the
important accounting ratios.
On the basis of time, Etale and Idumesaro (2019) posit that budget could be
developed to suit periodic intervals such as:
 Long-term budgets - prepared for a longer period varies between five to ten
years. It is usually developed by the top level management. These budgets
summarise the general plan of operations and its expected consequences.
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Long-Term Budgets are prepared for important activities like composition of
its capital expenditure, new product development and research, long-term
finance etc.
 Short-Term Budgets - These budgets are usually prepared for a period of one
year. Sometimes they may be prepared for shorter period as for quarterly or
half yearly. The scope of budgeting activity may vary considerably among
different organization.
 Current Budgets - Current budgets are prepared for the current operations of
the business. The planning period of a budget generally expressed in months
or weeks. According to ICMA London (2016), Current budget is a budget
which is established for use over a short period of time and related to current
conditions.
2.2.2 Concept of Budgetary Control
Budgetary control can be viewed as a system of controlling cost which embraces the
preparation of budget, coordinating the department and establishing responsibility,
comparing actual performance with budgeted and acting upon results to achieve
maximum profitability (Hemsing and Baker, 2013). As observed by Isaac, Lawal,
and Okoli (2015) budgetary control is a part of the overall system of responsibility
accounting within an organization, as costs and revenues are analyzed in accordance
23
with areas of personal responsibilities of the budget holders through permitting
financial monitoring. The Chartered Institute of Management Accountants (2019)
sees budgetary control as the process of comparing the actual outcomes with the
planned outcomes and reporting on the variations.
In the opinion of Accounting Solutions (2015), budgetary control basically means
how well the managers and coordinators are using up and utilizing the resources as
per the budget which is provided. Managers set some standards and parameters
under which they also monitor and control cost and the operations which are related
with them. In simpler terms (Lewis and Hildreth, 2013) assert that the budgetary
control refers to the process by which the managers set the financial goals as well as
the performance goals for the firm and its employees with the budgets, comparing
them with the actual result and adjusting the ongoing performance with it as well as
what is needed.
According to Sindhuja (2017), budgetary control is the planning in advance of the
various functions of a business so that the business can be controlled. Budgetary
control relates expenditure to a section or department who incurs the expenditure, so
that the actual expenses can be compared with the budgeted ones, thus providing a
convenient method of control. Its control makes use of budgets for planning and
controlling all aspects of producing and/ or selling products or services. Budgetary
control attempts to show the plans in financial terms. Budgetary control includes
24
forecasts of income and expenditures (for the budgetary period) on equipment,
machinery, manpower, materials, etc., necessary for the efficient production and
distribution of estimated volume of sale (Egbunike and Unamma, 2017). The
budgetary control when applied to a business as a whole or to different sections
within the business compares actual performance and the predicted performance and
thus enables all levels of management and supervision to know how their sections
(of business) are moving towards the achievements of budgeted targets. Is corrective
action needed; should it be applied? (Etale, 2019).
Thus, budgetary control attempts to bring actual performance at par with the
predicted performance by keeping a strict supervisory eye on the actual performance
and by exercising control, if necessary. Control follows the planning and coordination (Fadi, 2013). Deviations from predicted plan or performance are noticed
by comparing actual and budgeted performances and costs. The differences between
the two (i.e., predetermined and actual) figures-the variances-are analysed and an
action is taken quickly, at the right time and in the correct place to correct the actual
performance – as per the predicted or predetermined plan or performance (Ibid).
According to Creative Commerce (2015), budgetary control is the process of
determining various budgeted figures for the enterprise and then comparing the
actual performance with the budgeted figures for calculating the variances, if any.
In this process, first budgets are to be prepared. Second, actual results are to be
25
recorded. Third, comparison is to be made between the actual with the planned action
for calculating the variances. Once the discrepancies are known, remedial measures
are to be taken, at proper time (Gillikin, 2018). Then only, planned results can be
achieved. A budget is a means and budgetary control is the end result. The Chartered
Institute of Management Accountants, London, defines the Budgetary Control as
“The establishment of budgets relating to the responsibilities of executives to the
requirements of a policy, and the continuous comparison of the actual with the
budgeted result, either to secure by individual action the objective of the policy or
to provide a basis for its revision”. Thus, establishment of budgetary control involves
the following (Gershon, 2012):
 Establishment of budgets
 Continuous comparison of actual with the budgets for achievement of targets
and fixing the responsibility for failure to achieve the budget figures
 Revision of budgets in the light of changed circumstances.
Gamble & Strickland (2007) asserts that the position of budgetary control can be
likened or compared to the navigating of a ship, across the seas. The navigating
officer works out the course, ahead, and records the happening of the position of the
ship from hour to hour in a log-book. To navigate the ship across the seven seas,
safely, the captain wants the navigating officer to check his ship’s position,
constantly, against the predetermined one. If the ship is off its course, the navigating
26
officer must report, immediately, to the captain for prompt action to regain the course
(Amobi and Uchechukwu, 2017). Valuable lessons are learnt by the captain of the
ship from a study of the factors that have caused misadventure in the past. Exactly,
so it is with the industrial ship. What the modern management requires for day to
operating purposes is detailed forecasts and immediate reporting of variances, with
explanations of the reasons for variations (Adah and Mamman, 2013). This
facilitates management taking the required corrective action by the persons who
have been made responsible, but contributed for the failure. According to the author,
the followings are the essential elements involved in the establishment of a
budgetary control system (Chemweno, 2014):
 Establishment of budgets
 Continuous comparison of actual with budgeted for achievement of targets
 Revision of budgets after considering the changed circumstances
 Placing the responsibility for the failure to achieve the budgeted targets
The salient features of such a system can be listed as:
 Determining the objectives to be achieved, over the budget period, and the
policy or policies that might be adopted for achieving these ends
 Determining the various activities that should be undertaken for the
achievement of the objectives
27
 Drawing up a plan or a scheme of operation in respect of each class of the
activity, in physical as well as monetary terms for the full budget period and
its parts
 Laying out a system of comparison of actual performance by each person,
section or department with the relevant budget and determination of causes
for the discrepancies, if any
 Ensuring that corrective action will be taken where the plan is not being
achieved and if that is not possible, for the revision of the plan.
Chircir and Simiyu, 2017) has argued that in order to have proper control there must
be set goals which serve as the main objectives of budgetary control including:
 Planning - Budgetary control forces the management at all levels to plan, in
time, all the activities to be done during the future period
 Co-ordination - Normally, employees are efficient. If they are not considered
efficient, they would not have been recruited. Most of the employees can work
very efficiently, individually, but they fail to deliver better or improved results
when they work, as a group. Majority of the functions in an organization
cannot be done in isolation. The functions, be it production or marketing, are
to be performed in a greater coordination for smooth completion and better
results. Budget exercise develops team spirit amongst the employees to work
28
in a coordinated manner. The role of Budgetary Control is immense in
integrating the activities of different departments. Budgetary Control forces
executives to think and think as a group.
 Communication - A budget is a communicating device. Budget cannot be
achieved without communicating to the concerned, what is expected of them
to achieve. The approved budget shows, in detail, the plans of management,
which are communicated to the concerned departments. This would help them
to give adequate understanding and knowledge of the programmes and
policies, but also the restrictions to which the organization is expected to
adhere to. For example, maximum amount that can be spent on advertisement,
maintenance will be brought to the knowledge of the executives for exercising
the restraint and achieving the results.
 Control - Control refers to that action, necessary to bring the performance
according to the original plan. Control is possible with pre-determined
standards laid down in the budget. Budgetary control becomes possible with
continuous comparison of actual performance with that of budget to find out
the variances and report them for necessary corrective action. Standard
Costing and Budgetary Control are complementary to each other for achieving
improved performance in an organization.
29
2.2.3 Operationalizing Budgetary Control
Good budgetary control necessitates establishment of accounting procedures to
record actual operations in terms of sales, income, production, etc. within a
department. The head of each department will receive a copy of the budget
appropriate to his activity (Business Manager, 2017). Each month, he will get a copy
of the departmental budget report. From the report, head of the department can
visualise at once where he has over-or under-spent his budgeted allowance. This
enables heads of the departments to have a constant check on the operation and
unusual variations would come immediately to his attention (Egbunike, 2014).
The variations between actual and budgeted performance and the reasons for
variation require a thorough analysis. It may appear that the department has been
operating below strength and this caused increased over-time costs. Monthly budget
reports should be promptly issued to departments soon after the monthly period in
question, otherwise adverse costs may go unnoticed for a long time, and cause
problems later on (Gillikin, 2018). Various department reports are summarized and
consolidated by the chief budget executive or budget director in his regular report to
the budget committee. On the basis of regular reports, the budget committee may
recommend revisions or changes in the budget (Ibid).
30
2.2.4 Planning, Programming, Budgeting System (PPBS) in the Public Sector
Planning, Programming, Budgeting System (PPBS) in the public sector is a
technique of budget preparation that strongly emphasizes defining the goals,
objectives of immediate-, medium- term and long-term outcomes of a budget.
Chemweno (2014) identifies the following as basic elements of Planning
Programming Budgeting System:
 Identification and assessment of goals and objectives in each major area of
government activities.
 Analysis of the output of a given program in terms of its goals.
 Measurement of total program cost not just for one but for at least several
years.
 Formulation of objectives and program extending beyond the single year of
reaching basic program objectives.
 Establishment of these analytical procedures as systematic part of budget
review.
PPBS arose from the shortcomings of the incremental budgeting system which
comes short in objectivity and rationality. According to Bedford and Malmi, 2015).
PPBS emphasizes rational allocation of resources. Bedford and Malmi (2015).
recorded the application of PPBS in Nigeria during the 1981 budget proposals by
President Shehu Shagari. Although the intention by the President was well
31
highlighted, the programme did not seem to have made much impact on the
budgetary process. Figure 2.1 shows the three stages budget preparation going by
the PPBS.
Figure 2.1: Stages of Implementing PPBS
Source: Bedford and Malmi (2015).
At the first stage, it is crucial for decision-makers to determine which objectives are
targeted for the public in the next year's budget. After determining such objectives,
it is requirement of PPBS to categorize such objectives into programs and categories
that make up the programs by categorizing sub-outlines in program elements. The
program structure of an objective in the PPBS is illustrated in figure 2.2.
32
Figure 2.2: Program Structure of a PPBS Objective
Bedford and Malmi (2015).
Although it seems necessary to decide on inputs of program structure that are used
through sub-programs, program categories and program elements, such
identification may not be enough. It may need to have good communication and
organization amongst different departments of the Public sector as well. In other
words, one program may be provided by two or more than two departments in some
ways. In such circumstance, it should be perceived as a task to have good
33
correspondence between program structure and organization structure (Egbunike
and Unamma, 2017). At the second stage, Public sector managers need to identify
and evaluate alternative ways of accomplishing their objectives, evaluate all
alternatives and decide which one is most suitable. In this procedure, cost/benefit
analysis plays fundamental role. The last stage involves program analysis. This stage
contains a description of objects and activities as well as preparing and orienting of
long-term plans (Ibid).
Advantages of PPBS
The advantages of adopting PPBS in Public sector budgeting includes the following
(Johansson and Siverbo, 2014):
 PPBS provides clear information on objectives of organization: With
PPBS, administrative departments in the Public sector are enabled to
understand which targets they must meet. Periodically, it is to be determined
if they were successful in meeting those targets. Because of its informative
property, PPBS also enables both public and approval bodies to evaluate the
budget and be aware of programs and their financial resources.
 PPBS shows responsibility centers in the administration: As earlier
stressed, PPBS defines objectives that are also responsibility centers of
34
activities. It makes clear who are responsible for what objectives of the
budget.
 It helps the Public sector management to decide on programs: As PPBS
searches more than one alternative to fulfill one objective, it assists Public
sector managers, during its preparation and operation, to evaluate alternatives
and decide on the best one to achieve its objectives
 Overlapping Programmes are readily identified: PPBS provides
opportunity to find out programs that are overlapping with each other and
therefore it prevents extravagant spending.
 PPBS considers long-term effects of programs: The benefits of a
programme may not be clear for the first year but PPBS also looks at long
term benefits of the project
 Opportunity for optimum of resource allocation and monitoring: PPBS
provides opportunity for Public sector managers to allocate resources by
considering cost/benefits of program elements. It is capable of allocating
resources to individual services and then monitoring achievement of results.
 Information for Tax pays: PPBS offers a wealth of information for tax
payers to in order to facilitate trust in the Public sector leadership. So the
public has right to understand exactly:
o The kind of services are provided by the Public sector
35
o The cost of the services
o The efficiency in providing those services
Disadvantages of PPBS
Despite the advantages, PPBS has disadvantages as outlined below (Kaguri, 2015):
 Although PPBS focuses on objectives to find out what can be done, it does
not however consider how these objectives would be done
 PPBS needs some systematic information for it to work properly. PPBS may
not succeed if Public sector managers are not able to provide such
information.
 When PPBS evaluates cost of objectives, it mostly tends to get information
and data from Public sector management taken both at level of planning and
programming. It does not consider existing political decisions and their
alternatives
 PPBS does not seem as capable of defining programs in their priorities
 Most attention of PPBS focuses on new programs and/or existing programs
that require necessary increases
36
2.2.5 Public Sector Budget Cycle
It is the opinion of ICMA (2919) that using the systems approach to management
provides an effective way to understand a public sector’s annual budget cycle. The
systems approach to management recognizes the inter-dependence of all major
activities within the Public sector. Public sector managers think of this systems
approach in terms of piecemeal parts, but they are all related to the development,
approval, implementation, and feedback processes. By this approach, a Public sector
is viewed as an open system that includes six basic sub-systems, which are
highlighted and discussed below as they relate to the annual budget process:
i. Input - This includes available revenues to finance public services for the
coming fiscal year. A public sector's revenues typically include non-restricted
funds, restricted funds, and other possible funding sources as allocated and
approved by its elected officials. The services provided by a Public sector are
based on the available revenues from all sources as approved in its annual
budget, which is a result of the annual budget development process.
ii. Preparation - The budget preparation process includes four typical steps
followed by public officials, both elected and appointed. These steps include
administrative preparation, legislative approval, financial implementation,
and annual year-end accounting and financial reporting, which is usually
performed by an independent outside auditor. This process is in the best
37
interest of everyone -residents, their elected officials, as well as the employees
of the Public sector.
iii. Output - The output of the budget process is determined based on the
available revenues and approved allocation of these revenues to pay for
projected departmental services for the coming fiscal year. Available funds
are allocated to finance the public services provided by the departments in a
public sector, as well as its approved capital projects, for the coming fiscal
year. The common types of public budgets include line-item budgets, program
budgets, performance budgets, zero-based budgets, and other evolving budget
formats. Most public sector budgets use a line-item format, with possible
program performance measurements, where they have been developed.
iv. Feedback - The financial feedback on the adopted budget is provided to both
elected officials and administrators, based on an annual audit that is typically
conducted by an outside independent auditor. This financially objective
feedback is provided to the Public sector managers for both the operating and
capital budgets.
v. Operating Environment - The annual budget process is influenced by
several factors that are composed of the Public sector operating, environment.
These factors include its political environment, its economic environment, its
social environment, and its legal environment. All of these factors are inter38
related and greatly influence all phases of the organization's annual budget
process. While elected officials and their administrators have an influence on
their internal environment, they have little control over their external
environment.
vi. The Future - Elected officials typically create the political orientation of their
organization, its political environment. While some public sectors are liberal
and others are conservative, many represent both the prevailing perspectives.
Yet others change their political perspective over time.
2.2.6 The Concept of Public Sector
The public sector is the part of the economy composed of both public services and
public enterprises. Public services include public goods and governmental services
such as the military, Law enforcement, infrastructure (public roads, bridges, tunnels,
water supply, sewers, electrical grids, telecommunications, etc.), public transit,
public education, along with health care and those working for the government itself,
such as elected officials (Joshi and Abdulla, 2013). The public sector might provide
services that a non-payer cannot be excluded from (such as street lighting), services
which benefit all of society rather than just the individual who uses the service
(WebFinance, Inc., 2016). Public enterprises, or state-owned enterprises, are selffinancing commercial enterprises that are under public ownership which provide
39
various private goods and services for sale and usually operate on a commercial
basis. The organization of the public sector can take several forms, including:
Direct administration funded through taxation; the delivering organization generally
has no specific requirement to meet commercial success criteria, and production
decisions are determined by government.
Levels of Public sector are organized at three levels:
i. Federal or National
ii. Regional (State or Provincial), and
iii. Local (Municipal or County).
According to the Institute of Internal Auditors (2011), public sector consists of
governments and all publicly controlled or publicly funded agencies, enterprises,
and other entities that deliver public programs, goods, or services. It is not, however,
always clear whether any particular organization should be included under that
umbrella. Therefore, it is necessary to identify specific criteria to help define the
boundaries (Ibid).
The author maintains that the concept of public sector is broader than simply that of
core government and may overlap with the not-for-profit or private sectors. For the
purposes of this guidance, the public sector consists of an expanding ring of
organizations, with core government at the center, followed by agencies and public
enterprises. Around this ring is a gray zone consisting of publicly funded contractors
40
and publicly owned businesses, which may be, but for the most part are not, part of
the public sector. Figure 2.3 illustrates the concept of public sector.
Fig. 2.3: Organizations of Public Sector
Source: Institute of Internal Auditors (2011).
Public sector organizations may exist at any of four levels:
i. International (multi-state entities or partnerships)
ii. National (an independent state)
iii. Regional (a province/state within a national state)
iv. Local (a municipal-level body such as a city or county)
At any of these levels, the public sector generally consists of at least three types of
organizations. Core government consists of a governing body with a defined
territorial authority. Core governments include all departments, ministries, or
41
branches of the government that are integral parts of the structure, and are
accountable to and report directly to the central authority - the legislature, council,
cabinet, or executive head (Kazeem, Hakeem and Reuben, 2014).
Agencies, according to Mukah (2018) consist of public organizations that are clearly
a part of the government and deliver public programs, goods, or services, but that
exist as separate organizations in their own right - possibly as legal entities - and
operate with a partial degree of operational independence. They often, but not
necessarily, are headed by a board of directors, commission, or other appointed
body. Public enterprises are agencies that deliver public programs, goods, or
services, but operate independently of government and often have their own sources
of revenue in addition to direct public funding. They also may compete in private
markets and may make profits (Ibid). However, in most cases the government is the
major shareholder, and these enterprises partly follow the acts and regulations that
govern the core government. Outside this clear public sector area is a gray zone, or
boundary zone, with two types of organizations that might or might not be part of
the public sector (Marcormick, 2017).
According to Mukah (2018), State businesses are government owned and controlled
businesses that sell goods or services for profit in the private market. Although they
do not deliver what would be considered public programs, goods, or services, they
might be considered part of the public sector. Public contractors are legally
42
independent entities outside government that receive public funding - under contract
or agreement - to deliver public programs, goods, or services as their primary
business. Due primarily to their limited public control, these organizations usually
would be classified as not-for-profit or private sector entities (Johansson and
Siverbo, 2014).
2.3
Theoretical Framework
2.3.1 Theory of Zero-Base Budgeting
According to Government Finance Officers Association (GFOA) (2011), the theory
of Zero-Base Budgeting, supposes that the development and implementation of
budgets based on perceived value to the organization rather than incremental
budgeting, where last year’s budget is the starting point, offers a rational and
comprehensive means of budget control for organisational performance. ZBB
promises to move the organization away from incremental budgeting, where last
year’s budget is the starting point. Instead, the starting point becomes zero, with the
implication that past patterns of spending are no longer taken as a given. It is the
opinion of Marcormick (2017) that in order to deliver on this promise, the
organization is first divided up into “decision units” - the lowest level at which
budget decisions are made. Decision units could be formed along functional or
43
organizational lines – for example, a division of a department is a common decision
unit, but programs could be used as well. Managers in each decision unit then
prepare a detailed description and evaluation of all activities it performs, including
alternatives to current service delivery methods and the spending plans necessary to
achieve the decision unit’s goals. This information, in the opinion of Makah (2018),
is used to create a number of “decision-packages,” which show marginal spending
level differences that represent varying levels of effort and cost. Perry Moore has
argued that there should be at least three decision-packages for each decision-unit,
though there could be as many as ten or even more. The three elementary categories
of decision-packages according to Nicoleta (2017) are discussed below:
 Base package - This type of package meets only the most fundamental service
needs of the decision unit’s clientele and represents the minimum level of
funding needed for the unit’s services to remain viable. There could be
multiple base packages, each addressing a different way to provide the base
service. This represents an important departure from incremental budgeting in
that an incremental budget never considers what the absolute minimum level
of funding a program can survive on is. Rather, the current level of spending
is usually considered a sort of de facto minimum.
 Current service package. This type describes what it takes to continue the
level of service currently provided to the unit’s clientele. The difference
44
between the base package and the current service level may be expressed by
multiple decision packages, with each package representing one aspect of
what it takes to get from base funding to the current service level. There could
also be different decision packages describing different means for achieving
the same service level.
 Enhanced package - This category addresses resource required to expand
service beyond current levels. There could be any number of enhanced
packages. In addition to the detailed information on inputs (dollars, personnel,
etc.) needed to provide the service, decision packages include performance
measures that express the impact of the package on service levels. For
instance, a series of decision-packages from a street repair division might use
measures to describe the variation in lane miles that can be maintained and
the smoothness of the car ride that will be experienced.
It is the position of Bland and Rubin that because of the detailed information required
and because decision-packages are created for the lowest levels of budgetary
decision making, ZBB requires greater involvement of mid-level and perhaps even
line managers – an important difference between ZBB and many other budget
processes (Omeje et al., 2019). Because each division is creating between three and
ten decision packages, along with the required supporting information for each, the
documentation can be substantial. After the decision-packages are completed, they
45
are gathered up and ranked from top to bottom within the organizational unit in
which the decision unit resides. For example, in a public sector, the head of a
department might gather the decision-packages from the divisions of the department
and then rank them all together. Decision-packages could be gathered and ranked on
an organization-wide basis, but this is uncommon due to the amount of paperwork
involved and because it is usually easier for a department director to rank decisionpackage options within his or her own department than for a chief executive or
budget office to rank packages across departments (Imo and Des-wosu, 2018).
After the packages are ranked, the ranking is then used by central budget authorities
(e.g., budget office, chief executive, governing body) as the basis for making
allocations. For instance, each department would submit its suggested ranking to the
chief executive, who would use those rankings to formulate a recommended budget
for review by the governing body. According to Popescu (2013) the advantages and
disadvantages of Zero-Base Budgeting are as follows:
Advantages of ZBB
 Rational and comprehensive means to cut the budget - ZBB can be used
to make different cuts to different services based on the perceived value to the
organization
(rational)
and
all
spending
is
put
under
scrutiny
(comprehensive). This compares to a traditional line-item process where only
46
incremental spending is considered and where there is no ready means to
compare the value of one service versus another, and, thus, to determine
different reductions in spending for different services on a rational basis.
Hence, ZBB promises to move budgeting away from the use of across-theboard cuts – a budget reduction method that does not differentiate the value
of one service versus another.
 Provides top management better insights - Top management can have
better insight into the detailed workings of departments. In theory, ZBB
clearly differentiates service level options, the impact of different service
levels on what the community will receive from government (through
performance measures), and a detailed plan for the inputs necessary to provide
those service level options.
Disadvantages of ZBB
Popescu (2013) also enumerated the disadvantages of Zero-Base Budgeting as
follows:
 Associated Work - The most widely known is the work associated with
generating the decision-packages and then reviewing them. Conceivably, an
organization could develop hundreds of decision-packages, requiring
47
substantial time commitments from every level of management to develop,
review, and rank them.
 Reluctance of managers - The reluctance of managers to suggest decisionpackages below current spending. The advantage of an incremental budget
process, for risk adverse departmental managers, is that only a marginal
portion of their budget is on the line in any given year. Under ZBB, the whole
budget is on the line and managers are, in fact, expected to actively provide
far-reaching options for how their budget can be cut back, including revealing
the absolute minimum level of funding they can accept. This dynamic might
lead managers to attempt to “game” the system, such as providing a very small
number of decision-packages that contain a broad array of services so that
budget decision makers are not able to identify, much less de-fund, discrete
service levels. Managers of decision-units might also deliberately give low
rankings to services with high public appeal knowing that budget decision
makers will refuse to cut such services thereby sparing services the
department had ranked higher, but which are actually less valued by the
community.
 Non-explicit planning process - ZBB is not associated with an explicit
planning process that is separate from the budget process. This has two
primary implications. First is that ZBB does not provide a structured method
48
for taking account of the community’s or elected officials’ views and longterm priorities. Rather, ZBB is driven largely by managers’ perceptions and
preferences. Elected officials may provide input on the final ranking of
decision-packages, but even this is simply reacting to staff recommendations
and, in any event, is too late to make a far-reaching impact on how the budget
is structured. The second implication is that because participants in the ZBB
process will necessarily be preoccupied with putting together the numbers for
various decision-packages, they will not be able to focus on considering
significant changes to how service is provided. Rather, participants will tend
to focus on the current service model and dividing that into decision-packages,
instead of proposing packages for entirely new alternatives to meet the same
underlying demand from the public.
2.3.2 The Theory of Management by Objectives
The theory of Management by Objective, propounded by Peter Drucker in 1954
supposes that employees who have a say in their objectives will feel more valuable
and be willing to contribute to the success of the objective. Employees will take
ownership of the objectives and fulfill their portion of the objective (Angela, 2018).
The aim is to create a more harmonious relationship between the management and
the employees and enhance the operational efficiency of the organization. According
49
to Peter Drucker, this is best achieved if the goal setting and action planning is
determined by both the management and the employees. Furthermore, Drucker’s
MBO is based on a few core principles, which are:
 Challenging yet achievable goals
 Daily feedback on achieving objectives
 Focus on rewarding good behavior rather than punishing failure
 Emphasis on personal growth and development.
The MBO model focuses on using the SMART approach (The Specific, Measurable,
Acceptable, Realistic and Time-bound model ensures the objectives are efficient and
effective) in order to set the objectives. It acts as a checklist for setting the objectives
and it provides an opportunity for transparency within the organization as well. It’s
a feature providing clarity and efficiency to goal-setting (Usman, Yusufari, Hamza
and Abdullahi, 2016).
The key part of success is MBO’s ability to clarify and align the roles and
responsibilities of different people within the organization, which will lead to
enhanced effectiveness and quicker achievement of goals. But in addition, according
to Fredmund Malik, Drucker was interested in the ability of the model to improve
employee satisfaction and personal fulfillment of the different people within an
organization. According to Malik, five features or elements are central to the MBO
model. They are discussed below (Zayol, 2017):
50
 Superior-subordinate participation - As mentioned above, the MBO model
emphasizes the democratic and participative leadership and decision-making.
It asks for involvement of the different stakeholders, from low- to high-level
management and the employees. Therefore, the model can’t obtain its full
potential unless the participation between the superior and the subordinate is
equal. Both superiors and subordinates have to buy-in in the program and to
fully understand the model and its benefits. This is to create an environment
where objective-setting is considered a joint activity by both the subordinates
and the superiors. The input to identify objectives and the follow up with
responsibilities must be commonly shared. The management and the
subordinates need to work hand in hand to define and to fulfill the goals for
the organization. This means sharing the viability and the difficulties that
either party might face. The idea is that once each stakeholder participates in
the goalsetting, there’s also more clarity in terms of how to obtain these goals.
Therefore, it isn’t merely the objectives superiors and subordinates must agree
on; they must also agree on the processes to achieve the goals.
 Joint goal-setting - Both parties need to fully subscribe to the joint process,
but MBO further emphasizes the need for the goals to be realistic and tangible.
It’s not only about getting superiors and subordinates to agree on a goal, but
they also must find the objectives attainable. Therefore, by setting the goals
51
together, the aim is to ensure the objectives are set based on actual capabilities
and abilities of the team. In essence, the superiors can bring knowledge of
resources and the requirements, while the subordinates can help determine the
speed and ability in which goals can be achieved. The equal input and
information is thought to ensure the goals are not set with unrealistic aims in
mind. Furthermore, during the joint goal-setting, the objective is to guarantee
the goals will be tangible, verifiable and measurable. This is closely associated
with the SMART method, which is an acronym for Specific, Measurable,
Acceptable, Realistic and Time-bound, and we’ll return to it later.
 Joint decisions on methodology - The main difference of MBO to other
management styles is its lack of focus in terms of the processes that are used
to achieve the objectives. The most important part of organizational efficiency
in the MBO model is the objectives. The focus is on ensuring these are set
through a participative framework and enough attention is paid on ensuring
the goals are realistic and attainable. But this means there’s less focus on the
process of achieving them. Nonetheless, when it comes to deciding the
methodology, the superiors and subordinates must work together. Deciding
the methodology is not focused on the small detail and attention is not on the
process at any point. However, the idea is to set up certain standards and
performance evaluation points to guarantee the objectives are appropriately
52
obtained. Although the focus must be on setting the objectives, the key is to
ensure the broad framework of methodology (how to achieve the objectives)
is jointly decided and agree upon. This further strengthens the participation
levels and it can help in ensuring the objectives are realistic.
 Easy to attain maximum goals - The process emphasizes rational thinking.
As mentioned, the goals must be realistic and achievable, which further helps
to guarantee the model helps achieve maximum results. The participative
framework and attainability of the goals ensures organizational efficiency and
it makes achieving success more straightforward. The systematic approach
can help organizations to create a rational approach to approaching objectives.
Since the focus is on setting the objectives and only a broad framework of
methodology, the model could provide a bit more breathing room for the
superiors and subordinates in terms of execution. The system has in-built
freedom, which allows creative decision-making, since the only important
part is to set realistic objectives and achieve them. The freedom can motivate
and help subordinates, especially, to perform to the maximum ability.
 Support and coaching - The model facilitates effective communication as it
forces the superiors to talk with the subordinates. Requiring co-operation in
terms of goal-setting, the two stakeholders are forced to discuss things more
authentically and openly. Since the goals must be realistic, both parties need
53
to be aware of the positive and negative forces influencing the structures at
play. For the model to work, the superiors must be able to offer appropriate
support and coaching structures. The improved relationships should help
create an environment where sharing problems become easier. In order to
ensure the objectives are met, superiors want to support and help develop
subordinates.
2.3.4 Application of MBO to Budget Control Cycle
The budgeting process is considered to be based upon a cycle within a Management
Control System (MCS). It is comprised of two main phases: the planning phase and
the control phase (Abdallah, 2018). The planning phase quantifies the corporate
goals to be attained during the fiscal year and the financial plan necessary to achieve
them. This provides a benchmark to which performance can be assessed in the
control phase (detector) (Abogun and Fagbemi, 2012). When actual revenues and
expenses vary from the plan articulated by the budget, the control phase provides the
efficient assessor for this, the management function within an effective MCS takes
the appropriate action for improvement (effector) (Bedford and Malmi, 2015). The
budget control cycle is presented in figure 2.2.
54
Figure 2.4: Budget Control Cycle
Source: Bedford and Malmi (2015).
2.4
Empirical Review
Olaoye & Ogunmakin (2014) carried out a study examining the budgetary control
and performance in government parastals in Osun state of Nigeria towards
determining the relationship between revenues and expenditures with respect to
estimates and actuals. Five parastatals were sampled using budgetary performance
for five fiscal years (2007-2011). In Agricultural Development Corporation, it was
discovered that coefficient of correlation is -0.28. This result showed that negative
and weak correlation exists between expenditure or budget allocation and revenue
generated by agricultural development corporation. Thus, there is no justification
between budget allocation and revenue generated. In Broadcasting Service
Corporation, the degree of relationship that exists between the budget allocation and
55
revenue resulted in a correlation coefficient of -0.58. This result implies a negative
and strong correlation between the budget allocation and revenue generated. The
implication of this result is that, as the budget allocation is increasing the revenue
generated is decreasing. Hence, there is a call for serious check. In College of
Education, the extent of relationship that exist between the budgetary allocation and
revenue resulted in a correlation coefficient of -0.41. This implies the existence of
negative and weak relationship between the amount of money received and the
revenue generated. This means that the level of accountability and transparency in
government corporations need an urgent improvement. In Property Development
Corporation, the degree of relationship that exist between the expenditure and
revenue resulted in correlation coefficient of -0.64. This showed that there is a
negative and strong correlation between the corporation expenditure and revenue
generated. Thus, there is a need for investment in properties that can bring
improvement to people’s life as well as development to the state. In Osun State
Water Corporation, the extent of relationship that exists between the budgetary
allocation and revenue resulted in a correlation coefficient of -0.33. This implies that
negative and weak correlation exists between budget allocation and revenue
generated. Thus, there is a need for an improvement in water supply by Osun state
government through the water corporation.
56
Mukah (2018) investigated the relationship between Budgetary Control and
Performance in government Councils in Mezam and Momo Divisions in Cameroon
using five budgetary control variables of planning, monitoring and control,
participative budgeting, responsibility, motivation and communication. The result
indicated a positive relationship between planning and performance of selected
councils in North West Region. The planning coefficient of 0.6449 indicates that an
increase in planning by 1 unit will lead to an increase in performance by 0.6449.
This result further supports the contention of Perrin (2012) that budgetary control
becomes successful if it has a complete acceptance and support of the persons who
occupy important management positions. This suggests that for this to happen they
would have been actively involved in the planning process. The coefficient of
monitoring and control was positive at 0.8976. This shows that an increase in
monitoring and control will result to an increase in performance of councils. Put
more succinctly, an increase in monitoring and control by one unit will result to an
increase in performance by 0.8976. Communication is seen to have a positive
relationship with council performance. The coefficient for communication is 0.3860
showing that if there is an increase in communication by 1 unit, performance of
councils will increase by 0.3860. Motivation on its part indicates a positive
relationship with performance of the councils. The coefficient of motivation is
0.2749, indicating that 1 unit change in motivation will increase performance by
57
0.2749. The responsibility coefficient gives a positive relationship with the
performance of councils too. Its coefficient is 0.0688 indicating that if responsibility
accounting changes by 1 unit, performance of councils will increase by 0.0688 units.
The coefficient of the constant term is 1.4542 indicates that if all the independent
variables included in this study were considered to have any effect on the dependent
variable (performance), performance of councils will be 1.4542 unit.
Amalokwu and Ngoasong (2018) conducted a study to suggest the most appropriate
management control tool focusing on the budgeting in Guinness Nigeria Plc. Based
on their findings through qualitative approach and primary data from a sample of 50
respondents. Their study concluded that financial planning could assist in creating
and supporting competitive advantage. Also budgetary control was found to be an
effective tool in enhancing competitiveness which in tum affected high performance
in the organization.
In a study by on the effects of budget control on fiscal performance of manufacturing
companies in Nairobi, using both primary and secondary data, Onduso (2013) found
that there was positive and progressive effect of budgets on financial performance
measured through Return on Assets (ROA). He recommended proper evaluation and
capacity building.
58
Wamae (2019) studied the challenges of budgeting at National Social Security Fund
in Kigali. The study indicated management commitment to the budget, limited time
to prepare budget, poor management of expenditures.
Gershon (2012) studied the relationship between budgetary control and performance
in All Terrain Service Group (ATS) in Uganda. He collected quantitative and
qualitative data from 44 workers in different departments and tiers of management
He found that key participants were not working with the budgetary control because
there was no proper training and planning.
59
CHAPTER THREE
RESEARCH METHODS
Introduction
This chapter presents the methodology with which the research is carried out
describing the research design, the various sources of data collection, research
instruments, sample and sampling techniques and method of data analysis. In
carrying out this study, the researcher gathered information mainly from two
sources. Primary data was collected through research questionnaire. The secondary
sources included textbooks, journals, newspapers, magazines, seminar materials and
the internet.
3.1
Research Design
The study used descriptive research design. With this design, the study gathered
quantitative data from selected respondents about the subject matter. The data was
collated, tabulated in categories and summarized with frequencies, percentages and
in-depth narrative description of cases aimed at discovering patterns and
characteristics that help to draw relationships about the subject matter. This approach
was adopted to generate information about the effect of budgetary control on public
sector organisations.
60
3.2
Area of Study
The study was conducted in Ijora area of Lagos State of Nigeria where Lagos State
Water Corporation has its Headquarter and where all levels of personnel can be
accessible to obtain relevant information for the study. While the researcher is also
based in Lagos State, this area provides close proximity to readily access relevant
information about effectiveness of budgetary control system in public sector
organisations.
3.3
Population of the Study
The population in this study comprises all the staff of Lagos State Water Corporation
in Ijora which is estimated at 258 (LSWC, 2021).
3.4
Sample and Sampling Method
Stratified sampling technique was used to select respondents from various relevant
departments in Lagos State Water Corporation. The sample size for the study is
determined by the statistical formula for selecting from finite population. The sample
size is determined at 5% (0.05) error tolerance and 95% degree of confidence using
the formula below:
61
n=
N
_____________
1 + N (e) 2
Where:
n = Desired sample size
N = Total population
e = Sample limiting error, 0.05.
The sample size, n, is calculated as below:
n=
258
_____________
1 + 258 (0.05) 2
n=
258
_____________
1.645
n=
154
The sample size for the study = 157
3.5
Method of Data Collection
The questionnaires will be administered by the researcher personally. Respondents
will be instructed on how to respond to items on the questionnaire following their
degree of agreement or disagreement with the statements contained on the
questionnaire. One hundred and fifty-seven questionnaires were administered to
respondents and one hundred and forty-eight were retrieved by the researcher. Six
62
of the questionnaires were found to be invalid. The remaining one hundred and fortytwo questionnaires were collated and analysed for the study.
3.6
Research Instrument
The research instrument for the study is a self-developed and structured
questionnaire divided into five sections. Section one will solicit demographic
information of the respondent such as age, sex, and educational background.
Sections two to five is designed as 5-scale Likert-type items ranging from Strongly
Agree (SA); Agree (A); Undecided (U); Disagree (D); and Strongly Disagree (SD).
Section two solicits information on the effectiveness of budgetary control on public
sector performance. Section three solicits information on the relationship between
budgetary control and cost reduction in the public sector. Section 4 solicits
information on the relationship between budgetary control and accountability in the
public sector. And section five contains statements of hypothesis.
3.7
Validation of the Research Instrument
In order to ensure validity of the research instrument, the items were designed to
solicit direct and clear responses from respondents, relate directly with the research
questions, and eliminate undesirable items. The questionnaire will first be
administered on 10 staff of Lagos State Water Corporation in Ijora, Lagos. Their
63
responses will be used to ascertain that the items are relevant, reasonable,
unambiguous and clear; and objectively structured to solicit relevant answers to the
questions.
3.8
Reliability of Research Instrument
In order to ensure reliability, the researcher will conduct reliability test on the
research instrument. A test-retest method of reliability will be utilized in which the
questionnaire will be administered at two different times to the same group of
respondents. The time between the first test and the second one will be two weeks
to ensure that responses from the respondents are fresh.
3.9
Method of Data Analysis
The data collected from the sample survey will be analyzed using descriptive
statistics of frequency and percentage the respondents in the various categories. The
Chi-Square analysis of SPSS Statistical computer software will be used in testing
and analyzing the research hypothesis to determine whether or not two samples are
different enough in a particular characteristic to be considered members of different
populations.
64
CHAPTER FOUR
DATA PRESENTATION, RESULTS AND DISCUSSIONS
In this chapter, the data employed is presented, analyzed and the results are
interpreted in accordance with the research questions and hypothesis.
4.1
Data Presentation
Table 4.1: Gender distribution of respondents
Sex
Male
Female
Total
Frequency (f)
Percentage (%)
111
78
31
22
142
100
Source: Field survey, April 2023.
78% of the respondents were male while 22% were female. This shows that the
respondents were from both gender.
Table 4.2: Age category of respondents
Age
20-30 years
31-40 years
41-50 years
51-60 years
Above 60yrs
Total
Source: Field survey, April 2023.
Frequency (f)
13
21
57
33
18
142
Percentage (%)
9
15
40
23
13
100
65
40% majority of the respondents were between 41 and 50 years old. 9% were
between 21 and 30 years old, 15% were between 31 and 40 years old, 23% were
between 51 and 60 years old while 13% were 60 years old or above. This is an
indication that all the respondents were adults.
Table 4.3: Educational attainment or Respondents
Academic Qualification
Diploma
HND/First Degree
Masters’ Degree
Doctorate Degree
Total
Source: Field survey, April 2023.
Frequency (f)
23
61
52
6
142
Percentage (%)
16
43
37
4
100
43% majority of the respondents had HND/First Degree. 16% possessed Ordinary
Level Diploma, 37% possessed Masters’ Degree while 4% had Doctorate Degree. It
can be seen from this analysis that the respondents were well educated.
Table 4.4: Work Experience of Respondents
Years of Experience
1-2yrs
3-5yrs
6-10yrs
11-15 yrs
16yrs and above
Total
Source: Field survey, April 2023
Frequency (f)
16
22
49
36
19
142
Percentage (%)
11
15
35
25
13
100
66
35% of the respondents had work experience of between 6 and 10 years. 11% had
between 1 and 2 years’ experience, 15% had between 3 and 5 years’ experience,
25% had between 11 and 15 years’ experience while 13% had 16 and above years
of experience.
Table 4.5 Effectiveness of budgetary control on performance of Lagos State
Water Corporation, Ijora
STATEMENT
Budgetary control
SA
A
U
D
SD
Total
Frequency
42
61
11
12
16
142
%
30
43
8
8
11
100
Frequency
51
53
9
21
8
142
%
36
37
6
15
6
100
Frequency
28
78
4
13
19
142
enhances planning and
execution of social
services
Budgetary control
enhances the
monitoring, control and
evaluation of social
services
The implementation of
budgetary control in
public sector
organisations reduces
67
corruption and
mismanagement
Budgetary control
%
20
55
3
9
13
100
Frequency
72
37
7
14
12
142
%
51
26
5
10
8
100
Frequency
48
59
11
11
13
142
%
34
42
8
8
9
100
Frequency
54
64
12
9
3
142
%
38
45
8
6
2
100
Frequency
59
39
8
18
18
142
%
42
27
6
13
13
100
enhances engagement
with stakeholders for
proper management of
issues
Budgetary control
enhances personnel
motivation for high
productivity
Budgetary control
enhances capacity
building of personnel
for delivery of
community projects
The application of
budgetary control
improved revenue
collection from public
utilities
68
Budgetary control
Frequency
57
39
11
21
14
142
%
40
27
8
15
10
100
Frequency
39
48
14
25
16
142
%
27
34
10
18
11
100
Frequency
53
57
5
15
12
142
%
37
40
4
11
8
100
enhances the provision
of social services
Budgetary control
enhances awareness
and enlightenment on
contemporary issues
affecting the society
Budgetary control
enhances the proper
functioning of public
sector organisations
Source: Field survey, April 2023.
30% Strongly Agree that Budgetary control enhances planning and execution of
social services, 43% Agree, 8% were undecided, 8% Disagree and 11% Strongly
Disagree.
36% Strongly Agree that Budgetary control enhances the monitoring, control and
evaluation of social services, 37% Agree, 6% were undecided, 15% Disagree and
6% Strongly Disagree.
69
20% Strongly Agree that The implementation of budgetary control in public sector
organisations reduces corruption and mismanagement, 55% Agree, 3% were
undecided, 9% Disagree and 13% Strongly Disagree.
51% Strongly Agree that Budgetary control enhances engagement with stakeholders
for proper management of issues, 26% Agree, 5% were undecided, 10% Disagree
and 8% Strongly Disagree.
34% Strongly Agree that Budgetary control enhances personnel motivation for high
productivity, 42% Agree, 8% were undecided, 8% Disagree and 9% Strongly
Disagree.
38% Strongly Agree that Budgetary control enhances capacity building of personnel
for delivery of community projects, 45% Agree, 8% were undecided, 6% Disagree
and 2% Strongly Disagree.
42% Strongly Agree that The application of budgetary control improved revenue
collection from public utilities, 27% Agree, 6% were undecided, 13% Disagree and
13% Strongly Disagree.
40% Strongly Agree that Budgetary control enhances the provision of social
services, 27% Agree, 8% were undecided, 15% Disagree and 10% Strongly
Disagree.
70
27% Strongly Agree that Budgetary control enhances awareness and enlightenment
on contemporary issues affecting the society, 34% Agree, 10% were undecided, 18%
Disagree and 11% Strongly Disagree.
37% Strongly Agree that Budgetary control enhances the proper functioning of
public sector organisations, 40% Agree, 4% were undecided, 11% Disagree and 8%
Strongly Disagree.
Table 4.6 The relationship between budgetary control and cost reduction in
Lagos State Water Corporation, Ijora
STATEMENT
Budgetary control
enhances proper
definition of short term
and long term plans
Budgetary control helps
in setting clear goals
and objectives for the
corporation
Budgetary control takes
into account all aspects
of aspects of work in the
corporation for proper
planning and execution
Budgetary control links
goals and objectives of
the corporation to their
outcomes
Budgetary control helps
in setting priorities for
Frequency
SA
59
A
51
U
8
D
11
SD
13
Total
142
%
Frequency
42
43
36
68
6
6
8
11
9
14
100
142
%
Frequency
30
61
48
52
4
7
8
9
10
13
100
142
%
Frequency
43
38
37
73
5
12
6
16
9
3
100
142
%
Frequency
27
52
51
59
8
9
11
16
2
6
100
142
71
the fiscal year at budget
conference/committees
Budget control ensures
that everyone is
involved in the budget
preparation process in
order in order to ensure
commitment
All stakeholders to the
budget make
contribution to arrive at
the final budget
Departments work out
their budgets which
become input to the
overall budget of the
corporation
Approved budgets are
shared to all
departments in the
corporation to guide
operations
Budgetary control
enhances leadership and
coordination of all units
of the corporation for
attainment of goals
%
Frequency
37
43
42
79
6
4
11
7
4
9
100
142
%
Frequency
30
49
56
58
3
8
5
11
6
16
100
142
%
Frequency
35
61
41
53
6
8
8
17
11
3
100
142
%
Frequency
43
53
37
64
6
3
12
17
2
5
100
142
%
Frequency
37
49
45
66
2
7
12
9
4
11
100
142
35
46
5
6
8
100
%
Source: Field survey, April 2023.
72
42% Strongly Agree that Budgetary control enhances proper definition of short term
and long term plans, 36% Agree, 6% were undecided, 8% Disagree and 9% Strongly
Disagree.
30% Strongly Agree that Budgetary control helps in setting clear goals and
objectives for the corporation, 48% Agree, 4% were undecided, 8% Disagree and
10% Strongly Disagree.
43% Strongly Agree that Budgetary control takes into account all aspects of aspects
of work in the corporation for proper planning and execution, 37% Agree, 5% were
undecided, 6% Disagree and 9% Strongly Disagree.
27% Strongly Agree that Budgetary control links goals and objectives of the
corporation to their outcomes, 51% Agree, 8% were undecided, 11% Disagree and
2% Strongly Disagree.
37% Strongly Agree that Budgetary control helps in setting priorities for the fiscal
year at budget conference/committees, 42% Agree, 8% were undecided, 11%
Disagree and 2% Strongly Disagree.
30% Strongly Agree that Budget control ensures that everyone is involved in the
budget preparation process in order in order to ensure commitment, 56% Agree, 3%
were undecided, 5% Disagree and 6% Strongly Disagree.
73
35% Strongly Agree that All stakeholders to the budget make contribution to arrive
at the final budget, 41% Agree, 6% were undecided, 6% Disagree and 11% Strongly
Disagree.
43% Strongly Agree that Departments work out their budgets which become input
to the overall budget of the corporation, 37% Agree, 6% were undecided, 6%
Disagree and 2% Strongly Disagree.
37% Strongly Agree that Approved budgets are shared to all departments in the
corporation to guide operations, 45% Agree, 2% were undecided, 12% Disagree and
4% Strongly Disagree.
35% Strongly Agree that Budgetary control enhances leadership and coordination
of all units of the corporation for attainment of goals, 46% Agree, 5% were
undecided, 8% Disagree and 4% Strongly Disagree.
74
Table 4.7 The relationship between budgetary control and accountability in
Lagos State Water Corporation, Ijora
STATEMENT
Budgetary control
ensures that budget
review and performance
evaluation are regularly
undertaken through
budget
conferences/meetings
Budgetary control
ensures that budgetary
policies are always
checked against realities
towards attainment of
goals
The need for budgetary
control ensures that all
heads of departments
review their expenditure
to improve on
productivity
Operational and other
costs are always
reviewed by the
executive committee
Budget performance
evaluation reports are
prepared regularly and
followed up
Budget deviations are
reported to budget
committee/executives
Frequency
SA
49
A
64
U
9
D
13
SD
7
Total
142
%
Frequency
35
67
45
42
6
12
9
8
5
13
100
142
%
Frequency
47
53
30
62
8
11
6
12
9
4
100
142
%
Frequency
37
47
44
59
8
11
8
6
3
19
100
142
%
Frequency
33
67
42
51
8
9
4
11
13
4
100
142
%
Frequency
47
65
36
45
6
12
8
17
3
3
100
142
75
Managers always take
timely corrective actions
when adverse variances
are reported
There is a regular follow
up on budget plans by the
budget
committee/departmental
heads
%
46
Frequency 56
32
47
8
18
12
14
%
39
Frequency
39
33
73
13
9
10
16
51
6
11
%
Source: Field survey, April 2023.
27
2
7
5
100
142
5
100
142
4
100
35% Strongly Agree that Budgetary control ensures that budget review and
performance
evaluation
are
regularly
undertaken
through
budget
conferences/meetings, 45% Agree, 6% were undecided, 9% Disagree and 5%
Strongly Disagree.
35% Strongly Agree that Budgetary control ensures that budget review and
performance
evaluation
are
regularly
undertaken
through
budget
conferences/meetings, 45% Agree, 6% were undecided, 9% Disagree and 5%
Strongly Disagree.
37% Strongly Agree that The need for budgetary control ensures that all heads of
departments review their expenditure to improve on productivity, 44% Agree, 8%
were undecided, 8% Disagree and 3% Strongly Disagree.
76
33% Strongly Agree that Operational and other costs are always reviewed by the
executive committee, 42% Agree, 8% were undecided, 4% Disagree and 13%
Strongly Disagree.
47% Strongly Agree that Budget performance evaluation reports are prepared
regularly and followed up, 36% Agree, 6% were undecided, 8% Disagree and 3%
Strongly Disagree.
46%
Strongly
Agree
that
Budget
deviations
are
reported
to
budget
committee/executives, 32% Agree, 8% were undecided, 12% Disagree and 2%
Strongly Disagree.
39% Strongly Agree that Managers always take timely corrective actions when
adverse variances are reported, 33% Agree, 13% were undecided, 10% Disagree and
5% Strongly Disagree.
27% Strongly Agree that There is a regular follow up on budget plans by the budget
committee/departmental heads, 51% Agree, 6% were undecided, 11% Disagree and
4% Strongly Disagree.
77
4.2
Testing of Hypothesis
Test of Hypothesis 1
Budgetary control has effect on performance of Lagos State Water Corporation,
Ijora.
The SPSS Chi-Square analysis of Hypothesis 1 is presented below:
SPSS Result
Case Processing Summary
Cases
Valid
N
PerfObs * PerfExp
Missing
Percent
5
N
4.7%
Total
Percent
102
N
95.3%
Percent
107
100.0%
Chi-Square Tests
Value
Pearson Chi-Square
Likelihood Ratio
Linear-by-Linear Association
N of Valid Cases
df
Asymptotic Significance (2-sided)
20.000a
16
.220
16.094
16
.446
1.253
1
.263
5
a. 25 cells (100.0%) have expected count less than 5. The minimum expected count is .20.
From the Chi-Square analysis above, the Chi-Square value, 0.220, is less than 0.5
@ 95% Confidence Interval.
Decision
We therefore reject the null hypothesis.
78
Conclusion
Budgetary control has effect on performance of Lagos State Water Corporation,
Ijora.
Test of Hypothesis 2
There is no relationship between budgetary control and cost reduction in Lagos
State Water Corporation, Ijora.
The SPSS Chi-Square analysis of Hypothesis 2 is presented below:
Case Processing Summary
Cases
Valid
N
CostObs * CostExp
Missing
Percent
5
N
4.7%
Total
Percent
102
N
95.3%
Percent
107
100.0%
Chi-Square Tests
Value
Pearson Chi-Square
Likelihood Ratio
Linear-by-Linear Association
N of Valid Cases
df
Asymptotic Significance (2-sided)
20.000a
16
.183
16.094
16
.316
.664
1
.415
5
a. 25 cells (100.0%) have expected count less than 5. The minimum expected count is .20.
From the Chi-Square analysis above, the Chi-Square value, 0.183, is less than 0.5
@ 95% Confidence Interval.
79
Decision
We therefore reject the null hypothesis.
Conclusion
There is relationship between budgetary control and cost reduction in Lagos State
Water Corporation, Ijora.
Test of Hypothesis 3
There is no relationship between budgetary control and accountability in Lagos State
Water Corporation, Ijora.
The SPSS Chi-Square analysis of Hypothesis 3 is presented below:
SPSS Result
Case Processing Summary
Cases
Valid
N
AccountObs * AccountExp
Missing
Percent
5
4.7%
N
Total
Percent
102
95.3%
N
Percent
107
100.0%
80
Chi-Square Tests
Value
Pearson Chi-Square
df
Asymptotic Significance (2-sided)
20.000a
16
.019
16.094
16
.143
2.093
1
.148
Likelihood Ratio
Linear-by-Linear Association
N of Valid Cases
5
a. 25 cells (100.0%) have expected count less than 5. The minimum expected count is .20.
From the Chi-Square analysis above, the Chi-Square value, 0.019, is less than 0.5
@ 95% Confidence Interval.
Decision
We therefore reject the null hypothesis.
Conclusion
There is relationship between budgetary control and accountability in Lagos State
Water Corporation, Ijora.
4.3
Discussion of Findings
Budgetary control has effect on performance of Lagos State Water
Corporation, Ijora. This is because among other priority responsibilities of Lagos
State Water Corporation, budgetary control enhances planning, monitoring, control,
evaluation and execution of social services. The implementation of budgetary
control in public sector organisations reduces corruption and mismanagement. It
81
enhances engagement with stakeholders for proper management of issues, personnel
motivation for high productivity, and capacity building of personnel for delivery of
community projects. The application of budgetary control improves revenue
collection from public utilities, enhances the provision of social services, awareness
and enlightenment on contemporary issues affecting the society, and enhances the
proper functioning of public sector organisations.. A study by Creative Commerce
(2015) also arrived at similar conclusion. According to the authors, managers can
also use budgets to control the activities for which they are responsible. Analyses of
variances allow managers to identify those costs which do not conform to the long
term plan and therefore may require alteration. By investigating the reasons for
budget deviations managers may also be able to identify inefficiencies.
There is relationship between budgetary control and cost reduction in Lagos
State Water Corporation, Ijora When long term as well as short term plans of
organisations are provided for; budgetary control enhances proper definition of short
term and long term plans, helps in setting clear goals and objectives for the
corporation, takes into account all aspects of aspects of work in the corporation for
proper planning and execution and links goals and objectives of the corporation to
their outcomes. Budgetary control also helps in setting priorities for the fiscal year
at budget conference/committees. It ensures that everyone is involved in the budget
82
preparation process in order in order to ensure commitment, and all stakeholders to
the budget make contribution to arrive at the final budget. It encourages departments
to work out their budgets which become input to the overall budget of the
corporation. Approved budgets are shared to all departments in the corporation to
guide operations just as budgetary control enhances leadership and coordination of
all units of the corporation for attainment of goals. This finding corroborates an
earlier work by Accounting Solutions (2013) when the authors concluded that after
making much research work, then the decision makers come up with an appropriate
budget which foresees the needs and wants of the firm under tight cost and
expenditure. A budget includes planned volume sales and the revenue attached to
that, the costs and expenses, liabilities, assets, resource quantities and cash flows.
There is relationship between budgetary control and accountability in Lagos
State Water Corporation, Ijora. This is because with proper budgeting policies,
Budgetary control ensures that budget review and performance evaluation are
regularly undertaken through budget conferences/meetings, budgetary policies are
always checked against realities towards attainment of goals, and all heads of
departments review their expenditure to improve on accountability. Operational and
other costs are always reviewed by the executive committee, from which budget
performance evaluation reports are prepared regularly and followed up, and budget
83
deviations are reported to budget committee/executives. Managers always take
timely corrective actions when adverse variances are reported, and there is a regular
follow up on budget plans by the budget committee/departmental heads. In their
work of examining the budgetary control and performance in government parastals,
Olaoye and Ogunmakin (2014) also arrived at similar conclusion when they stated
that level of accountability and transparency in government corporations can be
improved with efficient budget controls.
84
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1
Introduction
This chapter presents discussion of findings, conclusion, implications of the study
and recommendations.
5.2
Summary of Findings
The effect of budgetary control on performance of Lagos State Water Corporation,
Ijora has contributed to the planning, execution, monitoring, control and evaluation
of social services in the organisation. It has reduced corruption and mismanagement
of public funds and enhanced engagement with stakeholders for proper management
of issues, and personnel motivation for high productivity.
Budgetary control enhances capacity building of personnel for delivery of
community projects. Its application improves revenue collection from public utilities
and the provision of social services. Budgetary control enhances awareness and
enlightenment on contemporary issues affecting the society and enhances the proper
functioning of public sector organisations. The relationship between budgetary
control and cost reduction in Lagos State Water Corporation, Ijora serves in the
proper definition of short term and long term plans which helps in setting clear goals
and objectives for the corporation and guides the taking into account all aspects of
85
aspects of work in the corporation for proper planning and execution. Budgetary
control links goals and objectives of the corporation to their outcomes, helps in
setting priorities for the fiscal year at budget conference/committees, ensures that
everyone is involved in the budget preparation process in order in order to ensure
commitment and that all stakeholders to the budget make contribution to arrive at
the final budget. The relationship between budgetary control and accountability in
Lagos State Water Corporation, Ijora has ensured that budget review and
performance
evaluation
are
regularly
undertaken
through
budget
conferences/meetings and that budgetary policies are always checked against
realities towards attainment of goals. The need for budgetary control ensures that all
heads of departments review their expenditure to improve on productivity.
Operational and other costs are always reviewed by the executive committee. Budget
performance evaluation reports are prepared regularly and followed up and Budget
deviations are reported to budget committee/executives. This has encouraged
managers to always take timely corrective actions when adverse variances are
reported, and there is a regular follow up on budget plans by the budget
committee/departmental heads.
86
5.3
Conclusion
Budgeting serves as a tool for financial planning and a vehicle through which the
actions of the different parts of an organization can be brought together and
reconciled into a common plan. The success and failure of any organization or
business concern depends greatly on its ability to integrate available resources,
whether human or material, and combine them in the most efficient and productive
manner through a budget. As political documents, budget allocates scarce resources
among competing social and economic needs. As managerial documents, budgets
specify the wants and means for providing for government services. Budgetary
control relates expenditure to a section or department who incurs the expenditure, so
that the actual expenses can be compared with the budgeted ones, thus providing a
convenient method of control. Public services include public goods and
governmental services such as the military, Law enforcement, infrastructure (public
roads, bridges, tunnels, water supply, sewers, electrical grids, telecommunications,
etc.), public transit, public education, along with health care and those working for
the government itself, such as elected officials. The budget control cycle is
comprised of two main phases: the planning phase and the control phase. The
planning phase quantifies the corporate goals to be attained during the fiscal year
and the financial plan necessary to achieve them. This provides a benchmark to
which performance can be assessed in the control phase.
87
5.4
Recommendations
Based on the findings of the research work, the following recommendations are
made towards enhancing budgetary control in public sector organisations:
i. The activities of the various departments in government organisations should
be planned and coordinated very well to ensure that the departments are in
harmony so that the effective budget will be achieved.
ii. Orientation, seminars and workshops on budgeting and budgetary system
should be emphasized to those involved in the budget preparation.
iii. Budget committees should function well to make sure that proper budgeting
is applied and in effective way.
iv. Since budgets and budgetary control are accounting tools and also useful
benchmark with which actual results can be compared, government should
encourage it so that it will be applied effectively.
v. Government at all levels, Federal, State, Local should enact policy framework
with corresponding monitoring and enforcement measures that that will
discourage poor budget implementation.
5.5
Limitations of the Study
The study was limited by time, operational logistics and finance. The time allocated
to the study was short. Operational logistics involved visiting the office of Lagos
88
State Water Corporation, Ijora to source relevant materials, administering and
retrieving the questionnaires from respondents. Some of the respondents were late
in returning their completed questionnaires. The researcher was also restricted from
accessing some official information relevant to the study. The research work is
limited to data obtained from personnel of Lagos State Water Corporation, the
Internet and other public sources of data.
5.6
Suggestions for Further Research
The following areas are suggested for further research work:
i. Effect of external auditing on government parastatals
ii. Effect of computerized accounting system on the performance of government
parastatals.
89
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97
APPENDIX 1: LETTER TO RESPONDENTS
Faculty of Management Science
Lagos State University
Ojo.
30 January, 2023.
Dear Respondent,
Kindly spare a few minutes to complete the attached questionnaire designed for
research titled “AN ASSESSMENT OF EFFECTIVENESS OF BUDGETARY
CONTROL SYSTEM IN PUBLIC SECTOR ORGANISATIONS. A CASE
STUDY OF LAGOS STATE WATER CORPORATION, IJORA”
The questionnaire is part of a research project being carried out in partial fulfilment
for the award of Master of Public Administration (MPA) Degree.
The research is for academic purpose only and I undertake that all information
provided will be treated with the utmost confidentiality and anonymity.
Your favourable consideration will be highly appreciated.
Yours sincerely,
MODUPE ADENIRAN
Researcher
98
APPENDIX 2: RESEARCH QUESTIONNAIRE
Questionnaire for research titled “EFFECT OF BUDGETARY CONTROL ON
PUBLIC SECTOR ORGANISATIONS.”
Section 1: Personal Data
Please provide your answer to each of the following questions. Read carefully and
choose the appropriate answer by ticking the box against it.
Sex: Male (
Age: 21-30yrs (
61 and above (
)
Female (
)
)
31-40yrs (
)
41-50yrs (
)
51-60 (
)
)
Education: Diploma (
Doctorate Degree (
)
Work Experience: 1-5yrs (
Above 20yrs (
)
)
HND/First Degree (
) 5-10yrs (
)
) Masters’ Degree (
10-15yrs (
)
10-20 (
)
)
Section 2: Effectiveness of budgetary control on performance of Lagos State
Water Corporation, Ijora
S/N STATEMENT
SA A U D SD
1.
Budgetary control enhances planning and
execution of social services
2.
Budgetary control enhances the monitoring,
control and evaluation of social services
3.
The implementation of budgetary control in
public sector organisations reduces corruption
and mismanagement
4.
Budgetary control enhances engagement with
stakeholders for proper management of issues
5.
Budgetary control enhances personnel
motivation for high productivity
99
6.
7.
8.
9.
10.
Budgetary control enhances capacity building
of personnel for delivery of community projects
The application of budgetary control improved
revenue collection from public utilities
Budgetary control enhances the provision of
social services
Budgetary control enhances awareness and
enlightenment on contemporary issues
affecting the society
Budgetary control enhances the proper
functioning of public sector organisations
Section 3: The relationship between budgetary control and cost reduction in
Lagos State Water Corporation, Ijora
S/N STATEMENT
SA A
Budgetary control enhances proper definition
1.
of short term and long term plans
2.
Budgetary control helps in setting clear goals
and objectives for the corporation
3.
Budgetary control takes into account all aspects
of aspects of work in the corporation for proper
planning and execution
4.
Budgetary control links goals and objectives of
the corporation to their outcomes
5.
Budgetary control helps in setting priorities for
the fiscal year at budget conference/committees
6.
Budget control ensures that everyone is
involved in the budget preparation process in
order in order to ensure commitment
7.
All stakeholders to the budget make
contribution to arrive at the final budget
U
D
SD
100
8.
9.
10.
Departments work out their budgets which
become input to the overall budget of the
corporation
Approved budgets are shared to all departments
in the corporation to guide operations
Budgetary control enhances leadership and
coordination of all units of the corporation for
attainment of goals
Section 4: The relationship between budgetary control and accountability in
Lagos State Water Corporation, Ijora
S/N STATEMENT
SA A U D SD
1.
Budgetary control ensures that budget review
and performance evaluation are regularly
undertaken
through
budget
conferences/meetings
2.
Budgetary control ensures that budgetary
policies are always checked against realities
towards attainment of goals
3.
The need for budgetary control ensures that all
heads of departments review their expenditure
to improve on productivity
4.
Operational and other costs are always
reviewed by the executive committee
5.
Budget performance evaluation reports are
prepared regularly and followed up
6.
Budget deviations are reported to budget
committee/executives
7.
Managers always take timely corrective actions
when adverse variances are reported
8.
There is a regular follow up on budget plans by
the budget committee/departmental heads
101
Section 5: Respondent Opinion - Research Hypothesis
S/N Statements
SA
Budgetary control has no effect on
1.
performance of Lagos State Water
Corporation, Ijora
2.
There is no relationship between budgetary
control and cost reduction in Lagos State
Water Corporation, Ijora
3.
There is no relationship between budgetary
control and accountability in Lagos State
Water Corporation, Ijora
A
U
D
SD
102