THE EFFECT OF BUDGETING AND BUDGETARY CONTROL ON ORGANIZATION PERFORMANCE

CHAPTER ONE

INTRODUCTION

1.1 Background to the study

The increasing complexity of business operation and the ever-changing conditions of the business environment-social, economic, technology and political factors make it increasingly difficult for a company to consistently earn a profit that constitutes a fair return on the capital investment. The internal operation of a firm using financial tools has been a very long time; management has to have a plan of action as a means of monitoring profit and financial control.

Budgeting is the accepted basis for profit, planning and financial control. It has been practice effectively and profitably by many progressive companies who generally regard it not simply as a procedure but as one of the more important of process of management. Budgeting is one of the management tools that force manager to perform according to a given level of expectation.

The process of preparing the budget forces the executive to become better administrator. It puts planning in the first key and budgeting primary attention directing because it helps managers to focus in the operating problem early enough. For effective planning or action, budgeting is usually been as an integral of various plans and providing feedback for the actual result. Budgeting has many purposes. The primary purpose of budgeting is conducted under favourable conditions, there is no doubt that a firm which budget will tend to perform rather better than a similar one that does not budget.

Budgetary control is control technique which when the compares of the planned state of affairs with actually state of affairs and the continuous devising of means of correcting the deviation. It involves the use of available technique such as operational research, computer science and so on, to ensure that the budget is realistic as possible. The budget is without doubt, the most widely used control device in both business and government circle. The budget is drawn up for control purpose, that is an attempt to control the direction that the firm taking. Indeed, it is used extensively to many people, the word budget is synonymous with control still, and the preparation of budget originates as a part of planning process. Some companies in other to avoid the negative reaction that are many a time associated with the concept of control. Refer to their budgetary controls as either profit plan or profit path. The aim of budgetary control is to provide a formal basis for monitoring the progress of the organization as a whole of its component parts towards toward the achievement of the objectives specified in the planning budget.

Budget planning budget control is part of the overall system or responsibility accounting within an organization. A vast number of organization and company are getting involved in budgeting and budgeting control in Nigeria, and this is taking different forms, but the one that seems to be gaining more recognition is based on the concepts and ideas developed in budgetary control.

1.2 STATEMENT OF PROBLEM

Some problems are identified to why public sector organization make deficit budget. These problems include:

Inability to evaluate and assess the viability of the organization.

What tools to be employed in comparing organization or actual performance with the planned or future performance and how tools can be implemented a good deviation and control?

What tools to be adopted in assessing the organization performance in terms its fair return on the capital investment?

Going by these problems, the study then consider budgeting and budgeting control on organization performance in local government?

1.3 OBJECTIVE OF THE STUDY

The objective of the appraisal and evaluation of business organization in the following areas:

To itemize the impact of budgeting and budgeting control in local government.

To exemplify by using budgeting and budgeting control by management for planning, control and decision making.

To know what is budgeting and budgeting control and why it is of interest and to whom.

To look into ways of encouraging human support for budgeting control.

1.4 PURPOSE OF STUDY

The purpose of this study is to identify the effectiveness or otherwise in the presentation of budgeting and its control in local government. Our analysis would however be limited to Ojo local government.

The study also determining ways and means of improving the operation and effectiveness of the system for as much as the success or failure of budgeting and budgeting control depend on the acceptance by the people in the organization. Consequently, consideration is given to why employees react the way the they do, the use, the usefulness of budgets in making budgets more successful and acceptable can be considered within a particular situation facing modern day business circle.

1.5  SIGNIFICANCE OF THE STUDY

The outcome of this study cannot be overemphasized. These are:

The effectiveness of budgeting on achieving their corporate goals.

The study will help in the formulation of corporate policies concerning local government.

It will help management to to understand ways in which budgeting could be a powerful tool for planning, control and decision making.

It will reveal how rational allocation of resources can be ensured.

It will serve as a tool for further research studies.

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