THE ROLE OF BUDGETING IN PUBLIC SECTOR MANAGEMENT (A CASE STUDY OFETHIOPE EAST LOCAL GOVERNMENT AREA OF DELTA STATE)

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THE ROLE OF BUDGETING IN PUBLIC SECTOR MANAGEMENT (A CASE STUDY OF ETHIOPE EAST LOCAL GOVERNMENT AREA OF DELTA STATE)

ABSTRACT

This research work is being carried out in order to analytically ascertain and explain the roles of budgeting in public sector management with particular reference to ETHIOPE EAST LOCAL GOVERNMENT AREA OF DELTA STATE.

The study includes an introduction and the following related sub-parts overview of the subject, statement of the problem. Objectives of related literature.  Also to be included are, research methods, i.e. sources of data, instrument of data collection, method of data analysis, presentation and analysis of data, findings and recommendations.

Furthermore, the obvious problems of collecting data through questionnaires, oral interview, library reading and obtaining budget (revenues and expenditure) estimates of the local government area for the relevant year (2001 – 2003) will be addressed squarely.

Furthermore, in public sector management emphasis would be laid on:

• Planning as a guide to policy formulation:


• Control and Appraisal of Government Expenditure;


• Efficient and Effective utilization and channeling of Government Revenue Resources;


• Prudence, transparency and accountability;


• Giving a sense of direction to Government workers involved in the attainment of targeted goals.

CHAPTER ONE

1.1     Introduction                                                                   1

• Statement of the problem 5


• Objective of the study 7


• Hypothesis 8


• Scope/limitation of the study 9


• Significance of the study 9

Notes                                                                    11

CHAPTER TWO

• Literature Review 12

2.1     History of Budgeting                                            12

• The concept of Budgeting 14


• Types of Budgeting 22


• Techniques of Budgeting 30


• Budget preparation 36
  
  
  
  • Principle/Key Limiting Budget Factors 38
  
  
  • The Budget Manual and Time Table 40
  
  
  • The Budget Committee 42
  
  
  • The Budget Process 43


• Administration of Budget 45


• Human Factor in Budgeting 48


• Relevance of the Review to the Study 52

Notes                                                                    54



CHAPTER THREE

• Research Methodology 55

3.1     Population and Study Area                                  55

• Sources of Data 57


• Instrument for Data Collection 58


• Distribution and Collection of Questionnaire 59


• Method of Data Analysis 63


• Three Years Financial Summary (2002 – 2003) 65

CHAPTER FOUR

• Presentation and Analysis of Data 81

Notes                                                                    91

CHAPTER FIVE

• Summary of Findings, Recommendations and Conclusion

5.1     Summary of Findings                                           92

• Recommendations 94


• Conclusion 97

Notes                                                                    99

Questionnaire.                                                               100



CHAPTER ONE

• INTRODUCTION

Business environment is characterized essentially by uncertainties; these uncertainties can reduce the business profit opportunities.

The possibilities of these suspected uncertainties being taken care of or controlled are largely dependent on the ability of the management to look into the future in order to see areas where problems are likely to occur.  We enquire into the future with predictions, which tend to reduce future uncertainties.

The economic environment is filled with foreseeable and unforeseeable events.

These events in the economic environment are built into the budget.

Budget is futuristic and because of this, those who make the budget try to look into the future when making it.

In economic theory, resources are said to be scarce and have alternative uses.

In order to derive maximum benefits, these resources have to be used effectively, efficiently and prudently.

Scarcity of resources does not mean that they cannot be found in the market, but because they have alternative uses and human wants are unlimited and also they are not free of charge.  The expenditure on them should be maximized.  The need to carefully plan for our resources cannot be over emphasized especially at critical time when the country is experiencing excessive inflation, low level of wages and salaries.

Great disparity between income and expenditure on necessities and finally, great disparity between the rich and the poor.

Therefore, failure to plan is planning to fail.

The uses to which a specific resource can be put are competitively varied, thus entirely ranking of the various objectives or need in order or priority and traded of in line with the available resources.

At the beginning of each financial year usually January as it now apples to Nigeria, are budget for both recurrent and capital expenditure and a budget for income or expected revenue are prepared as a guide and laid down expectations of income and expenditure in the fiscal year.

In the light of wide acceptance of budget by all managers both in the public by all managers economic sectors, various school of thought view it differently in the words of L. F. Hand (2000), budgeting is viewed as a plan quantified in monetary terms, prepared and approved prior to a defined period of time, usually showing planned income t be generated and/or expenditure incurred during that period and the capital to be employed to attain a given objective.

Here budgeting is viewed as a planning tools.

Budgeting can also be viewed as a control tool.  Nwoko C. (2000) is of the view that budgets are not mere intentions, they are prudent, honest, painstakingly assembled plans for future actions which than act as a guide for performance from the above, explanations, it can be deduced that budgeting is generally regarded as the process of formulating into a plan all the estimates of income and expenditure of an organization for the financial year with the ultimate intention of using it to direct, co-ordinate and control the activities of all persons involved in achieving the objectives of the organization as contained in the budget.

The budget is classified under expenditure and income heads so that it could be used as a means of controlling the actual process of generating income and incurring expenditure under the relevant income and expenditure system, the budget focuses on anticipated income from both internal and external sources and expenditure on goods, services and personal emoluments.

In the preparation of budgets the following should be taken into consideration:

• Targets should not be very difficult i.e. should not be set at unrealistic level as managers may be demotivated.


• Target should not be set at levels, which are very easy to achieve, as it may not serve any useful purpose.

Having enumerated he vast and important roles played by budgeting in both public and private sectors of the economy, the researcher aims at evaluating the roles played by budget in Ethiope East Local Government Area.  That is, to know the extent to which the local government adheres to and is guided by its budget.

• STATEMENT OF THE PROBLEM

Every (financial) year, the government makes annual budgets, this also applied to Nigeria.

According to T. Lucey, budget is a plan of financial operation embodying an estimate of proposal expenditure for a given period and the proposed means of financing them.  The states and local governments are not left out; they also make their own budgets.

This not withstanding, it is formal in Nigeria for the local state governments to obtain government subventions and subsidies, or some other forms of assistance from the federal government yearly.  This is because of the federal system of government run in Nigeria where most of the high revenue yielding resource and powers are possessed by the Federal government.

Ethiope East Local Government is one of the local government in Delta State of Nigeria.  It is made up of many towns including Okapara Inlan, Okpara Waterside, OVU, Ukokori, Agbon, Okurekpo, Eku, Oviorie, Agborhoho, Urodo, Just to mention but a few.  In its budgets, it was seen that provisions were made of funds for the development of these communities.  Budgets were also made for the provision of public utilities such as water, electricity, good road network and communication system among others in these communities.  From the investigation made, most of them were not provided by the local government.  Again, budgets were made for the building and equipping of schools, health centers and markets among others, yet it was seen that they were not constructed.  The big question now is, where are the money budgeted for these projects.

It was also seen that there was a great imbalance (unevenness) in the development of these communities, despite the fact that all the citizens play their civil roles in the local government; for example, payment of taxes.

Furthermore, in cases where these projects were executed, there is an unimaginable disparity between the amount allocated for the projects and the work on ground.  In the face of all these, it is wondered; if budgeting is still useful in public sector management especially in Ethiope East Local Government Area.  This study is aimed at finding out how far the local Government puts its budgets into practice.

• OBJECTIVE OF THE STUDY

The main objectives of this study are:

• To examine the organizational structure and the management and financial tools of Ethiope East Local Government.


• To ascertain the extent to which ineffective budgets has adversely affected the performance of the local government.


• To ascertain the importance attached to budgeting and budgets in the local government or are they merely seen as estimates whose purpose and usefulness expire no sooner than they are drawn up.


• To enable the reader obtain a better understanding of the budget and government policies so as to be in a position to criticize government actions objectively.


• To analyze critically the budget statement from 2000 to 2002 with regard to their government and output;


• To offer useful suggestions and recommendations where necessary.

• HYPOTHESIS


• Budgeting is indispensable in public sector management


• The activities of the budget review committee are responsible for poor budget formulation and implementation.


• Budget indiscipline is the cause of incremental budgeting in Ethiope East Local Government Area.

• SCOPE AND LIMITATIONS OF THE STUDY

The research is being done to identify, evaluate, and appraise the roles of budgeting in public sector management.  The study would cover the general roles but then would limit most of its evaluation to local government level.

Furthermore, the limitations that can be foreseen are transportation costs, time factor, difficult in obtaining the requires budget estimates, unwillingness of local government workers to consent to oral interviews and filling questionnaires, etc.

All the same, care and diligence would be taken to reduce the effect of these limitations.  Despite these information constraints, I am very confident that the study would have degree of validity and reliability.

• SIGNIFICANCE OF THE STUDY

Budgets are plans showing the estimates of revenues and expenditures to be made in a financial years or period.  The study strives to portray the importance of budgeting in public sector management.  It also tries to critically analyze the various problems relating to budgeting in this sector, offer concrete evidence with relation to these problems and finally, state out the findings, seek clarification on ambiguous issues and make recommendations.  The study also will help educate the user or reader on the importance of the various roles played by budgeting and is written in a language, which would in no small way enhance or enable easy understanding.

It is also hoed that the study would be found useful by the various aims of the public sector for example the local governments, state governments, federal governments and other agencies in the public sector like N.E.P.A., N.I.T.E.L, Water Co-operations, etc.



REFERENCES

Ani, W. U.  Government and Public Sector Accounting (Enugu: Immaculate Press Limited, 200) Vol.1.



Grace, E. (1994):  Management Control, Mar Wick: Mitchell & Co.



Pandey, M. (1999):        Financial Management, New Delhi: Vikas Publishing House PVT. Ltd.



Schater, L. (1988):         Management Accounting, New Jersy: John Wiley.



Welsch, G. (1996):         Budgeting, New York: Prentice – Hall Inc.

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