AN APPRASIAL OF BUDGET AS A TOOL FOR EFFECTIVE CONTROL IN THE PUBLIC SECTOR (A STUDY OF EEDC, AWKA)

ABSTRACT This study examined an appraisal of budget as a tool for effective control in the public sector, a study of EEDC Awka. A budget can be define as a plan for the accomplishment of programs related to objectives and goals within a definite time period including an estimate of the resources required together with an estimate of resources available usually compared with one or more past periods showing future requirements.. In an attempt to look into the problems, several literature, studies and works were reviewed. A sample of 133 staff was selected from the population using simple random sampling method. Data were collected from both primary and secondary sources and presented in tables and analysed using percentage and frequencies. Hypotheses were formulated and tested using Chi square test method. It was discovered during the research exercise that that mismanagement of funds hinders effective control of budget in EEDC. The findings also showed that non-release and delay in release of funds hinders effective control of budget.  It was observed that there is no checked on the use of virements to avoid abuse of funds in EEDC. Following the above findings, the researcher has recommended that there should be budgetary and financial discipline, while public officials should spend funds lawfully for the purposes provided by law otherwise face impeachment or dismissal and also made to bear the full brunt of the law. The researcher also recommended that the use of virements and other supplementary budgetary tools should be properly checked to avoid them from being abused by some unscrupulous financial wizards in the public sector.

TABLE OF CONTENTS

Title page ……………………………………………………………………………………………i

Certification page………………………………………………………………………………..ii

Approval ………………………………………………………………………………………….iii

Dedication ………………………………………………………………………………………..iv

Acknowledgement ………………………………………………………………………………v

Abstract …………………………………………………………………………………………..vii

Table of contents ……………………………………………………………………………..viii

CHAPTER ONE

1.0 Introduction…………………………………………………………………………………1

1.1 Background of the study………………………………………………………………..1

1.2 Statement of the problem……………………………………………………………….5

1.3 Objectives of the study…………………………………………………………………..6

1.4 Research Questions………………………………………………………………………..7

1.5 Research Hypotheses………………………………………………………………………8

1.6 Significance of the Study………………………………………………………………..8

1.7 Scope of the Study………………………………………………………………………….8

1.8 Limitation of the Study…………………………………………………………………..8

1.9 Definition of Terms………………………………………………………………………9

CHAPTER TWO

2.0 Literature Review…………………………………………………………………………10

2.1 Conceptual Framework…………………………………………………………………10

2.2 Review of Empirical Literature………………………………………………………40

2.3 Theoretical Framework…………………………………………………………………47

2.4 Gap in Literature………………………………………………………………………….48

CHAPTER THREE

3.0 Research design and methodology………………………………………………….50

3.1. Area of study………………………………………………………………………………50

3.2 Research Design…………………………………………………………………………..50

3.3 Sources of Data……………………………………………………………………………50

3.4 Population of Study………………………………………………………………………50

3.5 Sample Size Determination……………………………………………………………51

3.6 Sampling Technique……………………………………………………………………..52

3.7 Validity and Reliability of Data Instrument……………………………………..52

3.8 Method of Data Analysis……………………………………………………………….53

CHAPTER FOUR

4.0 Data Presentation and Analysis………………………………………………………54

4.1 Presentation of Data……………………………………………………………………..57

4.2 Test of hypotheses………………………………………………………………………..64

4.3 Discussion of Results……………………………………………………………………75

CHAPTER FIVE

5.0 Summary of Findings, Recommendations and Conclusion………………..77

5.1 Summary of Findings……………………………………………………………………77

5.2 Conclusion…………………………………………………………………………………..78

5.3 Recommendations………………………………………………………………………..78

References……………………………………………………………………………….80

Appendix/questionnaire…………………………………………………………….83

CHAPTER ONE

• Introduction
  • Background of the Study

The word ‘budget’ originated from a French word bougette meaning little bag. In Britain, the word was used to describe the leather bag in which the chancellor of the exchanger used to carry to the parliament the statement of government needs and sources Ade( 2005). Drury (2000) terms the word Public budget as the money bag/or the public purse which serve several functions as a receptacle for the revenues and expenditures of the state. As Hilton (1997) cites in Abdullah (1998) and Adams (1998) view a public budget as the detailed quantitative plan of a government specifying how resources are acquire and used during a period of time. After several thoughts of consensus, the budget became the document contained in the bags which represent plans of government expressed in money and submitted to legislatives for approval.

Most governmental and not-for profit organization, regardless of size, categories, complexity or sector, rely heavily on budgets and budgetary systems to achieve strategic goals. Raghunandan (2012). The success and importance of budgeting relates to the identification of organizational goals, allocation of responsibilities for achieving these goals, and consequently its execution Shah( 2007). It is one of the most successful and useful management accounting techniques that can reap handsome rewards if properly understood and adequately implemented. Public institutions in Nigeria represent the most dominant economic forces, so efficient and effective systems of government financial management in form of internal control are essential for budgeting the nation’s assets. It is also for facilitating the emergence of economic maturation processes through accountability. There is a general opinion that most of the public enterprises have failed to deliver on the purposes for which they were established. Management ineffectiveness and inefficiency have been advanced by practitioners and researchers of public enterprises as the bane of the Nigerian public sector. (Esu and Inyang, 2008).

Undoubtedly in any nation, budgets are part of national and management control tool designs to promote efficient use of resources and providing support for other critical functions. Its role in an economy cannot be overemphasized as it is an instrument of government planning and control process and it is not designed with the aim of making profits. National budget/or public budget serves as an important tool for resource mobilization, allocation, fiscal and economic management. It is an economic tool for facilitating and realizing the vision of government in a given fiscal year, and if a national budget is to serve as an effective tool in public sector, proper linkages and management of all the stages of budgeting is necessary. Apparently public-sector’ budgets have same characteristics as private-sector budgets.Olomola (2009). In line with this thought,states that budgeting has come to be accepted as an efficient method of short-term planning and control. It is employed, no doubt, in large business houses, but even the small businesses are using it at least in some informal manner. Through the budgets, a business wants to know clearly as to what it proposes to do during an accounting period or a part thereof.  Probably, the greatest aid to good management that has ever been devised is the use of budgets and budgetary control. It is a versatile tool and has helped managers cope with many problems including inflation.

National budget has to be well designed, effectively and efficiently implemented and adequately monitored; its performance must be effectively evaluated. As Yang (2010) have argue if administered wisely, budgeting drives management planning, provides best framework for judging performance, and promotes effective communication and coordination among various segments of business organizations. As Nigeria’s budgetary system could be expected, there is a sharp contrast between budgeting under a military regime which took place on an arbitrary basis and budgeting under civilian administration subject to scrutiny at various stages by the executive and legislative arms of government before it is finally approve. According to Faleti (2010 & 2012) irrespective of whether the government is military or civilian, Nigerian budgetary systems have always been abused.

The administration of former president Chief Olusegun Obasanjo 1999–2007 made ceaseless efforts to strengthen budgetary systems of MDAs to fulfill policy objectives of government and by implication satisfy aspirations of the people. The reform of Nigerian budgetary systems is a significant aspect of public-service reform embarked upon introduction of civilian administration in 1999. prior to this time the country was under military rule during where the Nigerian budgetary system was thrown into total disarray. This work therefore aims at looking at the appraisal of the budget as a tool for effective control in the public sector.

• Statement of Problem

One of the problems associated with the use of budget as a tool for effective control in the public sector includes; the  frequent  non-release, partial release or delay in release of approve funds for budgeted expenditure. It has always been the problem associated with the Nigerian budgetary system, specifically the EEDC. This is as a result of mismanagement of funds by some unscrupulous financial wizards which renders the budget ineffective. This above attitude has negative implications for institutional planning and management control process as well as measurement of overall performance of budgeting in developmental programmes and welfare.

Another problem is the lack of proper auditing i.e internal and external auditing of the budget to ensure that its objectives are adequately achieved. As it is the culture in Nigeria, especially the public sector to pay no attention to the importance of proper auditing for effective and efficient budgeting control.

Another problem that affects the purpose of effective role of control through the budget is the abuse of the use of virement which is used to transfer funds from one department to another when the need arises. They see it as a means to siphon public funds and enrich their pocket since it is an internal source of revenue with no stringent checks attached to it.

• Objectives of Study

The broad objective of this study is to appraise the budget as a tool for effective control in the public sector.

Specific objectives include;

1. To ascertain whether mismanagement of funds hinders effective control of budget in EEDC.
2. To investigate if there are proper auditing system in place for effective budget control in EEDC.
3. To examine if there are checks on the use of virements to avoid the abuse of funds in EEDC.

• Research Question

1. How effective is the budget as a tool for control in EEDC?
2. How does mismanagement of fund hinder effective control of budget in EEDC?
3. Are there proper auditing systems in place for effective budget control in EEDC?
4. Are there checks on the use of virements to avoid the abuse of funds in EEDC?
   • Research Hypotheses

Hypothesis One

Hi: Budget is an effective tool for control in EEDC

Ho: Budget is not an effective tool for control in EEDC

Hypothesis Two

Hi: Mismanagement of funds hinders effective control of budget in EEDC

Ho: Mismanagement of funds does not hinder effective control of budget in EEDC

Hypothesis Three

Hi: There are no proper auditing systems present for effective budget control in EEDC

Ho: There are proper auditing systems present for effective budget control in EEDC

• Significance of Study

This work has attempted at providing its views and suggestions on ways to enhance better control function of the budget on the financial activities of the EEDC. The work also serves as a source of reference to students for further study on the topic and research work related to the study. It also aims at suggesting to policy makers on how to draw policies that will eventually improve the efficiency of the budget as a tool of control.

• Scope/ Delimitation of Study

This research made use of the staff of Enugu Electricity Distribution Centre, Awka as its population.

• Limitation of Study

This research faced certain limitations in the course of carrying out the research. Some of these limitations include; the bureaucracy and redtapism encountered in the course of sourcing data from the population of study, lack of time on the part of the respondent in answering of questionnaires distributed and fear of being identified as respondents to certain questions especially during the interview

• Definition of Terms and Acronyms

Budget: A financial statement of expenditure and revenue of a government within a period of time usually a year

Budget Control: measures taken to ensure that the approved budget implemented achieves its goal.

Bureaucracy: structures and regulations in place    to control activities usually in large organizations and government operations.

Redtapism: official rules that seem more complicated than necessary and prevents things from being done quickly

Revenue: the total income generated from different sources

Expenditure: The act of spending or using money; an amount of money spent

EEDC: Enugu Electronic Distribution Centre

SMART: specific, measurable, achievable, realistic and time bound