CHAPTER
ONE
INTRODUCTION
1.1 OVERVIEW OF
THE STUDY
The origin of budgeting could be traced to the
cradle of civilization where Joseph according to the Bible (Genesis 41:33-36)
made a forecast (budget) of corn supplies and planned Pharoah's investment and
consumption policy in light of it budget was used in England as early as the
eighteenth century to control the King's power of taxation which provided the
revenues and to control governmental expenditures. The budget principles of
supply as well as the use of funds is still fully recognized in modern business
budgeting.
The idea of
government budgeting were brought into United States and carried by English
Immigrants. According to Horngreen and Foster (1987), Budgeting system are more
common in large companies, where formalized techniques often serve
management. Still, small concerns also use budget. All organizations whether incorporated
or unincorporated, public or private, religion or traditional, have some
objectives/or goals which it aims to achieve. The objectives could be the
maximization of profits or rendering of services. The realization of an organization's objective requires the
acquisition and utilization of both human and material resources. To achieve
these objectives, the organization tries to economize resources and change the
course or means of achieving its pre-determined goals. With these resources,
the organization determines the most effective way of achieving its goals.
Goals optimization is achieved only by the properly planned use of available
resources when the different activities are efficiently co-ordinated and the
various decisions are policy oriented or controlled.
Modem religious organizations require the use of
some technique in the formulation and adoption of planned and defined systems
include budgeting variance analysis, and budgetary control. The process of
setting goals or objectives to be achieved in some future time and determining
how these goals are to be reached is described as planning, translating this
planning into religion targets can be described as budgeting in religious
organization.
According
to Terry Lucey (1996) preparing a short term and detailed plan of activities of
an organization and so converting the strategic long term plan into action. The
degree of importance attached to this plan and the efforts made in controlling
the deviation from the planned performance differs among business
organizations. A budget can be defined as a quantitative financial statement
showing estimated incomes and expenditures of an organization for a specified
period of time. It is a predetermined statement of management policy during a
given period which provides a standard for comparison with results actually
achieved.
The
process of establishing a budget is known as budgeting while the process of
assigning responsibilities for achievement of the budget, measuring actual
performance and comparing it with the planned performance is known as budgetary
control.
Consequently,
budgetary control is a management function which includes the preparation of
budget and establishing responsibility, comparing actual performance with that
budgeted and acting upon result to achieve the described goal.
The
purpose of control is to ensure t at operation and performance conforms to
plans. The control aspect of budgetary activities is a management function
which involves taking action on adverse variance that are controlled.
According to Pogue (1989),
budget will control nothing as it is not on itself a control mechanism but a
yardstick by which actual results can be compared as and when they occur and
thus provide management with an aid to control cost. Budgetary control
therefore acts as guard on the executive capacity by controlling their scope of
expenditure. In a religious organization, it helps the budget committee or
church committee to control church expenditure. It aims at realistic approach
to project by management of an organization. Non profit making organization attached much
importance to budgeting. Thus budget is being controlled in each non profit
making organization. Like every other organization the realization of the
budget objective in Non profit making organization depends on the effective
control of management on the budget.
1.2 STATEMENT OF PROBLEM
This
research work is encouraged to help in highlighting the problems that militate
against the application and effective utilization of budgeting and budgetary
controls of Catholic Church in Delta State Asaba in Particular.
Specifically, the following problems are addressed:
(1)
The parish was
unable to accomplish budget goals.
(2)
There were
variances between budgeted and actual performance in the parish.
(3)
The
committee members were unable to exercise control on the budget system because
of lack of adequate experience.
(4)
Even
formulating master budget at parish level had been a problem and delayed
previous year’s budgets.
(5)
The parish
was unable to monitor both compliance with and deviation from budget's target.
1.3 OBJECTIVES
OF THE STUDY
Budgets are essentially forward looking and provide the
yardstick for the purposes of comparison. It is a means to an end and not an
end itself; hence it covers the area of responsibility of one specified person
so that his performance can be measured at the end of budget period.
These are the objectives of
this study:
(a)
To determine why the parish was unable to accomplish budget goals
(b)
To find why there was variance between budgeted and actual performance in the parish
(c)
To examine whether lack of experience contributed to committee inefficiency in terms of
budgetary control.
(d)
To ascertain why there has been delay in formulation of budget.
(e)
To find out why the parish was unable to monitor deviation from budget target.
1.4 RESEARCH QUESTIONS
The following research questions have been
formulated to help the researcher in data collection. They are:
(1)
What are
the problems of budgeting in your organization?
(2)
To what
extent does budget serve as an effective tool of planning
in your parish?
(3)
To what
extent do you think this parish was unable to accomplish her budget goals?
(4)
What are
the causes of variances in your parish budget?
(5)
To what
extent does your parish analyze the budget variances?
(6)
To
what-extent are budgets use is for controlling in his parish?
(7)
To what
extent are committee members educated on the budgetary control system?
(8)
What factor
do you take into consideration in allocating cost?
(9)
To what
extent are deviations from budgetary targets monitored?
(10)
To what
extent does budgetary control aid your parish in decision making?
1.5 STATEMENT OF HYPOTHESIS
A
hypothesis is defined as a proposition put forward as a basis for reasoning a
supposition formulated data and presented as a temporary explanation in order
to establish a basis for future research, produced data is accepted while the
other one is rejected after a statistical analysis of the data.
In this study, the researcher worked with these
hypotheses:
H01: Budgets are not effective means of planning.
H1: Budgets are
effective tool of planning.
H02: Catholic Churches in Delta State Asaba in particular does
not use budget as a basis of control
H2: Catholic
Churches in Delta State Asaba in particular use budget as a basis of control
H03: Budgetary control does not aid Catholic Churches in Delta
State Asaba in particular committee heads in decision making.
H3: Budgetary
control aid Catholic Churches in Delta State Asaba in particular in decision
making.
H04: Committee members are educated on budgetary
control system.
H4: Committee
members are not educated on budgetary control system.
1.6 SCOPE
OF THE STUDY
This study covers the
budgeting and budgetary control of Non Profit making Organization.
The processes of budgeting in
church are taken care of, starting from using level or unit level to parish
level that is, preparing a masters budget for the parish.
1.7 SIGNIFICANCE OF STUDY:
It is important that after the
formulation of budgets, all committee heads of Non Profit making Organization
responsible for actual results and should accept the part they have to play in
achieving them. Hence, this study is significant in the sense that:
1.
It will aid non profit making to know whether budgeting play a role towards
ensuring efficient rendering service.
2.
It will help Catholic Church to know the role played by committee members
in budgetary process and whether they ensure adherence to the budget.
3.
It will be of help to non – profit making organization to know the role of
budget as a tool for effective and efficient management of resources.
4.
It will also aid future researchers on budgeting and budgetary control with
emphasis on religious organization.
1.8 LIMITATIONS TO THE STUDY
In the course of this
research, the researcher encountered some problems. The first problem
encountered by the researcher was a non-challant attitude committee member who
was rather too busy to her. Lack of finance also posed some problems
researcher, who finds it difficult to keep some appointments with the
Arch-deacon because of high cost of transportation. The fairness of the result
of this research depends on how truthful respondents are. These are the relevant limitations that the researcher
had in the course of this study but none of these hindered the research.
1.9 DEFINITION
OF TERMS.
BUDGET: The Institute of Cost and Management
Accountants defines budget as a plan quantified in monetary terms, prepared and
approved prior to a defined period usually showing planned income to be
generated and/or expenditure to be incurred during that period and the capital
to be employed to attain that objective.
BUDGETARY CONTROL: This is the establishment of
budget relating to the responsibilities of executives to the requirements of a
policy and the continuous comparison of actual budgeted results, either to
secure by individual action, the objectives of the policy or to provide a basis
for revision.
VARIANCE: This is the difference
between planned (budgeted) and actual result.
FAVOURABLE VARIANCE: the excess of actual result
over that budget in the case of costs and vice versa in the case of revenue.
ORGANISATION: All establishments whether government, privately or religiously owned.
MASTER BUDGET: CIMA (1975) defined Master Budget as Summary Budget incorporating its
component functional budget, which is finally approved, adopted and employed.
1.10 ORGANISATION
OF THE STUDY
Ø Introduction
·
Overview
·
Statement
of problem
·
Objectives
of the study
·
Research
question
·
Hypothesis
·
Scope of
the study
·
Significance
of the study
·
Limitation
of study
·
Definition
of terms
·
Organization
of study
·
Summary
·
Reference
Ø Review of literature
·
Conceptual
issues
·
Theoretical
issues
·
Empirical
literature
·
Summary
·
References
Ø Research methodology
·
Introduction
·
Research
design
·
Population
and sample size
·
Sample
techniques
·
Method of
data collection
·
Techniques
of data analysis
·
Summary
·
References
Ø Data presentation and analysis
·
Introduction
·
Data
presentation
·
Analysis of
data
·
Test of
hypotheses
·
Summary
·
References
Ø Discussion, conclusion and recommendation
·
Discussion
of findings
·
Conclusion
·
Recommendation
·
Bibliography
·
Appendix