The Impact of Budgetary Control on the Organizational Performance of Public Institutions in Tanzania
Chapter One
General Objective
The general objective of the study is to assess the Impact of Budgetary Control on Organizational Performance in Tanzania.
Specific Objectives
The specific objectives of the study are:-
- To determine the relationship between budgetary control systems and the organizational performance of public institutions in Tanzania.
- To examine the effectiveness of budgeting as a tool for financial planning.
- To describe the theoretical impact of budgeting on performance measurement.
- To explore the problems encountered during budgeting exercises at public institutions in Tanzania.
Chapter Two
LITERATURE REVIEW
Meaning of Terms
Drury (2006) defines budget as a plan expressed in quantitative, usually monetary term covering a specific period of time usually one year in other words a budget is a systematic plan for the utilization of manpower and materials resources.
Lucey (1996) defines budget as a plan expressed in money terms. It is prepared and approved prior to the budget and may show income, expenditure and the capital to be employed. It may be drawn up showing incremental effects of former budgeted or actual figure, or be compiled by zero -based budgeting. Blocher et al (2002), argue that budgets help to allocate resources, coordinate operations and provide a means for performance measurement.
Horngren Forster and Datan (1997) describe a budget as a quantitative expression for period of time designed for future plan of action by management. A budget can cover both financial and non-financial aspect of these plans and act as a blue – print for the institution to follow in the upcoming period. Thus a budget is also an itemized estimate of operating result of an organization for a future time period.
According to Brook and Palmer (1984), it is a organizations financial control system. Budgeting is about making plans for the future, implementing those plans and monitoring activities to see to it that they conform to plan.
Appiah-Mensah (1993) explain that, budgeting is the way and means of preparing budgets and that a budgets is a plan of action which has been prepared and approved prior to the period when it will be used, detailing monetary, quantitative or other descriptive terms, the event to be accomplished in the budget period. A budget is different from a mere forecast, in that it is a formal management of events which are desired by management to take place in an organization within a defined period of time.
In this regard the work of Adams et al (2003) can also be pointed out. These authors emphasized that to be effective, budget must be aligned with the organizations strategies, appropriate for the organization performance management processes and must be involve processes that are valued based, consequential and continuous. Control, checks whether the plans are realize and put into effective corrective measures, where deviation or short-fall is occurring.
Egan (1997) maintains that without effective controls, an organization will be at mercy of internal and external forces that can disrupt its efficiency, and when this occur such institution will not be able to combat such forces. When budgeting and budgetary system is in use, budgets are established which set out in financial terms, the responsibility of employees in the relation to the requirement of the overall policy of the organization, continuous comparison is made between the actual and budgeted result, which is intended to either secure, through action of employees, the objectives of policy or to even provide basis for revision.
Herath and Indriani (2007) who investigated on the “role of budgetary control system as a component of the management control system in creating and sustaining competitive advantage‟‟ and came with a positive conclusion. They concluded that budgetary control system plays a leading role in establishing an efficient management control system for creating a sustainable competitive advantage.
Cole (1996), noted that fundamental to the success of any organization, is drawing a budget plan and putting it in operation. Further, notes that creating a budget is important as it enforces an organization to carefully consider the expected demand for its products, services and the resources required to meet that demand. It also translates the higher priorities for the organization into the appropriate resources required to achieve those priorities, as it would be difficult to allocate resources due to scarcity without a budget plan. It creates the baseline against which actual results can be compared, budgets act as a basis for measuring performance in organizations and help in directing the activities of the organization hence giving earlier signals on variances in sufficient time to take corrective actions. Clarke and Toal (1999) too are of the opinion that budgets are still essential and can for example, be incorporated as part of the financial component of the balanced scorecard. Pierce and O‟Dea (1998), also subscribe to the view that budgets are still relevant to today‟s business environment.
Chapter Three
STUDY METHODOLOGY
Study Area
The study conducted at the headquarters of Ministry of Home Affairs of the United Republic of Tanzania as one of the strategic ministries of the government whose core functions are to maintain Law and Order and protect life and property. The Ministry is serving a population of about 35 million people, according to 2002 population census, scattered on an area of about 945.087 square kilometers. The ministry‟s main mission is to save lives and properties, facilitate and control movement of aliens and non-aliens, assist refugees and rehabilitate convicts through implementation of relevant laws and regulations.
Among other units of this ministry is Tanzania Police Force. It has been established that, the Police Force has serious budgetary limitations and constraints. Lack of adequate financial resources has been the primary Couse of all secondary problems affecting performance of the Tanzania Police Force. These problems affect the efficiency and effectiveness of the Police in terms of its management, administration and above all its ability to discharge its functions. This state of affairs has contributed a lot on eroding the confidence of the people to their Police Force. We have noted that it has been a traditional for recurrent budget expenditure to exceed development budgets due to the country‟s low economic performances. This in turn has therefore led to inadequate internal allocation of government funds to the Police Forces planned development activities.
Research Design
Ranganathan (2007) defined research design as a logical and systematic plan prepared for directing a research study. It specifies the objectives of the study, and techniques that were adopted for achieving the objectives. This study is descriptive method by using both qualitative and quantitative techniques. The study employed an exploratory research design because budgetary control in the public sector is an idea not much known as no many studies have been done so far and helped the research to achieve new insight on it.
According to Kothari (2006), exploratory research has the objective of gaining familiarity with the phenomenon or to achieve new insight into it. Case study design was employed in this research, mainly as it is fairly exhaustive method which enables the researcher to study deeply and through different aspects of budgetary control, its flexibility in respect to data collection method and saves both time and cost.
Population of the Study
Population is described as the entire group of people or item on which information is collected (Krishna Swami, 1995). Populations are not just people. Populations may consist of individuals, but are not limited to, people, animals, businesses, buildings, motor vehicles, farms, objects or events. When looking at data, it is important to clearly identify the population being studied or referred to, so that you can understand who or what are included in the data. The study population of this research comprises about 1000 peoples. According to Olive and Muganda (2003, p. 41) target population defined as population to which researcher wants to generalize the results of the study.
Chapter Four
DATA ANALYSIS AND PRESENTATION
Challenges and Success Faced During Data Collection
In the process of data collection some challenges are met even though the process is conducted successfully. The problem of illiteracy among suppliers of MoHA on academic research researches reduced the proper answers as expected. Also, rough responding resulted from carelessness of the respondents gave out unexpected answers which even caused incomplete answers on questionnaires. In the case of MoHA staffs under the PFU the problem occurred during data collection was failure of providing feedback on time as promised due to negligence among some of the respondents like misplacing, damaging (tearing and losing of questionnaires, this resulted in additional costs of printing more questionnaires o as to fix the missing ones.
Chapter Five
CONCLUSION AND RECOMMENDATIONS
Conclusion
The point aim of this study was to assess the impact of budgetary control on the organizational performance of public institutions in Tanzania. With regard to the study objectives, this study was conducted in Dar es salaam Tanzania in the Ministry of Home Affairs, the Police Force Unit with mushrooming information concerning budgetary control and organization performance of public institutions in Tanzania.
In lightening the summary of this study a total of 50 respondents from the categories of Police Force unit suppliers, Management staffs as well as end users of the MoHA under PFU were interviewed in regarding to their views concerning the impact of budgetary control on the organizational performance of public institutions in Tanzania.
Some factors such as budget deficit, disruption of normal operation, lack of capital, impact of inflation, poor budget execution, poor expenditure management and government bureaucracy were considered since they prove to be validity for the reasons of improving budgetary control in public organization.
The study further revealed that, 60% of the respondents agree with the notion that budget control systems affect tools for financial planning in organization, 30% agree with the same notion, 1% argue that they don‟t know, where as 5% and 4% argue that they disagree and strongly disagree respectively.
The study also find out that, 21 respondents equivalent to 38% from the sample size of 50 strongly agree that budget measure the performance of an organization, 14 respondents equivalent to 30% agree with the same notion. Whereas 3 respondents equivalent to 5% don‟t know anything, 14% of the respondent‟s equivalent to 7 respondents disagrees and the remaining 5 respondent‟s equivalents to 13% strongly disagree with the same notion.
When linear regression was used to test the data, results show that (Adj R Square = 937) which is 93.7% of the variance for the relationship between Budgetary Control Systems and Organization Performance was attributed to the data of the study meanwhile the remaining 0.3% was due to other variables which were not studied in the research. However regression revealed that, there is statistically significant predictor in Relationship between Budgetary Control Systems and Organization performance with poor budget execution (p = 0.049), poor expenditure management (p = 0.034), government bureaucracy (p = 0.029). However the results of the data collected, also rejected that there is a statistically significant predictor on lack of staffs training on budget management with budgetary control system and organization performance in public institutions (p = 0.559).
Recommendation
The study recommended that the government should allocate enough funds for police force unit so that they can implement their activities efficiently and effectively. This has even been mentioned by Permanent secretary of MoHA (2014) that
“Budget deficit constrains the police force at crucial moments when it is expected to deliver to international standards ………”
Suggestions for Further Studies
It is necessary for the government and other stakeholders to conduct a further applied study sampling the whole nation with the intention of finding out the impact of budgetary control on the organizational performance of public institutions in Tanzania. This will add knowledge to the community as well as to the existing community.
REFERENCES
- Adam and Kamuzora. (2008). Research Methodology for Business and Social studies
- Appiah M, (1993) Principle of cost accounting, Cape-Coast Nabb publication.
- Baserville, R (1991). Risk analysis as a source of professional knowledge 7-3- 2011.
- Bird (2003) Country case study: Design and Implementation features of Medium Term Expenditure Frameworks (MTEF) and their links to poverty Reduction: Overseas Development Institute London centre for Aid and public Expenditure.
- Brook H and Palmer, (1984) Cost Accounting principles and applications (4th end) San Francisco MC Graw-Hill Book.
- Burlington and Foxton (1998).Management Accounting Study Book. London 2A 3E
- Charles, H. (2000). Managerial Emphasis, 4th Edition.
- Coombs, H.M and Jenkins D.E (1991) Public sector Financial Management. Chapman and Hall UK.
- Dixon, A. (2002). Financial Management 2nd Edition
- Drury, C. (2006), Cost and Management Accounting 6th Edition, pages 422- 471.
