Budgeting in Public Sector Economy

Budgeting in Public Sector Economy

This study is meant to look into how the budgeting in public sector economy serves as allocation in state government and also how effectiveness and efficiency is it in the state government. FREMGREN  [1973] defined budget as a compressive and coordination plan expressed in financial terms for the operations and period in the future .  

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CIMA [1990] Budget is an plan qualified in monetary terms prepared and approved prior to defined period of time usually showing planning income to be generated and expenditure to be incurred during the period and the capital to be employed to attain a give objective. A budget is thus a standard with which to measure the actual achievement of people department ,firm etc to be effective ,the budget muss be well coordinated with related management and accounting system .

ANDERSON AND RAWN [1988] Ascertained that “the budget can be a powerful tool for motivating people to achieve the state objectives or it can be a positive hindrance “

It analysis the effects of budgeting on people and show how it can lead to either bad or good consequences according to the way it is applied in various types of state.

WILSON UCHENNA ANI  [2001]Defined the public sector as that sector of the economy established and operated by the government or ,its agencies ,distinguishable from the private sector ,and organized on behalf of the whole citizens .

THE HISTORICAL LITERATURE FRAMEWORK 

The word “budget “ comes from the friends for a small beg or purse, and come to be associated with the chancellor of the Exchequers beg which contains annual estimate of the country’s income and expenditure in the national budget .The chancellor is concerned  with planning co-coordinating and controlling income and expenditure  for the government .A  dictionary  of economy defined budget as “ an estimate of income and expenditure for a future period  “-A national annual budget is therefore an estimate of income and expenditure of the central government for a give financial year . The essential point to note in the above definition is that a budget is an estimate and thus may differ from the actual income and expenditure for the period under review.

Vase and wood ward believed that budgeting is concerned with planning, co-ordinating and controlling but on order to carry out these activities there must be an objective, that is, the basis for the work undertaken.

According to them the plan whether it is strategies or tactical is concerned with the “how “ not with the “what “.

A plan or budget can be only be formulated once the objective is clearly defined.

Rudelius et al did not only see budget as a form of planning but that, which can be expressed in financial terms. This is because while operations are in progress the budget serves as a basis for comparison and facilitates the controls process.

Hingorani argued that budget is not merely a control system targets in the form of specific tasks] collection of information regarding actual and with a view to reporting for action. A budget control system in this sense is also a control system this could be evident from the definition given by the institute of cost and management accountant of executive to the requirement of the policy and the continous comparison of actual with budgeted results, either to secure individual action, the objective of that policy or to provide a basis for its revision. The budgeting system just as any other control system involves the establishment of quantitative targets comparison of actual with the target

And reporting the result of the comparison.

De Paula has put the main idea of budgetary control through an anloy thus: The position may be likened to the navigation of a ship across the sea. The log is kept written regarding happening and position of the ship from hour to hour and valuable lessons are to be leant by the captains from a study of  the factors that caused the misadventures in the past

But the navigate his ship safety over the seven seas the captain require his navigating officers to work out the course ahead and constantly to predetermine one. If the ship is off, its course the navigate officer must report immediately so that the captain take prompt action to regain his correct course.

Budgetary control means laying down in monetary and quantitative terms what exactly has to be done ove5r the coming period and than to ensure that actual result do not diverge from that planned course more than necessary. Palmer and Taylor in an earlier study considered that the real substance of budgetary control or budgeting in the co-ordination of activities of the various heads of departments in relation to the corporate plan, allocation of responsibilities for the action require to achieve the planned result, and the indication of priorities.

According to the national council on government accounting, of New York, budgets are used in the public sector for planning, controlling and evaluating operation just as they are used in the private sector. The council defined budgets merely a plan of financial operations covering a specified period of time. Prepared under the direction of the government unit’s, chief executive officer, the annual budgets is to be submitted to the legislative body for review, possible modification t and formal adoption for government fund certain fiduciary funds,, the legal significance of adoption the budgets that nit serves as the statutory authorization for spending an estimated amount during the subsequent fiscal year. This authorization is referred as “appropriate’’.

Horngren says budgeting puts planning where it belongs. In the for front of the leaders mind. He sees a budget as a formal quantitation expression of management plan thus the budgeting process makes planning an explicit management responsibility’’.

Gordon and shillinglaw argued that not only a budget expressed largely in financial terms, of management plan for operating and financial the enterprise during specify period of time. It is also a predetermined, detailed plan of action develop, approved and distribution as a guide to current operation and as a partial basis for the subsequent evaluation of performance, according to them the value of budgeting lies as much in the process as in the resulting documents. The greatest advantage of the budgeting process is that it forces periodic self- examination as to functions, method objective and cost. Jakande observed that one of the ministries should be so organized that they can respond to public demand reply to correspondence with minimum delay, and produce result within schedule and also to eliminate all areas of waste and irrelevance in both the recurrent and capital estimate. The approach of Weston and Bregham study:- while a federal budget indicate the government income source and allocate fund to defend welfare, agriculture, health, education and the like, a state budget is a plan detailing how fund will be spend on labour, capital goods health, education etc. as well as how the fund for these expenditure will be obtained. Just as the federal budget can be used as a device to insure that the defense, agricultural and health and others limit their expenditure and health to specified amount, the state’s plan and for exercising control over various department or ministries. Hence, a budget is a tool for both planning and control.

Budgeting process includes the preparation of proposal their acceptance or rejection, the revision of the proposals or briefly, the entire proposal or briefly, the entire obvious element of negotiation and bargaining. As Shillinglaw notes: budget proposal are prepared, submitted to the next management level sent back for revision or further evidence, review there, sent back down revised again and resubmitted and so on.

A search of the literature. However, reveal that the problem of giving little came to budgeting control or the careless control of budgeting has not received much research attention, although it is implicitly recognized throughout thee budget literature.

Stedry, on the basis of a laboratory experiment on the levels of aspiration, suggests that the workers aspiration, affect their performance levels.

Shillinglaw further noted that budgets can be extremely vulnerable when used to measure ministerial / department management exercises in the preparation of the budgets and on the report of result. After studying the slack-control-budget of some establishment, Williamson concluded that based on his analysis that the is a close co-relation between the type of cost reduction undertaken and the expense categories in which slack would accumulated these, Williamson report that the cost-reduction programs would result in decrease in employment, decrease in overhead, decrease in ministerial staff etc. but in the bare- banes statements of cost, he argued that slack or no slack, that it all depends on economy standard, management  decision and the executive to manage the group and the sub-group under it this is because government of its authority position in the hierarchy and ability to allocate resource, has the key role of balancing the pressures from the various group and sub-group member. In essence, begets is supposed to act as a stabilizer, or integrative force in the system.

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This article was extracted from a Project Research Work Topic

BUDGETING IN PUBLIC SECTOR ECONOMY

(CASE STUDY OF ENUGU STATE GOVERNMENT)”

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