Académique Documents
Professionnel Documents
Culture Documents
BY
SANDRA ASIBU
BBAA/WD/134739
BBAA/WD/133716
BBAA/WD/134064
SAMUEL ATIBILLA
BBAA/WD/136559
CHAPTER ONE
INTRODUCTION
1.0 Introduction
This chapter looks at the background of the study, statement of the problem, objectives of the
study, research questions, significance of the study, scope and limitations of the study, literature
review, research methodology, and definition of terms and the organization of the study.
as the proven management techniques which help to forecast the major changes which are likely
to affect the business. As such, organizations should recognize that the effective use and
application of any budget is very dependent on the extent to which employees are committed to
the ideals of the budgetary process and encourage behavior that is in accordance with the entitys
objectives. Bratton and Gold (2007: 442) assert that an organization can build capacity through
employee participation and empowerment.
Budgetary control, as a proven management tool, helps management, and enhances improved
performance of any economy in different ways. It helps administrative officials to make careful
analysis of all existing operations, thereby justifying expanding, eliminating or restricting present
practice. Various researches on budgets and budgetary controls have clearly shown that
organizations need to pay serious attention to budgetary processes, budgets, and budgetary
controls. In light of these, there are various issues facing organizations as a result of ineffective
budgetary control systems and budget implementation challenges.
The question whether budgeting in the organisation is a formality or reality has attracted the
attention of many scholars and researchers. The problems generate from the formulation,
implementation and evaluation of a budget and as well as the control measures put in place to
help achieve the budget. In addition to these short comings or problems, performance is also
dependent on those who are responsible for the implementation of the budget and the control
systems put in place.
cost as compared to revenues means that there are certain challenges or problems that affect the
performance of any business.
The issue at hand is whether budgeting in the organisation is a formality or reality as undertaken
by public officials. The problems generate from the formulation, implementation and evaluation
of a budget and as well as the control measures put in place to help achieve the budget. In
addition to these short comings or problems, performance is also dependent on those who are
responsible for the implementation of the budget and the control systems put in place.
At the stage of budget formulation, there is the need to involve the employees of the organization
in order to make them feel as part of management. This will enhance the implementation of a
budget. Also a comparison of actual results against budgeted projections provides a basis for
evaluating performance and signals the need for corrective action. This comparison can be very
meaningful since it identifies the variances, which need analysis and investigation.
At the implementation stage, employees must be communicated to about the budget so that they
can have a better understanding of the budget. This will motivate them to commit to the
achievement of the budget as performance is dependent on how well management communicates
the budget to the employees. For better control measures to be developed management should
evaluate how well they have performed. By evaluation, information can be gathered from
employees at the lower levels to help them develop control measures. Management plays a very
important role in the achievement of a budget as they are responsible for drafting, implementing
and evaluating the budget, as well as identifying effective control measures to correcting
deviations and inefficiencies.
department. The secondary data sources were obtained from various text books, journals and the
institutions brochures.
The target population of this study were the employees of the Account and Finance Departments
of StarLife Assurance Company but a sample of 50 respondents were selected using purposive
sampling because the researcher wants views from those who work on budgets and have
knowledge about budgeting
CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
This chapter reviews relevant literature on budget and budgetary control. It commences by
looking at the definition of budget, nature of budget and concludes by looking at the formulation,
implementation, evaluation and performance of a budget, budgetary control measures.
Adams (2001), views budget as a future plan of action for the whole organisation or a sector
thereof.
Budgets are plans that deal with future allocations and utilisation of resources to
different activities over a given period of time. For any organisation to make progress or
achieve its goals, it needs capital and to be able to make profit, it requires planning of its
resources, which can only be achieved through budgeting, hence budgeting serves as a tool for
financial planning.
Batty (1982), defined budgetary control as a system which uses budgets as a means of planning
and control- ling all aspects of producing and or selling commodities or services. This is true as
we tend to prepare revenue and expenditure variance analysis to be able to deduce areas of
divergences for which the management needs to watch to avoid embarrassment as any adverse
variance will translate into inability to meet the corporate objective which will eventually lead
to disagreement with stakeholders
Pandy (1985) has observed that although many people will complain about budget and its
process, budgets are indispensable in a large modern organisation as the benefit that occurs from
budgets and its control is much greater than the cost involved. In view of this, the fact that
resources are scarce, coupled with high competition that permeate most businesses, budgets
when rightly applied, would be an effective tool for planning and control.
Lucey (2010), in support of the CIMAs definition de- fined budget to be a plan quantified in
monetary terms, prepared and approved prior to a defined period of time, usually showing
planned income to be generated or expenditure to be incurred during the period and the capital
to be employed to maintain the given objective. From this definition, we can as well state that
budget is an aid to making and coordinating short range plan; a device for communicating
plan and objectives to various responsibility centres and a basic evaluation of performance.
Therefore, it can be said that budget is a parameter which measures the actual achievement
8
of people, departments, ministries and firms, while budgetary control ensures that actual results
are positively or negatively in accordance with the overall financial and policy objectives of the
establishment.
with the entitys objectives. Bratton and Gold (2007: 442) assert that an organization can build
capacity through employee participation and empowerment.
Horngren et al. (2008), define budget as a quantitative expression of a plan of action. Atkinson
et al. (1997), also define budget as a quantitative expression of the money inflows and outflows
to determine whether a financial plan will meet organization goal. The definitions above do not
mention the object of time to which a budget relates. A budget should always be in respect of a
period of time, it could be half yearly, yearly, quarterly, monthly, weekly, daily, or other time
periods (Harper, 1995; Frederick, 2001). A budget is also not just a quantitative expression of a
plan of action but a quantitative economic plan. For a plan of action to be referred to as a budget
it must be in economic term (Harper, 1995). The literature also posits that a budget is a
quantitative expression of a plan of action prepared in advance of the budget period (Lucey,
2000). Lucey identifies that budgets may be prepared for the business as a whole, for
departments or functions with a link with the overall objectives of an organization.
The valuable use of budgets for translating organizational objectives to feasible plan of action is
a major breakthrough against the ordinary use of budgets for cutting cost, restricting spending
and allocating scarce resources.
According
to
Romanian
authors
(Achim,
2009)
budgeting
purposes
(budget
ii.
indicators.
Coordinating various activities of different types of subdivisions. Coordination of each
employee and groups interests.
Each subdivision of an economic entity has its own objectives and this can lead to
12
iv.
v.
vi.
There are different reasons for which companies use budgets. The key purposes of budgets
can be translated into planning the use of resource, forecasting the future, assistance in
performance evaluation and maximization, assuring the means of communication for the
management, controlling the activities of various groups within the firm, motivating
employees to achieve performance, controlling performance by investigating variances,
resolving conflicts of interest between groups with the organization, pricing decisions and
control (Riley, 2012, Oak & Schmidgall, 2009, Cruz, 2007).
13
Existence of a budget manual: the manual shall contain the standing instructions
governing the responsibilities of persons, procedures, forms and records relating to the
ii.
iii.
budget;
Identifying principal budget factor: the factor that limits the level of activities (such as
shortage of skilled labour, inadequate raw material or machine capacity) the extent of
iv.
managers
prepare their budgets in time; preparing the budget summaries; submitting budgets to
committee and furnishing explanation on particular points; discussing difficulties with
v.
vi.
Income and Budgeted Statement of Financial Position. Both the master budget and
cash budget can be described as the financial budget. All these budgets, master and
functional, can be further classified
Budget established for use over a short period of time, usually a year, which the
responsible officer is to use for control purposes. This is commonly in use in manufacturing
industries due to the complex and dynamic environment in which they operate.
2.5.2
duration of 5 years and is sometimes called the strategic plan of the organisation. Government
prepares 5 years Development plan, which can be rolled over for every five year as
manufacturing companies also prepare 5 years strategic plans, which is sometimes broken into
yearly budget rolled over from one year to the other.
2.5.3
Fixed budget
Chartered Institute of Management Accountants (CIMA) defined fixed budget as budget set
prior to a control period and not subsequently changed in response to changes in any activity
costs or revenues. It may serve as a benchmark in performance evaluation
2.5.4
Flexible budget
CIMA defined flexible budget as a budget designed to change in accordance with the level of
15
activity attained. This budget recognises the existence of fixed, variable and semi-variable costs
and is designed to change in relation to the actual volume or output or level of activity in a
period.
2.5.5
This is also called Priority based budgeting. It is a technique which seeks to eliminate the
drawbacks of traditional incremental budgeting by taking the budgets for service of overhead
centres back to minimal operating level and then requiring increments above this level to be
quantified and adjusted. ZBB was introduced in the early 1970s in the US by Phyrr, O. and
gained prominence because of its practicability.
governments to adopt the technique. The technique is concerned with the evaluation of cost
and benefits of alternatives and implicit in it is the concept of opportunity cost. It is applied in
three stages of:
a)
The decision unit: i.e subdividing the organization to discrete sub-units where operations
The decision packages: each decision unit manager submits no less than three budget
packages namely: the lowest level of expenditure; the expenditure required to maintain levels of
activities and the expenditure required to provide an additional level of service or activity;
c)
2.5.6
Rolling Budget
This is also known as continuous budget. It is a system of budgeting that involves continuously
updating budgets by reviewing the actual results for a specific period in the budget and
determining a budget for the corresponding time period. Under this period, instead of preparing
a budget annually, there would be budget every three or six month so that as the current
16
Activity based budgeting (ABB) is similar to activity based costing (ABC) and activity based
management (ABM). ABB actually involves planning and controlling along the lines of value
adding activities and processes. Resource and capital allocations decisions are consistent with
ABM analysis, which involves structuring the organizations activities and business processes so
that they better meet costumers and external need. From the perspective of Wilhelmi and Kleiner
(1995), ABB can be applied in all industries and in all functions, including service industries and
overhead functions. It also can be used in manufacturing. It is really a management process,
operating at the activity level, for continuous improvement on performance and costs.
This is also called activity cost management which is defined as a method of budgeting
based on an activity framework and utilizing cost driver data in the budget setting and variance
feedback processes. It is a part of planning and controlling system which tends to support the
objectives of continuous improvement and it also a form of development of conventional
budgeting system. It is characterised by the following:
Recognition of activities that drive cost with the aim of controlling the causes of cost directly
rather than the cost themselves;
Differentiates and examines activities for their value adding potentials;
The department activities are driven by demands and decisions which are beyond
the control of budget holder;
Encourages immediate and relevant performance measures required than are found in
conventional budgeting systems.
2.5.8
Incremental budgeting
This is the traditional approach that uses the current year estimates of income and
17
expenditure as the basis for determining the budget for the year. It is normally used in
public sector and it has the misfortune of carrying over the inadequacy of yester-years into
subsequent year budgets as it only increases the current periods figure with what the
establishment thinks is the inflationary premium for next year financial period.
2.5.9
This system analyses the output of a given programme and also seeks for alternatives to find
the most effective means of reaching basic programme activities. It involves the preparation
of long term corporate plan that clearly establishes the objectives that the organisation has
to achieve. It aims at achieving the following objectives:
a) Enabling the management of a non profit making organisation to make more informed
decision about the allocation of resources to meet overall objectives of the organisation;
b)
situation to his best advantage. It is this same human being that is expected to supply the
information on which the formulation of budget would be based. He is also expected to use the
budget to achieve the organisational objective. He may decide to be enthusiastic or indifferent
about it. He may even consider it that his employer wants to reap where he has not shown at
his expense, he may therefore bring in wide variables into the budget, most especially where
he is informed that the budget would serve as a reference point in determining his efficiency of
performance. Also, executives and employees are expected through education to have a very
good understanding of what the budget is all about where this education and consequently the
under- standing is lacking, failure and collapse of the budgetary process is unavoidable.
Frank Wood (1988) has noted that many people look at budgets not as a control tool but as a
strait jacket. Too much rigidity in the pursuance of the budget could al- ways be detrimental to
the realisation of the objectives of the budget. Horngen and Foster (1985) observed that the
budget helps managers but that budget itself needs help. To this end, top management and
indeed the work force must be in support of the budget. Where this support is however lacking,
19
there is bound to be problem in the actualisation of the objectives of the budget. This is in line
with Frank Wood (1958) who noted that the more managers are brought into the budgetary
process, the more successful the budgetary control is likely to be. A manager whom a budget is
imposed rather than actively participating in it formulation is more likely to pay less attention to
the budget and use it unwisely in the control process. Miller and Earnest (1966) summarised the
need to secure the actualisation of the budget through participation by saying that participation
tends to increase the commitment, commitment tends to heighten motivation, motivation which
is job oriented tends to make managers work hard and more productive work by managers tends
to enhance the companys prosperity, therefore participation is good
2.7 Concept of Control
The goal of control is ensure that operations and performance conform to plans.
Controlling includes all activities that ensure that the actions of the organisation are directed
toward the stated goals.
Koontz et al (1979) defined control as the regulation of work activities in accordance with
predetermined plans, such as to ensure the accomplishment of the organisations objectives.
Control operates through standard and also measures the work performance according to these
standards and correct deviations from the standard.
plan against which performance is compared. Lucey (2003), in support of the above, opined
that control concerns itself with the efficient use of resources to achieve a previously determined objective, or set of objectives contained within a plan.
Steps involved in controlling include:
First of all establishing plan, goal or objective decision rule, then followed by recording of
actual performance of activity, then creation of a mechanism to compare the above two
20
steps, extraction of variances, that is, the difference be- tween the first two steps, then
investigation of the causes leading to the variances and finally correcting the variance or
taking appropriate action on the variances.
but this should not be a normal occurence but only in exceptional circumstances.
Practically, budgetary control involves departmental or sectional or functional heads in the
organisation, receiving a copy of budget relating to his activities. Each month he will receive a
copy of budget report showing visibly where he has over or under spent his budgeted allowance.
From this he will be able to decide on the corrective step to take. This is in tandum with the
fact that variances are the responsibility of departmental or sectional heads and every one of
them has to explain the variance and act in time to stop future occurrence of adverse variances.
Professor Pogue underscores this practical aspect of budgetary control, when he states that if
the actual sales as compared the budget always results in adverse variance, provided it is realistic
and attainable, it is not advisable to revise the figure just because they were not attained.
Therefore, it can be concluded that budgetary control on its own controls nothing but rather it is
management acting on the information received by way of results that exercise control, in short,
manage- ment holds the control yardstick.
Batty (1963) budgetary control is a system which takes budget as a means of producing and or
selling commodities or services. The same Batty (1970) went further to state that budgetary
control aims at the performance of three primary functions of planning, corporation and control
aided by feedback and corrective action. But Buyer and Holmes (1984) considered budgetary
control as a means of control in which the actual state of affairs is empowered with that planned
for, so that the appropriate action may be taken with regards to any deviations before it is too
late.
2.9 Objectives of Budgetary control
The major objectives of budgetary control can be summarised as:
i. Combination of ideas of all levels of management in the preparation of budget;
ii. Coordination of various activities in business organisation;
iii. Revelation of where an organisation needs to remedy a situation;
22
iv.
Planning and controlling of all income and expenditure to achieve maximum benefits for
v.
the organisation;
Provision of yardstick against which actual result can be compared along with
predetermined result;
Channelization of capital expenditure in most profitable manner.
vi.
iii.
iv.
v.
process;
Appropriate accounting and information system which will include: the record of
expenditure and performance related to responsibility; prompt and accurate reporting
system showing actual against budget; ability to provide more detailed information or
vi.
vii.
advice on request;
Regular revision of budget and targets, where necessary;
To be administered in a flexible manner. Changing in conditions may call for
changes in plans.
current conditions, will cause the whole budgeting system to lose credibility and
effectiveness.
control device. The following are some of the different roles played by budgets, which provide a
platform for dealing with management related functions.
2.10.1 Formulation and Implementation
Budget formulation in the organisation is carried out mainly by a department, the budget office,
but with inputs from, and in close consultation with other government departments.
Implementation is carried out by the management of SLAC. Anohene (2011) stated that the
implementation of the budget after the formulation stage involves; allocating responsibilities and
resources, monitoring and evaluating performance, collecting and analyzing financial and nonfinancial data to determine variances and deviations, reaching a conclusion after comparing all
the alternative choices made and taking corrective and comprehensive measures or actions to
overcome the variances and deviation.
2.10.2 Performance and Evaluation
Feedback is an important role of budget for attaining the expected quality and standards in
planning, controlling, leadership and staffing (Adu-Gyamfi, 2008). According to Cook (1968),
feedback is generally positively associated with budget performance. Feedback focuses on the
extent to which employees have achieved expected levels of work during a specified time period.
Budgets being a standard for performance are also used to evaluate managerial performance
(Srinivassan, 1987). Similarly, Douglas (1994) used a case study approach and found that budget
places a high importance on the budget-to-actual comparison for performance evaluation
purposes both at the corporate and the subsidiary levels. Anderson (1993) also supported this
view, stating that in most US companies the development of budget is still used as the main
performance measurement system. Weisenfeld and Tyson (1990), in a sample of 68 US managers
from two companies, found that budget and variance analysis can be positive tools, if the
accounting information or communication process is functioning appropriately. A total of ninety
24
percent of the respondents indicated that variance was a good way to measure their performance.
All of them agreed that variance reports positively influenced them to improve performance and
increase their bonuses.
Budget and budgetary control compels management to think about future, which is
ii.
probably the most important feature of a budgetary planning and control system.
To look ahead, to set out detailed plans for achieving the targets for each department,
iii.
iv.
v.
iii.
iv.
v.
overspend.
Inaccurate record-keeping.
Dispute over resources allocation.
Department blaming each other if targets are not attained.
preparing estimates of future sales, preparing estimates of future cash collections and
disbursements, whereas the budgetary control is a technique whereby actual results are compared
with budgets. Any differences (variances) are made the responsibility of key individuals who can
either exercise control action or revise the original budgets. It this way, budgetary control is the
establishment of budgets relating to the responsibilities of executives to the requirements of a
policy and the continuous comparison of actual with budgeted results.
There is a great need for defining a clear line of authority and responsibility in business
organizations, so that the business goals and objectives may be attained accordingly. It is through
the effective budgeting system, the authorities and responsibilities are established at different
levels in a way as needed to achieve the predetermined goals and objectives successfully.
Effective budgeting system is a great way to successfully attain the business goals and objectives
having been quantified and clearly stated. It not only provides a method of allocating and using
resources within the business organization helping the key individuals to monitor and exercise
control, but it also leads to align business goals within the framework of organizations strategies
and long term plans.
The careful planning and control of a sound budget benefits a company in many ways. It helps to
stay focused on its strategy and plan knowing exactly where it needs to spend its resources, while
it aids greatly to control inaccuracies regarding projections minimizing the discrepancies
between the standards and the actual results. At this stage, it must be noted that a well-defined
business policy and objectives are the prerequisite for a sound budgeting system to be
established.
One of the greatest positive impacts of a sound budgeting system on an organization and
its employees is that it establishes a great motivation among them by allowing them to
participate in setting budgets at all levels of management. In this way, using the budget
26
successfully, not only enables the employees to pay greater attention to details, but also to think
before they act. It is thus a great way to determine how a firm functions and earns and also to
motivate employees by periodically comparing their performance.
Effective budgeting systems can help managers perform their major management functions
effectively and efficiently. A sound budgeting system provides more accurate assessment in
terms of both managerial and organizational performance. Participating in budgeting process
motivates the key individuals to achieve budget level of efficiency. Thus, budgets are an integral
part of running any business in a successful manner.
CHAPTER THREE
RESEARCH METHODOLOGY AND PROFILE OF THE ORGANIZATION
3.1. Introduction
This chapter is divided into two sections. The first section, research methodology, deals with the
various methods and procedures adopted to ensure that the research work is carried out
successfully. It focuses on the research design, population, and sample size, sampling techniques,
source of data and instrumentation, data gathering procedure, data analysis and presentation. The
second section, profile of the organization looks at the history, mission, and vision and core
value.
27
28
StarLife Assurance has over the years delivered value added services to its valued clients making
it one of the preferred Life companies in Ghana. It is no doubt that we are part of the top three
life assurances companies in Ghana. The company currently employs about 168 staff.
SLAC has branches in all regional capitals and other contact offices to serve its numerous
customers. The company has a strong sales force that is able to promote and sells its products.
The company is owned by StarAssurance and unicredit that owns 70% and 30% respectively of
its share capital. The company is represented by vibrant Board of Directors who has
demonstrated deep understanding and knowledge of the insurance industry. SLAC also have
other sub board committee such as audit, nomination, technology and risk. The company has as
its board of directors accomplished business executives who exercise sound corporate
governance principles.
Products
With our set of innovative products and a team full of zeal and enthusiasm, we intend to
contribute significantly to the Companys market share, deepen our relations with corporate
institutions and increase the companys profit margins.
The companys products are grouped into three different categories and these are:
i.
Corporate Products
StarLife Employee Security Plan (Group Life), StarLife Keyman Plan, StarLife Loan
ii.
iii.
30
CHAPTER FOUR
DATA ANALYSIS, PRESENTATION AND DISCUSSION OF FINDINGS
4.0 Introduction
This chapter focuses on the analysis, presentation and interpretation of the data gathered from the
sample of fifty (50) persons. In all, fifty questionnaires were administered. The respondents to
the questionnaires returned each questionnaire issued to them implying 100% response rate. The
responses from the questionnaires were analyzed and presented through the use of tables, pie
charts, bar charts and percentages. All questionnaires were issued to the staff of SLAC.
Frequency
Percentages (%)
Male
35
70
Female
15
30
31
Total
Source: Field Data, 2016
50
100
The above table, Table 1, shows the gender distribution of staff of SLAC taken as a sample of
this study. Out of the 50 respondents, 35 (70%) of the respondents are males while 15 (30%) are
females. This is an indication that the organization has a favorable policy towards the
employment of males than females.
50
40
22
5
10
11
FREQUENCY
20
16
8
12
PECENTAGE
From Figure 1, out of the 50 respondents, 5(10%) have postgraduate degree. 11 (22%) hold
professional certificates, 20(40%) hold first degree, 8(16%) hold Diploma and 6(12%) hold O/ALevel certificates. This informs us that the works of the selected responses at SLAC require
certain level of expertise and skills to perform them.
32
Frequency
Percentage (%)
13
26
21
42
16
32
Totals
50
100
From Table 2, respondents have the following length of service in SLAC: 13 (26%) are less than
five years, 21(42%) between six and nine years, 16(32) ten years and above. averagely most of
the workers at SLAC have over 5 years working experience with the company and have acquired
more working experience with the facilities and activities of SLAC which may be due to
acceptable working conditions. SLAC therefore, needs to maintain acceptable current condition
as well as introduce other strategies that will motivate staff to stay and enhance effective
performance.
33
FREQUENCY
PERCENTAGE (%)
34
Percentage (%)
Departmental Heads
26
52
Accountant
15
30
Any Other
18
Total
50
100
35
Management (Managers)
Any other
48
Frequency
Percentage (%)
YES
15
30
36
NO
35
70
TOTAL
50
100
90
90
80
70
60
45
50
50
FREQUENCY
PERCENTAGE (%)
40
30
20
10
10
0
YES
NO
TOTALS
From Figure 4, 45 (90%) respondents answered no and 5(10%) responded yes. This shows
that the budgetary control system in SLAC is ineffective though ten percent of the respondents
claim to be done periodically.
Percentage (%
YES
42
84
NO
16
TOTAL
50
100
38
100
100
90
80
80
70
60
50
50
40
40
30
FREQUENCY
PERCENTAGE (%)
20
20
10
10
0
YES
NO
TOTAL
Frequency
Percentage (%)
YES
50
100
NO
TOTALS
50
100
39
Budgetary control coordinated the activities of the various departments and functions of
the business by ensuring that all the activities of the various departments are geared
ii.
iii.
iv.
meet the budget. This will enhance performance of the in all respect.
It helps management take corrective actions where necessary. Management is able to
v.
know where corrections need to be made by comparing actual results to the budget.
It provides clear guidelines for managers and supervisors. The budgets provide a standard
based on which the outcome can be compared. They also tell supervisors and managers
what to use, for what, when and how to use them. It therefore ensures effectiveness in the
management process of planning, coordinating and control.
40
vi.
It keeps the organization focused. Budgets spells out what the organization want to
achieve for the period and so channels its resources to that course.
These benefits of budgetary control suggested by the respondents are consistent with those
suggested by Lacey (ibid).This means that the employees of SLAC will generally be willing to
cooperate with budgetary control system if they are effective since they are aware of the benefits
that it brings to the organization.
The variance generally stem from the premium income. The premium income generally
ii.
iii.
iv.
v.
vi.
41
Variance
GHc
%Variance
GHc
GHc
30,507,931
43,516,292
(13,008,361)
(29.89)
104,073
87,698
(16,375)
(18.67)
30,455,895
43,472,443
(13,016,549)
(29.94)
Reinsurance
Net premium
Budget
GHc
Underwriting expenses
Transfer to Life Fund
Surrenders
Claims
3,096.854
2,233,994
(862,860)
(38.62)
937,410
1836,895
899,485
48.97
Maturity
10,232,971
10,853,050
620,079
5.71
Partial Withdrawals
2,491,624
1,672,001
(819,623)
(49.02)
42
Net Commission
2,360,719
4,377,945
2,017, 22
46.08
Management Expenses
Staff Cost
6,821,149
4,894,495
(1,926,654)
Financial Expenses
369,383
457,955
88,572
Depreciation
581,139
579,491
(1,648)
Marketing Expenses
834,406
678,500
(155,907)
(2,785,638)
Admin. Expenses
2,785,638
30,511,291
27,584,326
(2,926,965)
(39.36)
19.34
(0.28)
(22.98)
(100.00)
(10.61)
4.13 Factors That Contribute to the Effectiveness of Budget and Budgetary Control
If a budgetary control system is to be effective certain key factors must be considered. According
to the respondents these factors are very crucial if budgets are to be used as tools for cost control.
4.13.1 Participation in goal setting
43
An effective budget and budgetary system is one that ensures that employees opinions are
factored into the setting of the goals of the organization for a particular period. This will bring
about a sense of responsibility in among the employees to work even harder to achieve the goals
they have set for themselves. Also it will encourage them to work harder as they will not feel that
tasks are being imposed on them by their superiors. They will therefore strive to achieve such
goals in an efficient and effective manner which will enhance cost control.
4.13.2 Goals relationship between company and employees
A budget and budgetary control system will be more effective if there is a relationship between
the organizations goals and the individual employees goals. If employees are able to identify
themselves with the goals of the organization and see the goals of the organization as being one
that will help them achieve their personal goals, they will personalize the organizational goals
and work hard to achieve them.
44
there is unity among the employees of the organization, they would want to achieve budgets and
goals as effectively as possible for the general good of all.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.0 Introduction
This chapter presents the summary of the findings and conclusion from the issues arising from
the study. It summarizes the finding obtained through interviews and questionnaire and other
sources of information. It therefore continues to conclude on the effectiveness of budget and
budgetary control in organizations and prescribe recommendations on how to make the budget
more effective in organizations.
45
5.1 Summary
This study was undertaken at the Head Office of StarLife Assurance Company and was aimed at
finding out the effectiveness of budget and budgetary control as a cost management tool in
SLAC. This study also sought to find out the key benefits of budget and budgetary control at
SLAC.
SLAC considers budget as an important role planning and controlling cost. It was
established that Board of Directors require the company to prepare its budget and submit
for review and approval before the year end. This show the importance the Board attaches
ii.
iii.
every Head of Department is required to submit their input for the budgetary
process.
That the budget committee is headed by the Head of finance. The head of Finance heads
the budget committee. The head of Finance coordinates the various inputs submitted by the
iv.
various heads of department and present the budget for the year.
That the premium is the main driver of the budget. The premium budget is key for the
budget. The head of sales and strategy present its premium budget which provides the bases
v.
and underwriting expenses. The income only considers the premium received from policy
holders.
46
vi.
This performance report highlights, compares between the budget and actual result.
However this is only discussed at Ex-co management meeting comprising only top
ix.
identified.
That since the premium is the main driver of the budget; if there is a significant change in
x.
premium income, the company do not present flexed budget for these activities.
That most staff is not aware of the salient aspects of the budget figures, causes of variances
xi.
xii.
as well as steps being taken to correct them to achieve the budget results.
That the expenditure outside budget is not approved by the executive Director.
It ensures that adequate resources are always available, it increase production efficiency
and eliminate waste and controls the cost, it helps management to take corrective actions
where necessary, and budget provide clear guidelines for managers and supervisors
respectively.
5.2 Conclusion
This research analyzed the effectiveness of budget and budgetary control in organizational
performance within Starlife Assurance Company limited. In researching into the effectiveness of
budget and budgetary control as a cost management tool in SLAC the Accra Head Office, the
researcher concluded that, most employees and employers perceived the budget and budgetary
control system to be good and beneficial.
47
The research established that the budget and budgetary control is a key concept in modern
organization. However, the budget building takes more time. Also, the researcher came to the
conclusion that the adherence to the budget and budgetary control at SLAC is not too good due
to lack of employees participation in budget preparation. Few of them expressed doubt about the
effectiveness of budget and the budgetary control system since the budget is mostly prepared by
the ministry of finance and the budget unit without the involvement of all employees.
Furthermore, the performance reporting highlighting variances do not go down to most line
managers and it is also not comprehensive.
5.3. Recommendations
In view of the importance that budget and budgeting plays in ensuring efficiency in organization,
the following recommendations are proposed. This will help to improve the budgeting
preparation of SLAC and make it more effective.
(i)
That the Managing Director should be the Head of the Budget Committee with the head
of Finance functioning as the coordinator of the various input into the budget. The
preparation of the budget and controlling aspect of it should be the responsibility of the
Managing Director. The managing Director should give direction and dictate the pace and
(ii)
(iii)
line managers. This could help control expenditure and help in the future budgetary
(iv)
process.
It is also important that the variance report should identify those lines of expenditure that
varies directly in line with Gross premium income. This will make it possible to flex the
budget to match actual premium other than just to take the raw actual expenditure whilst
which may not present the true state of affairs.
Moreover, since the head of finance is also a key member of the budget committee, he
should be able to highlight those individual expenses that have deviated materially from
the budget and request explanation from the line managers involve. This will help in
(v)
(vi)
will create staff participation in the budget and will ensure a smooth process.
The organization should encourage employees participations in budget preparation,
evaluation and implementation. Budget preparation and procedures should be known to
(vii)
49
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53
Scandinavian
SECTION A.
1. Gender: Male [
Female [
2. Age Group:
18 30 years [
31 40 years [
41 50 years [
51 65years [
3. Level of Education
SHS [
Diploma [
1st Degree [
] Professional [
SECTION B
5. What budgeting system do you operate?
a. Zero Based budgeting [
] c. Rolling budget [ ]
] b. Accountant [
b. No [
9. Does the SLAC release to the public a mid-year review of the budget that includes updated
income and expenditure estimates for the budget year underway?
a. Yes [
b. No [
b. No [
11. Are budgets useful for assessing the performance of the SLAC?
a. Yes [
b. No [
12. Does the budget contain performance indicators, such that one can assess whether there has
been progress towards meeting policy goals?
55
a. Yes [
b. No [
13. Is the control of cost affected by the adherence of employees to the achievement of a budget?
a. Yes [
b. No [
c. It increase production efficiency and eliminates waste and controls the cost [
d. It helps management to take corrective actions where necessary [
e. Budgets provide clear guidelines for managers and supervisors [
]
]
17. How has budgeting and budgetary control affected the organization?
56
18. Will you encourage budget and budgetary control in your organization?
a. Yes [
b. No [
19. Please any suggestions to improve the budgeting and budgetary control(s) in the organization
Thank You
57