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Electronic copy available at: http://ssrn.com/abstract=1804251

 Contents

Relevance of Community Participation in Project

Determination to Effective Community Development
- Mbakogu, Ifeyinwa Annastasia (Ph.D)" , 1- 8

Analysis of Flow Properties of Bentonitic Clay from.

Bende, Southeastern Nigeria for Drilling Fluid Production
- Mbagwu, C. P.; posunmu, A. and Ajienka, J. A. 9 - 16

Aeromagnetic Anomalies over Part of the Basement

Complex of Sou thwes tern Nigeria and Part of the Niger
Delta - F. A. Isife 17 - 27

Collective Bargaining and Teacher's Strike in Nigerian

Universities -A Diagnosis - Idumange, John Agreen 28 - 39

Economies of Training and Development Investments in

Nigerian Professional Institutions .
- Prince Umor C. Agundu (Ph.D, CPA) and E'dem Udo
Udo Ekanem (Ph.D) 40 - 47

The Relationship between Secondary School Students

Academic Pursuit and their Vocational Interests
- Dr. Dickson Onoyase . 48 - 54

Budgeting as a Management Tool for Improving the

Effectiveness of an Organization
- Dr. (I~mma Okoye and A.N Odurn 55 - 60

Workability of Concrete: Influence of Mixing and

Vibration Time on Compressive Strength
- Bldr Akinloye Lawai and Dr. J. B; Akarakiri 61- 70

Language, Theme and Ideology in Petals of Blood

- Mohammed Attai Yakubu 71 -76

Electronic copy available at: http://ssrn.com/abstract=1804251

 New Direction in Nigeria Visual ..Arts Education (The
Nsukka Art School Experiment) - Chidum F. Onuchukwu 77 - 87

The Status of Universal Basic Education (UBE) in Year

2003 and Beyond =Ijauaku, Michael O. 88 - 98

'Tackling Thinking Skills through Language Arts: A

Continuum Model for the Universal Basic Education
- S. O. Medaliuusi 95 - 103

. Inequalities and Crime in Nigeria

- Uzuegbu, Charity Ngozi 104 - 113

Utilization of Finite Element Programs for;Correlation

.of Analytical and Experimental Analysis
- DrvHarold U. Nwosu 114 - 127

Procedures of Carrying Out a Morphological Research -

A Scientific Approach =Mohanuued Amiuu Mu' Azu
and Abba Kura Shettima 128 - 131

Lighting and Electrical Energy Conservation in

Industries
I
and Commercial Establishments';
- Engr, Kouui J. D. 132 - 137

Need for Guidance and Counselling for Effective

Technology Education in Nigeria .
- Mohammed Mahmoud Baba 138-'- 145

Relationship between Teachers' Job Satisfaction and

Students' Academic Achievement 111 Colleges of
Education in Adamawa and Taraba States
-Tbrahlm Aminu Buba 146 - 154

Enhancing the Effectiveness of Instruction in our Public

School through Educational Technology - J. J. Pekeue 155 - 159
I
 BUDGETING AS A MANAGEMENT TOOL FOR IMPROVING THE
EFFECTIVENESS OF AN ORGANIZATION

Dr. Emilio Okoye and A.iv Odlll~l

Abstract
A major problem often faced by company executive is how well
accurate plans for the future can be made in a world where change is
taking place almost daily. In the midst of the changing nature of the
business environment, company management must still make decisions
about the future if profitability is to be sustained. The entire process of
making these plans is referred to as budgeting. The issues relating to
the efficient/effective running of organizations as addressed by the
study included the meaning and role of budgets, responsibility fo~
'preparation, what it takes to prepare 'a useful budget, how budgets are
. used for control purposes as well as gains from budgeting. The paper
concludes that for a budget to serve as a meaningful and effective tool
of management the organization must know where it is heading and its
goals and objectives. Budgets serve as a tool; not a substitute for
management. Good management and a good budget can do much
together; a good budget can do very little by itself.

Introduction
The increasing complexity of business, and the ever-changing conditions
of the business environment-social, economic, technological and political
changes-make it increasingly difficult for the company to consistently earn a
profit that constitutes a fair return on the capital investment. Despite the turbulent
business enviroriment, management mus~ make hard decisions about the
company's future if profits are to be protected. The best way to prepare for
changing conditions is to provide a framework that contains a specific, but
sufficiently flexible plan to accommodate unanticipated changes. The entire
process of providing this framework is called budgeting. By formulating a
comprehensive future plan of action and subsequently comparing actual results
with the predetermined plan, budgeting performs the two vital management
functions of planning 'and control. These two functions thus constitute essential
features of the budgeting process.
It is the purpose of this paper to examine budgeting as a tool designed to
secure the most efficient use of the company's resources. In doing this, it
discusses' the importance of budgeting, the art of skillfully preparing a well-
conceived budget, and how the budget is actually used to control. The
administration of the budget as well as the gains and possible limitations of
budgeting are also discussed. The aim of .this paper having been achieved,
I persons associated 'with the planning and implementation of the company's plan
would find this paper invaluable.

The Nigerian Journal of Research and Production Volume 3 No.5, September 2003 55
 J Dr. /:."11111111 Okoye and /I.N 01111I1/

Meaning and Role of Budgets

A budget can be defined as a financial plan of action -or a quantitative
expression of planned activities. Budgets state formally-in terms of expected
transaction- the decisions of all levels of management about the resources to be
required, how they are to be used and what ought to result. It is the quantities
which are budgeted and not money figures. The money figures are just means of
expressing quantities in the form ofa common measure.
Budgets serve a variety of functions: planning, evaluating performance,
co-ordinating activities, irnplcincuting plans, communicating, motivating and
authorizing actions. Properly used, the budget can provide a benchmark or
comparison point which will alert management to the first indication that their
financial goals .won 't be met. For a budget to provide this type of information
and ~oJ1trol, four elements must be present:
1. The budget must be well .- conceived, and have been prepared or
approved by management; .
2. The budget must be broken down into periods corresponding to the
periodic financial statements;
3. . Finaucial statements must be prepared on a timely basis throughout the
year and a comparison made to the budget, right on the statements;
4. Management must be prepared to take action where' the comparison with
the budget indicates a significant deviation.

Preparing the Budget .

The budget development process and the degree of detail within
individual budgets vary among companies. While in small companies, one person
may prepare the entire budget, the talents and inputs of many people are utilized
in the big businesses. However, for a budget to be effective it must be a joint'
effo~t of many people. It must be a working document which forms the basis for
action. As pointed out by Manphine (1976), the basic steps that in one form or
another, should be followed by an organization in order to prepare a well-
conceived budget include:
1. A list of objectives or goals of the organization for the following year
should be prepared. For many organizations this process will be
essentially a re-evalualion of the relative priority of the existing
programmes. Since the business environments is not static, businesses
that fail to constantly re-evaluate and update its programmes is in danger
of being left behind.
2. .Tile cost-of each objective or goal listed above should be estimated.
,>, 3. The expected income of the organization should be estimated.
4. The total expected income should be compared to the expense of
achieving -the objectives or goals. Reconciling expected income and
expense is probably the most important step taken during the year
because it is here that the programmes blue print for the coming year is
fixed.

56
Budgeting As A Management Tool For Improving The Effectiveness Of All
Orgallization

The final proposed budget should be subl~itted to the appropriate body

for ratification. Once ratified all persons will be firmly committed to the
resulting plan of action. .
It need be stressed that where these steps are not followed, the resulting
budget IS bound to serve very little value to the organization.
Having outlined the steps to be followed, the question then is who should
c

...ollow these steps in preparing the budget? This now brings us to the issue of
participation in the budgeting process. .

Responsibility for Preparation

Total involvement of all managerial levels in budgeting is very
portant. It is even more necessary to get the participation in budgeting
especially at the lowest or supervisory level. Thus, budgeting is no longer and
:hould not be the sole responsibility of the chief executive, budget officer or
ther top executive in the company. Rather, all levels of the company will
articipate in the budgeting process and make commitments to achieving the
goals set by the budget. .
Theprincipal advantage which may accrue from full participation arises
ainly from a higher level of motivation. Allowing a person to take an active
art in planning and control should result in better co-operation. He should feel
that he i; a vital part of the process and as a result, may respond better. (Batty,
978).
Once the budget has been prepared it must be compared to actual results
·0 know where deviations are occurring. This brings us to the issue of control.

.slng the Budget to Control

Once operations starts, close attention. must be paid to actual
erformance and budgeted performance by managers 'and supervisors responsible
or' the individual budgets. Comparing budgeted figures with actual, noting
-ariances, taking action to determine the causes of variances, makes the budget a
.oo! of control. '
Clearly, control is 'a vital clement and to be effective, information on
urrent performance must be immediately available to responsible managers who
exercise control. This information is usually supplied by the management
accountant in the form of reports, operating statements and graphs.
Ideally the budget report should:
a. Show deviations of actual performance from that planned (i.e. variances)
b. Be available quickly so "that action can be taken without delay;
c. Be in a standard form to facilitate comprehension.
Buyers and Holmes (1984) sees budgetary control as a means of control in
which the actual state of affairs is compared with that planned for, so that
appropriate action may be taken with regard to any deviations before it is too
late. Budgeting is thus merely a part of budgetary control.

57
 " Dr. rmlllfl Olcoye and A.IV Or/Lilli

Budgetary control is as a result of continuous comparison of actual

results with operations. In addition, budget estimates need checking and revising
when necessary. Successful budgetary control requires careful analysis of both
actual results and budget estimates. Impossible goals have no place in business
as they discourage rather than-encourage and thus defeat' the purpose of a budget'
system. A budget must be possible to attain. The people working to reach the
budget goals must realise that those goals can be reached. Budgetary control
occurs through the co-ordination of all activities and the co-operation of all
participants,

Gains from Budgeting

·,,
A fully 'comprehensive budgetary control system should result in a
number of advantages to the business concerned. These are outlined below.
1. The budget can usefully serve as a means of communication between top
management and subordinate staff, and could make seniors more
appreciative of subordinates' roles and problems;
2. "Them and us" attitude may lessen as each manager sees his own role in
relation to the whole organization;
3. It can produce economies ih management through the process of
management by exception where managers focus their attention only
where variances occur between performance and targets;
4. It recognizesf
the need for, and encourages delegation of responsibility,
and participation by staff. Consequently, motivation and co-operation
may be improved;
5, Increases an awareness of the importance of cost considerations ill the
"
operations of a business.
G. Budgeting results ,in more rational use of the company's resources and
facilities. Management can make more accurate estimate of future labour
and capital requirements. This contributes to the welfare of workers, as
well as of the employers since it tends to' stabilize the demand for their
services.
It need be stressed that budgetary control systems are not without
problems, however, Difficulties can arise in formulating the budget and in
controlling.
. These problems as summarized by Watts (1976) are as follows:
a) The problem of setting realistic targets, for if the level is too high and is
unattainable, then morale will suffer, and if tooIow then inefficiency
results.
b) The budget can become an end in itself, and self perpetuating without
regular review and evaluation.
c) It can be used as a pressure device to promote the ends of sectional
interests.
"

58
 : ..,;:.

Budgeting As A Management Tool For Improving Tile Effectiveness Of All

Organization

.d) The budget may come to be regarded as an end in itself if the objectives
of the budgetary system are not emphasized and sold to the staff who
must implement it.
e) It can become cumbersome and less productive in time, and thereby hide
inefficiency. .,

Budget Administration
.According to.Harper (1977) budgeting is almost wholly a management
technique for a budget lays down management's plan regarding the economic
resources to be used and the utilities to be produced. Management, then is
responsible for the compilation of the budgets. Since these usually involve
managers throughout the whole enterprise, a budget committee' with
representatives from all sections of the business should be appointed to plan and
co-ordinate the budgets.
In large organizations, a budget officer is appointed to carry out the
policy decisions of the budget committee and the day-to-day work involved in
operating the budget system. In particular, his functions, amongst others are to:
a) Serve as secretary to the budget committee;
b)Corn.rTIunicate the committee's instructions;
c) Assemble information for the committee's consideration;
d) -Co-ordinate the preparation of individual budgets;
e) Prepare the master budget.
Clearly, the management accountant is well suited for, and often
appointed to this post.
To assist everyone engaged in budgeting and budget administration, a
budget manual should be issued. A budget manual sets out such matters as the
responsibilities of the people engaged in the routine of, and the forms and records
required for budgeting and the control procedure that subsequently follows.
Generally, the. need for budgeting does not depend on the size of a
business. Although in a small company the owner may single-handedly control
all activities, it does not follow that formal planning and carrying out of such
plans are unnecessary. Planning and following through are essential for the small
and large companies. Plans can be made without using a budget. But planning in
a definite manner as in a budgetary system, gets far better results than do
individuals carrying around general ideas in their heads. The size of a company
has no bearing on the' need for planning. The procedure may be simpler in the
small company, but no less important. .
A'system of budgetary control compels management to look into the
future and use all techniques that can help it shape a forecast. Businesses need to
determine the course of future events because of the instability of its
environment. Even if the forecast is wrong it provides a basis of adjustment.
Budgets are kept flexible to accommodate changes.

59
 Dr. Emma Okoye and A.N Ud{(~ll

Conclusion
A budget can be· 'an extremely important and effective tool for
management in piloting the affairs of the organization. However, to prepare a
meaningful budget the organization must know where it is heading and its goals
and objectives. Priorities change and this means that many people should be
. involved in the budget preparation and approval process to ensure the resulting
budget is fully supported.' Once prepared, the budget must be compared to
actual results 011 a timely basis throughout the year to ensure that management
.,knows where deviations are occurring for corrective actions to be taken when
necessary. The budget is a tool or management, not a substitute [or management.
A good budget can do very little by itself. Good management and a good budget
can do much together.

References
Buyers, C.! & Holmes, G.A (1984) Principles oj Cost Accountancy. London:
Cassell Ltd 434.

Batty, J. (1978) Accountancy jar Managers. London: Williaml-leiemann Ltd, 22

. Batty, J. (1978)
.
Advanced Cost Accountancy. Plymouth; Macdonald & Evans
Ltd. 461.

Harper, W.M (1979) Management Accountancy. Plymouth: Macdonald & Evans

. Ltd. 120.
, . \

. Henry R.
Anderson & Mitchell H Raiborn (1977,) Basic Cost Accounting
Concepts. Boston: Houghton Mifflin Company, 448;
,

MaAlpine, T.S. (1976) The Basic Arts oj Budgeting London: Business Books
Ltd. I.

Mal vern, J. Gross JR (1972) Financial and Accounting Guide Jar Non- Profit
Organizations. New York: The Ronald Press Company. 277-298.

Walls. BX.H... (1976): Elements of Finance for Managers. Macdonald & Evans
Ltd; 154-162.

60