seminar code
05-08-2014, 11:34 AM
BUDGETING AND BUDGETARY CONTROL AS MANAGEMENT TOOLS
FOR ENHANCING FINANCIAL MANAGEMENT IN LOCAL
AUTHORITIES, AFIGYA KWABRE DISTRICT ASSEMBLY AS A CASE
STUDY
[attachment=66595]
ABSTRACT
MMDAs as development partners to the central government need to mobilize enough
revenue locally to support the central government development agenda. Inadequate financial
resources can undermine the effective implementation of developmental projects in MMDAs.
Budgets are important as they prudently manage scarce financial resources and at the same
time serve as a means of expenditure authorization, control and evaluation base. MMDAs in
Ghana prepare budgets but deal with it in lesser extent unlike the profit-making organizations
which consider budget and budgetary controls important element in their policies. It is
against this background that this study was carried out to find ways by which MMDAS
especially AKDA can use budgeting and budgetary controls as management tools to
prudently enhance their financial management system for local development. The case study
approach was used in the study. Interviews and questionnaires were used to solicit data for
the study. The research found out among other things that MMDAs prepare budgets and
control the budgets. The research data evidently prove that in the case of Afigya Kwabre
District Assembly this is true. However, poor budget formulation and implementation and
low revenue generation base make it difficult for MMDAs to live up to their responsibility as
partners to the central government in national development. Recommendations and
suggestions have accordingly been made to improve upon budgeting and budgetary controls
in MMDAs and the nation as a whole
INTRODUCTION
This chapter looks at the background to the study, problem statement, objectives of the
study, research questions, significance of the study, scope and limitations of the study and
the organization of the study.
STATEMENT OF THE PROBLEM
MMDAs as development partners to the central government need to generate sufficient
revenue locally to support the central government development agenda. Budgets are
necessary to prudently manage scarce financial resources and at the same time serve as
means of expenditure authorization, control and evaluation base. Profit making organizations
consider budgets and budgetary controls important elements in their policy making. The
SIGNIFICANCE OF THE STUDY
This study is important because it will guide management of AKDA in future financial
decision making. It will also serve as a reference for ensuring prudent financial management
in MMDAs. Also it will be an added value to the knowledge base on budget and budgetary
controls and serve as an impetus for future policy making. Lastly, it will also serve as a guide
to policy makers, development workers and stakeholders in Ghana and the world as a whole.
ORGANISATION OF THE STUDY
The research is organized into five chapters. Chapter one covers the background to the
study, problem statement, objectives of the study, research questions, importance of the
study, purpose of the study, scope and limitations of the study. Chapter two will review
literature on budget formulation and implementation in particular types of budget,
preparation of budget and budget controls, budget being a tool for measuring financial
performance, benefits and challenges of budget and criteria for measuring budget
performance. Chapter three is about the methodology used in the study. It covers the research
design, population, sample and sampling procedures, data collection and instruments.
Chapter four is about data presentation and analysis whiles chapter five provides the findings,
conclusions and recommendations.
CONCEPT OF MANAGEMENT CONTROL
The literature holds a large number of definitions of management control. The modern
management control system originated with the influential work of Robert Anthony (1965)
who drew boundaries between management control, strategic planning and operation control.
He recognizes accounting language as the base for commonalities in the system.
Anthony (Ibid) defines management control as the processes by which managers assure that
resources are obtained and used efficiently in the accomplishment of the organisation’s
objectives”Garrison and Noreen (2000) suggest a different definition of management control
as follows: “those steps taken by management that attempt to increase the likelihood that the
objectives set down at the planning stage are attained and to ensure that all parts of the
organisation function in a manner consistent with organizational policies. In this paper, the
term management control is defined as those sets of organizational activities that include
planning, coordination, communication, evaluation and decision-making as well as informal
processes aimed at enhancing the efficient and effective use of the organizational resources
PREPARATION OF BUDGET AND BUDGETARY CONTROLS
Maitland (2001) mentions that the process of preparing and agreeing on a budget is a means
of translating the overall objectives of the organization into detailed, feasible plan of action.
Public budget preparation is one of the tedious tasks that any country should look upon. The
preparation process for the annual budget involves a great deal of energy, time, and expense.
Hence, it is important that a country must be able to follow accurately all the methods of
preparing an annual budget. In budgeting, the focus is not only to prepare the budget, but
more importantly to have a follow-up operation for budgeting and t o act according to known
data
PROFILE OF AFIGYA KWABRE DISTRICT ASSEMBLY (AKDA)
The Afigya Kwabre District Assembly (AKDA) is one of the newly districts created in 2008.
It was carved from two districts, Afigya Sekyere and Kwabre all in Ashanti region. It is
located in the central part of Ashanti Region. It has an area of about 342.3km2, being 1.44
% of the land area of Ashanti. The district is bounded by Kumasi Metropolitan
Assembly(KMA) to the south, Ejura –Sekyeredumasi District to the north, Offinso
Municipal Assembly to the west, Atwima District to the South- West and Kwabre East
District to the east.
DATA COLLECTION PROCEDURE
The research depended on primary and secondary sources for data collection. The primary
sources of data came from interviews, questionnaires, discussions and observations. The
primary data frequently provided the detailed data which were actual situations or responses
arising out of the field study. The secondary sources of data were from published and
DATA COLLECTION INSTRUMENTS
The data collection instruments were mainly questionnaires, interviews, observation and
face-to-face discussions with key respondents. The questionnaires were in three parts, those
questionnaires administered to key staff, other departmental staff and revenue and tax payers.
In all seventy (70) questionnaires were sent to all respondents. Respondents were asked to
answer the questions or give their views and opinions to the researcher .Sixty-eight (68)
questionnaires were returned. Three (3) were rejected because respondents did not answer
them the way they were expected. Sixty- five (65) questionnaires were considered quite good
and accepted for the use in the study. The questionnaires were a administered for two weeks
before they were collected.
CONCLUSIONS
The following conclusions have been reached based on responses from respondents as
well as records and confirmation made available to the research:
1. budgeting and budgetary controls are management tools of MMDAs for enhancing
financial management specially AKDA, this assertion is made because the Assembly
prepares budgets, check if expenditures are on course, assigns responsibilities and
compares actual results with budgeted results;
2. the Assembly prepares annual ,medium -term and long term plans through rigorous
processes and procedures which indicate that it attaches importance to planning and
budgeting;
3. AKDA experiences budget deficits because most of its budgeted revenues are less
than budgeted expenditure, in some cases this is attributable to poor budgetary
controls
FOR ENHANCING FINANCIAL MANAGEMENT IN LOCAL
AUTHORITIES, AFIGYA KWABRE DISTRICT ASSEMBLY AS A CASE
STUDY
[attachment=66595]
ABSTRACT
MMDAs as development partners to the central government need to mobilize enough
revenue locally to support the central government development agenda. Inadequate financial
resources can undermine the effective implementation of developmental projects in MMDAs.
Budgets are important as they prudently manage scarce financial resources and at the same
time serve as a means of expenditure authorization, control and evaluation base. MMDAs in
Ghana prepare budgets but deal with it in lesser extent unlike the profit-making organizations
which consider budget and budgetary controls important element in their policies. It is
against this background that this study was carried out to find ways by which MMDAS
especially AKDA can use budgeting and budgetary controls as management tools to
prudently enhance their financial management system for local development. The case study
approach was used in the study. Interviews and questionnaires were used to solicit data for
the study. The research found out among other things that MMDAs prepare budgets and
control the budgets. The research data evidently prove that in the case of Afigya Kwabre
District Assembly this is true. However, poor budget formulation and implementation and
low revenue generation base make it difficult for MMDAs to live up to their responsibility as
partners to the central government in national development. Recommendations and
suggestions have accordingly been made to improve upon budgeting and budgetary controls
in MMDAs and the nation as a whole
INTRODUCTION
This chapter looks at the background to the study, problem statement, objectives of the
study, research questions, significance of the study, scope and limitations of the study and
the organization of the study.
STATEMENT OF THE PROBLEM
MMDAs as development partners to the central government need to generate sufficient
revenue locally to support the central government development agenda. Budgets are
necessary to prudently manage scarce financial resources and at the same time serve as
means of expenditure authorization, control and evaluation base. Profit making organizations
consider budgets and budgetary controls important elements in their policy making. The
SIGNIFICANCE OF THE STUDY
This study is important because it will guide management of AKDA in future financial
decision making. It will also serve as a reference for ensuring prudent financial management
in MMDAs. Also it will be an added value to the knowledge base on budget and budgetary
controls and serve as an impetus for future policy making. Lastly, it will also serve as a guide
to policy makers, development workers and stakeholders in Ghana and the world as a whole.
ORGANISATION OF THE STUDY
The research is organized into five chapters. Chapter one covers the background to the
study, problem statement, objectives of the study, research questions, importance of the
study, purpose of the study, scope and limitations of the study. Chapter two will review
literature on budget formulation and implementation in particular types of budget,
preparation of budget and budget controls, budget being a tool for measuring financial
performance, benefits and challenges of budget and criteria for measuring budget
performance. Chapter three is about the methodology used in the study. It covers the research
design, population, sample and sampling procedures, data collection and instruments.
Chapter four is about data presentation and analysis whiles chapter five provides the findings,
conclusions and recommendations.
CONCEPT OF MANAGEMENT CONTROL
The literature holds a large number of definitions of management control. The modern
management control system originated with the influential work of Robert Anthony (1965)
who drew boundaries between management control, strategic planning and operation control.
He recognizes accounting language as the base for commonalities in the system.
Anthony (Ibid) defines management control as the processes by which managers assure that
resources are obtained and used efficiently in the accomplishment of the organisation’s
objectives”Garrison and Noreen (2000) suggest a different definition of management control
as follows: “those steps taken by management that attempt to increase the likelihood that the
objectives set down at the planning stage are attained and to ensure that all parts of the
organisation function in a manner consistent with organizational policies. In this paper, the
term management control is defined as those sets of organizational activities that include
planning, coordination, communication, evaluation and decision-making as well as informal
processes aimed at enhancing the efficient and effective use of the organizational resources
PREPARATION OF BUDGET AND BUDGETARY CONTROLS
Maitland (2001) mentions that the process of preparing and agreeing on a budget is a means
of translating the overall objectives of the organization into detailed, feasible plan of action.
Public budget preparation is one of the tedious tasks that any country should look upon. The
preparation process for the annual budget involves a great deal of energy, time, and expense.
Hence, it is important that a country must be able to follow accurately all the methods of
preparing an annual budget. In budgeting, the focus is not only to prepare the budget, but
more importantly to have a follow-up operation for budgeting and t o act according to known
data
PROFILE OF AFIGYA KWABRE DISTRICT ASSEMBLY (AKDA)
The Afigya Kwabre District Assembly (AKDA) is one of the newly districts created in 2008.
It was carved from two districts, Afigya Sekyere and Kwabre all in Ashanti region. It is
located in the central part of Ashanti Region. It has an area of about 342.3km2, being 1.44
% of the land area of Ashanti. The district is bounded by Kumasi Metropolitan
Assembly(KMA) to the south, Ejura –Sekyeredumasi District to the north, Offinso
Municipal Assembly to the west, Atwima District to the South- West and Kwabre East
District to the east.
DATA COLLECTION PROCEDURE
The research depended on primary and secondary sources for data collection. The primary
sources of data came from interviews, questionnaires, discussions and observations. The
primary data frequently provided the detailed data which were actual situations or responses
arising out of the field study. The secondary sources of data were from published and
DATA COLLECTION INSTRUMENTS
The data collection instruments were mainly questionnaires, interviews, observation and
face-to-face discussions with key respondents. The questionnaires were in three parts, those
questionnaires administered to key staff, other departmental staff and revenue and tax payers.
In all seventy (70) questionnaires were sent to all respondents. Respondents were asked to
answer the questions or give their views and opinions to the researcher .Sixty-eight (68)
questionnaires were returned. Three (3) were rejected because respondents did not answer
them the way they were expected. Sixty- five (65) questionnaires were considered quite good
and accepted for the use in the study. The questionnaires were a administered for two weeks
before they were collected.
CONCLUSIONS
The following conclusions have been reached based on responses from respondents as
well as records and confirmation made available to the research:
1. budgeting and budgetary controls are management tools of MMDAs for enhancing
financial management specially AKDA, this assertion is made because the Assembly
prepares budgets, check if expenditures are on course, assigns responsibilities and
compares actual results with budgeted results;
2. the Assembly prepares annual ,medium -term and long term plans through rigorous
processes and procedures which indicate that it attaches importance to planning and
budgeting;
3. AKDA experiences budget deficits because most of its budgeted revenues are less
than budgeted expenditure, in some cases this is attributable to poor budgetary
controls