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THE ROLE OF BUDGETING IN GOVERNMENT PARASTATALS ACCOUNTABILITY (A CASE STUDY OF ENUGU STATE HOUSING DEVELOPMENT AUTHORITY) BY OKAFOR DONATUS OKECHUKWU PG/MBA/11/60273 DEPARTMENT OF MANAGEMENT FACULTY OF BUSINESS ADMINISTRATION UNIVERSITY OF NIGERIA ENUGU CAMPS JULY, 2012
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TITLE The Role of Budgeting in Government Parastatals Accountability (A Case Study of Enugu State Housing Development Authority) By Okafor Donatus Okechukwu PG/MBA/11/60273 In Partial Fulfilment of the Requirement for the Award of Master in Business Administration (MBA) Department of Management Faculty of Business Administration University of Nigeria Enugu Campus Supervisor: Dr. E.K. Agbaeze July, 2012
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DECLARATION
I, Okafor Donatus Okechukwu, student in the
Department of Management with Registration No.
PG/MBA/11/60273 state that the work embodied in this project
is original and has not been submitted in any other University.
______________________ Okafor Donatus Okechukwu PG/MBA/11/60273 ___________________ Date
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CERTIFICATION
We, hereby certify that this project "The Role of
Budgeting in Government Parastatals Accountability (A
Case Study of Enugu State Housing Development
Authority)" by Okafor Donatus Okechukwu with Registration
Number PG/MBA/11/60273 under my supervision the project is
adequate in scope and quality, in partial fulfilment of the
requirements for the award of Master in Business Administration
(MBA) in the Faculty of Business Administration, University of
Nigeria, Enugu Campus.
___________________ ______________ Dr. E.K. Agbaeze Date Project Supervisor ___________________ _____________ Dr. C.A. Ezigbo Date Head of Department _________________ External Examiner _______________ Date
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DEDICATION
This project work is dedicated to the Almighty God for His
mercy and love and to my dear wife Mrs. Justina Okafor for her
support throughout this programme.
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ACKNOWLEDGEMENT
I am wholly grateful to my project supervisor Dr. E.k.
Agbaeze for showing a unique humility in correcting and
advising me in the course of this work and making me know the
rudiments in project writing.
I owe gratitude to the Head, Department of Management,
Dr. C.A. Ezigbo and the Dean, Faculty of Business
Administration Prof. U.J.F Ewurum, for providing the enabling
environment in this programme. I also appreciate my able
lecturers, Dr. O.C. Ugbam, Dr. C. Nnadi, Dr. V.A. Onodugo, Mr.
L.C. Odoh, Mr. B.I. Chukwu and others for their contributions.
I appreciate my follow 2011/2012 MBA students, staff of
management, my family members especially my wife Mrs.
Justina Okafor for their moral and financial support.
Above all I thank the Almighty God for His love and mercy
throughout this programme.
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TABLE OF CONTENTS
TITLE ......................................................................................... i
DECLARATION ......................................................................... ii
CERTIFICATION ...................................................................... iii
DEDICATION ........................................................................... iv
ACKNOWLEDGEMENT ............................................................ v
TABLE OF CONTENTS ............................................................ vi
ABSTRACT ................................................................................ x
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study .................................................. 1
1.2 Statement of Problem ...................................................... 5
1.3 Objectives of the Study .................................................... 6
1.4 Research Questions ........................................................ 7
1.5 Hypotheses ...................................................................... 8
1.6 Limitations of the Study .................................................... 9
1.7 Significant of the Study .................................................... 9
1.8 Scope of the Study ......................................................... 10
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CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 Budgeting - An Overview ............................................... 11
2.2 Definitions of Budgets and
Budgetary Control .......................................................... 12
2.3 Budgetary Control .......................................................... 14
2.4 Administration of Budgetary Control .............................. 15
2.5 Decision on Budget and Actual
Comnparism Statement ................................................. 18
2.6 Types of Budget ............................................................. 19
2.7 Budgeting and Budgetary Controls in
Government ................................................................... 22
2.8 Financial Authorities and their
Legal Aspect .................................................................. 23
2.9 The Role of Government Budget for
Accountability ................................................................. 25
2.10 Major Types of Budget in Government .......................... 28
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CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Research Design ........................................................... 34
3.2 Population of Study ........................................................ 34
3.3 Method of Data Analysis ................................................ 35
3.4 Sampling Method ........................................................... 35
3.5 Validity and Reliability of
Research Instrument ...................................................... 36
3.6 Sources of Data ............................................................. 36
3.6.1 Primary Data Sources .......................................... 37
3.6.2 Secondary Source ................................................ 38
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 Data Presentation .......................................................... 42
4.2 Analysis of the Questionnaire ........................................ 42
4.3 Test of Hypotheses ........................................................ 46
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CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSIONS AND
RECOMMENDATIONS
5.1 Summary of Findings ..................................................... 54
5.2 Conclusion ..................................................................... 55
5.3 Research Recommendations ......................................... 56
5.4 Direction for Further Research ...................................... 57
BIBLIOGRAPHY ............................................................ 59
APPENDIX ..................................................................... 62
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ABSTRACT The aim of this project is to address the role of budgeting in government parastatals accountability in Enugu State Housing Development Authority. It stresses the usefulness of budgeting and budgeting controls in government accountability. The major problems is the inability of organizations to plan and accomplish goals which can be traced to their inability to apply controls and accountability in the budgeting system. The researcher uses both primary and secondary data but reliance was placed more on primary data because of its relative factual nature. They include personal observation, interviews, questionnaire, about 60 personnel of the organization were interviewed and their responses analysed by simple percentage. The major findings reveals that there is a great degree of relationship between budgetary implementation and their actual performance. This lack or no implementation of the budget hinders the achievement of the organizational goal. Budgetary control also as a management tool contributes to efficiency and effectiveness of management productivity. The researcher based on these findings proposes many recommendations. Which include educating the other levels of management on the importance of adhering strictly on the provisions of the budgets and implement it as such. The organization should adopt technique that is easy to implement which include flexible and zero based budgeting techniques. The researcher concluded that when budget are effectively implemented at all levels, it will become an essential standard in ensuring actual performance.
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CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
This project addresses the role of budgeting as a tool for
accountability in government parastatals in Enugu State
Housing Development Authority. This is not intended to be a
complete work on all budgeting system; rather it stresses on the
usefulness of budgets in promoting accountability in government
parastatals.
Like every other parastatals, Enugu State Housing
Development Authority is fast growing, hence the need for
accountability becomes necessary with the use of budgeting.
Budgeting system is the process involved in using the
scarce resources to achieve the desired goals and objectives of
the corporation (Ikpe and Oba, 2004:66).
Budget is also seen as a financial or quantity statement
prepared and approved prior to a defined period for the process
of attaining a given goal or objectives. It may include income,
expenditure and employment of capital (ICMA; 2008).
Therefore in order to achieve these objectives, the
organization must deploy the economic resources and
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discover the means of achieving these goals. These goals can
only be realized when the properly planned use of available
resources are controlled and coordinated effectively.
Thus the system of managing a business by making a
forecast of different activities imperative.
These forecast are guided by the formulation and adoption
of planned systems such as techniques in budgeting variance
analysis etc. Budgets may be prepared for the firm as a whole
or smaller units like departments, operations like production and
sales, financial and resource items like personnel, purchase,
cash and capital expenditure etc.
Budgetary control at same time is a system of controlling
cost through the preparation of budget coordinating
departments, establishing responsibilities, relating the
responsibilities of the executives to the requirements of a policy.
It entails comparism of actual performance with the budgeted
and ensuring that the remedial actions are taken promptly to
achieve organizational objectives.
It is therefore germane to say that the level of importance
that is attached to these plan and effort made in
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controlling the variance differ in organizations once goals are set
which must be based on the detailed analysis of feasibility within
the content of political and social values and the financial plans
will be enable to strive towards its attainment.
Often than not when these plans are put into operation,
condition prevails which tends to cause deviation to the plan and
corrective controls and measures are always taken to steer the
business back on the right track.
The process already mentioned as it is applied entails
budgets and its control. And to lend credence to goal
congruence, suitable techniques should be applied to specific
areas needs. Special attention, hence the measurement of
budgeted with actual to arrive at variance cannot be over
emphasis. A business is said to be on the right track; if the
outcome of budgeted estimates is favourable as against the
actual.
Enugu State Housing Development Authority a Historical
Background
The history of Enugu State Housing Development
Authority started in the days of East Central State Housing
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Development Corporation that was established in 1971; by Ajei
Ukpabi Asika's administration.
It was charged with the responsibility of building houses
and estates to be used for both industrial and residential
purposes.
However, following the creation of states by the then
Murtala Mohammed government in 1976, the corporation was
renamed Anambra State Housing Development Corporation
owing to the splitting of East Central State to Anambra and Imo
States.
In 1991, the government of Ibrahim Babangida once again
created Enugu State from the Old Anambra State thus changing
the name once again to the present Enugu State Housing
Development Corporation.
The corporation began its operation by utilizing the
premises and facilities of the old East Central State and
Anambra State Housing Development corporation, while the
present staff were made up of employees of former corporation
of Enugu State origin and new employees.
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Organizational Structure
The corporation followed the line and staff method of
organization. It shows who performs the actual functions of the
organization and those that performs the support or auxiliary
function.
Line functions are those who performs the functions as
plan, layout, location and actual construction of the buildings
while the support functions are those who do the other
administrative function, like, personnel department, public
relation departments etc.
Edict No. 10, of 1991, clearly established the corporation
and stipulates the functions of the board in section 5 which is
the governing body of the corporation and shall in its capacity,
manage the corporation, Exercise all the functions and powers
of the corporation, and perform all other business functions as
relate tot he edict.
1.2 STATEMENT OF PROBLEM
The success of any business organization rest upon its
ability to adopt a well organized budgeting and budgetary control
system.
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Lack of budgeting system in planning and controlling has
resulted in indiscriminate spending of scarce funds meant for
use in viable projects and activities. The results in many
problems for many organizations which include;
1.Inability of the company to plan and accomplish goals which
can be traced to their inability to apply controls and
accountability in the budgeting system.
2.Budgeting goals are not fully realized due to low level of
understanding of middle and low level managements.
3.Improper accountability of past jobs performed has resulted in
management not being able to use past information to
make proper and accurate budget for the future which
leads to ineffectiveness and inefficiency.
4.Improper coordination of various cost centres and information
on job progress are delayed and this results in delay of
prompt management decisions.
1.3 OBJECTIVES OF THE STUDY
The primary purpose of this study are:
1.To find out the role of budgeting and budgetary control in
government parastatals.
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2.To find out whether there is a relationship between budgetary
implementation and their actual performance.
3.To determine whether budgetary control as a management
tool contribute to efficiency and effectiveness of
management productivity.
4.To find out whether budgetary control can be used in
assessing management budgeting accountability.
1.4 RESEARCH QUESTIONS
The following questions will be addressed in this study.
1.What role do budgeting and budgetary control play in your
organization?
2.To what extent do budget implementation and their actual
performance relates?
3.To what extent does budgetary control enhances
management productivity?
4.What are the significant relationship between budgeting
control and management accountability?
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1.5 HYPOTHESES
Ho:Budgeting does not play any role in government corporation.
Hi:Budgeting plays a vital role in government
organization/corporations.
Ho:There is no relationship between budget implementation and
their actual performance.
Hi:There is a relationship between budget implementation and
their actual performance.
Ho:Budgetary control does not enhance management
productivity.
Hi:Budgetary control does enhance management productivity.
Ho:There is no significant relationship between budgetary
control and management accountability.
Hi:There is a significant relationship between budgetary control
and management accountability.
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1.6 LIMITATIONS OF THE STUDY
The limitation of this study are:
i)Financial constraints on the part of researcher.
ii)Time constraints on the part of researcher and school
timetable on the MBA programme.
iii)Government secrecy: the corporation personnel are not willing
to release information in the course of this research and
thus hinders the details.
1.7 SIGNIFICANT OF THE STUDY
The research is so useful in several ways:
Firstly, the government will benefit immensely from the
findings and recommendations. This study will highlight the
problems associated with inadequate budgetary control in
government business. It will also help government on how they
will effect controls in their businesses.
Secondly, corporate organizations will utilize the
recommendations to effect proper budgetary control is all their
affairs to ensure accountability in all its businesses.
Thirdly, the society at large will benefit because
accountability will eradicate corruption. This will ensure that
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all projects and activities budgeted for are completed and on the
specified periods of time to their benefit.
Finally, this project study will be useful for academic
purposes. It will act as a data bank to those who will carry out
further study on the field in the future.
1.8 SCOPE OF THE STUDY
The study focuses on using budgeting as a tool for
accountability in government and its parastatals.
However, its scope covers; the role of budgeting, the
relationship between budgeting and budgetary controls budget
implementation and its performance and budgeting controls and
accountability in management.
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CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.1 BUDGETING - AN OVERVIEW
The success of any organization both government and
private, is in its ability to plan, quantify the plan, organize, direct
and control its implementation.
The relationship between plan and budget is that budget is
a quantified plan control is closely involved in planning in the
sense that every plan by implication comes with its control
procedures.
To this extent Morse (1981: pg. 368) states that when all
the planning and control topics are fuztapositioned a very
dynamic budgeting and performance evaluation cycle appears.
The assumption of the cycle starts with the present budget
and as the budget period elapses, the actual operational
achievements and results are gathered and matched with the
present budget in the form of feedback control and performance
report.
The various levels of controlling managers on receiving
these reports burdening on the areas of variation from the
responsible managers.
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The next steps based on these reports managers takes
steps to ensure that future plans or budget are enhanced.
Budget is a very important managerial model which will no
doubt benefit the organization if properly and effectively
packaged and operationalized.
2.2DEFINITIONS OF BUDGETS AND BUDGETARY
CONTROL
Budget is defined as a quantitative analysis prior to a
defined period of time of a policy to be pursued for the period to
attain a given objectives (CIMA, 1974).
A budget is also defined as a comprehensive and
coordinate plan expressed in financial terms for the operations
and resources of an enterprises for some specific periods in the
future (Fremgem 1973, pg. 144).
A budget is a plan of the organization's manipulations of
relevant variables (controllable and uncontrollable) and reduces
the impact of uncertainty, it activates the management into
influencing the environment in the interest of the organization
(Pandey 1985, pg. 556).
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A budget is a formal plan of action expressed in figures,
that specified the objectives and the means of its attainment
(Copeland and Dasher, 1978 p.614).
Budget is a statement of plan and expected result
expressed is numerical terms (Koont et al 1980, pg.3).
According to Adeniyi (2001, pg 379)
Budgeting is a systematic and formalized approach for
performing significant phases of the management planning and
control of functions. It is the process of preparing detailed short
term corporate plan into action. When monetary values are
attached it becomes a budget.
Budget are approved prior to the defined period of time
usually showing a planned income to be generated and
expenditure to be incurred during that period and the capital to
be employed to attain a given objectives.
To Eneje (2005:142)
A budget is a quantitative expression of a plan of action
and an aid to coordination and implementation prepared in
advanced to a period it relaltes. It can be preparallel for the
whole organization or for departments.
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To Eze (2001:168)
Budgeting refers to the formulation of plans for future
activity, which lay down carefully determined objectives and
programme of activity and provides yardsticks by which
deviations from planned achievements can be measured.
It is the preparation in advance of the quantitative as well
as financial statement to indicate the intention of the
management in respect of the various aspect of the business.
2.3 BUDGETARY CONTROL
According to Eneje (2005:142)
Budgetary control highlights the control of plans by
comparing actual results against plans by comparing actual
results against plans to identify variance upon which corrective
action can be placed.
According to Eze (2001 pg 168), Budgetary control refers
to the principles, procedures and practices of achieving a given
objectives through budget and budgets reports.
According to Ikpe and Obah (2004:66) Budgeting control
is a system of controlling cost through the preparation of
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budget, coordinating the departments, establishing
responsibilities, relating, the responsibilities of the executives to
the requirement of the policy.
(CIMA, 1975), defines budgetary control as the
establishment of departmental budgets relating the
responsibilities of the executives to the requirement of the policy
and continuously comparing actual with budgeted results either
to secure by individual action the objectives of that policy or to
provide the basis for its revision.
It is the essential feature of budgetary control that the
periodic report should be prepared comparing the budget with
the actual expenditure and showing the variances between them
corrective measures.
Budget and actual comaprism statement are more
effective when prepared frequently and promptly.
2.4 ADMINISTRATION OF BUDGETARY CONTROL
The administration of budgetary control is the
responsibility of the budget committee through the budget
officer. It is also a common principle that the executive of the
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organization each have a responsibility for the budget of the
particular activity which they control. The function of the budget
officer being rather to interpret the guiding decisions of the
budget committee and to advise the responsible executive with
a view to securing a budget which is compatible with the other
sections.
It is important to ensure that the scheme budgetary control
is properly explained to each person concerned with its
operation in the manner more appropriate to defining what is
required of that person.
During the operation of the scheme, a full liason should be
maintained between the budget committee and the executive
and persons responsible for the implementation of the
departmental policies.
The budget committee must ensure that through its officer
or liason that periodic statement should be prepared, comparing
the budget with the actual expenditure and showing the
variances between them. Budget and actual comparism
statement are more effective when prepared frequently and
promptly and the accounting statement should be organized
with this in view.
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The frequency of this statement as suggested with regard
to the period of the budget should be largely determined by the
requirement of the person exercising the control. Consideration
should also be given to the point at which the cost of frequency
of the statement becomes excessive.
Normally it is a matter of routine to check that all items of
expenditure charged against a persons budget results from the
action taken by the person.
According to Adeniyi (2001 pg 379); Budgetary control is
part of the overall system of responsibility accounting within an
organization. It is a system of accounting in which cost and
revenues are analyzed in accordance with areas of personal
responsibilities so that the performance of the budget holders
can be monitored in financial terms,
Hence, budget plays an accountability role in
governmental and organization and circle. Defining budget with
government in mind.
Taylor (1992:50) describe budget as a forecast made by
individual government and governmental institutions of its
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expenditure and income for a specific period of time usually not
more than one year.
2.5DECISION ON BUDGET AND ACTUAL COMNPARISM
STATEMENT
The preparation of budget and actual comparism
statement is normally the responsibility of the budget officer and
it has been found as an advantageous procedure for the result
represented by the budget.
In reports comparing capital expenditure budget with
actual expenditure, the figures prepared from the normal
(accounting records may not be adequate in themself for control
purposes. To decide whether further items can be ordered
without ultimately overspending the budget, it may be necessary
to know, in addition, the value of outstanding orders to items not
yet received for which no entries has been made in accounts.
Following the careful consideration of the result shown by
the budget and actual comparism statement, decisions may be
taken as follows:
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1.To take corrective actions with regard to expenditure where
the budget standard is not yet achieved.
2.To investigate cases where the budget has been exceeded by
an appreciable margin and to consider the implication of
such results.
3.To adjust the budget.
4.To correct errors made in its compilation.
5.To allow for the introduction of improvements of methods not
anticipated in the initial setting of the budget or any other
changes.
6.To discard the budget in such cases as where the policy on
which the budget is prepared has become impracticable
and to substitute a new budget.
2.6 TYPES OF BUDGET
Each revenue and expenses activities of an organization
can be budgeted. There are several types of special purpose
budgets which can be graded in respect of its attributable
functions.
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They include:
i)Time factor - long term and short term budget.
ii)Function factor - sales budget, selling and distribution cost
budget, production cost budget, purchase budget,
personnel budget, research budget capital budget, office
and administration, budget plant utilization budget, cash
budget.
iii)Flexibility factor - Fixed budget and flexible budget
For the purpose of this research work budget are
classified as follows:
1.Long term budget,
2.Short term budget
3.Fixed budget
4.Flexible budget
1.Long Term Budget
This is a budget that last for more than one year. It is usually
used to determine long range plan for especially capital
expenditures.
In the government circle it is usually called a rolling plan. This is
because it is under focus for a lengthy period but touches
all the yearly budgets until its completion date.
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It is a guide to determining the research projects that may be
initiated and schedule expansion and growth. It is usually
in the hands top level managers.
2.Short Term Budgets
This is a short period financial plan use to estimate income and
expenditures for the period. It generally involves all of
coordinated planning in all aspect of operations.
3.Fixed Budget
Under this budget, estimate level of income and expenditure are
fixed in advanced and these levels are not raised
regardless of what the actual level turn out to be fixed
budget requires accurate forecasting and analysis of each
budget item. It is best for manufacturing companies.
4.Flexible Budget
This is a group of budget each based on different operating level
or volume at various levels of activities and prices.
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2.7BUDGETING AND BUDGETARY CONTROLS IN
GOVERNMENT
Unlike the private sector, the budgeting and budgetary
control systems in government is governed a whole lot of
regulatory framework, some of which has instruments of
controls as systems of authorization of expenditure by warrant,
virement, supplementary estimates, authority to incur
expenditure, auditing, budget implementation and monitoring
process, all of which are aimed at ensuring conformity with
budget efficiency, effectiveness and economy.
Ikpe and Obah (2003:109) highlighted the following
budgetary control systems in government.
a)Due Process Certification
This is a budgetary control measures aimed at the following:
i)To ensure that "due process" is followed in the award of
capital projects contracts.
ii)To reduce cost by scrutinizing every project awarded by
the government.
iii)To ensure that funds are no longer diverted to private
pockets.
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iv)To strictly monitor the capital expenditure.
v)To streamline the approval limits in the award of capital
projects.
b)Standardization of Government Accounting
This is a reform effort the federal government aimed at
standardizing all government accounts at all levels
through budgeting standards and reporting procedures.
2.8 FINANCIAL AUTHORITIES AND THEIR LEGAL
ASPECT
Government businesses whether in the making of policies,
programmes, activities or functions, in run in accordance with
laid down formalities. This formalities become more rigorous
especially in relation to accounting and reporting for the
collection and use of government funds which supports the
process of governance.
The legal formalities in the areas of government
accountability and financial control includes established laws,
rules, regulations, customs, and accepted norms of behavioural
guidelines.
The laws in Nigeria in view of the interchanging nature of
government between military, and democratically elected
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governments are of two types.
They are the laws made by the military both at the Federal
and State levels known as decrees and that made by the
elected governments both Federal and State House of
Assembly known as Act of parliament.
The authority for financial transactions in public sector is
derived from the constitution, the finance (control and
management) ordinance 1958, and various laws in respect of a
number of financial activities such as revenue collection
authorization, and incurring of expenditure, central banking,
foreign exchange markets, audit etc.
The constitution of the Federal Government of Nigeria
1999 as amended till date has a clear picture of the financial
rules and regulations of the three tiers of government.
These documents are actually an implication of the public
finance ordinance of 1958 and the finance (control and
management) ordinance 1958 from where they derive their
authority.
All these documented laws and regulations are aimed at
instituting accountability in the collection and management of
government finance.
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2.9THE ROLE OF GOVERNMENT BUDGET FOR
ACCOUNTABILITY
In order to really appreciate the important roles of
government budget in enhancing economic activities and
accountability in the country, these major functions must be
looked into:
1.Forecasting
A budget is an express provision of the government to generate
revenue and apply the same revenue on its economic
activities in the coming financial year.
This anticipatory nature of budget makes it an important tool of
forecasting. The budget is prepared prior to the year, it will
be implemented based on the anticipated revenues from
various services. In Nigeria shares from oil account and
other local taxes. It is a useful tool for forecasting future
trends in the economy which is usually for anticipated
revenues and expenditures for the coming year.
2.Planning
Budget is also a tool for government to plan its policies and
programmes and its implementation. Government
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uses the budget to plan how to generate revenues and the
priority projects to be embarked upon in the year with the
aim of engineering the economic activities of the
economy. It is therefore the qualification of government
proposed plans in financial terms for the following
accounting of year.
3.Authorization
The approval of the yearly appropriation bill is by the national
assembly or state assembly is an authorization to the
executives to sign and spend public fund as contained in
the budget documents and also for a specific project.
It is therefore a formal authorization the hands of the executive
to acquire resources and undertake a specified activities
for the accomplishment of governmental aims and
objectives in a given period.
4.Performance and Measurement
A budget is a veritable parameter for evaluating the
performance of government with respect to the
achievement of stated objectives. It serves as a basis for
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making comparison between the budgeted and the actual for the
period. The variance helps to prepare and implement a
better budget in the next financial year. This is the most
important function of the budget which forms a guide to
making a better decisions on plans and priorities in the
next financial year.
In working on the variance the various responsible government
parastatals and agencies are thoroughly evaluated on
their performance toward the whole budgeted aims and
objectives.
The various accountability reports and speeches to both
committees of the national or state assemblies and other
committees setup by the executives will help in setting up
the required standard to achieve the overall governmental
aims and objectives.
5.Communication
Since the budget contains all policies and programmes which
the government plans to execute the following year, it
serves as a communication tool between the government
through its agencies and the society. It
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gives a clear picture of the economy in next one year and what
to be expected at the end of its implementation. This is
why the budget elixirs a lot of interest in the people. It
communicates economic direction of the government to
the society and provides likely indices to be expected at
the end of its implementation.
The lack of accountability by the government its agencies and
parastatals in the past has led to some degree of aparthy
in the budget and budgetary process in Nigeria.
2.10 MAJOR TYPES OF BUDGET IN GOVERNMENT
Government's spending profile and the desired level of
economic activity will to a great extent determine the type of
budget to be executed by the government in any given period.
There are three main types of government budget:
1.Balance budget
2.Deficit budget
3.Surplus budget
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The level of economic activity of an economy can take the
form of prosperity, recession, depression, and recovery.
The various degree of economic activity will determine the
fiscal policies to be adopted by the government.
i.Prosperity
This is when an economy is experiencing an overall level of high
economic activity.
ii.Recession
When the level of economic activity in a given economy drop
drastically, it is called recession.
iii.Depression
This is when an economic activity drop to a given economic
cycle.
iv.Recovery
This when the economic activity begin to show an upward
movements or begin to rise.
The true position of any economy can be measured by
using such economic indices as Gross Domestic Product
(GDP), level of employment, per capita income and rate of
inflation of prices level.
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The measurement and determination of the real economic
level of any economy will then depend on these economic
indices of budgeting.
1.Balanced Budget
A budget is said to be balanced when total government revenue
equals total government expenditure for a given period. In
this case the total spending in the economy remains
unchanged, and as such economic activities will not be
affected. However the budget will have an expansionary
effect in the economy in some cases.
For instance, if government applies an idle cash/fund that will
otherwise be spent by individuals and business on
consumption and investment. Also the expansion of
effective demand through the balance budget multiplier
effect will depend on the propensity to consume or save. If
the propensity to consume is 100 percent there will be no
balance budget multiplier effect.
2.Deficit Budget
A deficit budget is normally characterized by a high spending
profile over and above the amount of fund anticipated by
the government for the financial year.
31
Government indulge in excessive spending which will in other
words was designed to increase the level of economic
activity.
Deficit budget has an inflationary impact in the economy as the
government spends more than it can generate.
Government finance such deficits by borrowing from banks and
other institutional lenders.
By borrowing idle funds, government tends to spend such funds
on economic activities and thus increase demand. During
the period of full employment in the economy, deficit
budget will result in inflation but will increase economic
activity when there is less than full employment.
Deficit budget is used when there is recession and depression
to increase economic activity and addressing the
problems of unemployment.
3.Surplus Budget
This is diametrically opposite the deficit budget in that its
implementation reduces economic activity.
This is when government receives more than it spends in a
given financial year. When government spends less
32
than it generates, it will impact negatively in the economic
activity and thus reduces the level of employment and as
such results in a net decrease in demand for goods and
services. This made some economics to consider surplus
budget as a fiscal drag on the economy, but can be
minimized by the government by employing the surplus
earnings to write off some of the national debt.
One remarkable plus to the surplus budget is that it enables the
government to reduce or prevent inflation during
prosperity.
Conclusion
For budgets to play a vital role of a tool government
parastatal accountability, there must be an active participation
and involvement acceptance and commitment of top level
management and line management who are responsible for
budget implementation.
Through all managers are not equally gifted and
positioned, they must be well carried along right from the
33
planning stage to the implementation and evaluation stage of
the budgeting process.
This will enable them to easily dictate the variance stage
of the budgeted and actual. It will enable them to dictable where
the implementation failed and what or who was responsible and
what punishment or corrective action to be taken for future
budgets.
It will also be necessary to note that all the established
budgetary control process are well adhere to by the responsible
managers so also when the budget is approved, every manager
knows what is expected of him and does not need further
instructions or directions than to start going on his own task of
the entire budget.
Subsequently, managers of parastatals should be held
accountable for under or lack of performance but if they work in
accordance with the provision of the budget they owe no
explanation.
However, this chapter highlights the gap that exist relating
to various aspect of budgeting its overviews and in government
circle which leads to the rationale in carrying out the primary
research on those issues.
34
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 RESEARCH DESIGN
This study covers and concentrated on the role of
budgeting and budgetary control for accountability in Enugu
State Housing Development Authority. The various cost centres
were visited and personnel questioned for information on the
role of budgeting.
For the purpose of this work the researcher used the
research design type and this enables the researcher to collect,
analyse and interpret data collected.
3.2 POPULATION OF STUDY
For the purpose of this study; the staff of the corporation
were used as the population. Though the population consist of
manly of public servants, the members of the population differed
in their professional and occupational groupings.
The groupings considered were the various divisions and
department in the corporation.
35
3.3 METHOD OF DATA ANALYSIS
Data cannot be useful except it has been processed which
will eventually give rise to information. In processing data, the
researcher has to apply statistical and analytical tools
appropriate enough to yield a reliable result.
The purpose of this statistical analysis of data with a more
compact form is to shows general tend relationship between
variables.
3.4 SAMPLING METHOD
Taking the whole population is a difficult task therefore a
sample was used by the researcher.
The researcher adopted the probability sampling
technique this entails a deliberate and equal chance of selecting
any element of the population which serves as an invited
sample, because budget is a management tool, the sample
selected were made up of senior officers and departmental
heads of the corporation under study, the researcher therefore
selected a convenient sample of (60) sixty staff of the
corporation.
36
3.5VALIDITY AND RELIABILITY OF RESEARCH
INSTRUMENT
The validity of the instrument were validated through face
veniality and professional validity. The method adopted by the
researcher ensured that the instrument used for the data
collection method is measured in its face professional validity.
Reliability of the instrument is based on the test and retest
that was administered at different times with obtained result
considered over firms and this proved the reliability of the
instruments.
3.6 SOURCES OF DATA
The researcher used the primary and secondary sources
of data, but reliance was placed more on the primary source
because of its relatively factual nature.
37
3.6.1 Primary Data Sources
This sources of data consist:
1.Questionnaire
This was structurally designed to so that opinions of experts
such as Accountants and departmental and sectional
heads and senior and junior managers were collected.
This will help the researcher to analyse the situation under
study for a conclusive recommendation.
2.Direct Interview
This includes the interviews of the financial controller, senior
accountant and the secretary to the board. The interviews
were used for additional information on the question that
are not clear enough to reach a reasonable conclusion.
3.Personal Observation
This was used by the researcher during his visits to the
corporation at least to read the body language of some of
the staff of the corporation.
38
3.6.2 Secondary Source
The researcher made use of secondary data such as
journals, newspapers, magazines, annual budget financial
statements and textbooks both local and foreign.
The main statistical techniques employed in this study
include, tabulation, percentage frequency, distribution and chi-
square (X2), among others; these tools were used for testing the
validity of the stated hypothesis.
Tabulations
This involves the arrangement of collected data into
meaningful departments or groups. This enables the researcher
to prepare quantitative data so that they are readily understood
and their significant value appreciated.
Percentage Frequency Distribution
This is only one of the tools used in this work. It is used for
analyzing variables with regard to degree of contribution, in the
case of this work, the percentage frequency distribution was
used to access the degree of response from respondents based
on the questionnaire administered to them.
39
Chi-Square Technique
This statistical tool is used in testing the independence of
the variable from the other, it is also used to compare the
difference between observed and expected frequencies. The
observed frequencies are those obtained after the observation
has been carried out while expected frequency are merely
based on specification.
Formula X2 = Σ(O - E)2
E
Where
X2 = Chi-square
Σ = Summation
O = Observed frequency
E = Expected frequency
Expected frequency is calculated thus: - Row total x column total Grand total
Degree of freedom Df = (R - 1) (C - 1)
Where R = Number of Row
C = Number of Column
40
Decision
Accept the alternative hypothesis (Hi). If the calculated
values of chi-square, calculated value of chi-square is greater
than the critical value of chi-square (X2).
Tabulate and reject the null hypothesis (Ho). On the other
hand accept the null hypothesis (Ho) if the calculated value of
chi-square (X2) is equal to or less than the critical value of chi-
square (X2) tab and reject the alternative hypothesis (Hi).
Hence decision rule is mathematically put as follows.
Accept Hi if X2 cal > X2 tab
Reject Ho if X2 cal > X2 tab
Accept Ho if X2 cal < X2 tab
Accept Hi if X2 cal < X2 tab
Conclusion
The research philosophy method and strategies for
obtaining the primary and secondary data for this research has
been outlined and explained. The methods were carefully
chosen in other to obtain the best approach which assisted in
achieving the study aims and objectives.
41
The phenomenology paradigm as discussed above were
adopted stating the reasons for its selection. This basis of
combining both questionnaire and interviews was to provide
both the qualitative and quantitative data which will contribute to
an improvement of accountability of parastatals.
42
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 DATA PRESENTATION
In this chapter, the data collected from questionnaire are
presented, analysed and tabulated. Sixty questionnaire were
prepared and distributed to the respondent drawn from lower,
senior and management staff of Enugu State Housing
Development Authority.
The analysis were carried out using simple percentage
method, the hypothesis will be analyse using the chi-square
based on the analysis of the relevant questions.
4.2 ANALYSIS OF THE QUESTIONNAIRE
Question 1
What role does budget and budgeting control play in your
organization?
43
Table 4.1
Options No of Response Percentage
Very high 47 78%
Very low 13 22%
Total 60 100%
Source: Researchers Field Study (2012).
From the above table it was shown that 47 of the
respondent representing 78% agree that budgeting and
budgetary control play a vital role in the organization, while 13
respondents representing 22% disagree.
Question 2
To what extent do budgeting implementation and their
actual performance relate?
44
Table 4.2
Options No of Response Percentage
High 25 42%
Low 20 33
No idea 15 20
Total 60 100%
Source: Researchers Field Study (2012).
From the table 4.2 above it was revealed that out of 60
respondent 25 representing 42% believes it is high while 20
representing 33% believes it is low relationship while 15
representing 20% had no idea of the degree of relationship.
Question 3
To what extent do budgetary control enhance
management productivity.
45
Table 4.3
Options No of Response Percentage
Very high 55 92%
High 5 8
Low - 0
Total 60 100%
Source: Researchers Field Study (2012).
From the table above, it was shown that 55% of
respondents representing 92% said that there is a very high
degree of influence of budgetary control to management
productivity while 5 respondent or 8% stated otherwise.
Question 4
What are the significant relationship between budgeting
control and management accountability.
46
Table 4.4
Options No of Response Percentage
Strong significance 35 58%
Weak significance 15 25
No idea 10 17
Total 60 100%
Source: Researchers Field Study (2012).
From the table above, it is observed that 35 of the
respondents or 58% believe strongly, 15 or 25% believed
weakly while 10 or 17% of the respondent said no idea to the
notion that there is a significant relationship between budgetary
control and accountability.
4.3 TEST FOR HYPOTHESIS
With special reference to the purpose of this study, the
following shall be tested using the chi-square.
As in Question 1
Ho:Budgeting does not play any role in government parastatals
accountability.
47
Hi:Budgeting plays a vital role in government parastatals
accountability.
Table 4.5
Options (Observed Expected)
(Observed Expected)
(Expected Observed)
Very high 20(14.33)A 10(17.92)B 13(10.75)C 47
Very low 0(5.67)D 15(7.08)E 2(2.25)F 13
20 25 15 60
Source: Researchers Field Survey (2012).
Extracted from table 4.1, question 1.
The expected values for each of the cells in the table is
calculated from the methods before. Row cell A = 43 x 20 60 = 14.33 Row cell B = 43 x 25 60 = 17.92 Row cell C = 43 x 15 60 = 10.75
48
Row cell D = 17 x 20 60 = 5.67 Row cell E = 17 x 25 60 = 7.08 Row cell F = 17 x 15 60 = 4.25 Computation of Chi-Square Table 4.6
O E O - E (O - E)2 (O - E)2 E
20 14.33 5.67 32.1489 2.2435
10 17.92 7.92 62.7264 3.5009
15 10.75 2.25 5.0625 0.4704
0 5.67 5.67 32.1489 5.6700
15 7.08 7.92 62.7264 8.8597
2 4.25 2.25 5.0629 1.1912
21.9357
Source: Researchers Field Study (2012).
49
Extracted from table 4.5
The calculated chi-square is 21.9357
To determine the critical value, the associated degree of
freedom (DF) is DF = (R - 1) (C - 1)
Where R is number of rows
C is the number of columns
Therefore DF = (2 - 1) (3 - 1)
= 2
Significant level is 5% = 0.05
The critical value X2 for 2DF at 0.05 level of significance is
5.991.
Therefore Cal X2 = 21.936 (approx)
Tab X2 = 5.991 (approx)
Decision Rule
Since the calculated X2 value of 21.936 is greater than the
tabulated X2 value of 5.991 at 2DF. The researcher therefore
rejects the null hypothesis (Ho) at 5% level of significance. This
suggest that budgeting plays a vital role in government
parastatals accountability and should be accepted.
50
Hypothesis 4
Ho:There is no significant relationship between budgeting
control and management accountability.
Hi:There is a significant relationship between budgetary control
and management accountability.
Table 4.7
Options (Observed Expected)
(Observed Expected)
(Expected Observed)
Total
Strong 20(17.50)A 10(11.62)B 13(10.75)C 35
Weak 15(7.5)B 10(5.00)E 0(2.50)F 15
No 5(7.5)G 0(3.33)H 5(1.67)I 10
TOTAL 30 20 10 60
Source: Researchers Field Survey (2012).
Extracted from table 4.4, question 4.
The expected frequency for each of the cells are calculated
thus: Row cell A = 35 x 30 60 = 11.67
51
Row cell B = 35 x 20 60 = 11.67 Row cell C = 35 x 10 60 = 5.83 Row cell D = 15 x 30 60 = 7.50 Row cell E = 15 x 20 60 = 5.08 Row cell F = 15 x 10 60 = 2.50 Row cell G = 10 x 30 60 = 5.00 Row cell H = 10 x 20 60 = 3.33 Row cell F = 10 x 10 60 = 1.67
52
Computation of Chi-Square X2 for the test of hypothesis 4. Table 4.7
O E O - E (O - E)2 (O - E)2 E
10 17.80 6.25 32.1489 0.357
20 11.67 -1.67 2.7889 0.2390
5 5.83 -0.83 0.6889 0.1182
5 7.50 -2.50 6.25 0.8333
10 5.00 5.00 25 5.0000
0 -2.50 -2.50 6.25 2.5000
5 5.00 0 0 0
0 3.33 -3.33 11.0889 3.3300
5 1.67 3.33 11.0889 6.6400
19.0176
Source: Researchers Field Study (2012).
Extracted from table 4.7
The calculated of chi-square X2 is 19.0176 to determine the
critical value, the associated degree of freedom is determine
thus;
53
degree of freedom (Df) = (R - 1) (C - 1)
= (3 -1) (3 - 1)
= 2 x 2
= 4
Significant level = 5% = 0.05
The critical value X2 for 4DF at 0.05 level of significant 159.91.
Therefore X2 cal = 19.0176
tab = 9.91
Decision Rule
Since the calculated X2 value of 19.0176 is greater than
the tabulated X2 value of 9.91 at 4DF, the researcher therefore
reject the null hypothesis (Ho) and accept the alternative
hypothesis (Ho) and accept the alternative hypothesis (Hi).
This implies that there is a significant relationship between
budgetary control and accountability.
54
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSIONS AND
RECOMMENDATIONS
This chapter presents the summary of research findings
conclusions and recommendations based on the findings of the
research work. It is in this chapter that the objectives of the
study will be fulfilled through the discussions of the major and
minor findings from which the conclusions will be drawn and the
necessary recommendations made.
5.1 SUMMARY OF FINDINGS
In the course of this study which is based on the role of
budgeting in government parastatals accountability with
reference to Enugu State Housing Development Authority.
The following findings were made:
1)Budgeting and budgetary control play a vital role in the overall
success of the government parastatals which will lead to
the achievement of the set goals and objectives of setting
up the parastatals.
2)The study also reveals that there is a great degree of
relationship between budgetary implementation and their
55
actual performance. This shows that if a budget set out at any
financial period is not implemented to at least 70% the
goal of the period will not be made or attained.
3)The research also reveals that budgetary control as a
management tool contributes to efficiency and
effectiveness of management productivity.
4)It also reveals that budgetary control can be used to assessed
management budgeting accountability.
5.2 CONCLUSION
Having examined in details the uses and importance of
budgeting and budgetary controls in the organization and the
role the play towards determining the corporate objectives (profit
making) one could rightly conclude that it is indespensible to any
business organization.
If budget are carefully planned and implemented by
management, it could lead to decrease in cost and an increase
in revenue. Though budgeting and budgetary controls enhance
the efficiency of the organization performance, it should be
56
noted that it is not the magic stick that could replace effectively
planned and efficiency implemented at all levels, it will become
an essential standard in measuring actual performance.
This in above all makes budget an essential tool for
management accountability.
5.3 RESEARCH RECOMMENDATIONS
On the whole the findings of this study supports the
conclusion that the propose of budgeting and budgetary controls
contributes in no small way tot he overall performance of the
organizational accountability.
In the light of the findings made earlier, the following
recommendations were made:-
1.For budgeting to play a vital role in government parastatals
accountability. Top level managers should educate other
level managers on the importance of adhering strictly to
the budget provisions and implementations. When every
staff understands the provisions of the budget its
implementation will lead to proper accountability.
57
2.For actual performance the organization should adopt the
techniques that is easy to understand by their managers
and staff such as flexible and zero based budgeting
techniques. This will make it easy for implementation and
reduces cost for actual performance.
3.Since budgetary controls leads to efficiency and effectiveness
of management productivity, the top level management
should allow inputs from all levels of management in its
budgeting decisions to ensure its decisive implementation.
4.Since budgetary control is used to assess management
accountability, constant and periodic review should be
introduced in the budgeting process to ensure that
corrective action are taken an deviations which occur as
they occur.
5.4 DIRECTION FOR FURTHER RESEARCH
Future research should need focus on larger populations
size. For validation purposes. This will lead to an upshot to other
areas that has not been covered by this research because of
time constraints and other variable.
58
1.Environmental influence in budgeting control as a tool for
transparency in government parastatals.
2.Problems and prospects of budgets and budgetary controls in
government parastatals.
3.The role of corporate budgetary system in government
parastatals.
4.The benefits and contribution of budgetary control in
government decision making.
Finally researchers should took for other ways of using
budgeting as a tool for accountability in government parastatals.
Overall the research has been an interesting experience
to the researcher and has given evidence to the aim and
objectives and well as justified the researchers rational and
viewpoint.
59
BIBLIOGRAPHY Adeneji, A.A. (2011), An Insight into Management Accounting. Lagos Value Analysis Publishers, pg. 379. Anyigbo, C.I. (1999), Cost and Management Accounting, Enugu, Hugotez Publishers, pg. 196. Baggot, J. (1985), Cost and Management Accounting Made Easy London, McDonald and Evans Ltd p. 125. Bryman, A. (2001), Social Research Method, New York: Oxford University Press. Broom, J.L. and Howard, L.R. (1975), Principles and Practice of Management Accounting, London, McDonald and Evans Ltd,
p.82. Cooper, D.R. and Schander, S.P. (2008), Business Research Method, 10th Ed.; New York, McGraw/Irwin. Cooper, C. and Locke, E. (2000), Industrial and Organizational Psychology, Blackwell Business, Qualitative. Gesswill, J.W. (1994), Research Design and Quantitative Approach, London, Sage Publications. Deenscombe, M. (2002), The Good Research Guide, England, Open University Press. Eneje, B.C. (2005), Cost Accounting Made Easy, Enugu: Computer Edge Publishers.
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Eze, J.C. (2001), Principles and Techniques of Management Accounting, Enugu, JTC Publishers p.158. Ezeugwu, V.U. (1999), Intermediate Accounting, Enugu,Hugotez Publishers. Foot, M. and Hook, C. (2005), Introduction to Human Research Management 4th ed. Esseze, F7/Prentice Hall. Hussey, J. and Hussey, R. (1997), Business Research - A Practical Guide for Undergraduate and Post-graduate Students,
London: Macmillian Business. Ikpe, D.N. and Obah, G.S. (2004), Management Accounting An Introduction Test. Lagos, Masdoc Pub. Jankoweez, A.D. (2005), Business Research Projects 4th ed. London, Thomson Learning. Kumar, R. (1999), Research Methodology, A Step by Step Guide for Beginners, London, Sage Publishers. McQueen, R. and Knussen, C. (2002), Research Method for Social Science, An Introduction, Harlow: Pearson Limited. Punch, K.F. (1998), Introduction to Social Research, Qualitative abnd Quantitative Approach, London, Sage
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Strauss, A. and Corbin, J.M. (1997), Grounded Theory in Practice, Thousand Oaks, California, Sage Pub. Saari, L.M. and Schneider, B. (2001), Going Global: Surveys and Beyond", Professional Workshop Paper Presented at the
Sixteenth Annual Conference of the Society for Industrial and organizational Psychology, San Diego CA.
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APPENDIX Department of Management Faculty of Business Administration School of Post-graduate Studies University of Nigeria Enugu Campus. Dear Respondent I am a student in the above-named institution carrying out a study on the role of budgeting in government parastatals accountability - A Case Study of Enugu State Housing Development Authority. I want you to assist me by providing the information required in this questionnaire. The purpose of the study is academic and so the information you provide will be treated with strict confidentiality. Thanks for your cooperation. Yours faithfully, Okafor Donatus Okechukwu
63
RESEARCH QUESTIONNAIRE Please complete the blank spaces below by kindly ticking [] the correct answer. SECTION A 1.Name
______________________________________________ 2.Address
___________________________________________ 3. Sex a) Male [ ] b) Female [ ] 4. Marital status ____________________________________ 5. Age _______________________________________________ 6. Educational level a) Post graduate [ ] b) Graduate [ ] c) Professional certificate [ ] d) HND [ ] e) OND/NCE [ ] f) SSCE/GCE [ ] 7.Position held presently a) Top level management [ ] b) Middle level management [ ] c) Low level management [ ] 8.Work experience (in years)
64
a) 0 - 4 [ ] b) 5 - 9 [ ] c) 10 - 14 [ ] d) 15 and above [ ]
65
SECTION B 1.Do you prepare budget in your organization? a) Yes [ ] b) No [ ] 2.What type of budget do you prepare to achieve your goals? a) Flexible [ ] b) Static [ ] c) No idea [ ] 3.Who prepares budgets in your organization? a) Chief accountant [ ] b) the departmental heads [ ] c) Budget committee [ ] d) Any other [ ] 4.Are budget used as a basis for controlling? a) Yes [ ] b) No [ ] c) No idea [ ] 5.What factor do you take into consideration before allocating
cost. a) Relevant of the item [ ] b) Market trend [ ] c) Statue of the handling officer [ ] 6.To what extent does budgetary control act as an essential tool
to management decisions? a) Strong extent [ ] b) Very weak extent [ ] c) None at all [ ]
66
7.To what extent does the state government influence the budgeting process in your corporation?
a) To a high extent [ ] b) Minimal influence [ ] c) No influence at all [ ] 8.What role do budgeting and budgetary control play in your
organization? a) Strong role [ ] b) Weak role [ ] c) No role at all [ ] 9.To what extent do budget implementation and their actual
performance relate? a) Very high [ ] b) Very low [ ] c) No idea [ ] 10.To what extent do budgeting control enhances management
productivity? a) To a very high extent [ ] b) To a minimal extent [ ] c) No enhancement [ ] 11.What are the significant relationship between budgetary
control and accountability? a) Very important relationship [ ] b) Very low relationship [ ] c) No relationship [ ]