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PROJECT TOPIC: ASSESSMENT OF BUDGETING IN THE PRESENT NIGERIA ECONOMIC SYSTEM IN CROSS RIVER STATE UNIVERSITY OF TECHNOLOGY

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CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Budget and Budgeting are concepts traceable to the Bible days, precisely the days of Joseph in Egypt. It was reported that nothing was given out of the treasure without a written order. History has it that Joseph budgeted and stored grains which lasted the Egyptians throughout the seven years of famine.

Budgets were first introduced in the 1920s as a tool to manage costs and cash flows in large industrial organizations.

Jean, (2010), states that it was during the 1960s that companies began to use budgets to dictate what people needed to do. In the 1970s performance improvement was based on meeting financial targets rather than effectiveness companies then faced problems in the 1980s and 1990s when they were not willing to spend money on innovations in order to stay with the rigid budgets, they were no longer concerned about how customers were being treated, only meeting sales targets became essential.

It is a requirement as per Serena Group of Hotels Finance policy that each unit has got to prepare budgets from where financial statements prepared on a monthly basis can be compared with. However effective budgetary control has been a problem. What is forecasted monthly is not actually met. In business organizations, budgeting are formally associated with the advent of industrial capitalization for the revolution of the eighteenth century, which presented a challenge for industrial management (Jean, 2010).

However, budgeting at the early state of its development was concerned with preparing and to permit correct performance evaluation and consequently rewards.

Information that management accounting control system helps managers, by monitoring company‟s changing environmental circumstances, to compare opportunities and threats in the market so that they can obtain added value against competitors because it is important in facilitating the preparation of budgets, since budgeting and accounting are closely related (Bruner, 2002).

Budgets are known to have an important role to transmit the expectation of top management to lower levels. According to Brigham, (1979) budgets are used to communicate top management‟s expectations to managers and employees.

According to Lucey. (1993), it is a quantitative expression of plan of action prepared in advance of the period to which it relates, expressed in money terms approved prior to the period.

Lucey (2002) further urges that performance is influenced by many factors which includes planning and coordination, clarification of authority and responsibility, effective communication both internal and external, control of resources available, both human and non human and motivation of both the lower and middle management.

If the actual numbers delivered through the financial year turn to be close to the budget, this actually demonstrates that the organization‟s management understand its business and has been successfully driving it in the direction they had planned. On the other hand, if the actual results diverge wide from the budget, this sends out an „out of control‟ signal. For this reason, budget based control means manager‟s evaluation according to budgetary goals (Lucey 2002).

In this context, budgeting benefits and its possible negative effects on attitudes and behaviors of managers on performance are still among the subjects of strategic management control systems that are being researched presently nearly all large businesses reforecast their forecast their activities, as months pass, the actual income achieved and expenses incurred can be compared to the budget and forecast.

1.2 STATEMENT OF THE PROBLEM

Based on the purpose of the study, the problems under study can be seen in this context. Due to the dependence of Nigeria on revenue, a crisis in the world market will result to the following: A reduction of oil revenue which will cripple the economy and shatter National Development. Abandoning of capital projects or programs due to insufficient fund in the economy. In-efficient allocation of limited resources to provide the right caliber of manpower and necessary infrastructure as basis for our national growth. The inability of the management to prepare a concise budget that will enable Cross River State University of Technology to achieve its set goal and objective (Nwude, 2001).

1.3 OBJECTIVES OF THE STUDY

The broad objective of this study is to assess budgeting in the present Nigeria economic system in Cross River State University of Technology. Other objectives of the study are;

i.          To determine the role played by budgeting towards the controls of government fiscal policies.

ii.        To establish the relationship between budgetary control and performance in Cross River State University of Technology.


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