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BUDGETARY CONTROLS AND PERCEIVED FINANCIAL PERFORMANCE

OF TERTIARY INSTITUTIONS UNDER (BTVET)

Declaration

I hereby declare that this dissertation is my original work and has not been submitted for
a degree a ward to any other University.

Signature

.
ESUKU JOSEPH
2003/HD10/269U

Date

..

Approval

This dissertation has been submitted for examination with the approval of the following
supervisors;

Signed

Professor Munene JC

Date

..

Signed

...
Dr. Isaac Nkote Nabeta

Date

Dedication
This research work is dedicated to my father and mother, and more so my wife whose
prayers, love and unending support has led me to this heights in my life time.

Acknowledgement
First and foremost to the almighty God, without you things should have been difficult.
My special thanks go to the Administration of Makerere University Business School for
providing me with a scholarship in post graduate programme to pursue a degree of
Masters in Business Administration (Accounting and Finance). In the same note, special
thanks deeply go to my supervisors Professor Munene JC and Dr. Isaac Nkote Nabeta for
their committed and continued guidance that has made this work a success.
Special thanks go to Mr. Moya Musa for the continued concern and encouragement he
offered me during the times of my research work. Special thanks to my colleagues whose
guidance and comments enhanced greatly the accomplishment of this study. Particular
thanks go to Tukamushaba Eddy, Olinga Raphael, Abeja Martha, Nkutu Geoffrey.

Acronyms

AC

Agricultural College

BTVET:

Business, Technical and Vocational Education Training

CIMA:

Chartered Institute of Management Accountants

HTI:

Health Training Institution

MOE&S:

Ministry of Education and Sports

TI

Technical Institute

TS

Technical School

UCC:

Uganda College of Commerce

TABLE OF CONTENTS
Item
Page
Declaration

Approval

(i)

(ii)
Dedication

(iii)
Acknowledgement ..
(iv)
Acronyms ..
(v)
Table of Contents
(vi)
List of Figures and Tables.

(ix)

Abstract .

(x)

1.0

Background

..

1.1

Statement of the Problem

1.2

Purpose of the Study

1.3

Objectives of the Study .

1.4

Research Questions ...

1.5

Scope of the Study .

1.5.1

Subject Scope .

1.5.2

Geographical Scope ...

1.6

Significance of the Study ...

1.7

Conceptual Framework ...

2.0

Literature Review ...

2.1

Introduction

2.2

Concepts and Components of Budgetary Control ...

2.2.1

Budgeting and Planning .

2.2.1.1 Budgeting..

2.2.1.2 Budget Functions..

2.2.1.3 Planning.

10

2.2.1.4 Planning Process

12

2.2.2

Monitoring and Control ..

13

2.2.2.1 Monitoring.

13

2.2.2.2 Control

15

2.2.3

Analyzing, Feedback and Performance ..

16

2.2.3.1 Budgetary Analysis

16

2.2.3.2 Feedback.

18

2.3

Financial Performance ...

19

2.3.1

Performance Measurements.

21

2.4

Relationship between Budgetary Controls and Performance .

24

3.0

Methodology ..

30

3.1

Research Design .

30

3.2

Population of Study ............................................................................

30

3.3

Sampling Design

30

3.4

Sample Size .

31

3.5

Sources of Data ..

31

3.6

Data Collection Instruments ...

31

3.7

Measurement of the Research Variables

32

3.8

Reliability and Validity of Research Instruments ..

32

3.9

Data Processing and Analysis

33

3.10

Anticipated Limitations of the Study .

33

4.0

Data Presentation, Analysis and Interpretation.

34

4.1

Introduction

..

34

4.2

Demographic Statistics

..

34

4.2.1

Level of Education by Sex

35

4.2.2

Level of Education by Age

36

4.2.3

Level of Education by Period worked with Organization

37

4.3

Budgetary Controls

38

4.4

Perceived Financial Performance .

40

4.5

Correlation Analysis

41

4.5.1

Multiple Regression Coefficients .

42

5.0

Discussion of results/findings .................................

44

5.1

Introduction

44

5.2

Budgetary Control Components

44

5.3

Perceived Financial Performance

46

5.4

Relationship between budgetary controls and perceived financial


performance

..

..
8

47

6.0

Conclusions and Recommendations

49

6.1

Introduction 49

6.2

Conclusions

6.3

Recommendations

6.4

Areas for further Research ..............................................................

52

6.5

References ..

53

6.6

Appendices .......................................................................................

59

6.7

Letter of Introduction by the Director Post Graduate Studies..............

65

.... 49
................................................................................. 50

List of Figures and Tables:


Figure (i): Conceptual Framework .....................................................

Table (1):

Percentage Shortfall between expected and actual amounts

of UCC Soroti .........................................................................

Table (2):

31

Sample Size........................................................................

Table (3): Reliability and Validity of Research Instruments

32

coefficients.

35

Table (4.1): Case Processing Summary...................................................

35

Table (4.2):

36

................................................ Table (4.3): Level of Education by

37

Age...................................................

38

Table (4.4): Level of Education by Period worked with

40

10

Organization......

42

11

Table (4.5): Rotated Component Matrix for Budgetary Components...

43

12

Table (4.6);

59

13

Performance.......

Level of Education by Sex

Rotated Component Matrix for Financial

59
9

Table (4.7):

Correlation Matrix

Table (4.8):

Regression Analysis

Table (5): Time Frame of the Study...............................................


Table (6): Budget of study estimates...............................................

Abstract
This research was induced by the eminent low financial performance of BTVET
Institutions in terms of Infrastructure Development, Service Delivery and Expenditure
Related Activities. This research work examines the extent to which the Budgetary
Controls lead to a positive perception on the Perceived Financial performance.

A cross sectional and descriptive survey design was adopted using a representative
sample of 32 BTVET institutions out of a population of 111 institutions. Self
administered questionnaires were used to collect data from respondents. Factor analysis,
Rotated Matrix and chi-squares were used to determine the budgetary controls and
perceived financial performance of BTVET institutions while correlation and regression
coefficients were used to determine the relationship between budgetary controls and
perceived financial performance.

The findings indicates a low implementation of budgetary controls, low perceived


financial performance though slightly above average; with budgeting and planning,
10

monitoring and control and analyzing and feedback significantly correlated with
perceived financial performance in BTVET institutions.

This therefore calls for the payment of enormous attention by the management and staff
in BTVET institutions to ensure that the implementation of budgetary controls is done
focusing on Budgeting and Planning, Monitoring and Control and Analyzing and
Feedback in order to enhance perceived financial performance.

11

CHAPTER ONE
1. Background to the Study.
In a move to establish more tertiary institutions in the country, the government of
Uganda formed a task force in 1982 mandated with the responsibility of
establishing UCCs. Three (03) UCCs namely: Aduku, Kabale and Soroti were
established as a pilot scheme in 1983 and two more UCCs namely Packwach and
Tororo were established in 1984, (Apono, 2002).
The Ministry of Finance and Economic Development in conjunction with
Ministry of Education and Sports funds the operations of these institutions. The
budgetary control is decentralized; the institutions submit to the Minister for
approval the estimates of incomes and expenditure of the Institute (the University
12

and other Tertiary Act, 2001 Articles 80-90).


Budgetary control is the establishment of budgets relating to the responsibilities
of executives of a policy and the continuous comparison of the actual with the
budgeted results, either to secure by individual action the objectives of the policy
or to provide a basis for its revision C I M A (1999).
Budgeting, Control and measuring and reporting, analyzing and feedback
constitute elements of budgetary control (Chandan, 1998).
According to Arora (1995), budgetary control is one of the very important tools of
planning and control. Many organizations fail because of lack of planning, by
planning many problems and dangers are anticipated which the organization has
to face. In the case of UCCs due to the shortfalls in the expected income for the
overall annual budgets accruing from government budgetary cuts to BTVET sub
sector, the funding for the FY 2003/2004 was 3.6% of the overall expenditure of
MOE&S compared 4.0% for the FY 2002/2003 (Social Services Committee
Report to Parliament), colleges scale down some of their plans to meet specific
items such as utilities, food and infrastructural development.
Table (1): The percentage shortfalls between the expected and actual amounts
received by UCC Soroti.
F/Y

Expected UGX Received UGX

Percentage shortfall

2003/2004

144,144,000

90,221,732

37

25,875,622

40.9

2004/2005 half year 62,935,000

Source: UCC Soroti Financial Report for the FY2003/2004


Due to above shortfalls, the total liabilities accruing to non-computerized staff
salaries amounted to UGX 54 million and UGX 36 million to the suppliers of
13

food and non-food items for the financial year 2001/2002. This led to auctioning
of the college truck because of non-payment of a supplier.

In the F/Ys

2002/2003 2003/2004 the liabilities were UGX 31 million and UGX 38 million
respectively accruing both to staff salaries and suppliers of food and non-food
items. The reason advanced for such performance was inadequate funding, poor
identification of targets and allocation of resources. Thus, the need for effective
budgetary controls which is a challenge to government supported tertiary
institutions.

2.

Statement of the Problem.


Tertiary institutions draw budgets annually, however, there are inconsistencies in
the budgetary implementation hence failure to stick to the drawn budgets. This
has resulted in failure to meet budgetary obligations in many of these institutions.
There have been delays in staff salaries, payment of suppliers and school
activities have stalled because of lack of funds though these activities were
budgeted for. It is imperative therefore to investigate these inconsistencies and
failures in financial performance in tertiary institutions.

3.

Purpose of the Study.


The purpose of the study was to examine the existing budgetary controls and
financial performance of BTVET institutions.

4.

Objectives of the Study.


The objectives of the study were;
14

(I)

To establish the budgetary controls at the BTVET institutions.

(ii)

To establish the financial performance of the BTVET institutions.

(iii)

To establish the relationship between the budgetary controls and financial


performance at the BTVET institutions.

5.

Research Questions.
(i)

What are the budgetary controls at BTVET institutions?

(ii)

What is the financial performance of BTVET institutions?

(iii)

What is the relationship between budgetary controls and financial


performance at BTVET institutions?

6.0

Scope of the Study.


Subject Scope
The study investigates budgetary controls and the perceived financial
performance of the BTVET institutions
Geographical Scope
The study was carried out in the Government aided Tertiary Institutions under
BTVET located in the Eastern, Northern and Central parts of Uganda, because of
convenience and ease in the collection of data.

7.0
i.

Significance of the Study.


Findings of the study shall help Government in identifying the effects and
15

implications of its inconsistencies towards its tertiary education budget


commitments.
ii.

The study shall guide tertiary education administrators to a new planning


paradigm to effective budgetary controls and financial performance evaluation.

iii.

The Study shall add to the already existing literature on budgetary controls and
performance of the BTVET institutions.

iv.

The study is expected to enable the identification of budgetary control methods


that are essential to financial performance of the BTVET institutions.

v.

The study shall enhance the regulators and policy makers formulation of
appropriate policies, which enhance budgetary controls and financial performance
in BTVET institutions.

8.0.

Conceptual Framework.
The conceptual framework figure below explains the relationship between the
variables under the study, the budgetary controls (Independent Variable) and the
level of financial performance (Dependent variable).
Figure (i): Conceptual Framework

16

Budgetary Controls

Perceived Financial
Performance

Budgeting and Planning

Monitoring and Control

Analyzing & Feedback

Infrastructural
development
Service delivery
Expenditure
related activities

Intervening Variable

Government policies
Incentives

Source: (Literature reviewed from Blocher et a., 2002; Drury, Hilton et al., and Mordi
2000).

The Budgetary Control process comprised of budgeting and planning, which


provides a formal basis for Monitoring and Controlling the progress of the
organization as a whole and its component parts, towards the achievement of the
objectives

specified in the budgeting and planning stages, thus providing

feedback necessary to be able to make corrections to current operations and


activities in order to meet the original objectives and plans, thus enabling the
determination of the performance of the organization in financial, efficiency
ratings, infrastructural and units produced terms.
CHAPTER TWO:
2.0

LITERATURE REVIEW.

2.1

Introduction.
The literature reviewed in the study is cited mainly from studies carried out in
17

developing countries, regarding budgetary controls by other scholars and writers.

2.2

Concepts and Components of Budgetary Controls.


Budgetary Control is the process of comparing actual results with planned results
and reporting on the variations (Lucy,1989). Control compares actual
performance and budgeted and helps expenditure to be kept within agreed limits.
The most important managerial problem in Budgetary Control is the
interpretation of budget variance. Deviations should be noted and corrective
action taken. Budgetary Control is constituted of Budgeting, monitoring and
control, analyzing and feedback.

2.2.1

Budgeting and Planning.


2.2.1.1

Budgeting:

Budgeting is the process of preparing and using budgets to achieve management


objectives. A budget represents managements plans of action for future periods
of an organization (Drury, 2000; Pandey, 1994). Extensive use of budgeting has
been documented in studies of Scarborough et al., (1991). They have largely
highlighted the significant emphasis, which diverse types of organizations in
various countries, put on budgeting systems, as key elements of management
control. Increasingly, however, there appears to be a paradigm shift in the
management accounting literature, while there are still advocates of budgeting,
critics argue that the traditional budget is no longer appropriate given changes in
technology and the rapidly changing business environment (Kaplan, 1988, 1990;
Johnson and Kaplan, 1987). Proponents of budgeting argue that budgets have
18

several important roles. Blocher, (2002), for instance argued that budgets help to
allocate resources, coordinate operations and provide a means for performance
measurement. Hilton (2000) agrees with this view and claim that the budget is
most widely used technique for planning and control purposes. The Institute of
Cost and Management Accounts defines a budget as a plan quantified in monetary
terms, prepared and approved prior to a defined period of time, usually showing
planned income to be generated and/or expenditure to be incurred during that
period and the capital to be employed to attain given objectives (Mordi, 2000).
Budgeting involves the preparation of an itemized financial statement showing
what the expenditures are going to be over a given period, usually a year. The
budget may also show what income the institution is likely to generate during the
same period.

Cole (1996), noted that fundamental to the success of any organization, is drawing
a budget plan and putting it in operation. Further, notes that creating a budget is
important as it enforces an organization to carefully consider the expected
demand for its products, services and the resources required to meet that demand.
It also translates the higher priorities for the organization into the appropriate
resources required to achieve those priorities, as it would be difficult to allocate
resources due to scarcity without a budget plan. It creates the baseline against
which actual results can be compared, budgets act as a basis for measuring
performance in organizations and help in directing the activities of the
organization hence giving earlier signals on variances in sufficient time to take
corrective actions. Clarke and Toal (1999) too are of the opinion that budgets are
19

still essential and can for example, be incorporated as part of the financial
component of the balanced scorecard. Pierce and ODea (1998), also subscribe to
the view that budgets are still relevant to todays business environment.

2.2.1.2

Budget Functions:

Budgeting serves functions of financial and management control. Financial


control results to the control of financial resources while management control
ensures that the activities of the parts of the organization are co-coordinated
(Otley, 1987). Budgets coordinate the activities of the parts of the organization,
through this; the objectives of the organization are harmonized with the objectives
of

the

parts

or departments.

Budgets

facilitate

coordination

through

communication of information about plans to managers and employees (Nassolo,


1997).

Budgets perform the function of control, which is the art of comparing where you
are (actual performance) to where you are supposed to be (Budgeted) so that
corrective action can be taken. It is necessary to ensure that plans as laid down in
the budgets are being achieved. Through control, organizational activities are
monitored and performance is evaluated (Sebbi, 1994; Lewis, 1996).

Budgeting at the local level is intended to improve service delivery by shifting


responsibility from policy implementation to the beneficiaries and promotion of
local skills. This is intended to place emphasis on transparency and accountability
in the management of public affairs (Danilo, 2002).
20

On the other hand, if the budget is insufficient to compete a piece of work,


additional funds should be availed so that the project is completed. Additional
funds in from of supplementary estimates should be availed so long as satisfactory
reasons are given, this will facilitate completion of projects on time. It will also
reduce wastage of resources on uncompleted projects. There is need to plan for
changing business conditions in order to appropriately take action that can deal
with changes that occur should any of the plans be affected by such changes. This
is the implication of having contingency plans available to deal with changes,
which were unforeseen at the time when the budget was originally prepared
(Parasuraman and Zeithml, 1994).

Mean while critics of budgets claim that budgets are bad for business, are no
longer adequate and are fundamentally flawed as a planning and control
mechanism in todays complex and highly uncertain business environment
McNally, (2002). Stewart (1990) claims that experts criticize budgets as being
ineffective. According to him, Budgets, says experts, control the wrong things,
like head count and even profits (Stewart, 1990, P. 179). Prendergast (2000) lists
a number of problems with budgeting for planning and control purposes. First, a
lot of guesswork is involved in the budgeting process. Second, budgets are
increasingly inaccurate as a result of shorter product lifecycles and the rapidly
changing business environment. Finally the extent of budget gamesmanship, he
argues that over the years, budgets have resulted in a conflict between top
management and their subordinates.
21

Another major criticism of budgets is the over-emphasis on short-term profits at


the expense of continuous long-term improvements such as new product
development and customer satisfaction (Hayes & Abernathy, 1980). McNally
(2000) is also very critical of the traditional budget. He argues, The days of
traditional budgeting and panning are numbered (McNally, 2000, P. 10). Some
criticisms that McNally has of budgeting are that budgeting process consume too
much time and incur very high costs. Consequently, when the budget is
authorized, it may no longer be accurate and this causes problems for businesses
in todays unpredictable and fast-phased business environment (McNally, 2002,
P.11). An annually established budget is, therefore, imperative to the effective
and efficient functioning of the college (Zimmerman, 2003).

2.2.1.3

Planning:

Planning as part of the Budgeting system involves a long range planning, strategic
planning and short term planning (Sizer, 1989). Further, emphasizes that short
term budgeting must accept the environment of today, and the physical human
and financial resources at present available to the organization.

Planning involves selecting objectives and action to achieve them. It is looking a


head and preparing for it, which links it to budgeting. Through planning the
organization is able to assess where it is supposed to be in terms of objectives and
goals. This comes from the information system (Mocker, 1970; Lewis, 1996;
Stoner, 1996)
22

Good planning is characterized by clear objectives and goals. It must be simple


and comprehensive. The plan should be well balanced and flexible so as to
incorporate changes in the resources and should be time bound. Properly covered
plans tell what, when and how something is to be done (Chandan, 1995; Bhatia,
1996). Sound planning mentions priorities and the planning control cycle. Since
there are so many activities to be performed, its imperative that they are listed in
order of preference.
Budgets are put in place in advance of the budget periods based on anticipated set
of circumstances or environment. The major decisions are made as part of the log
term planning process (Selznick, 1988). Benefits of budgeting accrue to the whole
organization if both the short and long term consequences of the budgets are
considered (Otley, 1987). However, the annual budgeting process leads to the
refinement of those plans, since managers must produce detailed plans for the
implementation of the long range plans. Without the annual budgeting process,
the pressures of day-to-day operating problems may tempt managers not to plan
for future operations (Scott, 1987).

2.2.1.4

Planning Process:

The planning process ensures that managers do plan for future operations, and
consider how conditions in the next year might change and what steps they should
take to respond to these conditions.
23

Kimbrough and Nunnery, (1988) describing the procedures for school budget
preparation points out the following; that teachers should be asked to submit items
to included in the estimates, that the lists of estimates by the different teachers and
heads of departments be assembled, reviewed during a special meeting consisting
of the school heads and the bursar. According to them, plans and estimates must
reflect serious considerations when budgeting. This process sets out the various
requirements of the agreed priority to ensure its feasibility. In particular, the plans
should include considerations of cash resources available, and the cash needs and
further ensure that any differences are covered by the available resources. This
calls for a coherent plan including all parts and individuals of the organization.

Budgetary planning is therefore the key to success in business and budgeting


forces planning to take place. Once not done properly the organization will not
operate properly (Lucy, 1996). This process encourages managers to anticipate
problems before they arise, and hasty decisions that are made on spur of the
moment, based on expediency rather than reasoned judgment (Murphy and Peek,
1980). An organizations plan and priorities should therefore be important drivers
to the budgeting process.

The previous studies reviewed above, therefore lead to the conclusion that there
is an increasing perception that budgets are less useful in today highly challenging
business environment. Consequently knowledge about budgeting practices is
useful to provide insights into whether budgets are still appropriate planning and
control tools. Its the researchers intention to explore whether such a budgeting
24

process and planning processes exist at BTVETs institutions.

2.2.2 Monitoring and Control.


2.2.2.1

Monitoring:

Budgetary Monitoring and Control is a deterrent process against misappropriation


of funds in terms of procedures and rules that establish the boundaries of financial
behaviour. According to Drury (2000), budgetary monitoring and control process
is a systematic and continuous one which, is characterized by the following
stages:
Establishing targeted performance or level of activity for each department of the
organization by way of setting targets to be achieved enhances the monitoring of
the organizations performance.
Communicating details of the budgetary policy to all the stakeholders for easy
appreciation of the set targets and objectives enhances ownership of the results
achieved at end of the day.
Monitoring actual revenue or cost data this is done by way of continuous
comparison of actual performance with the budgeted performance and regular
reporting of variances to the responsible officers.
This helps in asserting the reasons for the differences between actual and
budgeted performance and taking the suitable corrective action.
The bottom-top approach of budgeting allows participation of all levels of
management in the decision-making process. Negotiations then begin between the
corporate office and department heads to finalize budgetary figures. The
budgetary process then shifts to a "tops-down" approach, where the corporate
25

office has ultimate control to set the final budget. Through this process of
monitoring, analysis and control, the problem of "ratcheting" is generally avoided
(Kelly, 2003).
A budgetary monitoring and control process assumes that expenditure must agree
with the budgeted plans and maintains information about expenditure. Financial
control is also one of the most important aspects of budgeting. By means of
budgetary control, which means comparing actual results with planned results and
reporting on the variations, a control frame is set for management.

This frame points to managers to track flow of resources accurately and


consistently. This calls for continuous control process through the year, and not
just at the end of a budget period. The objectives of control are to plan the policy
of an organization, to coordinate the activities of the organization so as to achieve
the targets set. According to Briston (1981), financial control and monitoring
ensures efficient and cost-effective program implementation within a system of
accountability. He however, notes that the existing financial control arrangements
must be complemented by further improvements in the overall program
monitoring for better budget implementation in accordance with approved work
programmes.
The above process demands comprehensive planning and approval framework,
consistent with processes for constructing budgets, both Capital and Revenue.
Sound methodologies for assessing the financial impact of proposed expenditures,
compatibility with other management and performance data and a system of
control that set clear responsibilities and gives accurate and timely monitoring
26

information on performance against budgets is important.

2.2.2.2

Control:

Control basically provides the ex-ante motivation to achieving the budget and the
ex-post reinforcements necessary to ensure future motivation (Kerr, 1979). Hence
the perception of variances as extremely important and valid measures of
performance is upheld. The evaluation of budget performance should be based on
a comparison of actual performance with an adjusted budget to reflect the current
circumstances of the environment under which managers are actually operating
in. a budget therefore, assists mangers in monitoring and controlling the activities
for which they are responsible. By comparing the actual results against the
budgeted amounts for different categories of expenses, managers can ascertain
which costs dont conform to the original plan requires their attention. This
process enables management to operate a system of management by exception,
which means that a managers attention and effort can be concentrated on
significant deviations from the expected results. Thus enabling managers to
identify inefficiencies and appreciate control action thought to remedy the
situation.

By means of budgetary control that is, comparing actual results with planned
results and reporting on the variations, a control frame is set for management. It
helps expenditure to be kept within the planned limits (Alesina and Perotti, 1996).
Carr, (2000), argues that in order to achieve the expected output results,
monitoring and evaluation is necessary. Monitoring and evaluation maintains
27

stability under many competing forces, hence important to lower local


government effectiveness (Hokal and Shaw, 1999). However, Hokal and Shaw
continue to note that monitoring and evaluation requires only raw data to test and
examine performance which is time consuming yet contributes little to
performance.
Hence, the need to establish the level of monitoring and control in realizing sound
budget management and performance at BTVET government owned tertiary
institutions.

2.2.3 Analyzing, Feedback and Performance.


2.2.3.1

Budgetary Analysis:

Analysis is the process of examining variances by sub-dividing the total variance


into smaller parts in such a way that management can assign responsibility for any
off budget performance. An aspect of variance analysis is the need to separate
controllable from uncontrollable variances. A detailed analysis of controllable
variances will help the management to identify the persons responsible for its
occurrence so that corrective action can be taken. Through variance analysis it is
established whether over expenditure is caused by deliberate actions or inadequate
controls by management (Arora, 1995).
Its imperative that staff learns that their adverse variances are be analyzed, that
unjustified expenditure will not pass without punishment. This will increase staff
care as to the use of resources in performance of tasks and in so doing control
costs and the associated variances.

28

According to Glautier, (1997) and Fang, (1998), a budget variance requires


analysis, investigation and correction. The analysis of the budget variance
necessitates splitting up the variance into two components of standard costs i.e.
quality standard and the price standard.

The variances could be corrected through strict enforcement of use of the budget
whenever expenditure is incurred. This is preventive control. This means that
previous over expenditure attributed to the use of resources without particular
reference to the budget as a control tool, are eliminated. Items on which money is
spent are budgeted for and any expenditure incurred is only after reference to the
budget (Mathis, 1996).

The primary function of evaluation-reward aspect of budgetary control is to


provide the ex-ante motivation to achieve the budget and the ex-post
reinforcement necessary to ensure future motivation (Kerr, 1979). This is what
makes variances to be perceived as extremely important and valid measures of
performance.
Performance evaluation of budgets should be based on comparison of actual
performance with an adjusted budget to reflect the circumstances of the
environment under which managers actually operate. A budget assists managers
in managing and controlling the activities for which they are responsible by
comparing the actual results against the budgeted amounts for different categories
of expenses, managers can ascertain which costs do not conform to the original
plan and thus require their attention.
29

According to Kreitner (1989) corrective action is necessary when the final results
deviate from plans. The gaps are addressed through punishment of those staff that
spends more than the budget without good reason. In situations where gaps were
not anticipated and they occurred, it is necessary to redraw the budget so as to
have the objectives match the cost incurred and this is feedback control.

2.2.3.2

Feedback:

Feedback is an important role of budgeting for attaining the expected quality and
standards in planning, control and leadership and staffing. According to Cook
(1968), feedback is generally positively associated with budget performance. It
focuses on the extent to which employees have achieved expected levels of work
during a specified time period. The reports should be simple and suitable for the
level of understanding for the user. They should be presented promptly to enable
timely actions to take place. Reports should be accurate to enable the making of
corrective decisions based on the reports. However, the extreme accuracy should
not be at the cost of promptness. It has to be noted that the principle of exception
should be utilized where possible.

Budgetary Control is not effective unless there is continuous flow of budget


reports. These reports should be prepared at regular intervals (say monthly) to
show comparison of actual performance with that budgeted. Such reports may be
presented to heads of budget centers, showing favorable or unfavorable variances
from budget figures. These heads of budget centers should explain these variances
30

to the top management so that necessary corrective action may be taken (Arora,
1995; Foster, 1987).

According to Underdown (1997), a good budget system should be integrated with


the standard cost system. Where standard costing system is used it should be
integrated with the budget programme in both budget preparation and variance
analysis. Unfavorable variances are mostly scrutinized which take the form of
over expenditure or expenditure incurred on non-budgeted items.

2.3

Financial Performance.
Financial performance is a management initiative to upgrade the accuracy and
timeliness of financial information. Areas of emphasis include reducing erroneous
payments and strengthening the management of government held assets.
Performance budgeting is an integrated annual performance plan and annual
budgeting that shows the relationship between program funding levels and
expected results. It shows that a goal or set of goals should be achieved at a given
level of spending. Performance budgeting identifies the relationships between
money and results, as well as explaining how those relationships are created. A
program performance budget defines all activities, direct and indirect required by
a program for support in addition to estimating activity costs (Kydland and
Prescott, 1977).

Improving the performance of an organization is a central concern of management


researchers, and speculation about the factors related to organizational
31

effectiveness is abundant in the literature and elsewhere. Unfortunately, little


effort has been made to verify these factors empirically. One reason is that
organizational performance is a difficult concept to define and measure.
Stakeholders often disagree about which elements of performance are most
important and some elements are difficult to measure because they are preventive
in nature (Brewer, 1993).

Performance as a concept suffers from the problem of conceptual clarity in a


number of ways. First in terms of definition, performance is often used
indiscriminatingly to mean everything from efficiency to effectiveness (Stannack,
1996). Organizational performance has been defined as the measure of how well
the organization does its job (Stoner, 1995). Pettigrew, 1992, says it is the extent
to which an organization achieves its intended outcomes. Research on
organizational performance reveals definition ranging from social performance or
contribution to charity (Casio, 1998) to company profits (Huselid, 1995), and
organizational effectiveness Zahra and Pearce, 1989). Inadequate definition has
often led to problems in measurement and practitioners seem to use the term
performance to describe a range of measurements including input efficiency,
output efficiency, and in some cases, transactions efficiency (Heffernan and
Flood, 2000).

Performance as defined by McGill (2001), and Bestbreur and Henk (2003), is the
agency outputs, with an agencys program structure linking outputs to long-term
objectives, which then creates a performance budget. This process helps to
32

annually track and report programme results and provide reasons for performance
not meeting expectations (Thor et al., 1999).

2.3.1

Performance Measures:

Amaratunga et al; (2001) also described performance measurement as a process


of assessing progress towards achieving pre-determined goals including
information on the efficiency with which resources are transformed into goals and
services, the quality of those outputs and outcomes, and the effectiveness of the
organizational operations in terms of their specific contributions to organizational
objectives.

Research made by several scholars has indicated that in this modern world where
there is relentless technological change, changing customer tastes, demand and
uncertainties in the market, on financial indicators have become essential for
characterizing an organization future performance (Guthrie, 2001). Non financial
measures reflect activities an organization performs in order to execute its
strategy and as such serve as predictors of future smooth operations of an
organization (Amaratunga, 2001). They are operational and provide managers,
supervisors and operators with information required for daily decision making.

According to Cumby and Conrad, (2001), sustainable shareholder value is driven


by non-financial factors such as employee satisfaction, internal processes and
organizational innovation. This study defines performance in respect to internal
business processes like new innovations, quality of service provided, expansion of
33

infrastructure and timely payments to suppliers and service providers.

Performance of any institution is often evaluated by measuring success in meeting


the budgets. This view is shared by Buckley and McKenna (1995), who says that
when the budget management is successful bonuses are awarded on the basis of
an employees ability to achieve the targets specified in the periodic budgets, or
promotion may be partly dependent upon a successful budget record.

Gonahasa (1994), noted that a proper college budget should show all activities the
college intends to do in the coming year, such as purchase of instructional
materials, payment of salaries and allowances for support and lecturing staff,
suppliers, feeding of students, capital developing and income generating projects
if any and this point to a budgeting paradigm, which is based on the establishment
of financial performance measures. These measures act as a gauge of what the
institution feels important, and how well it will reflect good financial
performance.

The development of a performance budget is a simultaneous top-down and


bottom-up process. Senior planners and policy officials must articulate program
goals and objectives. They also must outline the levels of resources that they
anticipate allocating to support those goals and objectives. These same officials
should identify outcome measures that determine whether goals, objectives,
resource levels and outcome measures must be developed and validated by lower
level managers.
34

The above kind of planning transforms program activities and performance goals
into budgetary (financial) terms. However, most tertiary institution plans do not
exactly and clearly explain how funding would be allocated to achieve
performance goals, if at all they are set. Its actually identifying the objective
without identifying the means for achieving it. These identify as challenges to
performance budgeting among other related challenges to performance budgeting
implementation such as: lack of credible and useful performance information
within the institution, difficulty in achieving consensus on goals and measures
because of low levels of participation, hence dissimilarities between programs and
fund reporting structures and the limitations of information and accounting
systems.

ODI (2003) concurs with OPPAGA (2003), who asserts that the amount of
resources given to public programs influences their performance in achieving
desired results; that performance budgeting enhances service delivery and
infrastructural development. Performance budgeting provides Managers with
flexibility to utilize resources to achieve performance results. Long-term
perspectives characterize it; identification of the mission, goals and objectives;
linking strategic planning information with the budget; development and
integration of performance measures into the budget (Mwabilu, 2004). The study
therefore shows how BTVET tertiary institutions evaluate their budgets in relation
to the set objectives and goals in a bid to measure whether the limited resources
have been spent effectively and efficiently. Hence, the potential of the
35

government tertiary institutions for improving their financial performance needs


to be investigated.

2.4

Relationship between Budgetary Controls and Performance.


Budgetary control involves the preparation of a budget, recording of actual
achievements, ascertaining and investigating the differences between actual and
budgeted performance and taking suitable remedial action so that budgeted
performance may be achieved (Cooper, 1996; Fang, 1996).

Budgetary control is the system of controlling costs through budgets. It involves


comparison of actual performance with the budgeted with the view of ascertaining
whether what was planned agrees with actual performance. If deviations occur
reasons for the difference are ascertained and recommendation of remedial action
to match actual performance with plans is done (Arora, 1995). The basic
objectives of budgetary control are planning, coordination and control. Its
difficult to discuss one without mentioning the other (Arora, 1995).

A budget provides a detailed plan of action for an organization over a specified


period of time. By planning, problems are anticipated and solutions thought. This
helps to reduce on costs and achievement of goals is enhanced (Mathis, 1989). By
budgeting, managers coordinate their efforts so that objectives of the organization
harmonize with the objectives of its parts.

Control ensures that objectives as laid down in the budgets are achieved.
36

Management is able to know about this through information availed to it by


subordinates (Millichamp, 1990; Middlemist, 1996).

Control ensures

that

objectives are being achieved. A comparison is therefore made between plans and
actual performance, the difference between the two is reported to management for
taking corrective action. This control process is not possible without planning
(Lewis, 1996).

An effective control system helps accomplish the purpose for which it is


designed. Effective control systems rely on good information, are well
communicated, well coordinated, timely and economical to the organization
(Arora, 1995; Mathis, 1996).

Budgets reflect estimates of future events, and what is considered acceptable


performance. Comparing actual with budgeted results provides meaningful
information and indicates the need to analyze and investigate over and under
spending. The action taken on over and under spending is one of the most
important aspects of a budgetary control system. Budgetary Control aims to
achieve four things:
To define and evaluate short-term plans, this is seen in the process of developing
a budget within the given structure of the organization.
To identify responsibilities and delegate authority to Budget Managers for the
achievement of those plans, Budgets are devolved as a means of empowering
middle Managers because Managers can make the best use of resources and
savings can be deployed for investment in other areas under their control. The
37

Managers cease to be bidders for resources and instead become a Manager of


resources, which gives more opportunity to focus on outcomes, the students
experience and achievement rather than struggle with senior Managers over
resource allocation that many managers engage in.
To allocate resources between various Budget Managers up to the limit imposed
by the available funds in order to control activities, unless the Institutions own
resource allocation mechanisms parallel the devolution of responsibilities to
teams explicit in Total Quality Management programs in reality that devolution
will be little more than a cosmetic exercise. Real delegation of authority, which is
the essence of empowerment, requires a real and effective control over resources
(Sallis, 1996).
To motivate Budget Managers, as a motivating tool, the freedom to take decisions
and make mistakes may be empowering or it may be viewed as a control
mechanism by which managers performance will be judged, apparently on
impartial grounds. If rewards do not accompany the additional responsibility,
Managers may feel that they are being taken advantage of within the structure.
Once budgets have been agreed and established for each area of responsibility, the
remaining two stages of budgetary control are:
The continuous comparison of actual with budgeted results and Management
action resulting from this comparison, either to secure adherence to the original
plan or to agree some modifications to it are the basic aims.

Inadequate budgetary controls lead to objectives not being clear and performance
not being achieved or satisfactory. This reduces output because employees do not
38

know or are doubtful about what to do, when and how to do it. They spend a lot of
time seeking clarifications from executives. Thus leading to delays in
identification of deviations from plans, which lead to failure in goal achievement
and hence poor performance (Phyrr, 1970)?

Performance of any institutions is often evaluated by measuring success in


meeting the budget. When the budgetary control is successfully implemented, the
organizations objectives will be realized and once this has been done the
organization is said to have achieved at performance level (Turyakira, 2004).
Resbery and Lormorie (1986), stated that in practice, many organizations compare
actual performance with the original budget, but if the circumstances expected
when the original budget was set differ, there will be a planning and control
conflict.

Seldin (1981) argues that for the smooth implementation of an organizations


budget, budgetary planning and control must be properly done. Under budgetary
control, evaluation which is a process by which an appraisal of performance is
systematically conducted with a view to measure individual, department and
organizational contribution should be done. It is conducted in order to take
appropriate action. In particular, evaluation of budgetary control is a process of
assessing performance against budget standards and performance targets with
intent to take corrective action (Emmanuel and Otley, 1985). Budgetary standards
and targets tend to be the criteria upon which the performance of organizational
member, the superiors in particular are evaluated. These standards and targets
39

provide a basis for identifying and appraising selected aspects of organizational


performance, since they are the criteria used to guide and motivate it.

Cyert and March (1963), stated that evaluation standards should be very fine
statements derived from budgetary planning goals of the previous time period,
budgetary control experience with respect to budgetary goals of the previous
years and from the experience of comparable performance aspects with respect to
the past periods. Once this is done, budgetary control will be achieved and the
organizations objectives will be properly implemented and hence efficiently
achieved.

In the case of BTVET tertiary institutions, which are not profit making
organizations, income is usually from the privately sponsored students being
supplemented by government funds. In most cases the planned budget has higher
sum to be the expenditure for the coming financial year than the actual sum of
funds released. Government releases within a particular financial year are very
minimal compared to the increased demands of the institutions. Thus the need for
more infrastructure development in form of construction of more lecture halls,
accommodation facilities, library facilities, dinning and recreational Halls, etc
which increases the expenditure generally.

During the budget year, the budget committee should periodically evaluate the
actual performance and re-examine the organizations future plans if there are any
changes expected, this will normally mean that the budget plans should be
40

adjusted (Benlo, 1990). This revised budget then represents a revised statement of
formal operating plans for the remaining portion of the budget period. The
important point is that the budgetary process does not end for the current years
once the budget period has started. Budgeting should be seen as a continuous and
dynamic process. Budgetary Control properly applied can be immensely valuable
to Managers of all levels. It is, however, not without dangers, unless skill and
intelligence are exercised both in devising the budgets and implementing the
plans to achieve them, performance may not be realized as planned.

CHAPTER THREE:
3.0

Methodology.
This section focused on the research methods and the instruments used by the
researcher to carry out the study. It provides a description of the research design,
area of study, sample description, data collection and analysis methods.
41

3.1

Research Design.
A cross-sectional research design was used and was combined with descriptive
research design and Correlation studies to establish the relationship between the
independent variable (budgetary control) and the dependent variable (perceived
performance).

3.2

Population of the Study


The population of the study covered Government aided institutions under
Business, Technical, Vocational and Educational Tertiary institutions that is 5
UCCs, 3 ACs, 34 TIs, 29 TSs and 40 HTIs and considering Administrative
staff and Lecturing staff. A total population size of 111 institutions under BTVET.

3.3

Sampling Design.
The Quota sampling and purposive designs were used to select 32 institutions
from the four regions namely eastern, northern, western, and central from a
population of 111 BTVET institutions. The respondents included administrative
and lecturing staffs that were selected using the judgmental and purposive
methods because they were in the best position to give the required information.

3.4

Sample Size.
The sample size comprised of 32 BTVET institutions in Uganda. From these
therefore, a total sample of 32 institutions was considered sufficient as per
Roscoes 1975 rule of thumb that states that sample sizes of 30 and above are
sufficient.
42

Table (2): Sample size determination.


Category
Total Population
UCCs
05
TIs
34
TSs
29
HTIs
40
ACs
03
Total
111
Source: Computation by the researcher.

3.5

Sample Size
5
10
8
8
1
32

Sources of Data.
Primary Sources
The primary data was collected from the BTVET institutions by use of
questionnaires.
Secondary Data
This included review of official policy documents, journals, reports and seminar
papers.

3.6

Data Collection Instruments.


Questionnaire
The researcher collected primary data using closed structured questionnaires.
These questionnaires were self administered amongst the respondents in order to
collect the completed responses within a short time possible.

3.7

Measurement of the Research Variables.

Budgetary Control was measured by Budgeting and Planning, Monitoring


and Control and Analyzing and Feedback which were subjected to a 5
point anchored likert scale for Mwabilu et al., 2004.

Perceived

financial

performance
43

was

measured

by

Infrastructure

Development, Service Delivery and expenditure related activities which


were subjected to a modified version of multi-item five-likert scale
developed by Melkers and Willoughby (2002) to suit the study at hand.

3.8

Reliability and Validity of Research Instruments.


The questionnaires were developed in harmony with the guidelines given by
Sekaran (2000). An item analysis was done followed by a pre-test to check for
validity and reliability. Validity was measured using face validity by the research
Supervisors to give comments on the questions developed, which confirmed the
dimensions of the concepts that have been operationally defined.
Reliability of the instrument was tested using Cronbachs coefficient Alpha
(Cronbach, 1946) as shown by the table below:
Table (3):

Reliability Coefficients

VARIABLE
Budgeting and Planning
Monitoring and Control
Analyzing and Feedback
Financial Performance
Infrastructure Development
Service delivery
Expenditure related activities
Source:
Primary data.

CRONBACH ALPHA
0.9031
0.9269
0.7111
0.6742
0.7164
0.6344
0.6817

The Cronbach Coefficients were above 0.6 and therefore the scales used to
measure the study variables were consistent and therefore reliable.

3.9

Data Processing and Analysis.


Data collected was compiled, sorted, edited, classified, coded and analyzed using
a computerized Statistical package for social sciences known as SPSS 11.0.
44

Cross tabulations tables, chi-square tests were used to determine the budgetary
controls and financial performance. Pearson correlation Coefficient was used to
determine the degree of relationship between budgetary controls and perceived
financial performance. Multiple regression analysis was used to predict the
perceived performance of BTVET institutions.

3.10
(i)

Limitations of the Study.


Research funds available to the researcher were limited to speed up the
research process; however the researcher managed to spend within the limited
resources.

(ii)

The research was basically on financial related matter; some respondents were
not willing to give the required information calling it classified, however
with an introduction letter from the Director Graduate research Center and
assurances that data will be held confidentially 122 responded.

CHAPTER FOUR:
4.0

DATA PRESENTATION, ANALYSIS AND INTERPRETATION.

4.1

Introduction.
This chapter deals with Presentation, Analysis and Interpretation of data collected
regarding demographic factors in respect of sex, age, level of education and
45

period worked with the organization. Secondly, it presents cross tabulations,


factor analysis and chi-square tests to establish budgetary controls measured by
budgeting and planning, monitoring and control and analyzing and feedback.
Thirdly, it presents factor analysis and chi-square tests to establish perceived
financial performance in BTVET institutions measured by infrastructural
development, service delivery and expenditure related activities. Fourthly
correlation matrix and multiple regression coefficients, were used to measure the
relationship between the study variables namely, budgetary controls and
perceived financial performance.

4.2

Demographic Statistics.
The demographic factors such as the Sex, Age, Level of education and Period
worked with Organization at individual level were analyzed using cross
tabulations as shown in the tables 4.1 4.4 below.

Table (4.1):

Case Processing Summary.

Level of Education * Sex


Level of Education * Age
Level of Education * Period
worked with organization
Source:
Primary data.

Valid
N
Percent
122 100
122 100

Cases
Missing
N Percent
0
.0
0
.0

Total
N Percent
122 100
122 100

122

122

46

100

.0

100

4.2.1 Level of Education by Sex


Table (4.2):

Level of
Education

Level of education by Sex

Certificate

Diploma

Degree

Masters and Above

Total

Source:

Count
% within Level of
Education
% within Sex
% of Total
Count
% within Level of
Education
% within Sex
% of Total
Count
% within Level of
Education
% within Sex
% of Total
Count
% within Level of
Education
% within Sex
% of Total
Count
% within Level of
Education
% within Sex
% of Total
X 2 = 17.143

Male
7

Sex
Female
7

Total
14

50.5
8.3
5.7
27

50.5
18.4
5.7
7

100
11.5
11.5
34

79.4
32.1
22.1
44

20.6
18.4
5.7
12

100
27.9
27.9
56

78.6
52.4
36.1
6

21.4
31.6
9.8
12

100
45.9
45.9
18

33.3
7.1
4.9
84

66.7
31.6
9.8
38

100
14.8
14.8
122

68.9
100
68.9
df = 3

31.1
100
100
100
31.1
100
Sig. = .001

Primary data.

In the table 4.2 above 69% of the respondents were male employees of at the
BTVET institutions while 31% were female employees, 52% of the male have
first degree and second degrees, while 31% of the women both having first and
second degrees. There is therefore a relationship between the level of education
and sex of the respondents (Chi-Square = 17.143, df = 3, P-Value = 0.001).

4.2.2 Level of Education by Age


Table (4.3):

Level of Education by Age


20-39 Years

47

Age
40-49 Years &
above

Total

Level of
Education

Certificate

Diploma

Degree

Masters and Above

Total

Source:

Count
% within Level of
Education
% within Age
% of Total
Count
% within Level of
Education
% within Age
% of Total
Count
% within Level of
Education
% within Age
% of Total
Count
% within Level of
Education
% within Age
% of Total
Count
% within Level of
Education
% within Age
% of Total
X 2 = 59.071

14

14

100
64.6
11.4
28

0
0
0
6

100
11.5
11.5
34

82.4
43.1
23
24

17.6
20
4.9
32

100
27.9
27.9
56

42.8
73.9
19.7
12

57.1
160
26.3
6

100
45.9
45.9
18

66.7
18.5
9.9
78

33.3
20
4.9
44

100
14.8
14.8
122

64
100
64
df = 9

36.1
100
36.1
Sig. = .000

100
100
100

Primary data

In the table 4.3 above 64.0% of the respondents were in the age bracket of 2039years and 36.1% were in the age bracket of 40-49 years and above. The older
the staff in terms of age the greater the opportunity for one to continue with
further studies. 57% of the respondents who were aged 40 years and above had
first degrees, while 42% of the respondents aged between 20 and 39 years had
first degrees. Therefore, there is a relationship between the level of education and
the age (Chi-Square = 59.071, df = 9, P-Value = 0.000).
4.2.3

Level of Education by Period worked with organization


Table (4.4)

Level of
Education

Level of Education by Period worked with organization.

Certificate

Count
% within Level of
Education
% within period worked
with organization

48

Period worked with organization


1-6 Years
7 Years & above
14
0

Total
14

100

100

47.1

11.5

% of Total
Diploma

Total

Source:

Count
% within Level of
Education
% within period worked
with organization
% of Total
Degree
Count
% within Level of
Education
% within period worked
with organization
% of Total
Masters and Above
Count
% within Level of
Education
% within period worked
with organization
% of Total
Count
% within Level of
Education
% within period worked
with organization
% of Total
X 2 = 73.173

11.4
25

0
9

11.5
34

73.5

26.5

100

64.1
20.5
24

15.3
7.4
32

27.9
27.9
56

42.9

57.1

100

88.7
19.6
0

54.2
26.2
18

45.9
45.9
18

100

100

0
0
63

30.5
14.8
59

14.8
14.8
122

51.7

48.4

100

100
51.7

100
48.4
df = 6

100
100
Sig. = .000

Primary data.

The tables 4.4 above 48.4% of the respondents have worked with their
organizations for a period of seven years and more 14.8% have masters and
above, 26.2% have first degrees and 7.4% have Diplomas. 51.7% of the
respondents who have worked with the organization for a period between one and
six years, 11.4% have Certificates, 20.5% have Diplomas and 19.6% have first
degrees. The more years one spends in an institution, the more chances one has to
continue with studies as shown above. Therefore, there is a relationship between
the level of education and the period worked with organization (Chi-Square =
73.173, df = 6, P-Value = 0.000).
4.3

Budgetary Controls.
This section presents findings on research question one, which is aimed at
examining the budgetary controls at BTVET institutions. Perceptions were
49

obtained in terms of Budgeting and Planning, monitoring and control, analyzing


and feedback. Factor analysis was performed using principle component and
Varimax rotation methods to extract components of factors that measured the
study variables.
Table: (4.5) Rotated Component Matrix Showing Budgetary Controls
Components.

50

.897
.863
.859
.850
.832
.832
.830
.826
.824
.810
.808
.806
.803
.800
.792
.785
.770
.767
.767
.764
.754
.737
.734
.732
.720
.715
.708
.676
.672
.660
.642
.625
.577

3
Analyzing
& Feedback

Monitoring
& Control

Programmes and plans are the basis for allocating financial resources
We have clear result targets in the budget
Budget outcome goals and objectives are linked to programmes
Management discusses with staff goals to be met
The budget structure facilitates a clear linkage between the money and the results
We normally identify high priority programmes to include in the budget
We describe the tasks to be carried out in the budget
The resources are released on time to carry out the activities
Decisions made here are based on plans and programmes in the budget
Planning helps us to know the type and level of resources to provide
All programmes are classified according to the objectives
Programme activities are clearly indicated
The basis for re-allocating resources in your institution is the performance indicators
Budgets are always used as a standard of measuring financial performance
Planning helps to manage the programmes of the institution
Performance indictors are normally included in the budgets of our institution
We normally formulate our objectives from the set goals
Budgets take into account the three year development plan
Our budgets are for more than one year
We start with planning for our programmes
We frequently use resources to achieve results
We design appropriate programmes to accommodate short-term objectives
My institution always follows budget procedures
We combine planning with the budgeting process
The finance committee of the Governing Council scrutinizes budget proposals
Programmes and plans are the basis for getting financial resources
Each budget activity is allocated appropriate resources
The budget facilitates the estimation of future cost implications
Our budgets emphasize outcomes
We always present the budget to the governing council/BOG for approval
Our budgets are based on the needs identified by our sections/departments
Programmes are analyzed before selecting the different resources
Priorities for the coming year are set at workshop sessions/budget conference

Budgeting
& Planning

Components

In involved in the budget setting process


All the stakeholders to the budget are involved
We normally publish the budget after approval
Our programmes are in line with the budget objectives
The budget activities are controlled by use of a vote book in my institution
Budget review is done in my institution
There is clear reporting of programmes results
The perceived level of budget monitoring and control in my institution is adequate
The perceived level of budget monitoring and control in my institution is excellent
Budget adjustments are done in my institution as need arises
Continuous comparison of actual with budgeted performance is done in my institution
Reasons for differences between actual and budgeted performance are always given
The budget performance reports are prepared monthly in my institution
The governing council/BOG normally checks on the progress as planned
All our expenditures are paid after approval
The top management always hold budget conferences to review performance
Performance targets for each department are agreed on
The favorable and unfavorable variances are frequently reported
The budgeting process is expedited by use of budget centers
Control of the budget activities is done by only the Principals office

.542
.524
.513
.423
.333
.770
.763
.754
.734
.716
.692
.669
.664
.659
.646
.646
.645
.583
.490
.460
.459

The implementation of the budget activities is the responsibility of the department manages

Financial performance is communicated frequently in meetings


The heads of budget centers always explain variances to top management
The budget reports are always presented to the heads of budget centers
Follow up of unfavorable variances is done in my institution
The management agrees on priorities in the budget conference

.863
.840
.809
.791
.759
.757
.685
.677
.646
.641
.556
.547
.509

Management always takes timely corrective actions when adverse variances are reported

Requisitions raised by the staff are honored


There is clear tracking of programme results in my institution
Deviations from the expected and the actual results are common
The favorable and unfavorable variances are reported to budget committee/top management

Funding of budget programmes is based on approved budget


The budget deviations are monitored by the top management
The line managers are always involved in the budgeting process

Eigenvalues
Percentage of variance
Cumulative Percentage variance
Source:
Primary data.

23.894

11.281

5.440

35.072

16.590

8.000

35.072

51.662

59.663

The table 4.5 above indicates that, only components with Eigenvalue greater than
1 were extracted. Items or questions with correlation coefficients above (positive
or negative 0.3) were considered indicating that the elements of budgetary control
include the following; Budgeting and Planning with percentage Variance of
35.072, Monitoring and Control with Percentage Variance of 16.590 and
Analyzing and Feedback with percentage variance of 8.000 giving a cumulative
51

Percentage Variance of 59.7%. This indicates that the budgetary controls in


BTVET institutions are Budgeting and Planning, Monitoring and Control and
Analyzing and Feedback.

4.4

Perceived Financial Performance


This section presents findings on research question two, which aimed at
establishing the perceived financial performance of BTVET institutions.
Perceptions on Perceived level of financial performance were obtained from three
components that is Infrastructure Development, Service Delivery and Expenditure
related activities as shown below.

Table (4.6):

Rotated Component Matrix for Perceived Financial Performance.

Our expenditure on infrastructure development against total expenditure is adequate

The staff receive their salaries and allowances on time


The Funds for food and its preparation is always released on time
We always achieve our targets within the budgeted period
We are always paid top-up in addition to the basic monthly salary
Our suppliers are always paid on time
Our Expenditure on students food and its preparation are genuine
The disbursement of finances is immediate upon requisition
The funds budgeted for are always released on time
Funds for items budgeted for the last 3 years have all been received
We receive all the tuition fees as budgeted for
Our expenditure on games and sports is adequate
The grants were received regularly
The grants are received in full as per the budget
We have adequately taken care of capital expenditure in our budget
The institutions requirements are financed immediately the need arises
There are income generating projects undertaken by my institution
All the budgeted activities are implemented as planned for
Our expenditure on instructional materials is adequate
The expenditure on infrastructure development in my institution is adequate
Our expenditure on ICT meets the demands of the changing environment

52

3
Expenditure
activities

2
Service
delivery

1
Infrastructure
development

Component

.804
.789
.784
.740
.698
.670
.636
.627
.856
.823
.750
.687
.654
.627
.565
.478
.805
.760
.719
.701
.653

The expenditures incurred in my institution are as per our plan


The expenditure on students welfare is adequate every semester
Our budget expenditure on maintenance and repairs is adequate

.538
.470
.318

Eigenvalue
Percentage of variance
Cumulative Percentage of variance

Source:

9.872
41.133

2.688
11.201

2.191
9.125

41.133

52.334

61.459

Primary data.

Factor analysis was used to determine the level of perceived financial


performance using the components of financial performance as shown in the
rotated matrix table (4.6) above. Results indicate that 3 components namely
Infrastructure development, Service delivery and Expenditure related activities
explained 61.5% of perceived financial performance. Therefore at 95%
confidence level one can confirm that the level of perceived financial
performance at BTVET institutions was 61.5% above average.

4.5

Correlation Analysis.
Pearsons correlation coefficient matrix was used to show the relationship
between budgetary control and perceived financial performance as indicated in
the table 4.7 below.

Table (4.7):

Correlation Matrix

Budgeting
&
planning (1)

1
1.000

Monitoring
Control
(2)

&

.616**

1.000

Analyzing
feedback

&

.371**

.703**

1.000

53

(3)
Budgetary
Control
(4)
Infrastructure
Development
(5)
Service
Delivery
(6)
Expenditure
related
activities
(7)
Financial
Performance
(8)

Source:

.752**

.874**

.691**

1.000

.204*

.612**

.658**

.525**

1.000

.134

.394**

.423**

.209*

.743**

1.000

.199*

.591**

.536**

.483**

.886**

.698**

1.000

.295**

.580**

.893**

.519**

.880**

.861**

.803**

1.000

Primary data.

** Correlation is Significant at the .01 level (2-tailed)


* Correlation is significant at the .05 level (2-tailed)
There was a significant positive relationship between Budgetary Control and
perceived financial performance (r = 0.519**, P-Value<0.01). This implied that
Budgetary Control positively and moderately influenced perceived financial
performance at BTVET institutions. Budgeting and Planning, Monitoring and
Control and Analyzing and Feedback as measures of Budgetary control
significantly and positively affected the financial performance and its components
of BTVET institutions (r = 0.295**, 0.580**, 0.593**, P-Value < 0.01)
respectively.
4.5.1

Multiple Regression Coefficients


Multiple regression coefficients were used to predict the proportions of the
variance in the perceived financial performance in BTVET institutions explained
by budgetary controls components as shown by the results presented in the table
(4.8) below.

Table (4.8):

Multiple Regression Coefficients.


54

R2

Standardized

Model

coefficients
Beta

(Constant)

ted
t

Sig.

0.984

.327

Analyzing& Feedback

0 .432

4.569

.000

Monitoring & Control

0 .386

3.662

.000

Budgeting & Planning

0.176

2.334

.021

Source:

Adjus F

R2
0.510

0.497

40.883

0.000

Primary data.

In the table 4.8 above, Analyzing and Feedback, Monitoring and Control and
Budgeting and Planning were linearly correlated to Perceived Financial
Performance (F = 40.833 and Sig. = 0.000). Showing that, 49.7% of Perceived
Financial Performance was explained by Monitoring and Control, Analyzing and
Feedback and Budgeting and Planning. Analyzing and Feedback contributed more
(Beta = 0.432), Monitoring and Control (Beta = 0.386) and Budgeting and
Planning (Beta = 0.176). The Standardized Regression Model is expressed as y =
x1 + x2 + x3 +, therefore the standardized regression model for the study is y
= 0.432af + 0.386mc 0.176bp. Where AF = Analyzing and Feedback, MC =
Monitoring and Control and BP = Budgeting and Planning as shown above.
CHAPTER FIVE:
5.0

DISCUSSION OF RESULTS/FINDINGS.

5.1

Introduction.
This chapter set out to study budgetary controls and perceived financial
performance in BTVET institutions. In this chapter results presented and
interpreted in chapter four are discussed. Part one of this chapter deals with
55

discussion of study objectives,

5.2

Budgetary Controls Components


For proper budgetary control to be done, Programmes and plans should be the
basis for allocation of financial resources. Also clear result targets should be set
indicating budget outcome goals and objectives being linked to programmes.
Building of consensus is useful by way of discussing the goals to be met with all
stakeholders since decisions reached here will be based on plans and programmes
in the budget. This also goes along way to help identify the type and level of
resources to provide in order to achieve the set objectives and goals. According to
the results presented, there were significant negative perceptions among the staff
regarding budgeting and planning in BTVET institutions a signal that budgeting
and planning has not taken root in BTVET institutions. Planning as part of the
budgeting system involves long range planning, strategic planning and short term
planning. Proponents of budgeting however argue that budgets help to allocate
resources, coordinate operations and provide a means for performance
measurement. Hilton et al, (2000), agrees with this view that budgeting is the
most widely used technique for planning and control purposes.
Secondly, budget monitoring in terms of budget reviews is important as it paves
way for budget adjustments. It also permits continuous assessment of budget
variances in terms of actual against the budgeted so that reasons for differences
between actual and budgeted performance are always given in a budget
conference. Similarly, results on monitoring and control established significant
negative perceptions among staff with a majority not sure of monitoring and
56

control being implemented in BTVET institutions. The agreement of budget


priorities is not done in budget conference and neither are budget reviews which
are useful in determining the budget variances done. According to Briston (1981),
financial control and monitoring helps to ensure efficient and cost-effective
program implementation within a system of accountability, coupled with constant
program implementation for better budget implementation in accordance with
agreed plans.

Thirdly, its important for the financial performance to be communicated to the


stakeholders by the budget managers. This forms the basis of identification of
variances or deviations of actual from budgeted so that corrective action can be
undertaken. Equally the results on analyzing and feedback divulge significant
negative responses among staff on the implementation of analyzing and feedback.
A majority of staff had perceptions that analyzing and feedback was not done in
BTVET institutions. Most issues regarding financial performance were not always
discussed with other staff in meetings. The monthly financial reports where
budget variances would be reported and corrective action taken were lacking in
most BTVET institutions. These points to general lack of information regarding
the financial performance of the institutions since there were monthly reports
drawn and discussed. Feedback is an important aspect in budgeting that attains
quality and standards in planning, control and leadership. Cook (1968) agrees that
feedback is generally positively associated with budget performance by focusing
on employees achieved expected levels of work during a given period.

57

5.3

Perceived Financial Performance


There was low level of financial performance though above average in BTVET
institutions as established by the results on perceived financial performance where
there were significant negative perceptions among the staff, with a majority
having negative perceptions about the financial performance. Given that most of
the grants were always received, respondents doubted the expenditure of capital
and revenue nature whereby most of the developments seemed blurred. The level
of service delivery is low since most of the requirements are not taken care of in
the budget as a result also infrastructural development is not taking root.

According to Gonahasa (1994), a proper college budget should show all the
activities intended for the coming year, thus pointing to a budgeting paradigm,
which is based on the establishment of financial performance measures which
measures act as a gauge to most important issues in the situation and how well it
will reflect good financial performance.
However, most tertiary institutions plans dont exactly and clearly show how
funding would be appropriated to achieve performance goals. Its actually
identifying the objectives without identifying the means for achieving it. The
BTVET institutions are faced with challenges to performance budgeting
implementation among which, lack of credible and useful performance
information, difficulty in achieving consensus on goals and measures because of
low levels of participation are the major drawbacks.

OPPAGA (2003), on the other hand asserts that the amount of resources given to
58

public programs influence their performance in achieving results; that


performance budgeting actually enhances service delivery and infrastructural
development.

5.4

Relationship

between

Budgetary

Control

and

Perceived

Financial

Performance.
The findings show a significant positive relationship between budgetary controls
and perceived financial performance in BTVET institutions. All the three
components of budgetary controls; budgeting and planning, monitoring and
control, and analyzing and feedback significantly and positively affected the
financial performance and its components of BTVET institutions.

Inadequate budgetary controls lead to objectives being unclear and performance


not satisfactorily achieved. This reduces output because employees/staff do not
know or are doubtful about what to do, when and how to do it. Thus leading to
delays in identification of deviations from plans, which lead to failure in goal
achievement and hence poor performance Phyrr, (1970).

Seldin (1981) argues that for smooth implementation of budgets, budgetary


planning and control must be done properly. Evaluation of budgetary controls acts
as a process of assessing performance against budget standards and performance
targets with the intent to take corrective action as stated by Emmanuel and Otley,
(1985).

59

CHAPTER SIX:

6.0

CONCLUSIONS AND RECOMMENDATIONS

6.1

Introduction
This section deals with the conclusions, recommendations and areas for further
60

research about the study.

6.2

Conclusions
In general, this study has examined the budgetary controls and perceived financial
performance of BTVET institutions in Uganda. The relationship between
budgetary controls and the perceived financial performance is clear especially
when one considers the implementation of its components by the staff in BTVET
institutions. The implementation of budgeting and planning, monitoring and
control, analyzing and feedback will affect the perceived financial performance in
terms of infrastructure development, service delivery and expenditure related
activities in the BTVET institutions.

According to the results presented, there were significant negative perceptions


among the staff regarding budgeting and planning in BTVET institutions a signal
that budgeting and planning has not taken root in BTVET institutions. Similarly,
results on monitoring and control established significant negative perceptions
among staff with a majority not sure of monitoring and control being
implemented in BTVET institutions.
Equally the results on analyzing and feedback divulge significant negative
responses among staff on the implementation of analyzing and feedback. The
findings indicate that budgeting and planning, monitoring and control, analyzing
and feedback as components of budgetary controls were significant predictors of
perceived financial performance in BTVET institutions.

61

Likewise there was a low level of Financial Performance in BTVET Institutions


as established by the results on general perceived financial performance where
there were significant negative perceptions among the staff, with a majority
having negative perceptions about the financial performance. All the three
components of budgetary controls; budgeting and planning, monitoring and
control, and analyzing and feedback significantly and positively affected the
financial performance of BTVET institutions.

6.3

Recommendations
This section, deals with policy implications promoting Budgetary Controls among
the staff in Tertiary Institutions through continued partnering with Ministry of
Education and Sports and Ministry of Finance, Planning and Economic
Development.

There is need for the creation of Budgetary Controls knowledge within the
curriculum of Tertiary Education system to enhance perceptions on the
implementation of Budgetary Controls which is at stake in BTVET institutions.

There is need for sensitization drive through training, workshops, seminars and
meetings on the values of implementation of Budgeting and Planning, Monitoring
and Control and Analyzing and Feedback.
The Ministry of Education and Sports and Ministry of Finance, Planning and
Economic development officials should focus attention on important points in the
implementation process of the Budgetary Controls and adequately monitor the
62

BTVET Institutions Financial Performance in terms of Budget formulation and


implementation.

The Ministry of Education and Sports should provide the BTVET Institutions
with the guidelines for the setting of goals, objectives, programs designs and
formulation of performance measures.

The use of a Vote book must be taken up for purposes of Monitoring and Control
Financial Performance in the BTVET Institutions.

The BTVET Institutions need to adopt the bottom top approach to allow
effective participation by all levels of management in the decision making
processes, which requires comprehensive planning and approval framework
consistent with processes for Budget construction.

The Performance reports should be made quarterly to enhance feedback which is


useful for disseminating Financial Performance information within the BTVET
Institutions.
6.4

Areas for future Research.


The results of this study point to numerous opportunities for future research into
the budgetary controls and the perceived financial performance.
(i)

The future research should attempt to investigate other factors other than
budgetary controls components that affect the perceived financial
performance in BTVET Institutions.
63

(ii)

There should also be an attempt to gather data from other sections of the
Educational system like primary and secondary other than BTVET
Institutions.

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69

Appendix (I)

12.0

TIME FRAME OF THE STUDY


Table (5):

Study Time Frame

ACTIVITY
Writing and presenting Proposal
Designing data collection instruments
Testing of the instruments
70

DURATION (WEEKS)
12
4
3

Data collection
Data Analysis
Data interpretation and Presentation
Report Writing
Submission of Final Report
TOTAL
Source:
Self designed.

4
3
2
3
1
32

Appendix (ii)

13.0

PROPOSED BUDGET OF THE STUDY


Table (6):

Budget of Study Estimates.

ITEM
Stationery and Printing
Research Assistants
Secretarial
Photocopying
Binding
Transport
Miscellaneous
TOTAL
Source:
Self designed.

ESTIMATED COST (UGX)


600,000
500,000
300,000
100,000
70,000
1,000,000
500,000
3,070,000

Appendix (iii)

MAKERERE UNIVERSITY BUSINESS SCHOOL


MASTER OF BUSINESS ADMINISTRATION
QUESTIONNAIRE TO BE FILLED BY THE ADMINISTRATORS, BURSARS
AND LECTURING STAFF OF BUSINESS, TECHNICAL AND VOCATIONAL
EDUCATION TRAINING INSTITUTIONS (BTVET)
71

Dear respondent, I am conducting a study on Budgetary Controls and Perceived


Financial performance of tertiary institutions under (BTVET) as part of my study at
Makerere University. As one of the staff of BTVET institutions, your opinions are very
important to this study. The information provided will only be used for academic
purpose, and will be treated with utmost confidentiality.
Thank you in advance.

PART A: DEMOGRAPHIC CHARACTERISTICS (Please tick in the appropriate


box provided).
1

Category of staff:
Administrator
Bursar
Lecturer/Teacher/ Tutor

2.

Sex of respondent: Male

3.

Age of respondent:
20-29 years

Female

30-39 years

40-49 years

above 49

years
4.

What is your level of education?


O Level

A Level

Diploma

Ist Degree

Other, (please specify)


5.

For how long have you worked with the institution?


1-3 years

4-6 years

7 years and above

PART B: BUDGETING AND PLANNING.

Please respond to the following statements by indicating the extent to which you
agree or disagree with the activities.

72

1.
2.
3.
4.
5.
6.
7.
8.
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37

My institution always prepares budgets


Im involved in the budget setting process
We are sensitized on the budget process
Performance indicators are normally included in the budgets of our institution
We do understand the performance indicators set
Resource re-allocation is based on the performance indicators
All the stakeholders to the budget are involved
Budgets take into account the three year development plan
Our budgets emphasize outcomes
The line managers are always involved in the budgeting process
We always present the budget to the Governing Council/BOG for approval
The finance committee of the Council/BOG is knowledgeable on budgeting
We normally publish the budget after approval
Budgets are always used as a standard of measuring financial performance
Our budgets are based on the needs identified by our sections/departments
Our programmes are in line with the budget objectives
Our budgets are for more than one year
The budget facilitates the estimation of future cost implications
We have clear result targets in the budget
Each budget activity is allocated appropriate resources
When budgeting, outcome goals and objectives are linked to programmes
The budget structure facilitates a clear linkage between the money and the results
We start with Planning for our programmes
Planning helps to manage the programmes of the institution
We discuss goals to be met with the management
We combine Planning with the Budgeting process
Programme activities are clearly indicated
Programmes and plan are the basis for allocating financial resources
Programmes and plans are the basis for getting financial resources
Planning helps us to know the type and level of resources to provide
Decisions made here are based on plans and programmes in the budget
We set priorities for the coming year at budget conference
We normally identify high-priority programmes to include in the budget
Programmes are analyzed before selecting the different options
All programmes are classified according to the objectives
We design appropriate programmes to accommodate short-term objectives
Planning of the budget activities is done by the departments

73

(3)

(4)

Not sure

Agree

Strongly Agree (5)

(2)
Disagree

Strongly Disagree (1)

Statement

38 The budget priorities are agreed upon in the budget conference


39 Budgeting is done for a period ranging from four and ten years
40 We normally formulate our objectives from the set goals

PART C: MONITORING AND CONTROL.

1.
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17

(2)

(3)

(4)

(5)

Disagree

Not Sure

Agree

Strongly Agree

Statement

Strongly Disagree (1)

Please respond to the following statements by indicating the extent to which you
agree or disagree with the activities.

We often receive guidelines from the Ministry of finance on the budget process
Funding of budget programmes is based on institutions approved budget
The Governing council/BOG normally checks on the progress as planned
The budget performance is always communicated
The perceived level of budget monitoring and control in my institution is excellent
The perceived level of budget monitoring and control in my institution is adequate
The perceived level of budget monitoring and control in my institution is inadequate
We always make adjustments regarding budget performance
We normally monitor the deviations
There is clear tracking of programme results in my institution
We often monitor the budget deviations
Control of the budget activities is done by only the head of department
We use vote books to ensure adherence to the budgeted activities
The implementation of the budget activities is the responsibility of the department
managers
The budgeting process is expedited by use of budget centers
We often hold budget conferences to review performance
The costed activities are always reviewed by the executive committee

PART C: ANALYZING AND FEEDBACK.


Please respond to the following statements by indicating the extent to which you
agree or disagree with the activities.

74

1
2
3
4
5
6
7
8
9
10

(4)

(5)
Strongly Agree

(3)
Not Sure

Agree

(2)
Disagree

Strongly Disagree (1)

Statement

The budget performance reports are prepared regularly in my institution


The budget deviations are reported to budget committee/top management
The deviations from the budget targets are frequently reported
Management always takes timely corrective actions when adverse variances are reported
There is clear reporting of programme results
Follow up of deviations is not done in my institution
Financial performance is communicated frequently in meetings
Deviations from the expected and the actual /reported results are common
Our budgets are always balanced
Analysis of deviations is not necessary in my institution

PART D: FINANCIAL PERFORMANCE.

Please respond to the following statements by indicating the extent to which you
agree or disagree with the activities.

1
2
3
4
5
6
7
8
9
10
11
12
13
14

We achieve most of our budgeted plans in my institution


We fulfilled our plans to accommodate our students
We have sufficient library facilities at the college
We have adequate power supply in my institution
We have sufficient furniture in our lecture halls, recreational and residential halls
The service provision in my institution is adequate
All the budgeted activities are implemented as planned and budgeted for
We have enough Lecture rooms to cater for our needs
We do paint and repair our buildings frequently
We met our previous years budget targets
We have enough office equipment in our departments
We spend in accordance to the planned activities
We purchased relevant academic materials for students and lecturers/tutors
In my institution the number of students passing is high each academic year

75

(2)

(3)

(4)

(5)

Disagree

Not Sure

Agree

Strongly Agree

Strongly disagree (1)

Statement

15
16
17
18
19
20
21
22
23
24
25
26

We purchase at least 2 computers every year


We received all the funds budgeted for
We realized improved students academic performance in my institution
We provide our students with the necessary games and sports equipment
There are developmental projects under taken by my institution
We maintain our buildings to the best standards
The training and teaching facilities are adequate in my institution
Our programmes are in line with budget objectives
The budget structure facilitates a clear linkage between the money and the results
The institutions requirements are financed immediately the need arises
All the activities under taken in my institution are budgeted and planned for
We describe the tasks to be carried out in the budget

Thank you for your time, dedication and cooperation in this study.

76

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