CHAPTER ONE

1.1 BACKGROUND TO THE STUDY

Managing organization performance in today‟s complex and rapidly changing climate is crucial

for any organization‟s short-term and long-term success. In order to maintain better provision of

service to public, there is an increased demand for finance organizations to provide prospective

insights on institutions trends and drivers of performance.

Budgetary performance in the public sector is a crucial aspect of governance worldwide,

impacting economic stability, social welfare, and overall development. Understanding both the

global context and the specific dynamics within countries like Nigeria provides valuable insights

into the challenges, successes, and potential strategies for enhancing budget execution and

accountability (Simons, 2017).

From a global perspective, effective budgetary performance is essential for achieving the

Sustainable Development Goals (SDGs) set forth by the United Nations. Governments across the

world grapple with similar issues such as revenue generation, expenditure prioritization, and

fiscal discipline. Factors like economic volatility, demographic shifts, technological

advancements, and geopolitical dynamics further shape budgetary outcomes on a global scale

(Mintzberg, 2019).

Financial planning, a key component of managing and driving organization performance,

continues to be of limited value and mired with conservatism for many organizations. Extended

financial planning and forecasting cycle times that delay decision making, financial drivers and

metrics that don‟t align with strategies and the ownership of planning projections that often gets

attached to finance adds to the frustration with many planning and forecasting functions (Adams

et al, 2018).

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Planning is the primary and control is the last function of management. Budgeting and budgeting

control occupies an important place among the various techniques which are used in performing

these functions. According to ICMA London, a budget is a functional statement prepared prior to

a predetermined period of time of the policy to be pursued during that period for the purpose of

obtaining given objectives. Budgeting and budgetary control systems play a leading role in every

institution by helping in establishing an efficient management control system.

A budget is a key management tool for planning, monitoring, and controlling the finances of a

project or organization. It estimates the income and expenditures for a set period of time for your

project or organization. Budget is an estimated plan of money available to a particular institution

or company and how it will be spent over a period of time (Dixon, 2019). This estimation of

money can enable an institution to have a budget according to economic environment of the

concerned. Budget is the most important aspect for any organization since it enables its

management to meet its obligations, and objectives.

Many organizations do not appreciate the importance and usefulness of budgets. They tend to be

done only when a potential funder asks for one. In fact, the budget is the cornerstone of any

financial system. It enables the institution to carry out its duty of good financial management. It

is the key element in establishing internal controls and making sure the organization does what it

should. Budgets can be used to plan, to communicate, to control, to motivate and to monitor.

Budgeting system normally is affected by different factors such as taxation policy, interest rates,

the issue of inflation, market situation or the economy situation (James, 2015). Inflation impacts

the economy so significantly because economies are organized based on the value of currency,

both within and outside of the country. Therefore, all financial interactions are negotiated based

on the worth of our shilling to another country's currency and this includes all the budgets which
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are done either by private institutions or any public organizations. The impact of inflation is

normally negative to the developing countries like Tanzania since most of African countries

currencies are not stable compared to the western and as a results it largely affect the budgeting

system as well. A low rate of new capital investment clearly damages long-run economic growth

and productivity. Cost-push inflation usually leads to a slower growth of company profits which

can then feed through into business investment decisions (Dixon, 2019).

Further, the economy and current market conditions can impact the financial forecast of the

budget in several ways; changes to the inflation rate and stock market conditions directly affect

the institution net worth and its ability to generate funds or loans (Charles, 2017). Taxation is one

of the oldest functions of a government in running government affairs. Thus, taxation is the

primary source of revenue at all levels of government. Therefore by all standards taxes are

inevitable due to their inherent advantages over other sources of revenue (Pandey, 2015). In

carrying out this function (of raising revenue), government formulate tax policies, enact tax laws

(statutes), and translate these policies and statutes into the desired tax structure and administer its

attainment thus, changing/raising of inflation rate and tax contribute to the budget deficit.

The public sector in Tanzania has been growing over time. With the current reforms, budgeting

has become important aspect in any public organization particularly the ministry of internal

affairs. In order to recue over expenditure, cash budget has been an important instrument for

controlling budget deficit. Further improvement is also needed so as to be more aware with the

market forces and to come up with better strategies in order to deal with the market forces like

inflation, interest rates, taxation policy and some other financial risks effectively and efficiently

without being highly affected by it thus, all the above necessitate the need for this study.

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1.2 STATEMENT OF PROBLEM

Despite the significant allocation of resources in the public sector, there remains a critical

need to evaluate the efficiency and effectiveness of budgetary performance. The absence of a

comprehensive framework for assessing budget execution often leads to suboptimal resource

utilization, inefficiencies, and potentially wasteful expenditure. This problem is exacerbated by

the complex nature of public sector operations, involving diverse stakeholders, multiple

objectives, and intricate regulatory frameworks. (Smith, A. 2019)

The absence of clear, transparent, and standardized performance metrics makes it challenging to

gauge the effectiveness of budget allocation and execution within public sector entities. Without

such metrics, it becomes difficult to identify areas for improvement or to compare performance

across different departments or agencies.

Inadequate mechanisms for prioritizing spending and allocating resources can result in

misallocation, leading to the underfunding of critical programs or the overspending on less

impactful initiatives. This inefficiency undermines the achievement of policy objectives and

erodes public trust in government institutions. (Jones, B., & Johnson, C. (2020).

Ensuring compliance with budgetary regulations and holding accountable those responsible for

budget execution is essential for maintaining fiscal discipline and preventing financial

mismanagement or corruption within the public sector. However, without robust monitoring and

enforcement mechanisms, accountability may be compromised, leading to potential misuse of

public funds.

Effective budgetary performance assessment requires active engagement with stakeholders,

including citizens, civil society organizations, and government officials. Lack of transparency

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and public participation in the budget process can hinder accountability and diminish trust in

government institutions. (Rahman, M., & Ali, F. 2021).

1.3 OBJECTIVES OF THE STUDY

The specific broad objectives of the study is to assess the impact of budgetary control on

budgetary performance in the public sector. The specific objective of this study are to:

1. Evaluate the impact of budget monitoring on budgeting performance in the public sector.

2. Evaluate the role of stakeholder involvement on budgetary performance in the public

sector.

3. Investigate the impact of centralized control on budgetary performance in the public

sector.

4. Assess the impact of decentralized control on budgetary performance in the public sector.

1.4 RESEARCH QUESTIONS

1. What is the impact of budget monitoring on budgetary performance in the public sector?

2. What is the role of stakeholder involvement on budgetary performance in the public

sector?

3. What is the impact of centralized control on budgetary performance in the public sector?

4. What is the impact of decentralized control on budgetary performance in the public

sector?

1.5 RESEARCH HYPOTHESIS

HYPOTHESIS ONE

H0: Budget monitoring has no significant impact on budgetary performance in the public sector.

HYPOTHESIS TWO

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H0: Stakeholder involvement has no significant impact on budgetary performance in the public

sector.

HYPOTHESIS THREE

H0: Centralized control has no significant impact on budgetary performance in the public sector.

HYPOTHESIS FOUR

H0: Decentralized control has no significant impact on budgetary performance in the public

sector.

1.6 SIGNIFICANCE OF THE STUDY

The significance of the study on the impact of budgetary control on budgetary performance in

the public sector extends to various stakeholders, each with distinct interests and potential

benefits:

Understanding how budgetary control mechanisms influence budgetary performance can help

government agencies and departments enhance their financial management practices.

Insights from the study can aid public sector managers and financial officers in designing and

implementing more effective budgetary control systems.

Findings from the study can inform policy development and legislative initiatives aimed at

strengthening budgetary control mechanisms in the public sector.

Increased transparency and accountability in budgetary processes can build trust and confidence

among taxpayers and citizens. Improved budgetary performance can lead to better public

services, infrastructure development, and overall quality of life for citizens.

The study holds significance for a diverse range of stakeholders by offering insights,

recommendations, and potential solutions to improve budgetary control practices and enhance

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budgetary performance in the public sector. By addressing the needs and interests of these

stakeholders, the study aims to drive positive change, accountability, and efficiency in

government financial management.

1.7 SCOPE OF THE STUDY

The scope of this study encompasses various public sector organizations, including government

departments, agencies, and public enterprises. It aims to cover a broad spectrum of budgetary

control mechanisms, from traditional budgeting practices to more contemporary approaches like

performance-based budgeting. The significance of this research lies in its potential to contribute

valuable insights into the optimization of budgetary control processes in the public sector. By

identifying effective strategies and practices, the study seeks to support public sector entities in

achieving better financial management, enhanced service delivery, and greater accountability to

stakeholders using Independence National Electoral Commission as case study.

1.8 LIMITATIONS OF THE STUDY

Every research study has its set of limitations, which can affect the scope, outcomes, and

generalizability of its findings. Acknowledging the limitations of the study on the impact of

budgetary control on budgetary performance in the public sector is crucial for setting the proper

context for interpreting the results.

The study may focus on a specific geographic region, type of public sector organization, or

period, which might limit the applicability of its findings to other contexts, regions, or types of

public sector entities.

Access to accurate, comprehensive, and up-to-date data might be challenging. Public sector

organizations may have restrictions on data sharing due to confidentiality, privacy concerns, or

bureaucratic hurdles.

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Unforeseen external factors such as economic downturns, political changes, or global crises (e.g.,

pandemics) might impact the study's findings or the implementation of its recommendations.

Acknowledging these limitations is not only an exercise in transparency but also helps in framing

the conclusions and recommendations of the study in a balanced and cautious manner. It also

provides a foundation for future research to address these limitations and expand upon the

study's findings.

1.9 DEFINITION OF TERMS

BUDGETARY CONTROL

The process of establishing budgets, comparing actual performance with planned performance,

and taking corrective action to achieve organizational objectives. It involves monitoring,

evaluating, and adjusting financial activities to ensure that resources are utilized efficiently and

effectively.

BUDGETARY PERFORMANCE

The degree to which actual financial outcomes align with budgeted expectations. It encompasses

various indicators, such as revenue generation, expenditure management, cost containment, and

achievement of strategic objectives, to assess the effectiveness and efficiency of budget

implementation.

PUBLIC SECTOR

Refers to the part of the economy that is owned and operated by the government and includes

government departments, agencies, local authorities, and public enterprises. It encompasses

entities responsible for delivering public services, managing public funds, and implementing

government policies.

TRANSPARENCY

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The principle of openness, accountability, and accessibility of information related to government

operations, including budgetary processes, decision-making, and resource allocation. It involves

providing clear, timely, and comprehensible information to stakeholders to foster trust and

accountability.

ACCOUNTABILITY

The obligation of public sector entities to answer for their actions, decisions, and stewardship of

resources to stakeholders, including citizens, taxpayers, elected officials, and oversight bodies.

PERFORMANCE METRICS

Quantifiable measures used to evaluate the effectiveness, efficiency, and outcomes of public

sector activities and programs. Performance metrics may include key performance indicators

(KPIs), benchmarks, targets, and objectives that help assess progress toward organizational goals

and inform decision-making.

STAKEHOLDERS

Individuals, groups, or organizations that have an interest, influence, or stake in the activities,

decisions, or outcomes of public sector entities. Stakeholders may include citizens, taxpayers,

government officials, employees, suppliers, community organizations, and regulatory agencies.

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 CHAPTER TWO

LITERATURE REVIEW

2.1 CONCEPTUAL REVIEW

2.1.1 BUDGETARY PERFORMANCE

Budgetary performance refers to the evaluation of how well an organization has managed its

financial resources in accordance with its budgetary plans and objectives. It involves assessing

the extent to which actual financial outcomes align with budgeted targets and goals. Budgetary

performance serves as a critical measure of an organization's financial health, efficiency, and

effectiveness in utilizing resources (Anthony and Govindarajan, 2007).

Introducing budgetary performance entails examining how well an organization manages its

financial resources in line with its planned budget. It serves as a crucial yardstick for evaluating

fiscal discipline, operational efficiency, and strategic alignment within an entity. Typically,

budgetary performance is assessed by comparing actual financial outcomes against the budgeted

targets set forth by the organization (Pollitt and Bouckaert, 2019).

Discussing the broader implications of budgetary performance extends beyond financial metrics

alone. It often reflects managerial effectiveness, resource allocation decisions, and the overall

health of an organization's financial management practices. Thus, an introduction on budgetary

performance should underscore its multifaceted nature and its critical role in driving

organizational success and sustainability (Brusca and Montesinos, 2017).

KEY ASPECTS OF BUDGETARY PERFORMANCE

Budget Variance Analysis: Comparing actual financial outcomes (e.g., revenues, expenditures)

with budgeted amounts to identify variations or discrepancies. Positive variances indicate that

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actual performance exceeded budgeted expectations, while negative variances suggest that actual

performance fell short of budgeted targets.

Efficiency: Evaluating the efficiency of resource utilization by examining the relationship

between inputs (e.g., financial resources, labor) and outputs (e.g., goods produced, services

delivered). Efficient budgetary performance entails achieving desired outcomes with minimal

inputs or costs.

Effectiveness: Assessing the effectiveness of budgetary allocations in achieving organizational

goals and objectives. Effective budgetary performance involves ensuring that resources are

allocated to activities that contribute to the organization's mission and strategic priorities.

Transparency and Accountability: Ensuring transparency and accountability in financial

management processes by providing clear and accurate information about budgetary

performance to stakeholders, including government agencies, taxpayers, and oversight bodies.

Compliance: Ensuring compliance with legal and regulatory requirements governing budgetary

processes and financial management practices. This includes adherence to budgetary guidelines,

reporting standards, and auditing procedures.

Flexibility and Adaptability: Assessing the organization's ability to respond to changing

circumstances and unforeseen events while maintaining budgetary control. Flexible budgetary

performance allows for adjustments to be made to budget allocations and spending priorities as

needed.

Strategic Alignment: Evaluating the extent to which budgetary allocations are aligned with the

organization's strategic priorities, long-term goals, and performance objectives. Budgetary

performance is enhanced when resources are allocated in ways that support the organization's

overall mission and strategic direction.

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Effective budgetary performance is essential for ensuring the financial sustainability, operational

efficiency, and organizational effectiveness of public sector entities. It requires careful planning,

monitoring, and evaluation of budgetary activities to optimize resource utilization and achieve

desired outcomes.

2.1.2 BUDGETARY CONTROL

Budgetary control is a systematic process used by organizations to plan, monitor, and control

their financial resources effectively. It involves setting financial targets, comparing actual

performance against these targets, and taking corrective actions as necessary to ensure that

financial goals are met. Budgetary control is a fundamental tool in financial management and

plays a crucial role in achieving organizational objectives (Bouckaert and Halligan, 2017).

Introducing budgetary control involves understanding how organizations use budgets as a tool to

plan, monitor, and control their financial activities. It's a systematic approach that helps

management ensure that actual results align with planned objectives and take corrective actions

if deviations occur. Budgetary control serves as a cornerstone of financial management,

providing a framework for decision-making and resource allocation (Pollitt and Bouckaert,

2019).

In crafting an introduction on budgetary control, it's essential to highlight its role in promoting

financial discipline, optimizing resource utilization, and facilitating goal achievement. By

establishing clear targets and performance benchmarks, organizations can effectively track their

financial performance and make informed decisions to steer operations in the desired direction

(Pollitt and Bouckaert, 2019).

DETAILED EXPLORATION OF BUDGETARY CONTROL

Planning

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Budget Formulation: Developing a comprehensive budget that outlines expected revenues,

expenditures, and other financial activities for a specific period, typically a fiscal year.

Strategic Alignment: Ensuring that budgetary plans are aligned with organizational goals,

objectives, and strategic priorities.

Coordination

Resource Allocation: Distributing financial resources among different departments, projects, or

activities based on their importance and priority.

Communication: Facilitating communication and coordination among various stakeholders

involved in the budgeting process, such as department heads, managers, and finance personnel.

Implementation

Budget Authorization: Obtaining approval for the budget from relevant authorities, such as the

board of directors or senior management.

Monitoring and Control: Tracking actual financial performance against budgeted targets

through regular reviews and reports. This involves identifying variances and investigating the

reasons behind them.

Performance Evaluation

Variance Analysis: Comparing actual financial results with budgeted amounts to identify

discrepancies and deviations from the planned targets.

Performance Indicators: Using key performance indicators (KPIs) to assess the efficiency,

effectiveness, and overall performance of budgetary control processes.

Corrective Actions

Budgetary Adjustments: Making adjustments to the budget or reallocating resources to address

variances and ensure that financial goals are achieved.

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Continuous Improvement: Implementing changes and improvements to budgetary control

processes based on lessons learned and feedback from performance evaluations.

Compliance and Accountability

Legal and Regulatory Compliance: Ensuring compliance with relevant laws, regulations, and

accounting standards governing budgetary practices.

Accountability: Holding individuals and departments accountable for their financial

performance and adherence to budgetary targets.

Reporting and Communication

Financial Reporting: Generating timely and accurate financial reports to inform stakeholders

about the organization's financial performance and compliance with budgetary plans.

Transparency: Promoting transparency by providing clear and comprehensive information

about budgetary processes, decisions, and outcomes.

Continuous Improvement

Feedback Mechanisms: Soliciting feedback from stakeholders and participants in the budgeting

process to identify areas for improvement and enhance the effectiveness of budgetary control.

Benchmarking: Benchmarking against industry standards and best practices to identify

opportunities for innovation and optimization in budgetary processes.

Budgetary control is a multifaceted process that encompasses planning, coordination,

implementation, performance evaluation, corrective actions, compliance, reporting, and

continuous improvement. By effectively managing financial resources and aligning them with

organizational goals, budgetary control helps organizations achieve better financial performance

and operational efficiency.

2.1.3 BUDGET MONITORING AND BUDGETARY PERFORMAMNCE

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Budgetary monitoring and budgeting performance are integral components of financial

management in organizations. (Smith and Wesson 2018)

BUDGETARY MONITORING

Budgetary monitoring involves the continuous tracking and assessment of actual financial

performance against the planned budget. It allows organizations to identify deviations, variances,

and trends in financial activities, enabling timely intervention and corrective actions. Key aspects

of budgetary monitoring include:

Regular Review: Consistently reviewing financial transactions and comparing them with

budgeted amounts to identify discrepancies and deviations.

Variance Analysis: Analyzing the differences between actual financial results and budgeted

targets to determine the reasons for discrepancies and assess their impact on overall performance.

Performance Indicators: Using key performance indicators (KPIs) and financial metrics to

measure progress towards budgetary goals and objectives.

Timely Reporting: Providing timely and accurate reports on financial performance to

stakeholders, including management, board of directors, and external parties.

BUDGETING PERFORMANCE

Budgeting performance refers to the evaluation of how well an organization has managed its

financial resources in accordance with the budgetary plans and objectives. It assesses the

effectiveness and efficiency of budgetary processes in achieving desired outcomes. Key aspects

of budgeting performance include:

Efficiency: Assessing the efficiency of resource utilization by comparing actual expenditures

with budgeted amounts and identifying areas of cost savings or inefficiencies.

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Effectiveness: Evaluating the effectiveness of budgetary allocations in achieving organizational

goals and objectives, such as revenue targets, cost reduction initiatives, or service delivery

improvements.

Strategic Alignment: Ensuring that budgetary plans are aligned with organizational strategies,

priorities, and performance objectives.

Transparency and Accountability: Promoting transparency and accountability in budgeting

processes by providing clear and comprehensive information about budgetary decisions,

allocations, and outcomes.

Continuous Improvement: Implementing feedback mechanisms and process enhancements to

improve the effectiveness and efficiency of budgeting processes over time.

RELATIONSHIP BETWEEN BUDGETARY MONITORING AND BUDGETING

PERFORMANCE

Budgetary monitoring and budgeting performance are closely intertwined, with each influencing

the other in a continuous feedback loop:

Budgetary monitoring informs budgeting performance: By tracking actual financial

performance against budgeted targets, organizations can identify areas of strength and weakness

in their budgeting processes and make adjustments to improve performance.

Budgeting performance drives budgetary monitoring: The evaluation of budgeting

performance helps organizations identify opportunities for enhancing budgetary monitoring

processes, such as refining performance indicators, improving data collection methods, or

enhancing reporting mechanisms.

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Budgetary monitoring and budgeting performance are essential components of financial

management that work together to ensure effective resource allocation, efficient utilization of

funds, and achievement of organizational goals and objectives. By implementing robust

budgetary monitoring processes and evaluating budgeting performance regularly, organizations

can enhance their financial performance and drive continuous improvement in budgetary

processes.

2.1.4 STAKEHOLDER INVOLVEMENT AND BUDGETARY PERFORMANCE

Stakeholder involvement is a critical aspect of any project, initiative, or decision-making

process. Stakeholders are individuals, groups, or organizations who have an interest or are

impacted by the outcome of a particular project or decision. Involving stakeholders in the

process ensures that their perspectives, concerns, and needs are taken into account, leading to

more informed and inclusive outcomes (Brusca and Montesinos, 2017).

Effective stakeholder involvement requires communication, collaboration, and engagement

throughout the project lifecycle. It involves identifying key stakeholders, understanding their

interests, and actively seeking their input and feedback. By involving stakeholders early on and

throughout the process, organizations can build trust, foster support, and mitigate potential

conflicts or resistance (Brusca and Montesinos, 2017).

Stakeholder involvement plays a crucial role in influencing budgetary performance within an

organization.

HOW STAKEHOLDER INVOLVEMENT IMPACTS BUDGETARY PERFORMANCE

Improved Decision Making

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Diverse Perspectives: Involving stakeholders such as department heads, managers, employees,

and external parties in the budgeting process ensures that a wide range of perspectives and

expertise are considered during decision-making.

Better-Informed Decisions: Stakeholders bring valuable insights and information about

operational needs, challenges, and opportunities, which can lead to better-informed budgetary

decisions.

Increased Accountability

Transparency: Engaging stakeholders in the budgeting process promotes transparency and

accountability by providing visibility into how financial resources are allocated and utilized.

Shared Responsibility: When stakeholders are involved in setting budgetary targets and

priorities, they have a stake in achieving them, leading to increased accountability for budgetary

performance.

Enhanced Resource Allocation

Alignment with Organizational Goals: Stakeholder involvement ensures that budget

allocations are aligned with organizational goals, priorities, and strategic objectives.

Optimized Resource Allocation: By soliciting input from stakeholders, organizations can

prioritize resource allocation based on identified needs, risks, and opportunities, leading to more

effective and efficient use of funds.

Increased Commitment and Ownership

Buy-In: Involving stakeholders in the budgeting process fosters a sense of ownership and

commitment to budgetary targets and objectives.

Motivation: Stakeholders are more likely to support and actively participate in budgetary

initiatives when they have been involved in the decision-making process from the outset.

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Facilitated Implementation

Clear Communication: Engaging stakeholders in the budgeting process ensures that

expectations, responsibilities, and timelines are clearly communicated, facilitating smooth

implementation of budgetary plans.

Problem-Solving: Stakeholders can contribute to identifying potential implementation

challenges and developing strategies to overcome them, leading to more successful execution of

budgetary initiatives.

Enhanced Performance Monitoring

Feedback Mechanisms: Stakeholder involvement provides opportunities for ongoing feedback

and performance monitoring, allowing organizations to adjust budgetary plans in response to

changing circumstances or emerging issues.

Continuous Improvement: By soliciting input from stakeholders on budgetary performance,

organizations can identify areas for improvement and implement corrective actions to enhance

overall performance.

Stakeholder Satisfaction

Addressing Needs and Concerns: Involving stakeholders in the budgeting process allows

organizations to address their needs, concerns, and priorities, leading to increased satisfaction

and support for budgetary initiatives.

Building Trust: Transparent and inclusive budgeting processes build trust and confidence

among stakeholders, strengthening relationships and collaboration within the organization.

Stakeholder involvement is essential for achieving optimal budgetary performance by promoting

informed decision-making, accountability, resource allocation, commitment, implementation

effectiveness, performance monitoring, and stakeholder satisfaction. Organizations that actively

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engage stakeholders in the budgeting process are better positioned to achieve their financial

goals and objectives.

2.1.5 CENTRALIZED CONTROL AND BUDGETARY PERFORMANCE

Centralized control refers to a management structure where decision-making authority is

concentrated at the top levels of an organization. In this setup, key decisions regarding

operations, strategy, and resource allocation are made by a select group of individuals or a single

entity, often at the headquarters or main office.

In a centralized control system, key decisions regarding policy, operations, resource allocation,

and other significant matters are made by a central authority, which typically holds considerable

power and influence over subordinate entities or individuals. This centralization of control can

take various forms, ranging from authoritarian regimes with centralized political power to

centralized management structures in organizations and businesses (Brusca and Montesinos,

2017).

Centralized control is a governance or management approach characterized by the concentration

of decision-making authority at a central point. While it offers potential benefits in terms of

efficiency and coordination, it also poses challenges related to bureaucracy, responsiveness, and

risk management. As such, the suitability of centralized control depends on various factors,

including the nature of the system, its objectives, and the trade-offs involved in centralizing

decision-making authority.

Budgetary performance within a centralized control framework can be both advantageous and

challenging:

Advantages:

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Efficient Resource Allocation: Centralized control allows for a streamlined allocation of

resources since decisions are made at the top. This can lead to better coordination and utilization

of funds across various departments or projects.

Consistency: With centralized control, there's a greater potential for consistency in decision-

making, which can enhance predictability and stability within the organization.

Clear Accountability: Since decisions are made by a select group or individual, accountability

for budgetary performance can be clearly defined. This can make it easier to identify responsible

parties in case of success or failure.

Challenges:

Lack of Flexibility: Centralized control may inhibit flexibility and responsiveness to local or

departmental needs. Decisions made at the top might not always align with the specific

requirements or opportunities present in different areas of the organization.

Bureaucracy: Centralized decision-making processes can sometimes lead to bureaucratic

hurdles, slowing down the implementation of budgets or changes in resource allocation.

Limited Innovation: In some cases, centralized control can stifle innovation and creativity since

decisions may be influenced by a narrow set of perspectives or priorities.

The effectiveness of centralized control in achieving budgetary performance depends on various

factors such as the nature of the organization, the industry it operates in, and the leadership style

of those in control. Finding the right balance between centralized control and decentralization is

often crucial for organizations to thrive in dynamic environments.

2.1.6 DECENTRALIZED CONTROL AND BUDGETARY PERFORMANCE

Decentralized control refers to the delegation of decision-making authority and responsibility to

lower levels of an organization, allowing for greater autonomy and flexibility in decision-

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making. When it comes to budgetary performance, decentralized control can have both positive

and negative impacts.

In a decentralized performance framework, decision-making authority is often delegated to

lower-level units, such as departments, teams, or individuals, empowering them to make

decisions that are aligned with the organization's goals and objectives. This distribution of

authority enables quicker responses to local conditions, fosters innovation, and encourages

greater engagement and ownership among employees (Rahman, M., & Ali, F. (2021)

One of the key advantages of decentralized performance is its ability to adapt to diverse and

rapidly changing environments. By empowering local units to make decisions based on their

specific knowledge and expertise, decentralized systems can be more responsive to local needs,

market dynamics, and emerging opportunities or challenges.

Moreover, decentralized performance can promote innovation and creativity by allowing for

experimentation and risk-taking at the grassroots level. When decision-making authority is

decentralized, individuals and teams are more likely to take initiative, explore new ideas, and

implement creative solutions to problems (Jones, B., & Johnson, C. (2020).

POSITIVE IMPACTS

Responsiveness to Local Needs: Decentralized control allows local managers and departments

to tailor budgetary plans and allocations to meet specific operational needs and priorities. This

responsiveness can lead to more efficient resource allocation and better alignment with local

objectives, ultimately enhancing budgetary performance.

Faster Decision-Making: With decision-making authority decentralized, local managers can

make budgetary decisions more quickly in response to changing circumstances or emerging

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opportunities. This agility can help organizations adapt to market dynamics and improve their

financial performance.

Enhanced Motivation and Accountability: Empowering local managers with budgetary

control can increase their sense of ownership and accountability for financial outcomes. When

managers have a direct stake in budgetary performance, they are often more motivated to achieve

positive results, leading to improved performance.

Innovation and Creativity: Decentralized control encourages innovation and creativity in

budgetary management. Local managers may develop novel approaches to cost management,

revenue generation, or resource utilization, leading to improved efficiency and effectiveness in

budgetary performance.

Improved Communication and Coordination: Decentralized control fosters better

communication and coordination between different levels of the organization. As local managers

have greater autonomy, they are more likely to communicate budgetary needs and constraints

effectively, facilitating smoother coordination and collaboration across departments.

NEGATIVE IMPACTS

Lack of Coordination: Decentralized control can lead to fragmentation and lack of coordination

in budgetary management. Without centralized oversight, different departments or units may

pursue conflicting priorities or duplicative activities, undermining overall budgetary

performance.

Risk of Inconsistency: Inconsistent budgetary practices across decentralized units may lead to

disparities in performance and financial outcomes. Without standardized processes and

guidelines, it can be challenging to maintain consistency and fairness in budgetary management,

potentially impacting overall performance.

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Loss of Economies of Scale: Decentralized control may result in suboptimal resource allocation

and utilization, leading to inefficiencies and higher costs. Without centralized oversight,

organizations may miss opportunities to leverage economies of scale or achieve cost savings

through centralized procurement or resource pooling.

Difficulty in Performance Evaluation: Evaluating budgetary performance across decentralized

units can be challenging due to differences in operating environments, priorities, and

performance metrics. Without standardized benchmarks or performance measures, it may be

difficult to assess the overall effectiveness of decentralized control in achieving budgetary goals.

Risk of Overlooked Risks: Local managers may focus on short-term objectives or local

priorities at the expense of broader organizational goals or long-term sustainability. Without

centralized risk management and oversight, decentralized units may overlook systemic risks or

external factors that could impact budgetary performance.

Decentralized control can have both positive and negative impacts on budgetary performance.

While it can foster responsiveness, innovation, and motivation at the local level, it also poses

challenges related to coordination, consistency, and performance evaluation. Effective

implementation of decentralized control requires careful balancing of autonomy and

accountability to maximize its benefits while mitigating potential risks.

2.2 THEORETICAL REVIEW

2.2.1 Walker’s Progressive Theory

This theory was propounded by walker in (1930) Theory was concerned with the standard of

living in cities and the ability to pay for it. A city’s standard of living included both the number

and quality of government services provided. Walker’s progressive budget theory centered on

the premise that the means to decide how to allocate between options was through the “utilitarian

ideal” or indifference point in economic theory as applied to government budgets. The

24
indifference point was a measure of current expenditures as an expression of balance between

citizen demand and government service provision. A theory of expenditures based on economic

ideas was preferable to reliance on abstract pleas to the claims of justice that were noneconomic

and external to the government. In other words, despite some limitations, allocation based on

economics provided facts to replace judgmental arguments.

2.2.2 Musgrave and Rostow Theory of Public Expenditure

Theory of public expenditure was propounded by Musgrave in (1969) and popularized by

Rostow (1973), this theory postulated the development model of government expenditure growth

which emphasis that government must increase budget for the provision of infrastructural

facilities to increase people standard of living. According to Musgrave (1969), public sector

investment as a proportion of total investment of an economy is noted to be high due to the fact

that, public capital formation is a great necessity at this stage. Public sector investment includes

basic social infrastructure overheads like education, potable water, law and order, good roads and

highways and good health systems. Governments after achieving the developmental stage seek

assistance from private sectors in the economy.

2.2.3 Punctuated Equilibrium Theory of Budgeting

This theory was propounded by Baumgartner and Jones (1993) established their concept of

“punctuated equilibria” that addresses both incremental and large budget changes. It asserts that

there is a state of equilibrium followed by a punctuated change followed again by equilibrium.

The state of equilibrium is during quiet periods of incremental change. Punctuations are breaks

from the equilibrium norm. Punctuated equilibrium theory involves environments of stability

shifting into environments of instability (Jordan, 2002). Thus, in order to establish equilibrium in

terms of budget changes, the budget and budgetary control measures put in place by an entity

25
becomes pivotal to the overall performance system of ensuring stability of environment The

relevance of this theory of budget control is the participative perspective when an institution set a

target but the fund hire mark for this project couldn’t complete the execution there will be need

for the increment to enhance their financial performance

2.2.4 Budgetary Control Model

This model was propounded by (Phyrr, 1970) Budgeting system is a tool used by the

organization as a framework for their spending and revenue allocation. To ensure its resources

are not wasted, the organization must be able to come out with an effective budgeting system.

This is important as it ensure that the outputs produced and services delivered achieve the

objectives. According to this theory, a good budgeting system must be able to addresses the

effectiveness of the organization’s expenditure. The organization has to put proper controls that

ensure that the budget is properly maintained and allocated. This is achieved through cutting

costs in order to increase the quality service offered by the organizations. However, if an

organization has lesser revenue generation sources they might have to find a way to fund their

estimated budget by borrowing and tax restructuring as cited by (Robinson & Last, 2009). This

theory has been critized by different researcher’s base on their view from different direction.

2.2.5 Theoretical Framework

Theoretical framework for budgetary performance in the public sector typically draws upon

various theories and concepts from public administration, economics, political science, and

organizational behavior. Here's a framework that encompasses several key dimensions:

Public Choice Theory: This theory examines how individuals, including public officials, make

decisions regarding resource allocation in the public sector. It considers factors such as self-

interest, rational decision-making, and the role of incentives in shaping budgetary decisions.

26
Agency Theory: This theory explores the principal-agent relationship between elected officials

(principals) and public administrators (agents) responsible for implementing budgetary policies.

It examines issues of delegation, accountability, and the alignment of incentives to ensure that

agents act in the best interests of principals.

Institutional Theory: This perspective examines how formal and informal institutions shape

budgetary decision-making processes and outcomes. It considers factors such as organizational

culture, bureaucratic norms, and the influence of interest groups on budgetary performance.

Stakeholder Theory: This framework emphasizes the importance of considering the interests

and preferences of various stakeholders (e.g., citizens, elected officials, interest groups) in

budgetary decision-making. It highlights the need for stakeholder engagement, transparency, and

accountability to achieve optimal budgetary outcomes.

By integrating these theoretical perspectives, researchers and practitioners can develop a

comprehensive understanding of budgetary performance in the public sector and identify

strategies for improving budgetary processes and outcomes.

2.3 EMPIRICAL REVIEW

Etale (2019) reassessed the nexus between fiscal policy and economic growth in Nigeria

using time series secondary data covering 2001 to 2018. The study adopted gross domestic

product (representing economic growth) as the dependent variable, while total revenue, recurrent

expenditure and capital expenditure (components of fiscal policy) were used as the independent

variables. Data obtained from CBN Statistical Bulletin and the National Bureau of Statistics was

analyzed using descriptive statistics and multiple regression analysis based on E-views 9.0

software. The results revealed that recurrent expenditure had significant positive effect on gross

domestic product, but total revenue and capital expenditure were insignificant and negatively

related to GDP.
27
 Similarly, Imo and Des-Wosu (2018) examined the effect of budgetary control on

performance of government owned companies in Rivers State of Nigeria. The study used

Pearson product moment correlation coefficient based on SPSS 20 version for the analysis of

data. The results showed that a significant positive link existed between budgetary control and

financial performance of government owned companies. Based on the findings, the study

recommended that government owned companies should adopt budgetary control measures to

sustain improved performance.

Mukah (2018) investigated the relationship between budgetary control and performance

of local government councils in Northwest Cameroon. The study employed correlation and

multiple regression techniques based on SPSS version 20 for the analysis of data. The results

revealed that the key budgetary control variables adopted (planning, participation, monitoring

and control) had statistically significant positive influence on performance of the local councils.

Also, Mutungi (2017) examined the effect of budgeting and budgetary control on

performance of in Kenya using primary and secondary data sourced from 47 county governments

for the period 2013 to 2017. He employed the statistical package for social sciences (SPSS)

version 21 based on OLS for data analysis. The results indicated a strong positive relationship

between budgetary control and financial performance.

Egbunike and Unamma (2017) assessed the association between budgetary control and

performance evaluation measures in the hospitality industry in Nigeria. Primary data obtained

through the administration of a structured questionnaire were analyzed using inferential and

descriptive statistics. The results showed that budgetary control was an important tool for

performance evaluation.

28
 Ng’wasa (2017) examined the relationship between budgetary control and financial

performance of financial institutions in Tanzania using National Microfinance Bank of Dodoma

as a case study. The study adopted financial performance as the dependent variable, while

budgetary planning, budget monitoring and budgetary participation were used as the independent

variables. Data collected from secondary and primary sources were analyzed using descriptive

statistics and multiple regression methods based on the windows SPSS computer software. The

findings showed that budgetary planning had strong relationship with financial performance, but

budget monitoring and budgetary participation had no effect on financial performance. The study

concluded that budgetary planning is an important tool for control in financial institutions.

Kaguri (2015) investigated the link between budgetary control and financial performance

of insurance companies in Kenya. The study adopted return on assets as proxy for financial

performance and the dependent variable, while budget planning, budget monitoring and budget

participation were used as the independent variables. Secondary and primary data collected from

sampled 44 listed insurance companies were evaluated using descriptive and inferential statistics.

The results revealed that all the components of budgetary control significantly affected financial

performance.

Also, Callahan and Waymire (2017) examined the association between effects of

budgetary control on performance, using a sample of large U.S cities over 2004 – 2005

timeframe. Within this context they examined whether the tightness of budgetary controls or

level of budgetary control within the cities were measured by budget variance contributed to

performance as measured by bond rating, and found that the effective level of budgetary control

was significantly and positively related to bond rating.

29
 Similarly, Douglas (2014) used a case study approach and found that budgeting practices

place high importance on budget-to-actual comparism for performance evaluation purposes both

at corporate and subsidiary levels. Anderson (2003) also supported this view saying that in most

U.S companies, the development of budget is still used as the main performance measurement

system. Budgetary standards and targets tend to be the criteria upon which the performance

organizations are evaluated. These standards and targets provides a basis for identifying and

appraising selected aspects of organizational performance, since they are the criteria used to

guide and motivate it.

Brownell (2012), in his study suggests that when budgetary participation should increase

accordingly. When budgeting control is riding subordinates would want to know assessment

criteria in details. Therefore, as the budgetary control increases, budgetary participation of

subordinates is also expected to increase. He advocated that budgetary participation should be

seen as an important moderating variable in the relations between type of budgetary control and

subordinates performance. In his findings budget application that includes Budgetary Control has

no direct effect on performance, while budgetary participation affects performance directly and

negatively. But in case where budgetary control is high, there is a meaningful positive relation

between performance and budgetary participation. Budgetary practices being a standard for

performance are used to evaluate managerial performance.

Chircir and Simiyu (2017) examined the effect of budgetary control process on financial

performance based on a profit-oriented company in Kenya. The study used four components of

budgetary control such as planning, human factor, resource availability, and monitoring and

evaluation as the independent variables. Secondary data (through financial statement content

analysis) and primary data (through the use of a structured questionnaire) were collected from

30
three Coca-Cola bottling companies within the Almasi Beverages Group of Companies. The

study employed descriptive statistics and inferential statistics (Karl Pearson correlation) for the

analysis of data. The results provided evidence that the components of budgetary control had

significant influence on financial performance.

Geletaw (2018) conducted a research to investigate the determinants of budget control in

the Benishangul Gumzu regional state public organizations using descriptive research design.

The study found that the composite measure of information and communication, cost reduction,

competent internal audit staff, management support, budget monitoring and evaluation,

organizational commitment and budget planning processes for 78% (Nagelkerke modified R2 =

0.78) variance for the budget control in the public sector offices.

Ifra Kerosi,and Ondabu, (2018) studied the effectiveness of budgetary control techniques

on organizational performance at Dara salaam Bank to analyze the effectiveness of budgetary

control techniques on organizational performance using descriptive and retrospective research.

The study had proven that there was a positive relationship between Organization’s

responsibility accounting system and performance.

Fadi, (2013) conducted an investigation of the effect of tight budgetary control on

management behavior at Swedish public sector emphasizing on motivation, commitment,

satisfaction, and stress using a survey questionnaire with the objective of determining the effect

of using TBC on managerial behavior. The result of the study found that first; the study suggests

that the majority of managers working in the public sector actually experience TBC.

Edvine, (2018) conducted a study to examine the role of budgetary control in enhancing

financial management in Local Government Authorities at Kinondoni Municipal Council

(KMC). The study employed a case study using a sample of 50 respondents who were

31
purposively selected in which questionnaire and interview were the data collection instruments

and data were analyzed by using MS Excel computer program. The study found that information

sharing, budget participation; organizational commitment, role ambiguity and job performance as

the characteristic features of budgeting, budgeting and Planning and Analyzing & Feedback are

not being effectively practiced at KMC and that there was little impact of budgetary control

principles on financial management at KMC.

In their study, Nickson and Mears (2012) examined the relationship between budgetary

control and performance of state ministries in Boston Massachusetts, a sample of five ministries

were examined to test the relationship between budgetary control and performance of state

ministries, secondary data was used and a review of 10 years was used, a regression model was

used for data analysis and a statistical positive relationship was found between budgetary control

and performance of state ministries. The results of the regression analysis concluded that proper

budgetary control measures led to performance of state ministries.

Marcormick and Hardcastle (2011) carried out a study on budgetary control and

organizational performance in government parastatals in Europe. A sample of 40 government

parastatals were used for establishing the relationship between budgetary control and

organizational performance, secondary data was used and a period of ten years was reviewed. A

regression model was used for data analysis and the results of data analysis revealed a positive

relationship between budgetary control and organizational performance of government

parastatals.

Nicoleta (2017) conducted a study on public Budgeting on Republic of Moldova as a case

study by reviewing both theoretical and practical analysis done by World Bank with the

objectives of illustrating if public Budget is efficient or not and impact of applications of

32
practice. The study found that the general trend concerning the Budget method and procedures is

directed to the achievement of results, performance indicators and performance information.

Carolyn and Tammy,(2017) conducted a study on title „an examination of the effects of

Budgeting control on performance: evidence from cities „and the result of their study shows that

effective budgetary control has a positive effect on organizational performance.

33
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 RESEARCH DESIGN

This research work consists of a survey research design. For the purpose of carrying out a sound

analysis and then arriving at a reasonable conclusion, this work entails the collection of data

using both the primary and secondary sources of data collection.

3.1.1 PRIMARY SOURCES

The primary data used for this research work were gotten from the companies used as a case

study in this research work and this was done through the use of questionnaire and oral

interview.

3.1.2 SECONDARY SOURCES

The secondary data were extracted from textbooks and other related materials which included

journals, internet browsing.

Data collected during this work were restricted to experts in the area of my interest and standard

textbooks that are internationally recognized and accepted. Citations were made where

appropriate.

3.2 POPULATION OF THE STUDY

The population for this study will consist of independence national electoral commission.

3.3 SAMPLE SIZE AND SAMPLING TECHNIQUE

Sample is a small group of element or subject drawn from a definite or specified population.

Sampling involves the process by which the subject or object of the observation is drawn from a

large sect and studied in other to make references about the characteristics of the large

population. Simple random sampling technique was used to select the participants. This every

34
member of the population had an equal chance of being selected.

3.4 METHOD OF DATA COLLECTION

Questionnaires were administered directly by the researcher by the help of the management to

respondents that are staffs of the selected companies. The researcher will ensure that there was

no double issuance of questionnaires so as to avoid loss of questionnaires. The questionnaires

will be left with the respondents so as to allow for privacy.

3.5 METHOD OF DATA ANALYSIS

The questionnaires, which were answered by the respondents were tabulated and data analyzed

by using descriptive, inferential and quantitative analytical techniques with estimations from the

Gnu Regression, Econometrics and Time-series Library (gretl) software. Statistical tools such as

frequency distribution tables were employed in analyzing the questionnaire. This study employed

the ordinary least squares multiple regression econometric model in estimating the study.

3.5 MODEL SPECIFICATION

Multivariate Analysis

In order to determine the effect of budgeting processes on firm performance, we used the

following equations:

Y1= a1+ b1Xa +b2Xb + ε......................................................................................... (1)

Y2 = a2+b3Xc + b4Xd + ε........................................................................................... (2)

Y3= a3+b5Xe+ b6Xf + ε ........................................................................................(3)

Y4=a4+b7Xg+ b8Xh + ε.............................................................................................. (4)

Where:

Y1=firm performance; Xa = the formal budgetary planning Xb = the formal budgetary control

and ε is the error term,

35
Y2 = financial performance; Xc = the formal budget planning, Xd = the formal budgetary control

and ε is the error term,

Y 3= Growth on sales revenue; Xe = the formal budget planning, Xf = the formal budgetary

control and ε is the error term

Y4=Growth on Profit; Xg= the formal budget planning, Xh= the formal budgetary control and ε

is the error term

a1, a2, a3 and a4 are intercepts of the regression lines while b1 through b8 are parameters

associated with formal budgetary planning and formal budgetary control and the symbol ‘ε’ is

the error term.

36
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