1

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 ………………………………………..

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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 ……………………………………………

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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.

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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.

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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

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TABLE OF CONTENTS Item

Page

Declaration ………………………………………………… (i)

Approval ………………………………………………….

(ii)

Dedication …………………………………………………

(iii)

Acknowledgement ………………………………………..

(iv)

Acronyms ………………………………………………..

(v)

Table of Contents …………………………………………

(vi)

List of Figures and Tables………………………………. (ix)

Abstract …………………………………………………. (x)

1.0 Background ……………………………………………………….. 1

1.1 Statement of the Problem …………………………………………. 2

1.2 Purpose of the Study ……………………………………………… 3

1.3 Objectives of the Study ……………………………………………. 3

1.4 Research Questions ………………………………………………... 3

1.5 Scope of the Study …………………………………………………. 4

1.5.1 Subject Scope ………………………………………………………. 4

7

1.5.2 Geographical Scope ………………………………………………... 4

1.6 Significance of the Study …………………………………………... 4

1.7 Conceptual Framework ……………………………………………... 5

2.0 Literature Review …………………………………………………... 6

2.1 Introduction …………………………………………………………

6

2.2 Concepts and Components of Budgetary Control …………………... 6

2.2.1

2.2.1.1

2.2.1.2

2.2.1.3

2.2.1.4

Budgeting and Planning …………………………………………….

Budgeting……………………………………………………………..

Budget Functions……………………………………………………..

Planning……………………………………………………………….

Planning Process………………………………………………………

6

6

8

10

12

2.2.2

2.2.2.1

2.2.2.2

Monitoring and Control ……………………………………………..

Monitoring…………………………………………………………….

Control…………………………………………………………………

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13

15

2.2.3

2.2.3.1

2.2.3.2

Analyzing, Feedback and Performance ……………………………..

Budgetary Analysis……………………………………………………

Feedback……………………………………………………………….

16

16

18

2.3

2.3.1

Financial Performance ……………………………………………...

Performance Measurements………………………………………….

19

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

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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

4.0

4.1

4.2

4.2.1

4.2.2

4.2.3

4.3

4.4

4.5

4.5.1

5.0

5.1

5.2

5.3

5.4

Anticipated Limitations of the Study ……………………………….

Data Presentation, Analysis and Interpretation……………………….

Introduction ………………………………………..

Demographic Statistics ………………………………………..

Level of Education by Sex ……………………………………….

Level of Education by Age ……………………………………….

Level of Education by Period worked with Organization ……………

Budgetary Controls ……………………………………………..

Perceived Financial Performance …………………………………….

Correlation Analysis……………………………………………………

Multiple Regression Coefficients …………………………………….

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

Introduction ……………………………………………………………

Budgetary Control Components ………………………………………

Perceived Financial Performance ………………………………………

Relationship between budgetary controls and perceived financial

performance …………………………………………………………..

33

34

34

34

35

36

37

38

40

41

42

44

44

44

46

47

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6.0

6.1

6.2

6.3

6.4

6.5

6.6

6.7

1

2

3

4

5

6

7

8

9

10

11

12

13

Conclusions and Recommendations ……………………………………

Introduction ………………………………………………………………

Conclusions ...………………………………………………………….

Recommendations .................................................................................

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

References …………………………………………………………..

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

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

List of Figures and Tables:

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

Table (1): Percentage Shortfall between expected and actual amounts

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

Table (2): Sample Size........................................................................

Table (3): Reliability and Validity of Research Instruments

coefficients.

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

Table (4.2): Level of Education by Sex

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

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

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

Organization......

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

Table (4.6); Rotated Component Matrix for Financial

Performance.......

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49

49

50

52

53

59

65

5

2

31

32

35

35

36

37

38

40

42

43

59

59

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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,

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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.

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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

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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 UCC’s 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

2004/2005 half year 62,935,000 25,875,622 40.9

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

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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/Y’s

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;

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(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 Significance of the Study.

i. Findings of the study shall help Government in identifying the effects and

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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 regulator’s and policy maker’s 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

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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

Budgetary Controls

Budgeting and Planning

Monitoring and Control

Analyzing & Feedback

Perceived Financial Performance

Infrastructural development

Service delivery Expenditure

related activities

Intervening Variable

Government policies Incentives

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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 management’s 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

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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

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still essential and can for example, be incorporated as part of the financial

component of the balanced scorecard. Pierce and O’Dea (1998), also subscribe to

the view that budgets are still relevant to today’s 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).

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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 today’s 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.

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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 “today’s” 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)

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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, it’s 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.

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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. It’s the researcher’s intention to explore whether such a budgeting

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process and planning processes exist at BTVET’s 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

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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

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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 don’t conform to the original plan requires their attention. This

process enables management to operate a system of management by exception,

which means that a manager’s 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

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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.

29

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.

30

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

31

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

32

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 agency’s program structure linking outputs to long-term

objectives, which then creates a performance budget. This process helps to

33

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

34

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 employee’s 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.

35

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. It’s 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

36

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. It’s

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.

37

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

38

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

39

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

40

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

41

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.

42

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

UCC’s, 3 AC’s, 34 TI’s, 29 TS’s and 40 HTI’s 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

Roscoe’s 1975 rule of thumb that states that sample sizes of 30 and above are

sufficient.

43

Table (2): Sample size determination.

Category Total Population Sample Size UCC’s 05 5 TI’s 34 10 TS’s 29 8 HTI’s 40 8 AC’s 03 1 Total 111 32

Source: Computation by the researcher.

3.5 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 was measured by Infrastructure

44

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 Cronbach’s coefficient Alpha

(Cronbach, 1946) as shown by the table below:

Table (3): Reliability Coefficients

VARIABLE CRONBACH ALPHA Budgeting and Planning 0.9031 Monitoring and Control 0.9269 Analyzing and Feedback 0.7111 Financial Performance 0.6742 Infrastructure Development 0.7164 Service delivery 0.6344 Expenditure related activities 0.6817

Source: Primary data.

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.

45

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 Limitations of the Study.

(i) 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

46

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.

Cases Valid Missing Total

N Percent N Percent N Percent Level of Education * Sex Level of Education * Age Level of Education * Period worked with organization

122 122 122

100 100 100

0 0 0

.0

.0 .0

122 122 122

100 100 100

Source: Primary data.

47

4.2.1 Level of Education by Sex

Table (4.2): Level of education by Sex

Sex Total Male Female

Level of Certificate Count Education % within Level of Education % within Sex % of Total

7 50.5 8.3 5.7

7 50.5 18.4 5.7

14 100 11.5 11.5

Diploma Count % within Level of Education % within Sex % of Total

27 79.4 32.1 22.1

7 20.6 18.4 5.7

34 100 27.9 27.9

Degree Count % within Level of Education % within Sex % of Total

44 78.6 52.4 36.1

12 21.4 31.6 9.8

56 100 45.9 45.9

Masters and Above Count % within Level of Education % within Sex % of Total

6 33.3 7.1 4.9

12 66.7 31.6 9.8

18 100 14.8 14.8

Total Count % within Level of Education % within Sex % of Total

84 68.9 100 68.9

38 31.1 100 31.1

122 100 100 100

X2 = 17.143 df = 3 Sig. = .001 Source: 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

Age Total 20-39 Years 40-49 Years &

above

48

Level of Certificate Count Education % within Level of Education % within Age % of Total

14 100 64.6 11.4

0 0 0 0

14 100 11.5 11.5

Diploma Count % within Level of Education % within Age % of Total

28 82.4 43.1 23

6 17.6 20 4.9

34 100 27.9 27.9

Degree Count % within Level of Education % within Age % of Total

24 42.8 73.9 19.7

32 57.1 160 26.3

56 100 45.9 45.9

Masters and Above Count % within Level of Education % within Age % of Total

12 66.7 18.5 9.9

6 33.3 20 4.9

18 100 14.8 14.8

Total Count % within Level of Education % within Age % of Total

78 64 100 64

44 36.1 100 36.1

122 100 100 100

X2 = 59.071 df = 9 Sig. = .000 Source: Primary data

In the table 4.3 above 64.0% of the respondents were in the age bracket of 20-

39years 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 by Period worked with organization.

Period worked with organization Total 1-6 Years 7 Years & above

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

14 100 47.1

0 0 0

14 100 11.5

49

% of Total 11.4 0 11.5 Diploma Count % within Level of Education % within period worked with organization % of Total

25 73.5 64.1 20.5

9 26.5 15.3 7.4

34 100 27.9 27.9

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

24 42.9 88.7 19.6

32 57.1 54.2 26.2

56 100 45.9 45.9

Masters and Above Count % within Level of Education % within period worked with organization % of Total

0 0 0 0

18 100 30.5 14.8

18 100 14.8 14.8

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

63 51.7 100 51.7

59 48.4 100 48.4

122 100 100 100

X2 = 73.173 df = 6 Sig. = .000 Source: 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

50

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.

Components

1 Bu

dget

ing

& P

lann

ing

2 M

onito

ring

& C

ontro

l

3 A

naly

zing

&

Fee

dbac

k

Programmes and plans are the basis for allocating financial resources .897 We have clear result targets in the budget .863 Budget outcome goals and objectives are linked to programmes .859 Management discusses with staff goals to be met .850 The budget structure facilitates a clear linkage between the money and the results .832 We normally identify high priority programmes to include in the budget .832 We describe the tasks to be carried out in the budget .830 The resources are released on time to carry out the activities .826 Decisions made here are based on plans and programmes in the budget .824 Planning helps us to know the type and level of resources to provide .810 All programmes are classified according to the objectives .808 Programme activities are clearly indicated .806 The basis for re-allocating resources in your institution is the performance indicators .803 Budgets are always used as a standard of measuring financial performance .800 Planning helps to manage the programmes of the institution .792 Performance indictors are normally included in the budgets of our institution .785 We normally formulate our objectives from the set goals .770 Budgets take into account the three year development plan .767 Our budgets are for more than one year .767 We start with planning for our programmes .764 We frequently use resources to achieve results .754 We design appropriate programmes to accommodate short-term objectives .737 My institution always follows budget procedures .734 We combine planning with the budgeting process .732 The finance committee of the Governing Council scrutinizes budget proposals .720 Programmes and plans are the basis for getting financial resources .715 Each budget activity is allocated appropriate resources .708 The budget facilitates the estimation of future cost implications .676 Our budgets emphasize outcomes .672 We always present the budget to the governing council/BOG for approval .660 Our budgets are based on the needs identified by our sections/departments .642 Programmes are analyzed before selecting the different resources .625 Priorities for the coming year are set at workshop sessions/budget conference .577

51

In involved in the budget setting process .542 All the stakeholders to the budget are involved .524 We normally publish the budget after approval .513 Our programmes are in line with the budget objectives .423 The budget activities are controlled by use of a vote book in my institution .333 Budget review is done in my institution .770 There is clear reporting of programmes results .763 The perceived level of budget monitoring and control in my institution is adequate .754 The perceived level of budget monitoring and control in my institution is excellent .734 Budget adjustments are done in my institution as need arises .716 Continuous comparison of actual with budgeted performance is done in my institution .692 Reasons for differences between actual and budgeted performance are always given .669 The budget performance reports are prepared monthly in my institution .664 The governing council/BOG normally checks on the progress as planned .659 All our expenditures are paid after approval .646 The top management always hold budget conferences to review performance .646 Performance targets for each department are agreed on .645 The favorable and unfavorable variances are frequently reported .583 The budgeting process is expedited by use of budget centers .490 Control of the budget activities is done by only the Principals office .460 The implementation of the budget activities is the responsibility of the department manages .459 Financial performance is communicated frequently in meetings .863 The heads of budget centers always explain variances to top management .840 The budget reports are always presented to the heads of budget centers .809 Follow up of unfavorable variances is done in my institution .791 The management agrees on priorities in the budget conference .759 Management always takes timely corrective actions when adverse variances are reported .757 Requisitions raised by the staff are honored .685 There is clear tracking of programme results in my institution .677 Deviations from the expected and the actual results are common .646 The favorable and unfavorable variances are reported to budget committee/top management .641 Funding of budget programmes is based on approved budget .556 The budget deviations are monitored by the top management .547 The line managers are always involved in the budgeting process .509 Eigenvalues 23.894 11.281 5.440

Percentage of variance 35.072 16.590 8.000

Cumulative Percentage variance 35.072 51.662 59.663

Source: Primary data.

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

52

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. Component

1 In

fras

truct

ure

de

velo

pmen

t

2 Se

rvic

e

deliv

ery 3

Expe

nditu

re

activ

ities

Our expenditure on infrastructure development against total expenditure is adequate .804 The staff receive their salaries and allowances on time .789 The Funds for food and its preparation is always released on time .784 We always achieve our targets within the budgeted period .740 We are always paid top-up in addition to the basic monthly salary .698 Our suppliers are always paid on time .670 Our Expenditure on students food and its preparation are genuine .636 The disbursement of finances is immediate upon requisition .627 The funds budgeted for are always released on time .856 Funds for items budgeted for the last 3 years have all been received .823 We receive all the tuition fees as budgeted for .750 Our expenditure on games and sports is adequate .687 The grants were received regularly .654 The grants are received in full as per the budget .627 We have adequately taken care of capital expenditure in our budget .565 The institutions requirements are financed immediately the need arises .478 There are income generating projects undertaken by my institution .805 All the budgeted activities are implemented as planned for .760 Our expenditure on instructional materials is adequate .719 The expenditure on infrastructure development in my institution is adequate .701 Our expenditure on ICT meets the demands of the changing environment .653

53

The expenditures incurred in my institution are as per our plan .538 The expenditure on students welfare is adequate every semester .470 Our budget expenditure on maintenance and repairs is adequate .318 Eigenvalue 9.872 2.688 2.191

Percentage of variance 41.133 11.201 9.125

Cumulative Percentage of variance 41.133 52.334 61.459

Source: 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.

Pearson’s 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

1 2 3 4 5 6 7 8 Budgeting & planning (1)

1.000

Monitoring & Control (2)

.616**

1.000

Analyzing & feedback

.371**

.703**

1.000

54

(3) Budgetary Control (4)

.752**

.874**

.691**

1.000

Infrastructure Development (5)

.204*

.612**

.658**

.525**

1.000

Service Delivery (6)

.134

.394**

.423**

.209*

.743**

1.000

Expenditure related activities (7)

.199*

.591**

.536**

.483**

.886**

.698**

1.000

Financial Performance (8)

.295**

.580**

.893**

.519**

.880**

.861**

.803**

1.000

Source: 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.

55

Model Standardized

coefficients

Beta

t

Sig.

R2 Adjus

ted

R2

F P

(Constant)

Analyzing& Feedback

Monitoring & Control

Budgeting & Planning

0 .432

0 .386

0.176

0.984

4.569

3.662

2.334

.327

.000

.000

.021

0.510 0.497 40.883 0.000

Source: 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 =

αx1 + βx2 + γx3 +…, 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

56

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

57

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, it’s 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.

58

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 don’t exactly and clearly show how

funding would be appropriated to achieve performance goals. It’s 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

59

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).

60

CHAPTER SIX:

6.0 CONCLUSIONS AND RECOMMENDATIONS

6.1 Introduction

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

61

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.

62

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

63

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.

64

(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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Appendix (I)

12.0 TIME FRAME OF THE STUDY

Table (5): Study Time Frame

ACTIVITY DURATION (WEEKS) Writing and presenting Proposal 12 Designing data collection instruments 4 Testing of the instruments 3

71

Data collection 4 Data Analysis 3 Data interpretation and Presentation 2 Report Writing 3 Submission of Final Report 1 TOTAL 32

Source: Self designed.

Appendix (ii)

13.0 PROPOSED BUDGET OF THE STUDY

Table (6): Budget of Study Estimates.

ITEM ESTIMATED COST (UGX) Stationery and Printing 600,000 Research Assistants 500,000 Secretarial 300,000 Photocopying 100,000 Binding 70,000 Transport 1,000,000 Miscellaneous 500,000 TOTAL 3,070,000

Source: Self designed.

Appendix (iii)

MAKERERE UNIVERSITY BUSINESS SCHOOL MASTER OF BUSINESS ADMINISTRATION

QUESTIONNAIRE TO BE FILLED BY THE ADMINISTRATOR’S, BURSAR’S

AND LECTURING STAFF OF BUSINESS, TECHNICAL AND VOCATIONAL

EDUCATION TRAINING INSTITUTIONS (BTVET)

72

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 Female

3. Age of respondent:

20-29 years 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.

73

Statement

Str

ongl

y D

isag

ree

(1)

D

isag

ree

(2)

N

ot su

re

(3)

Agr

ee

(4

)

Str

ongl

y A

gree

(5

)

1. My institution always prepares budgets 2. I’m involved in the budget setting process 3. We are sensitized on the budget process 4. Performance indicators are normally included in the budgets of our institution 5. We do understand the performance indicators set 6. Resource re-allocation is based on the performance indicators 7. All the stakeholders to the budget are involved 8. Budgets take into account the three year development plan 9 Our budgets emphasize outcomes 10 The line managers are always involved in the budgeting process 11 We always present the budget to the Governing Council/BOG for approval 12 The finance committee of the Council/BOG is knowledgeable on budgeting 13 We normally publish the budget after approval 14 Budgets are always used as a standard of measuring financial performance 15 Our budgets are based on the needs identified by our sections/departments 16 Our programmes are in line with the budget objectives 17 Our budgets are for more than one year 18 The budget facilitates the estimation of future cost implications 19 We have clear result targets in the budget 20 Each budget activity is allocated appropriate resources 21 When budgeting, outcome goals and objectives are linked to programmes 22 The budget structure facilitates a clear linkage between the money and the results 23 We start with Planning for our programmes 24 Planning helps to manage the programmes of the institution 25 We discuss goals to be met with the management 26 We combine Planning with the Budgeting process 27 Programme activities are clearly indicated 28 Programmes and plan are the basis for allocating financial resources 29 Programmes and plans are the basis for getting financial resources 30 Planning helps us to know the type and level of resources to provide 31 Decisions made here are based on plans and programmes in the budget 32 We set priorities for the coming year at budget conference 33 We normally identify high-priority programmes to include in the budget 34 Programmes are analyzed before selecting the different options 35 All programmes are classified according to the objectives 36 We design appropriate programmes to accommodate short-term objectives 37 Planning of the budget activities is done by the departments

74

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

Statement

Stro

ngly

Disa

gree

(1)

Disa

gree

(2

)

Not

Sur

e

(

3)

Agr

ee

(

4)

Stro

ngly

Agr

ee

(5)

1. We often receive guidelines from the Ministry of finance on the budget process 2 Funding of budget programmes is based on institutions approved budget 3 The Governing council/BOG normally checks on the progress as planned 4 The budget performance is always communicated 5 The perceived level of budget monitoring and control in my institution is excellent 6 The perceived level of budget monitoring and control in my institution is adequate 7 The perceived level of budget monitoring and control in my institution is inadequate 8 We always make adjustments regarding budget performance 9 We normally monitor the deviations 10 There is clear tracking of programme results in my institution 11 We often monitor the budget deviations 12 Control of the budget activities is done by only the head of department 13 We use vote books to ensure adherence to the budgeted activities 14 The implementation of the budget activities is the responsibility of the department

managers

15 The budgeting process is expedited by use of budget centers 16 We often hold budget conferences to review performance 17 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.

75

Statement

Stro

ngly

Disa

gree

(1

)

Disa

gree

(2)

Not

Sur

e

(3)

Agr

ee

(4)

Stro

ngly

Agr

ee

(5)

1 The budget performance reports are prepared regularly in my institution 2 The budget deviations are reported to budget committee/top management 3 The deviations from the budget targets are frequently reported 4 Management always takes timely corrective actions when adverse variances are reported 5 There is clear reporting of programme results 6 Follow up of deviations is not done in my institution 7 Financial performance is communicated frequently in meetings 8 Deviations from the expected and the actual /reported results are common 9 Our budgets are always balanced 10 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. Statement

St

rong

ly d

isagr

ee (

1)

Disa

gree

(

2)

Not

Sur

e

(3)

Agr

ee

(4)

Stro

ngly

Agr

ee

(5

)

1 We achieve most of our budgeted plans in my institution 2 We fulfilled our plans to accommodate our students 3 We have sufficient library facilities at the college 4 We have adequate power supply in my institution 5 We have sufficient furniture in our lecture halls, recreational and residential halls 6 The service provision in my institution is adequate 7 All the budgeted activities are implemented as planned and budgeted for 8 We have enough Lecture rooms to cater for our needs 9 We do paint and repair our buildings frequently 10 We met our previous years budget targets 11 We have enough office equipment in our departments 12 We spend in accordance to the planned activities 13 We purchased relevant academic materials for students and lecturers/tutors 14 In my institution the number of students passing is high each academic year

76

15 We purchase at least 2 computers every year 16 We received all the funds budgeted for 17 We realized improved students academic performance in my institution 18 We provide our students with the necessary games and sports equipment 19 There are developmental projects under taken by my institution 20 We maintain our buildings to the best standards 21 The training and teaching facilities are adequate in my institution 22 Our programmes are in line with budget objectives 23 The budget structure facilitates a clear linkage between the money and the results 24 The institutions requirements are financed immediately the need arises 25 All the activities under taken in my institution are budgeted and planned for 26 We describe the tasks to be carried out in the budget

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