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BUDGET DISCIPLINE AND MANAGEMENT OF FUND (A CASE STUDY OF UGHELLI NORTH LOCAL GOVERNMENT AREA OF DELTA STATE)

(Accounting)

BUDGET DISCIPLINE AND MANAGEMENT OF FUND

(A CASE STUDY OF UGHELLI NORTH LOCAL GOVERNMENT AREA OF DELTA STATE)

           

ABSTRACT

This study is centred on Budget discipline and Management of local government funds with emphasis on Ughelli North Local Government Area  of Delta State.

Ughelli North Local Government was particularly chosen because of it natural resources which include kaolin, sharp sands, crude oil/petroleum and natural gas coupled with allocation from federation account.

Over the years the emphasis on Governance has been to deliver the dividend of democracy to the people at grassroots. Thus, the government both at State and the Federal level has ensured the adequate allocation of revenue to the Local Government. Be this as it may, it has been notice or seen that this dividend cannot be delivered in a place devoid of financial prudence and budgetary discipline.

All through the project work, we have seen that once there is fiscal discipline, budgetary implementation and monitoring thrives for the benefit of the citizens

TABLE OF CONTENTS                                                     

Title                           

Table of Contents                

List of Tables                             

Abstract                                    

CHAPTER ONE                                                     

1.1      Background of the Study                    

1.2       The People of Ughelli North Local Government Are

1.3      Statement of the Problems   

1.4      Objectives of the Study               

1.5      Scope of the Study              

1.6      Significance of the Study                    

1.7      Limitations of the Study                     

1.8      Research Methodology                

1.9      Definition of the Terms        

1.10  References                                

CHAPTER TWO

2.1      Budget Discipline-An overview            

2.2      Types of Budgets                              

2.3      Steps in Planning a Budget   

2.4      Procedures in approving a Budget        

2.5      Evaluation of Budget Performance       

2.6      Uses of Budgets                         

2.7      Problems associated with Budget implementations

2.8      Existing Systems in maintaining Budget Discipline

2.9      References                                

CHAPTER THREE

3.0      Introduction                              

3.1 Sources of Data Collection    

3.2  Sampled Areas                           

3.3  Data Collection Techniques          

3.4  Data Analysis               

CHAPTER FOUR

4.1  Introduction                       

4.2 Data Presentation                       

4.3  Data Analysis and Interpretation  

 

CHAPTER FIVE

5.1  Introduction                       

5.2 Conclusion                         

5.3 Recommendations               

       Bibliography                            

      

CHAPTER ONE

1.1     BACKGROUND OF THE STUDY

According to the Oxford Advanced learners of contemporary English, “a budget is an official statement by the government of a country’s income from taxes, etc. and how it will be spent in a particular period.

T. Lucey defines a budget as “a plan expressed in money.  It is prepared and approved prior to the budget period and may show income, expenditure and the capital to be employed.  It may be drawn up showing incremental effects on former budgeted or actual figures or be compiled by zero-based budgeting.

R. A. Adams sees a budget as “a future plan of action for the whole organization or a section thereof.  He also defined a budget as a financial and or quantitative statement prepared and approved prior to a defined period of time of the policies to be pursued by the organization in order to achieve organizational goals and objectives.

From the aforementioned, a budget is, simply put, a plan of how a person, an organization or government will generate money and spend same within a given period of time.

Man, as a social animal who must fend for itself has over the eons learnt the necessity of planning if he must survive.  He (man) up the ante when he began manufacturing/producing goods.  This increased again with the institutionalization of the government apparatus.  When man turned over his security into a body, it became necessary for this body (government) to provide a minimal level of security, comfort, education, etc for man.  To secure these services, taxes where imposed and collected and then redistributed.  This called for planning, hence the birth of budgeting in governance.  Since a budget is intent, it means that it could deviate from the proposed goals.  This could be due to various reasons ranging from human, a fall in revenue generated or poor policy implementation and/or poor fiscal discipline. In other to avoid this, a budget ought to be and should be backed by in built checks and regulatory frame work to ensure discipline and policy implementation be it an individual, corporate bodies or as in this case, governments.

Budget discipline is akin to budget control.  According to R. A. Adams, budgetary control is “the establishment of budget, relating the responsibility of the executives to the requirement of the policy and the continuous comparison of actual performance with budgeted level so as to secure either by individual or collective action the objectives of such policies or a revision thereof”. From the above definition, budget discipline means a deliberate attempt of comparing results/performance with the intended outcome.  Thus, corrections or adjustments could be made to ensure optimal budgetary performance.

Functionally, government has a responsibility towards its citizens – to provide adequate security, social amenities and infrastructural development.  Consequently, budget implementation should be devoid of partisan politics and party affiliations and favouritism/nepotism.

The local government is the third tier of government (Federal being first and the state government being second respectively) in Nigeria.  It goes without saying that the state government wields considerable influence over the Local Government Councils.  Be that as it were, the functions of Local Government Councils are now recognized by the (Fourth schedule) of the Nigeria constitution.  These functions which are not limited to, include the following:

1.          Collection of rates, radio and T.V. licence fees

2.          Naming of roads and numbering of houses.

3.          Registration of deaths, births and marriages

4.          Establishment and maintenance of market stalls, car parks and public conveniences

5.          Licensing of bicycles, motor-cycles, trucks, cars etc.

6.          Assessment of properties for the purpose of levying tax

7.          Establishment and maintenance of cemeteries, burial grounds and home for the destitute and infirm.

8.          Construction and maintenance of roads, streets, drains, parks and other public facilities prescribed by the state legislature.

A Local Government is controlled by the office of the Governor.  The Council submits its budget to the office of the Governor where it is examined and approved.

The sources of revenue of a Local Government Council can be grouped into three:

(a)       Statutory:  Here the Federal government pays 20% from the Federation Account direct into the Council direct.

(b)      Permissive sources of income:  These include license fees, special rates, tenement rates etc.

(c)       Incidental sources of Revenue:  These include proceeds from economic project, grants from federal, state governments and international donors, loans, investment incomes, donations, etc.

While it is not arguable that the sources of revenue to a local government council are limited, however, it is an axiomatic fact that much money comes into the councils.  The question is: Do we feel the impact of such monies?  One must not lose sight of the fact that the local council was contrived to bring government closer to the people so that it (government) can be felt at the grass root level.

In the local government council, there ought to be a budget office whose function is to provide budget function, budget implementation and fiscal policies.  It is worthy to note that the budget office has six departments.  Four of these departments are operational departments which consist of Revenue, Expenditure, Budget Monitoring and Evaluation and Fiscal Polices departments.  The other two are service departments and consists of Administrations departments.  Each of these departments can be sub-divided into divisions for functional purposes.

It is imperative to note that all budget systems have three basic tasks:

(a)       Maintaining aggregate fiscal disciplines

(b)      Allocate resources in accord with government priorities

(c)       To promote efficient delivery of services.

 

It is sad to note that inspite of these existing structures, when it comes to the nitty gritty of budgeting and budget implementation, these structures are abandoned and are at best reduced to center for the collection and collation of budgetary figures!

One thing that is common in the average Nigerian psyche is the ability to put forward well intended plans.  However, when it comes to execution that is another thing all together.  Consequently, budgets and their presentations are seen as annual rituals by government officials.  We pay lip service to the implementation of budgetary proposals and thus the populace is the worse for it!

1.2     THE PEOPLE OF UGHELLI NORTH LOCAL GOVERNMENT AREA

Nigeria has (774) seven hundred and seventy-four Local Government Areas.  Following the creation of Delta State on August 27, 1991 out of the defunct Bendel State by the Ibrahim Babaginda administration, Ughelli North Local Government Area was created in 1991 as one of the new local councils.

Ughelli North Local Government Council is bounded to the East by Isoko North Local Government Council, to the West by Okpe Local Government Council, to the South by Patani Local Government Council and to North by Ukwuani Local Government Council.

According to the 1992 population census, Ughelli North Local Government Council has a population figure of 0.8 million persons.  The local council is inhabited by the Urhobo speaking ethnic group.  The headquarter, i.e. administrative headquarters of this local council in Ughelli town.  Other major town in the Council includes Agbarha-Otor, Evwreni, Orogun, Uwheru, Agbarho and Ewu.

The people engage in agriculture, hunting and trapping of animals, fishing and local arts and crafts.

The Local Government Council is richly endowed with natural resources which include Kaolin, sharp sands, crude oil/petroleum and natural gas.  Because of its natural endowment, the local council receives huge sums of money from the Federation Accounts as it is statutorily recommended.  For instance in the month of May 2004, the Local Government Council received a total sum of N66, 730,444.49 as its allocation.  If we hold this figure constant, it would translate to the fact that for the year 2004, the council received the sum of N800, 765,333.88!  That is a whooping sum of eight hundred million naira from the Federation Account alone.  If other sources of income – 10% from the state, internally generated funds, grants in aid and loans, it would run into billions for a year.

For instance, the budget outline for the Local Government Council for 2004, 2005, 2006, 2007 and 2008 is shown below.  This is actually in raw figures and not broken down into specifics.

YEAR

AMOUNT BUDGETED =N=

ACTUAL= N=

VARIANCE =N=

2004

1,241,362,480.68

1,302,362,820.68

+61,000,341.00

2005

1,001,468,840.75

1,010,532,840.32

+9,064,000.04

2006

1,201,580,640.63

1,306,432,320.80

+104,851,680.17

2007

2,602,100,280.74

2,530,807,420.30

- 71,292,860.44

2008

2,802,150,480.35

2,792,150,480,20

-10,000,000.15

 

Table 1:        Budget figures

Source:  Council records

The above budget estimates are fantastic to say the least.  However, one wonders what happened during the implementation.  This is because in five years, the council expended/budgeted a total sum of N8, 484 billions but what do we have to show for it?

1.3     STATEMENT OF THE PROBLEMS

In the course of carrying out this investigative research, the ability to get relevant and reliable data relating to budgeting and budget implementation in Ughelli North Local Government Council remained a daunting task.  This may not be unconnected with the fact that people were skeptical as to the use for which the figures were being asked and also those in possession of such information would not want to divulge same due to its “classified” nature since it would be obvious that these figure which were actually bloated would now be in public domain.

At the present, there is the urgent need for government to ensure strong fiscal discipline and spending so as to ensure the fulfillment of her primary purpose.  Thus the budget monitoring and implementation department should ensure that due process is followed in her activities and same should follow the use of a comprehensive integrated accounting system, which provides a reliable basis for assessing payment arrears in the treasury.  They should also go out into the field to monitor projects and filled detailed reports.

However, we know that the evaluation of performance on specific job indices would be difficult because of worker attitude.  Workers are of the view that the expression of and personal loyalty to their superiors is more important and is expected of them than the need for efficient and effective contribution to achieve job or budget objectives.

The Research problems which the researcher intends to find out are:

(i)          What strategies or systems can be adopted for performance evaluation in Ughelli North Local Government Area?

(ii)        What strategies can be adopted to evaluate staff attitude towards jobs in Ughelli North Local Government Area?

(iii)      How best can the excesses of an Executive Chairman be put in check.

(iv)       How effective is the legislative arm of the Ughelli North Local Government Area?

(v)         What is the relationship between the Executive and Legislative Like?

(vi)       What other inhibitors are associated with fund management in Ughelli North Local Government Area?

(vii)     How are funds managed for the benefit of the stakeholders in Ughelli North Local Government Council?

1.4     OBJECTIVES OF THE STUDY

The objectives of any research are usually a mirror image of the research questions and the knowledge gap it intends to fill.  The objectives of this study are as follows:

(i)         To examine the strategies or systems adopted for performance evaluation in Ughelli North Local Government Area.

(ii)       To examine the strategies adopted for evaluation of staff attitude towards jobs in Ughelli North Local Government Area.

(iii)     To find and proffer solutions to existing (if any) excesses of the Executive Chairman.

(iv)     To find out the usefulness of the legislative laws and their implementation.

(v)       To find and proffer solutions to the management of funds in Ughelli North Local Government Area.

(vi)     To determine if or not a cordial relationship exists between the Executive and the Legislative arms in Ughelli North Local Government Area.

(vii)   To find and proffer amenable reforms that will strengthen budget implementation in the Local Government

1.5     SCOPE OF THE STUDY

In any scientific research, the area under study gives the population.  It may not be very feasible to access the whole population, thus for convenience, a particular size or number is taken.  This number would then be subjected to certain scientific analysis.  This number is termed the sample.

Delta State has twenty-five (25) local government areas.  Ughelli North been created in 1991 has existed for more than eighteen years (18) now.  It would be quite an arduous task to collate all annual budgetary figures of the twenty-five local councils and subject same to scientific analysis.

In view of the aforesaid, Ughelli North Local Government Area was chosen and specifically the years 2004, 2005, 2006, 2007 and 2008 were chosen.  This choice was not based on any scientific approach or parameters but for ease of administration and to cut cost.  On this note, the scope of this study is limited to analysis carried out on budget discipline and management of funds in Ughelli North Local Government Area of Delta State.  It is pertinent to note that Ughelli North Local Government Area is an oil (crude oil) producing area.  It receive huge sum from the federation account monthly.  But how has these funds been managed?

1.6     SIGNIFICANCE OF THE STUDY

The relevance of this study cannot be over-emphasized.  It is my candid view that this study will contribute in no small measure to the existing stock of knowledge on topics of this nature.  It will also be of significance in the following ways:

(i)         It will assist the local governments in Ughelli North in improving their fiscal responsibility and to spend her funds towards fulfilling her primary purpose.

(ii)       It will pave ways to detect inefficiency and indiscipline among all stakeholders.

(iii)     It will proffer corrective measure to be taken to enhance fiscal and budget implementation discipline.

(iv)     It will also show that government spending is sustainable, create value for money and direct the local council towards its objectives and priorities.

(v)       It will assist local governments in the future when they (the council) is preparing for budgeting.

1.7     RESEARCH METHODOLOGY

Since every research work seeks to find out; and thus offers explanations why certain anomalies exist.  To do this, a well designed strategy of finding out why the anomalies exist is put in place.

The sample population is the employees or personnel of the Council; the legislative arms/elected Councilors and the Executive chairman.

The sources of data were through primary sources from the sampled population.

Questionnaires were administered and the responses therefrom were subjected to theoretical analysis to test the research questions which were put forward and results were obtained using simple percentage method.

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