CHAPTER ONE

1.1      INTRODUCTION

BACKGROUND OF THE STUDY

Traditional
budgeting has been criticized for a long time now for its inadequacy as a means
of management control. Criticisms concerning its inadequate practices in a
changing business environment emerged as early as the mid 1980’s with Johnson
and Kaplan (1987) seminal book relevance lost?

It
called also note from the work of Allen (1998). Who stated that the rapid
changes in today’s business environment renders a rigid approach to budgetary
control obsolete. It is no longer helpful in his anything up to 15 months
previously. He argues that amongst the requirements of a more appropriate
system, would be the building in of accountability to explain the differences
between actual and planned performance. This demands a more immediate time
frame of information reporting. Thus, there is a need to integrate strategic
management and budgeting. The works of C. Adams et al (200) called be pointed
to this regard. These author, conceptualized that to be effective, budgets must
aligned with the organization’s strategies, appropriate strategic planning, and
performance management process introduced, and must involve processes that are
value based, consequential and continuous.

The
work of Tim Blumentritt (2006) called be viewed as further contributions to the
above stand point as he recognizes the need for organizations to integrate
strategic management and budgeting. What seems rather unfortunate according to
Tim Blumetritt (2006) is the fact that most organizations still great the
budgeting and strategic management processes separately and also, a significant
portion of small and medium sized enterprises do not engage in strategic
planning (Tim Blunetritt 2006, p 74).

Hence,
the reason for this research work which is to investigate the question; “what
is the budgeting practice in Nigerian manufacturing company?” The motivation
for this study also comes from the work of Herath and Indrani (2007) who
investigated on the “roles of Budgetary Control System (BCS) as a component of
the Management Control System (MCS) in creating and sustaining competitive
advantage” and came up with a positive conclusion. They concluded that though
BCS called play a leading role in establishing an efficient MCS for creating a
sustainable competitive advantage, budgeting will not function in isolation (P
79). “Instead, it can be used more effectively oriented knowledge enterprise”
(Herath and Indrani; 2007, P179)

The
choice of National Emergency Agency (NEMA) 
is related to the fact that it is a manufacturing company in a very
competitive industry and lots of challenges faces Nigerian manufacturing
companies as they struggle with economic depression and high inflation
resulting form IMF world bank led structural adjustment plan (SAP) implemented
by the Nigerian government. These programs were initiated to promote the
liberalization of the domestic economy, operations efficiency, productivity
growth, privately owned enterprises development, economic growth, trade and
investment. The economic liberalization policies have nurtured on upon economy
and have minimized the hurdles that the manufacturing companies need to clear
in order to obtain raw materials and inputs, and other resources for productive
activities. However, it has created an unprecedented change in their business
environment through increased competition both in the domestic market and from
need to development and implement a well conceived strategic plan is order to
be competitive in the business environment.

1.2       Statement of the Problem

Nomatter ho well a plan is organized, it
cannot produce results on its own, thereby the need for control strategy
through budgeting practices to check compliance and excesses with particular
reference to National Emergency Agency (NEMA) . What is the budgeting practice
in the Nigerian manufacturing companies?

1.3      Objectives of the Study

The
aim of this study is to investigate the management control practice (budget
being the tool for management control) in National Emergency Agency (NEMA). The
objectives of this study include the following:

           
i.               
To examine the present system of
budgeting being practiced in National Emergency Agency (NEMA) .

          
ii.               
To examine how budgeting and control
system effectively put to use in order to enhance the accomplishment of the
organizational set goals and objectives.

        
iii.               
To highlight some of the problems that
militates against better performance.

1.4      Research Questions

                   
i.       
What is the present system of budgeting
being practiced in National Emergency Agency (NEMA) .

                  
ii.       
How is budgeting and control system
effectively used in order to enhance the accomplishment of organization goal
and objectives.

                
iii.       
What are the problems that militate
against better performance.

1.5      Significance of the Study

The
target groups of this study are managers, business practionners and scholars in
the field of business management. This will enhance a deeper knowledge about
how better a management control would be if its essential tools are well
integrated.

1.6      Scope and Limitation of the Study

The
scope of this study is limited to the 2005 – 2010 budgeting periods of National
Emergency Agency (NEMA) . The estimates of both revenue and expenditure of the
above years will be examined. The process of budget preparation, control,
management control, implementation and review will be covered by the study.

Limitation of the Study

The
study is limited to National Emergency Agency (NEMA). Kaduna and if they are
applying the concepts of budgeting in their operations and how well. As the
organization under consideration is a manufacturing firm having to contend with
competition, we cannot justify the credibility of all information to be used for
the study.

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