Project Topic:

APPLICATION OF BUDGETING AND BUDGETARY CONTROL TECHNIQUE IN NON-PROFIT MAKING ORGANIZATION (A CASE STUDY OF THE REDEEMED CHRISTIAN CHURCH OF GOD)

Project Information:

 Format: MS WORD ::   Chapters: 1 - 5 ::   Pages: 89 ::   Attributes: Questionnaire, Data Analysis,Abstract  ::   573 people found this useful

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ACCOUNTING UNDERGRADUATE PROJECT TOPICS, RESEARCH WORKS AND MATERIALS

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CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

For many churches, planning and financial budgeting is a way of life while for others it can be seen simply as a ‘business tool’ with no place in church whatsoever. Every non-profit making organization is unique and has its own operating environment and sets of Policies, Visions and Mission statements.  As a result, the execution of the policies, vision and mission is subject majorly to the application of budgeting and budgetary control techniques that determines the commencement or progression of its operations, which invariably have significant impact on its overall performance.  By definition, non-profit making organization refer to any organization that is dedicated to a given cause and it’s not profit driven. The organization often depends on the employees or volunteers who believe in their cause because it is practically difficult to compete with the private organization or sector`s salaries/wages.  Although the executives’ salaries may be high as a way of competing with their contemporary positions in the private sector.  To fund non-profit making organization can be a serious matter as they often rely on the external sources, such as gifts, offerings and donations. Successful management of these funds relies greatly on the application of budgeting and budgetary control techniques.  Ideally, every non-profit making organization should detail their plans of action – that will ensure a successful running and effective management and control. The process of preparing budget is known as budgeting and this prepared budget is meaningful when it has been executed and a control is put in place to checks whether or not the plans are realized, and a standardized corrective measures deviating or shortfall is occurring. A non-profit organization is organized for purposes other than generating profit and in which no part of the organization's income is distributed to its members, directors, or officers. Non-profit organizations are often termed "non-stock corporations." They can take the form of a corporation, an individual firm (for example, individual charitable contributions), unincorporated association, partnership, foundation, or condominium. Non-profit making organizations include churches, public schools, public charities, public clinics and hospitals, volunteer services organizations, political organizations, legal aid societies, labour unions, professional associations, museums, research institutes and some governmental agencies. Non-profit entities are organized under state law. Some non-profit organizations may also be a charity or service organization; they may be organized as a non-profit corporation or as a trust, a cooperative, or they exist informally. Budgeting has been described as “a complex behavior that has little impact in a sacred environment” (Kluvers, 2010), and a division between the sacred and the secular has been proposed (Laughlin, 2012). At the same time, it has been suggested that this division can be reduced, but there has been little coverage of this possibility in research on accounting in churches, let alone the concept that budgeting could actually be used to further spiritual goals. While some studies have focused on the acceptance of budgeting in specific religious organizations (Faircloth, 2012), it has been proposed rarely that budgeting has the potential, as a manifestation of holistic stewardship, to be consistent with a church’s sacred agenda and to assist it in achieving its spiritual goals. Berger (2015) asserted that “every human society is an enterprise in world-building” and “religion occupies a distinctive place in this enterprise”. If the prevalence of religion and, by extension, the significance of religious organizations, is accepted, then the way budgeting is treated in these organizations ought also to reveal, at a profound level, something of the inherent nature of accounting. This study of a budgeting system in a church uses Booth’s (2013) framework to consider these issues. Following this, Booth’s three factors are introduced and considered in relation to the church’s budgeting process: the religious belief system; church members and occupational groups; and organizational resources. Each of these is viewed from the perspective of the church’s budget, and assessed in the light of existing research on accounting in churches. This research project will provide an overview of practical approach in the application of budgeting and budgetary control techniques in non-profit making organization using The Redeemed Christian Church of God as the case study.

1.2 STATEMENT OF PROBLEM

The importance of budget has been recognized by organization.  However, numerous course of action are still plagued by delays and budget overruns, which can frequently be traced to ineffective application of budgeting and budgetary control techniques.  If an organization must survive and grow, an effective budgetary control techniques must be put in place which invariably means that, an organization can be successful and achieve enormous results if budgets are effectively designed and implemented. Today, we have incidences of unsuccessful organizations and many achieved very low results.  It seems that people at the helm of affairs are not taking superlative advantage of the budgetary process to the merit or success of the organizations. Majorly, at the preparation level of budgets, the concern and attitude of people are nothing to write home about: what are the effects of budget on the people’s behavior? And how are the people’s perspectives towards budgeting?  These questions have raised a major concern among the social researchers to into an in-depth study about the human behavioral factors involved in budgeting. The decision as to how to distribute limited financial and non-financial resources, in an effective and efficient manner, is an important challenge in all organizations. In most large and complex organizations, this task would be nearly impossible without budgeting. Without effective budget analysis and feedback about budgetary problems, many organizations would become bankrupt. Some of the problems arise from inadequate data to formulate and implement a proper budget; and non existence of well defined structure, which leads to overlapping of duties. These deficiencies can therefore be addressed through the use of budgeting technique.

1.3 AIMS OF THE STUDY

The major purpose of this study is to examine the application of budgeting and budgetary control technique in non-profit making organization. Other general objectives of the study are:

  1. To provide a comprehensive review of budget control techniques typically found in non-profit making organization.
  2. To review the mission’s current practices and researches in regards to budget control techniques.
  3. To research into why variance between the budgeted and actual performance in Provinces.
  4. To find out why monitoring deviation from budget target is difficult
  5. To ascertain the level of compliance with the budget target.
  6. To  research into why accomplishing budget goals is difficult
  7. To know why there has been delay in formulation of budget.
  8. To determine the process involves in incorporating the Provinces budgets into the National budget.
  9. To determine the directors influences in the implementation of budget system

1.4. RESEARCH QUESTIONS

  1. What are the typical constraints found in accomplishing budget goals?
  2. Is there any variance(s) between budgeted and actual performance in the Provinces.
  3. Can the directors exercise control on the implementation of budget system?
  4. How does the National Headquarters incorporate the budgets of the Provinces into National budget?
  5. What measure has the mission put in place to monitor the compliance with the budget target?
  6. How does the mission monitor and militate against deviation from budget target?
  7. What are the mission’s current practice as well as research advancements in resolving budget issues?

1.5. RESEARCH HYPOTHESIS

H0: There is no significant effect of budgeting and budgetary control technique in non-profit making Organizations

H1: There is a significant effect of budgeting and budgetary control technique in non-profit making Organizations

1.6 SIGNIFICANCE OF THE STUDY

This study will provide useful information for researchers regarding budgeting and budgetary techniques, process, benefits and its impact on the performance of Non-profit corporations. The result of this study will be valuable to the organization volunteers / executives as well as Non-profit making organizations (NGOs) in developing better budgeting and budgetary control techniques that are practicable in achieving the organization growth and success. The study will be important to academicians who may wish to carry out further research in capital budgeting and performance of government corporations as this will add more to the existing body of knowledge.

1.7    SCOPE OF THE STUDY 

The study is based on the application of budgeting and budgetary control technique in non-profit making organization, a case study of Redeemed Christian Church of God.

1.8 LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.9 DEFINITION OF TERMS

Budgetary Control: According to the Chartered Institute of Management Accountants (CIMA). Budgetary control is the establishment of budgets relating to responsibilities of executive to the requirements of a policy and the continuous comparison of actual with budgeted results, either to secure by individual action the objectives of that policy or to provide a basis for its revision.

Responsibility Centre: According to Colin Drury in his management and cost accounting. Responsibility centre is a unit of a firm where an individual manager is held responsible for the unit’s performance.

Budgeting: According to Ugwu Chukwuma Collins in his understanding cost accounting (2009). Budgeting is the act of preparing a budget.

Budget: According to Terry Lucey in his costing sixth edition. A budget is a quantitative statement, for a defined period of time, which may include planned revenue, expenses, assets, liabilities, and cash flows, which provides a focus for the organization, aids the co-ordination of activities and facilitates control.

Planning: Is the activity where the manager analyses present condition to determine ways of reaching a desired future state.

Forecasting: This is the procedures and techniques for predicting condition or event that are expected to prevail in the future.

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