BUDGETING AS A CONTROL STRATEGY

(A CASE STUDY OF UNIONBANK OF NIGERIA PLC ENUGU OGUI ROAD)

By

Author

Presented To

Department of Accounting

PROPOSAL

The research work is expected to provide the importance of budgeting and relevance of budgeting information system to some firms and even organization with respect to union bank Nigeria plc Enugu.

The study among other things will consider the relevant concepts adopted in Budgeting and control and various works by some authors, it will also examine the extent of utilization and effect of budgeting as a control strategy on the divisional earning view our five years.

The entire project work will be divided into five chapters and the data for the study will be grouped into five chapters and the data for the study will be grouped into primary data and also secondary sources,the researcher will also make use of questionaires, textbooks, literally materials and journals to carry out his research work. Even oral interview from the employees or management of the organisation will also be carried out.

The constraints to be encoutered as a researcher are as follows:-

-Insufficient fund:-There is no sufficient fund to carry out this research, and this research will a large amount of money.

-Limited time:-As a researcher, a lot of my time is needed for the objective to be achieved.

-Unwillingness to disclose the information:-The employees may be unwilling to give every information needed in order not to loose their job as a result of that.

However, I believe that this project will make the private and public sector organisation employ a better way of accesing their budgeting system.

CHAPTER ONE

INTRODUCTION

11 Background of study

Union Bank of Nigeria plc is one of the first generation banks started to the colonial era Formally known as Baraclays bank DCO(Dominion Colonial and Overseas) it was opened in1917

In compliance with the directive of the government in 1968, that all companies (Including Banks) must be incoporated locally in Nigeria in1969 and its name was consequently changed to Baraclays Banks of Nigeria Limited with its registered Head office at 40 Marina Lagos

As a result of Nigerian Enterprises promoation decree of 1972 and 1977, the federal government of Nigeria acquired 52% of the Bank shares Leaving 40% for Barclays Bank international ltd (Now Baraclays-Bank plc) while the remaining 8% was taken up by the Nigerian public Baraclays Bank plc sold 20% of its shares to Nigerian in 1979 and the remaining 2% in June 1989 Thus, it became an indigenous bank wholly managed by Nigerians And the name was changed to Union Bank of Nigeria Limited In 1990 the name was further changed to Union Bank of Nigeria Plc

The bank is one of the commercial bank that survives and strives during the nations economic unsteadiness Union bank of Nigeria plc currently has her corporate head office at 40 marina Lagos This Head office building “The STALLION PLAZA” is a 32 story edifice and is now the most magnificant and tallest building in Africa

The bank now has 9 Area office bsranches, including full indegenous branch in LONDON and SOUTH AFRICA respectively It has 5 staff training centres with on LAGOS, IBADAN, PORT-HARCOURT, ZARIA JOS The bank which is regarded as the largest employer of labour in banking industry in Nigeria, now has a staff strength of 8 workers It has some group of company such as union merchant bank, union assistance and union Homes

The bank is about 75% computerian and has an outstanding record in term of profitability As at Septembers 30^th 1998 bank’s gross earnings total assets and deposit base stood at N138 billion N1024 billion and N77 billion respectively

The principle and consent of budgeting centres around the optional allocation scarce resources Resources are limited but human wants are not only unlimited but also multifarious In order to make the best use of available resources, the principle of budgeting has to be adopted

Every business organization, government, sole propertor and banks employs the principle of budgeting as a control strategy Even individuals like salary earners hardly know that they are adopting the principle of budgeting when at the end of the month, they try to reconcile their monthly salaries with their expenses for the month

The budgetary control strategy calls for the preparation of plane in the form of ideas and values for the future Budgeting cannot be performed in isolation This is one of the reasons that all managers should be financially aware because almost every decision taken will have financial implication and will therefore effect other department, even if this means they have less money available for their Own budget

Clearly, once a budget has been established it is necessary to set up control and procedures which enables the budget to be monitored

Budgetary control is the establishment of budget relating the responsibilities of executives to the requirement of actual with budgeted results either to secure by individual action the objective of the policy or the provide basis for its revision It should be pointed out that there is on significant difference between the principles of budgeting control in either the banks or public sectors, the statement implies that as budgets are established for various elements of the bank managers are given responsibility foe the management of budget resources in those

Clearly, a strategy require information which has to be related to the delegate responsibilities within the bank, these should be related to the objectives of the budget and then be monitored as out turn figures become available Overall, it was felt that the budgetary control process and demand that it places on financial management skills represents the major challenges of change being faced by the bank

The budget can be a powerful tools for motivating people to achieve the bank objectives or it can lead to either bad or good consequence according the way it applied in various type of organization

Budgeting is essentially concerned with establishing a t plan or target of performance which co-ordinates all the activities of the business and calculating differences or various and analysising the reason for them One general purpose of budget in bank, sole proprietor and government is to enable them to plan their financial resources which will be consumed and generated during the course of the budget period

The period generally adopted for budgeting is one year and this usually coincides with the financial year of the bank

Finally, in introducing an effective budgeting strategy, management has to make penetrating critical and uncompromising study of the business to determine its strength and weakness in relation to what it is trying to achieve Budgets should be capable of change when circumstances changes so that the yardstick is a realistic attainable one The strategy should operate to assist motivation and not simply be used as a bigstick or a pressure device

12 STATEMENT OF RESEARCH PROBLEM

It is generally agreed that every business organization, government and sole-proprietors should employ the principle and concept of budgeting control as a tool in achieving set goals Consequently, for this research work, the following are the problems which this study hope to provide solution to:

a The inability of banks to property forecast expenditure matched to revenue given the instable economy and monetary policies generating therefrom

b Inability of the bank to state a detailed plan of action thereby reducing uncertainty

c Inadequate policies formulated for budget implementation in union bank for budget Ogui road branch

d budgeting will lower moral and productivity if unrealistic targets are set and if it is use as a pressure tactic

e The inability of the bank to know fully which future cost it will incure in rending certain service to the public and also the rev to be received as a result of jobs carries in each department

f Lack of a well oriented programs to felicitates the need to use budget as a control strategy

13 PURPOSE OF RESEARCH STUDY

There is a strong belief that good operation of budgeting controls os great value to Union Bank planning and control are indispensable in the banking industry

The following are the purpose of the stdy:

a To know the type of budets and budgetary control strategy applied

b To ascertain the efficiency and effectiveness of the strategy applied

c To ascertain how budgeting and budgetary contrl strategy assist management in decision making

d To highlight the problems in the present day system of budgeting in Union Bank 4 need be, the ways of improving on its budgeting

e Efforts will be made to compare the acecpted rules of budgeting contorl strategy as contained in the view of the related literature and what obtained in practice as discovered from data collection

14 STATEMENT OF HYPOTHESIS

For the purpose of this research, the following assumptions were made:

1 Null Hypothesis (Ho): Bank run some motivational programme so as avoid conflict and aslo budgeting as a control strategy help your bank to achieve efficiency in its operation

Alternative Hypothesis (Hi): Banks do noterun some motivational programe soa s to avoid conflict and also budgeting as a control strategy do not help banks to achieve efficiency in its operation

2 Null Hypotehsis (Ho): Bank managers prepare budgeting as a control stragety alternative hypothesis (Hi): bank managers do not prepare budgeting as a control strategy

15 SCOPE / LIMITATION

The study is a case study of Union Bank Ogui Road Branch Enugu The time period under consideration is four (4) years that is between 1994 to 1998

It is worth mentioning that personnel problem affecting this bank are not within the scope of this study expect where such problem directly related to budgetary control

In general it is also worth mentioning that for practical purpose it would be impossible to discuss all these areas in department in this research It should be noted that out of the so many tools of control employed by Union Bank to achieve their various objective this study is only concerned with the budget aspect of it

16 RESEARCH QUESTIONS

The following research questions were formulated by the researcher for the conduct of this project

a How long does it take the bank to prepare a budget

b To what extent does the lower management participate in budget formulation of the bank by given their view and ideas on how things should be done

c What does the bank consider to be major objective of a budgeting control strategy

d To what extent does the central bank policies and guidelines affect the Union Bank budget

e What type of budget does the bank prepare

f What measure should be taken to ensure that budget implementation strategies are properly used

17 SIGNIFICANCE OF STUDY

It is expected that the result of this study will help improve banks budgeting control strategy

Budgeting as a control strategy assist the banks in control of costs by providing a budget yardstick by which actual cost can be measured

Budgeting enables management more effectively to plan co-ordinate, control and evaluate the activities of the business The budget provides relevant information to a decision makers and at the time they must choose between alternatives, therefore a budget implicitly incorporates control at the point of the decision The most important of budget is to aid in the accomplishment of corporate objectives

18 DEFINITION OF TERMS

The definitions contained in the text are from accounts books, journals and lectures used as references

Budget; A financial or quantitative statement prepared and approved prior to defined period of time of the policy to pursued during that period for the purpose of attaining a given objectives

Budgetary control: Measures taken to ensures that approved provision are not over spent with out approved additional or supplementary provision

Budgeting : A word given to the formulation of plans for a given future period expressed in quantitative financial terms

Appropriation: Statement showing that amount voted and expenditure there of with a view to indicating an excess of expenditure over the or surplus of the vote to another with in the expenditure

Vire –Warrant: Is an authority to vire fund from one sub- head to other with in the same head of account

Fixed Budget: Budget prepared for only one level of activity and consequently, one that is not adjusted automatically to changes in the level of volume

Flexible Budget : Budget which by recognize variable costs in behavior between fixed and output or turnover is designed to change appropriately with such fluctuation

DVEA: Means department vote expenditure and Account This is a ledger where the amount released for use in the financial year is allocated is spent per each sub –head