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BUDGETING AND FINANCIAL PERFORMANCE OF PUBLIC FIRMS IN UGANDA;
A CASE OF UGANDA INSTITUTE OF ALLIED HEALTH AND MANAGEMENT
SCIENCES- MULAGO
BY
NYAKATO JOSELINE
REG.NO: 1161-05014-04239
A RESEARCH REPORT SUBMITTED TO THE COLLEGE OF ECONOMICS
AND MANAGEMENT IN PARTIAL FULFILLMENT OF THE
REQUIREMENTS FOR THE AWARD OF BACHELORS
DEGREE OF BUSINESS ADMINISTRATION
OF KAMPALA INTERNATIONAL
UNIVERSITY
JULY, 2019
Declaration
Nyakato Joseline hereby declare that this research report is my own now e ge, effort and it
as never been submitted by any other person for degree in any institution of higher learning.
;igned Date..P~
1YAKATO JOSELINE
REG. NO. 1161-05014-04239
APPROVAL
certify that this research report was submitted with my approval as the university research
upervisOr
.~cTh 3/P di 9
VIR TIMBIRIMU MICHEAL Date
DEDICATION
rhis research report is dedicated to the almighty God for his mercy, guidance and protection, for
;eeing me through this programme, most successftilly efforts towards my academics.
111
Acknowledgement
Vork of this nature can only be completed with external support and guidance. There fore under
his note. I wish to extend my sincere gratitude and appreciation to the following;
thank our Almighty God for the gift of life and the ability to write this work. I also thank my
upervisor Mr. Timbirimu Micheal for his professional guidance throughout the work and the
notivation that enabled me to compile this project. I also thank all my Classmates Ms. Ngancla
ren, Ms. Birungi Sharnusah Abudhallah and others for their presence that offered me the
sychological motivation and need to learn. My family has supported me throughout all my
;tudies from nursery school to university level. I lack words to express my gratitude to them for
their unconditional love, which has been my greatest strength. Many thanks to everyone who has
accorded me any form of support to enable me complete this piece of work successfully. 1
appreciate you.
My sincere gratitude further goes to my dear friends for their encouragement, support and ideas
to continue with my studies whenever I could fell down at campus.
I am also indebted to all lecturers of Kampala International University for being patient with me and
letting me realize my dream. You will always be my source of pride and I love you all. Friends and
relatives too numerous to mention please receive my heartfelt thanks.
Last but not least, I glorify God for making everything possible. This work was impossible if not
because of you. Continue blessing me and my family so that your name is magnified and
Glorified.
iv
TABLE OF CONTENTS
Declaration
DEDICATION ii
Acknowledgement iv
TABLE OF CONTENTS V
List of Tables ‘7”
LIST OF ACRONYMS ix
ABSTRACT X
CHAPTER ONE 1
INTRODUCTION
1.0 Introduction
1.1 Background. of the study
1.2 Statement of the problem 4
1.3 General objective of the study 5
1.4 Specific objectives of the study 5
.5 Research questions
1.6 Significance of the study 6
1.7 Scope of the study 6
1.8 Limitations of the study 6
1.9 Theoretical framework 7
1 .10 Conceptual framework 9
1.11 Operational definitions of terms 10
CHAPTER TWO 12
LITERATURE REVIEW 12
2.0 Introduction 12
2.1 Effects of Budgets on Financial Performance 12
2.2 Roles for budgeting 13
2.3 Contributions of budgeting on financial performance 17
2.4. The relationship between Budget and financial performance 19
CHAPTER THREE 22
METHODOLOGY 22
3.0 Introduction 22
v
3.1 Research design .22
3.2 Locale of the study 22
3.2 Population of the study 22
3.3 Sample size 23
3.4 Sampling procedure 23
3.5 Research Instruments 24
3.5.1 Questionnaire 24
3.5.2 Interview guide 25
3.6 Validity and Reliability 25
3.7 Data collection methods 26
3.7.1 Questionnaires 26
3.7.2 Interviewing 27
3.8. Data Analysis 27
CHAPTER FOUR 29
PRESENTATION, ANALYSIS, AND 1NTERPRETATION OF THE DATA 29
4.0 Introduction 29
4.1 Biographic characteristics of the respondents 29
4.1.1 Gender distribution of respondents 29
4.1.2 Age distribution of respondents 3()
4.1.3 Marital status of the respondents 31
4.1.4 Level of education of the respondents 32
4.1 .5 Length of service 34
4.1 .6 Departments of the respondents 34
4.2. Roles for budgeting in public firms 35
4.2.1 Respondents views on whether they understand the term budgeting 35
4.3 Contributions of budgeting on financial performance 38
4.3.1 Budgeting has a significant role on financial performance of public firms in Uganda40
4.4 Whether budgeting and financial performance of public firms are significantly related. .. 41
4.4.1 Kind of influence of budgeting on the financial performance 42
4.4.2 “Budgeting has a significant relationship on the financial performance of this
Company”
4.4.3 Whether there is a relationship between budgeting and financial performance of public
firms in Uganda
CHAPTER FIVE 45
vi
DISCUSSION, CONCLUSIONS AND RECOMMENDAT1ONS .45
5.1 Discussion of the study findings 45
5.1.1 Roles of budgeting 45
5.1.2 The contribution of budgeting on the financial performance of public firms 46
5.1 .3The relationship between budgeting and financial performance of public firms 47
5.2 Conclusions 48
5.2.1 Roles of budgeting
5.2.2 The contribution of budgeting on the financial performance of public firms 49
5.2.3 The relationship between budgeting and financial performance of public firms 49
5. 3 Recommendations
5.4 SUGGESTED AREAS FOR RESEARCH 50
REFERENCE
APPENDIX I: TIME FRAME 55
APPENDIX II: PROPOSED BUDGET 56
APPENDiX III
RESPONDENTS’ QUESTIONNAIRE 57
APPENDIX IV 61
RESPONDENTS’ INTERVIEW SCHEDULE 6!
vii
List of Tables
[able 1: Showing Sample Size. 23
Fable 2: Showing gender distribution of respondents 30
Fable 3: Showing age distribution of the respondents 3 1
Table 4: Showing marital status of the respondents 32
Table 5: Showing level of education of the respondents 32
Table 6: showing length of Service 34
Table 7: showing the department of the respondents 34
Table 8: Showing whether respondents understand the term budgeting 35
Table 9: Showing how the company budgeting is ofien done 36
Table 10: Showing role for budgeting 36
Table 11: Showing whether budgeting has contributions on the financial performance 38
Table 12: Showing whether budgeting has significant role on financial performance of public
firms in Uganda 40
Table 13: Showing whether Company budgeting was influencing its financial performance 41
Table 14: Showing kind of influence of budgeting on the financial performance of public firms42
Table 1 5: Showing whether budgeting had a significant relationship on the financial performance
of the Company
Table 16: Showing whether there is a relationship between budgeting and financial performance
of public firms in Uganda 43
List of Figures
Figure: Conceptual framework 12
viii
LIST OF ACRONYMS
Dollar
~0 Percentage
]DP Growth Domestic Product
Gross Margin
-IRM Human Resource Management
Km Kilometer
VID Managing Director
Vlgt Management
KIU Kampala International University
NY New York
PBL Print British limited
Sh. Shilling
UN United Nations
US United States
UIAI-IMS Uganda Institute of Allied Health & Management Sciences
MakCHS Makerere University College of Health Sciences
ECUREI Ernest Cook Ultrasound Research and Education Institute
ix
ABSTRACT
The study was about budgeting and financial performance, a case study on UIAHMS- Mulago.
The study was guided by three objectives that is: to establish the roles for budgeting in
rganizations, to establish the contribution of budgeting on the workers’ performance in terms of
ime management, to establish the relationship between budgeting and the financial performance
~f the Company.
~ case study research design was used where both quantitative and qualitative methods of data
~ollection and analysis was also used. Purposive and simple random sampling was used to get a
epresentative sample fifty. Thematic content analysis was used as the main analysis strategy.
Key findings were transformed into themes for analysis and presentation of data.
The study found out that there are number of roles for budgeting in the Companies including;
planning, evaluation of performance, for control purpose, continuous comparison of actual
results against budgets to form a basis of standards and creation of responsibility centers in
organizations. That budgeting contributions on the workers’ performance in terms of time
management in as way of proper time planning, even distribute the time resources of the
employees in the organization, help firms to make profits in time, as well as provides direction to
the future progress.
The researcher concluded that, budgeting contributes greatly on the financial performance ol
public firms whereby through budgeting, costs are managed and controlled, can realize when
costs are high and make some adjustments and that the firms can set targets to meet through
budgeting and that by doing this cost is managed and controlled for increased financial
performance. The researcher recommended that Companies should employ workers who are
qualified for improved financial performance and that since budgeting serves as performance
indicator, model of communication, measure of control, means of motivation, it is recommended
that Companies in developing countries Uganda in particular to always perform budgeting
process. The study further recommends that human resource to conceive and adhere budgeting in
a positive way as it is drafted and follow its contents in the day to day running of the firms’
activities. By doing this, negative attitude of the human resource in such Companies will be
reduced that will result into proper allocation of resources, firms should operate on budgets
x
CHAPTER ONE
INTRODUCTION
1.0 Introduction
This chapter of the study contains the background of the study, statement of the problem,
objectives of the study, research questions, significance of the study, scope of the study,
limitations of the study, theoretical frame work, conceptual framework, and operational
definition of terms.
1.1 Background of the study
“Budgeting” are concepts traceable to the bible days, precisely the days of Joseph in Egypt, It
was reported that “nothing was given out of the treasure without a written order”. History has it
that Joseph budgeted and stored grains which lasted the Egyptians throughout the seven years of
famine. John (1996), states that it was during the 1960s that companies began to use budgets to
dictate what people needed to do.
The subject of Financial Performance (FP) has received significant attention from scholars in
various areas of business and strategic management. Financial performance has implications on
an organization’s health and ultimately its survival (Onduso, 2013). Financial performance is
referred to as the degree to which financial objectives are being or have been accomplished.
Extensive literature regarding the firm’s objectives, places much emphasis on the maximization
of shareholder’s wealth. Managers are thus concerned about maximizing shareholder’s wealth as
it connotes future prospects, reflects steady growth, and provides a risk shield. In order to
achieve this, Naser and Mokhtar (2014), argue that high performance reflects management
effectiveness and efficiency in making use of company’s resources
Generally, firms operate using several resources including financial, human, capital and others.
Financial resource is one of the key elements in achieving organizational objectives and goals
Drury, 2008). However, in order to achieve the objectives the budget has to be prepared
~ffectively and adhered to. According to Hongreen (2007) a budget is a quantitative expression
a plans and the process of converting plans into budget is known as budgeting. Budget is one
)f the most widely used tools for planning and controlling business organization (Lazaridis,
~014). The budgeting process may be quite formal in a large institution with committees set up
~o perform the tasks. On the other hand, in a very small firm the owner may write down the
budget on a piece of paper or just budget in his head about the items he can remember easily.
A properly managed budget can promote sustainable profits in many business organizations. The
actions that follows managerial decisions normally involve several aspects of business, such as
the marketing, production, purchasing and finance functions, and it is important that the
management should coordinate these various interrelated aspects of decision-making. If the
management fails to do this, there is danger that managers may each make decisions that they
believe are in the best interests of that organization when, in fact, together they are not; for
example, the marketing department may introduce a promotional campaign that is designed to
increase sales demand to a level beyond that which the production department can handle. The
various activities within a company should be coordinated by the preparation of plans of actions
for future periods. These detailed plans are usually referred to as budgets (Drury, 2008).
Budget is among the major tools for implementation of the objectives and policies of the
organizations. In other words, budget provides the basis for decision making in the organization.
Budgeting plays importance not only to organizations but also to individuals on how to spend in
relation to the resources available. Further, budgets play other managerial roles such as planning,
controlling, communication and motivation. A well formulated budgeted system enables the
organization to reach its goals more successful (Drury, 2008).
7
The rapid changes in today’s business environment render a rigid approach to budgetary control
bsolete. It is no longer helpful to compare actual results to that forecasted anything up to 1 5
vlonths previously (Pandey, 2002). He argues that amongst the requirements of a more
ippropriate system, would be the building in of accountability to explain the differences between
~ctual and planned performance. This demands a more immediate time frame of information
-eporting. Thus, there is a need to integrate strategic management and budgeting. These authors
Donceptualized that to be effective, budgets must be aligned with the Organization’s strategies,
appropriate strategic planning, and performance management processes introduced, and must
involve processes that are value based, consequential and Continuous.
The work of Arora (2010) could 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 Arora (2010) is the fact that most organizations still treat
the budgeting and strategic management processes separately and also, a significant portion of’
small and medium-sized enterprises do not engage in strategic planning. Therefore, the aim of
this research work is to examine the effects of budgeting process in public firms in Uganda.
According to Kamukama. (1992), a budget is a plan of action expressed in quantitative terms. It
is a financial and or quantitative statement prepared and approved prior to a defined period of
time for attaining some given organizational objectives.
The Tennessee board of Regents (2006) defines budgeting as the process whereby the plans of an
institutions are translated into an itemized, authorized and systematic plan of operation,
expressed in dollars for a given period. Budgeting, at both management level and operation level
looks at the future and lays down what has to be achieved. Control checks whether the plans are
being realized and put into effect corrective measures, where deviation or short-fall is occurring
(Egan, 1997).
-3
The institute started and was Founded in 1944 the Society boasts of about 1050 practicing
Radiographers. Incidentally, the training of Radiographers started from a humble beginning at
the level of assistant Radiographer certificate in 1953. Training institutions are: Uganda Institute
of Allied Health & Management Sciences — Mulago (UTAHMS), Makerere University College of
Health Sciences (MakCHS), Ernest Cook Ultrasound• Research and Education Institute
(ECUREI). All in all, Uganda has always maintained a pioneer role on the African continent in
Medical Radiography Training. Therefore, it was against this back ground that the researcher
was prompted to carry out this study and establish the role of budgeting on financial
performance of public firms.
1.2 Statement of the problemBudgets play effective role in achieving organizational strategic goals, in this sense budgets are
ways through which one can reach the goals set (Drury, 2008). In budget development process
one tries to foresee whether strategic goals can successfully reach or not. Budgets set standards
to achieve goals and can help in evaluating the fluctuations occurring during the year and try to
ascertain the reasons from deviating from achieving the defined goals.
The criticism towards the budget has been severe and optional models exist, example the be
young Budgeting concept, but the use of budget is till extensive in organizations today
(Libby & Lindsay, 2010). A survey presented by Libby and Lindsay (2007), made in 2012
organizations in 2007, shows that a majority of managers agree that management through
budgets is needed. Their research verifies that managers have experienced negative effects to
budget. The negative effects could be, that necessary investments are delayed to next year in
order to reach a current target in negotiation to get lower budget targets are common. Even
though the study verified that problems associated with the budget are common, the main part of
the respondents simultaneously agreed that budget is irreplaceable. The managers started that
they could not manage without a budget, they would rather improve the budget process than
indicate the same.
Different organizations have different goals. For example increasing number of customers
(Tabachnick, 2015), increasing net profit (Trevor, 2014), increasing quality of services provided
and improving performance to a certain better level (Upadhaya, 2014). Organization resources
need to be employed so as to enhance its achievement. Thus, budgeting is thus vital to any
organization that needs to progress positively. High performance in organizations reflects
management effectiveness and efficiency in making use of company’s resources and this in turn
4
ontributes to the country’s economy at large (Naser and Mokhtar, 2014).
The effect of budgeting on public firms’ financial performance has been studied in various
:ountries across the world. For example, worldwide Subrarnaniarn and Ashkanasy (2011);
wieringa and Moncur (2013), in Africa Onduso (2013) and Mohammed (2013). However,
Lccording to researcher’s knowledge, not much research has been covered in the area of public
Irms in Uganda.Whereas Kenis (2012) supported the argument that budgeting is positively and
;ignificantly associated with performance, Milani (2011) found that there is a weak positive
issociation between budget and performance. With reference to the ambiguities
arising in previous studies as well as the absence of extensive research in this area of study in
Uganda, this research seeks to find out the effect of budgeting on financial performance of public
lirms in Uganda.
The Institute has acknowledged that its financial performance is influenced by budgetary control
systems. The increasing number of cases of organizations operating without budgets is at
alarming rate. Several organizations have been closed and others have been performing poorly in
terms of service delivery (Hopwood, 1973). The problem to be investigated therefore, is to
establish the role of budgeting on the financial performance of public firms in Uganda taking a
case study of UIAHMS- Mulago as to whether budgeting has improved on its financial
performance.
1.3 General objective of the study
The general objective of study was to establish the role of budgeting on the financial
performance of public firms in Uganda. A case study of UIAHMS- Mulago.
1.4 Specific objectives of the study
The specific objectives of the study were:
(i) To find out the roles for budgeting in the public firms
(ii) To establish the contribution of budgeting on the financial performance of public firms
(iii) To find out the relationship between budgeting and financial performance of public firms.
1.5 Research questionsThe study was based on the following research questions:
(i) What are the roles for budgeting in the public firms?
(ii) What are contributions of budgeting on financial performance of public Firms?
(iii) What is the relationship between budgeting and financial performance of public firms?
5
1.6 Significance of the studyUhe study findings were significant in the following ways;
:t is significant that the study findings will be used as a basis for further research and
nvestigations in form of literature.
The findings provided information to managers in different organizations especially on knowing
L~ow to compare actual performance and financial budgeting.
The findings will be used by managers in knowing the contributions of budgeting in the financial
performance of the organization.
In addition, the study helped the researcher to get equipped with information on the role of
budgeting and financial performance of public sector in Ugandan concept.
The study also set an agenda for further scholars by documenting findings that will be used as
literature review as well as advancing policy recommendations that will be used to identify
groups and carry out more research so as to provide detailed information.
The study will be of use to the researcher in developing necessary theoretical skills useful in
relating information given by different scholars with analytical view hence enabling the
researcher to understand how wide the concept of budgetary control and the performance of
public firms are.
1.7 Scope of the study
The study focused on the role of budgeting and financial performance of public sector with
specific reference to UIAHMS- Mulago.
UIAHMS is a Public Institution located in Mulago- Kampala District in central region of
Uganda. UIAHMS is bordered with Mulago National Referral Hospital, Makerere University
(Medical School). The study was carried out from June to July, 2019.
1.8 Limitations of the studyThe limitation of the study included the following:
6
The study was faced with a problem of not finding all respondents in the time of the study due to
the busy schedule with the organization work. The researcher however made appropriate
appointments with the top company managers that suite all the respondents during the process of
data collection for reliable and valid information.
The researcher faced a problem of some respondents not providing information for the study as
information relating to finance as it is taken to be crucial, however to this, the researcher
explained to them that the information provided would only be for the academic purposes.
The study was also expensive in terms of transport given the distance from the study Centre to
the study area is a somehow long. However, the researcher borrowed money from colleagues for
the study to be completed.
Time: The time to do this research was not enough to allow exhaustive study and obtain all the
essential information for much more suitable conclusions. The problem was minimized by
putting much effort on this research so as to meet the deadline.
Financial Constraints: The Researcher was limited by financial resources such as the transport
costs and stationery to carry out research effectively. In an effort to mitigate this shortcoming,
the researcher sourced for funds from a few sponsors.
Due to the sensitivity of the study, the respondents refused to give some data to the researcher
citing the reasons behind the study.
Bureaucracy delayed the study. From all the procedures, getting data from management took
time.
1.9 Theoretical framework
The study will be guided by the Budget theory which was developed by Bartle, and Shield,
(2008). Budget theory is the academic study of political and social motivations behind
government and civil society budgeting. Budget theory was a central topic during the Progressive
Era and was much discussed in municipal bureaus and other academic and quasi-academic
facilities of that time such as the nascent Brookings Institution. That the executive budget was a
financial innovation designed to empower city mayors and city managers with the capacity to
7
mplement needed policy reforms in the Progressive Era. Since that time, the executive budget
ias become a tool by which the president of the United States has been able to substantively
hape policy and draw power to the president from Congress, which was originally charged with
holding the purs&’(and still is constitutionally, as there is no federal-legislative authority to
~hange the constitution outside the amendment process or for congress to legislate away their
mthority).
3udget theory results in an ever increasing role and power base for what is now called the Office
f Management and Budget (Bartle, and Shield, 2008). In many respects, the budget process has
ecome theatrical and artificial even while it remains highly politicized. Budgets are, in addition
Lo implementing incentives systems, a common way of handling the principal-agency challenge
and the threat of moral hazard. Budgets allow the principal to control the agents’ use of
resources.
Budget theory will help the researcher to understand the more formal relationship between
budgeting and financial performance of public firms. The formal relationship is mirrored in the
link between the formal responsibility and the formal controllability. This can be related to
Roberts’ (1991) individual form of accountability, i.e. when responsibility is individualized
rather than based on the collective. The resource-dependency perspective, on the other hand,
directs our attention to the informal dimensions such as interaction, dialog and other forms of
knowledge sharing. This can be related to Roberts’ (1991) collective form of accountability who
asserts that, modern management practices emphasis front line empowerment, interdependence
of units, horizontal communication flows, and greater use of internal networking area. All these
characteristics are likely to increase jurisdictional and decisional ambiguities. These management
practices, while important to the strategic forceful roles managers may be expected to perform,
nevertheless serve to undermine the link between formal responsibility and formal
controllability. Budget theory principles make it even more difficult because the budget at least
provides the managers with partial controllability.
By using both an economic and a sociological perspective of the Budget theory, the study will
make it possible to create more complete and valid explanations of the role of budgeting in
financial performance of public firms.
8
LAO Conceptual framework
~he conceptual framework defined key variables of the study, and discussed the relationship
etween dependent and independent variables and how they relate to financial performance of
)ublic firms; the independent variables being; role of budgeting, contributions of budgeting on
inancial performance, the relationship between budget and financial performance and the
lependent variable being financial performance.
Independent variable (Budgeting)
1. Role of budgetingImproved communicationAccountability
• Financial control of inputso Planning & coordination
Dependent variable
2. Contributions of budgeting (Financial performance)Management of on growingactivities Financial performanceo Efficiency measures • More profits
Effectiveness in • Growthimplementation Financial reports
o Commitment
3. The relationship between the role
of budgeting and financial
performance
• Financial planning andmanagement control
o Productivity (outputs and
In the conceptual framework approach, which has its key issues as the historical and institutional
basis of the functioning of budgeting and the institutional characteristics that arise in affecting
the financial performance (planning, controlling of allocation of resources, improved
communication and policy outcomes), is the most appropriate framework. A micro-conceptual
analytical framework prepared by the student was used to study situations that reflect precisely
the salient relationship of the variables within which, operated during the study.
9
The variables are defined as role of budgeting; contributions of budgeting on financial
performance, the relationship between budgeting and financial performance. The type of
relationship they generate play a pivotal role in structuring both strategic planning,
accountability and Financial control of inputs when budgeting is effectively done which finally
determines the role of budgeting in financial performance of public firms. The main strength of
the conceptual framework is that it strives to capture the specificity about the realities of the role
of budgeting where it looks at the management of ongoing activities after budgeting, the
efficiency measures and effectiveness in implementation. This means that budgeting has a
relationship with financial performance whereby if budgeting is adequately prepared in public
firms, more profits will be in place, and the firm will grow at a high rate.
The conceptual framework shows that, the variables had a significant impact on the budget
usage, characteristics and financial performance. Budgeting as seen in the figure above is
assumed to influence on the financial performance of public firms in Uganda. As it is indicated
by the figure above when budgeting is done inform of~ strategic planning, accountability,
financial control of inputs among other kinds of budgeting and good management style, that
eventually improved on the financial performance of public firms in Uganda.
Under the figure above, budgeting is an independent variable while financial performance is a
dependent variable. Financial performance depends on many factors and budgeting is assumed to
be one of the major one which justifies their relationship. Budgeted cash can contribute viability
and make the company to get its financial position improved. Donaldson (1998) wrote that there
is no doubt that budgeting has a great significance on financial performance.
1.11 Operational definitions of termsAccording to Allan, William (1996), Budget is defined as estimate of costs, revenues, and
resources over a specified period, reflecting a management’s reading of future financial
conditions. As one of the most important administrative tools, a budget serves also as a plan of
action for achieving quantified objectives, standard for measuring performance, and device for
coping with foreseeable adverse situations.
Budgeting is a process of preparing and using budgets to achieve management objectives.
Budgeting in organization performs a number of functions and achieves a number of objectives
including; to guide action, to guide planning process, to communicate expectations to all
takeholders, to coordinate the activities and efforts to achieve goals, to provide basis for control
Lnd performance evaluation, to provide a means of motivating managers and cadre employees,
ielp in clarification of authority and responsibility as well as improving management by
)bjectives and management by exception. it is also a technique of looking at a business’s future
n order to anticipate what is going to happen and then trying to make it happen (Allen, Richard
[997).
~fficiency refers to a functioning or prospering of a company at a given time in a given period
asing on the desired goals and objectives of a company (Ghiselli, A. et al, 2001).
A Company is a structure or undertaking that may have been created to provide a good service
Lo the population with an aim of achieving the stated goals to arrive at profits. (Drury. C, 2000);
In addition, Finnie C. (2001) A firm is the member of a business organization that owns or
operates one or more establishments.
Business is a commercial or industrial enterprise and the people who constitute it; ‘the bought his
brother’s business”; “a small morn-and-pop business”; “a racially integrated business concern”
(Finni C. 2001).
11
CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction
This chapter presents the existing literature on the study variables of budgeting and financial
performance. This is secondary data and major sources were magazines, newspapers, textbooks,
and previous research reports, publications, journals and Internet.
2.1 Effects of Budgets on Financial Performance
Without losing its control and accountability mechanisms, modern budgeting can better support
performance management by integrating known financial outcomes with frequent re-forecasting
of the budget and linked to analysis of performance trends. A manufacturing firm’s financial
performance management reporting systems will draw on a number of information sources and
reflect the range of stakeholder and departmental perspectives (Melekker, 2007). There are a
variety of approaches to developing the performance metrics and the reporting of performance.
But without integration of the financial resources consumed, the firm cannot measure value for
money or make informed choices about future resourcing and service priorities.
One way in which the in-year operational performance and financial information can be
integrated more closely is to develop a system which encourages the issues to be considered
together and to develop management reports that provide a rounded picture (Hansen and Mowen,
2005).Manufacturing firms should develop an approach that consciously attempts to consider the
financial and non-financial processes together. A key feature is that before any review of the
financial variances takes place, the firm asks questions about the expected position, based on the
understanding of what has happened, what happened that was unexpected and what planned
events did not take place.
The best management reports detail what has happened and what is expected to happen in the
future. The accounts and report provide the information needed to take any corrective action
required. Such action needs to take place for the firm as a whole, so it is important that all areas
are covered. This implies that the operational data and financial data are presented together in a
comparable and consistent form (Kariuki, 2010). It also implies that risk and other aspects of
performance are reported along with the financial headlines. The risks are thus quantified
12
financially and uncertainty in the financial forecasts is made explicit. Some firm have found it
helpful to present a regularly updated board-level report of risks and opportunities, in which the
main possible financial up- and downsides are shown alongside each period’s forecasts. This
permits focus on a range rather than a spot forecast (Horngreen, 2007).
Where big deviations from budget have occurred, it may be necessary to formulate and report on
a recovery plan alongside the routine budget profile. Getting the reporting framework right is
critically important so that the Board has the full picture on which to base its decisions. It ensures
that everyone is considering issues within the context of a consistent reporting template and
using a consistent language. For management it brings the benefit that a common framework for
reporting can enhance co-operation between the operational managers and the finance function
(Engler, 1995).
2,2 Roles for budgetingBatra & Mahrnood, (2003); once the business is operational, it’s essential to plan and tightly
manage its financial performance. Creating a budgeting process is the most effective way to
keep businesses in United States and their finances on track. This guide outlines the advantages
of business planning and budgeting and explains how to go about it. It suggests action points to
help the business owners manage their business’ financial position more effectively and ensure
plans are practical.
According to Pefa (2005); Budgeting in Sierra Leone has improved communication in which
organizations are designed to provide employees with explicit information pertaining to the level
of performance expected of them. Managers must understand and enthusiastically support the
budget first. Through the budget, top management communicates its expectations to lower-level
employees, so that all members of the firm may understand the organization’s goals and
coordinate their efforts to achieve them. Similarly, budgeting has promoted coordination through
the meshing and balancing of all department’s operations and functions so that an organization’s
goals are realized. Therefore, budgets enforce managers to examine the relationships between
their own operations and those of other departments, and in the process, to identify bottlenecks
or weaknesses (Pefa, 2005).
According to Pilkington & Crowther (2007) the effectiveness of budgeting has a link with the
level of environmental volatility. It means that, how effective budgeting would be in controlling
13
the activities of any organization depends largely on the environmental volatility under which
such budget is operated. In other word, in a conducive business environment, the role of
budgeting cannot be over emphasized. For instance, Horngren et al., (2008) mentioned that the
effectiveness of budgeting for planning, motivating, communicating and controlling in the
developed world is evident.
A study done in Nigeria by World Bank (2002) found out that strategic plan of an organization
sets out the overall direction and goals of the business. Such a plan helps the organization to
define the type of business, or businesses, it is in and states the long-term goals of the
organization. Long term goals are usually no more than 3 years in the constantly changing
modern business environment. Once long-term objectives are decided upon they are broken
down into one-year elements in order to provide a short-term, tactical framework for the
organization’s overall or operational budget(s) (DFID. 2005). The organizational management
team is usually responsible for the preparation of budgets and the responsibility for specialist
areas is delegated to the appropriate manager or specialist in that operational area or team. These
areas may include sales, marketing, human resources, production and purchasing. In other words,
any operational area that is seen as essential to achieving the organizational objectives will have
a specific budget. The number of budgets prepared within an organization will depend on the
type of industry, size of the business and the specific needs of management.
According Kanyerezi (2000); budgeting in Ugandan, serves management to coordinate in several
ways as follows: A clear, explicit, and attainable plan is considered. Top management is
compelled to relate individual operations to the firm as a whole. Budgets assist in getting rid of
unconscious biases engineers, sales managers, and production officers may have through the
process of broadening individual thinking, further; budgets help to hinder the empire building
efforts of executives. Budgets serve to identify carefully the structure weaknesses in the firm.
Budgets also isolate problems of communication, of fixing responsibility, and of operations
relationships. Good budgets provide managers enough flexibility to accommodate their plans and
operations to unexpected situations. In this sense, the budget should be flexible enough to permit
changed conditions and changes in plans.
On the other hand Kanyerezi (2000) also argued that all levels of management must be cost
conscious, and possess cooperative attitudes toward budgetary control. Budgeting helps bring
nd keep short-range steps in line with all long-range goals. Therefore, long-range planning
strategic planning) is often affected either directly by budgetary information or indirectly by the
hinking developed from dealing with budgets. Still that budgeting, clarify the relationships
)etween current and future policies. The short-range policies adopted by management must be
nodified whenever the assumptions underlying them change. Economic, social, or business
~onditions may change, supply or demand may fluctuate, competitors may leave the market,
~onsumer taste may change, or technological innovation may occur. For instance, increased
ornpetition may enforce a firm to lower its prices and increase its sales volume in an effort to
~ttain the level of revenue specified in a budget. Budgets assist managers adjust their operations
md plans to unexpected changes by providing a framework or measure against which to evaluate
:he consequences of the change (Basheka, 2007).
In addition, study done by Kyogabiirwe (2002) in Uganda established the following as reasons
for budgeting; Management Communications Strategies and Employee Relations: Budgets affect
directly or indirectly the formulation of overall enterprise strategies and policies end then assist
to implement them. Effective strategies and policies (classified by their sources as; originated,
appealed, implied, and externally imposed) represent a powerful tool of management. To make
strategies and policies effective, certain guidelines can be used as presented briefly as; Strategies
and policies should contribute to objectives and plans, Strategies and policies should be
consistent, Strategies and policies should be flexible, Policies should be distinguished from rules
and procedures, Policies should be in writing, Policies should be taught, Strategies and policies
should be controlled.
That profit budget is used for control by top management in two ways: First, budget reports,
comparing actual results with budget, together with analyses of variances, an explanation of the
causes of variances, an explanation of any corrective actions being taken, and a current annual
forecast are used to keep management informed on what is happening in the divisions. It acts as
an early warning so that management can take appropriate action when necessary. Second, the
budget system is used to assist top management appraise the performance of the individual
manager.
Planning is the first and most basic of management functions and other managerial functions
(organizing, staffing, directing, and controlling) reflect and depend upon planning (Kyogabiirwe,
2002). He added that, planning involves selecting company objectives and departmental goals
and determining ways of reaching them. Moreover, decision making is at the core of planning, so
effective strategies and policies should contribute to objectives and plans. The more strategies
and policies are clearly understood, the more consistent and effective will be the framework of
company plans. Thus planning is deciding in advance what, how, when, and who is to do it.
Planning bridges the gap from where we are to where we want to go, and without planning
events are left to chance. Planning is an intellectual process, the conscious determination of
courses of action, the basing of decisions on purpose, facts and considered estimates (Pefa,
2005).
Pefa, (2005) asserts that, budgets formulate expected performance and they reflect managerial
objectives. Without such objectives, operations lack direction, problems are not foreseen; results
lack meaning, and the implications for future policies are dwarfed by the pressure of the present.
He added that, a budgetary system should emphasize and enlarge the planning role of all levels
of management. Managers were enforced to look ahead and were ready for changing conditions.
This forced planning is by far the greatest contribution of budgeting to management.
According to McBain, (1999), budgeting is not a substitute for effective decision making. Most
budgets provide only for finances and specify where and how it should be spent, they do not
provide for people (McBain, 1999). People think, perform, have competence, need finances to be
sure; however without the people, finance alone is insufficient in arriving at an improved
performance of any organization. In essence managers should also look, into human resource
budgeting and see how improvement in this results in better performance.
In addition to being the managers’ planning tool, budgeting is also one of the most effective tool
of communication and integration. It shows how each part of the organization relates to the end
and needs of the whole. Budgeting therefore requires that the manager in charge of the whole
and each person in charge of parts discuss the budget jointly in order to arrive at better result
(Adedeji, A.O.2004).
Budgeting sets clear financial goals for the organization. Webster (2001) indicates that budgeting
provides a basis for judging the financial performance of the organization (Webster, 2001).
Feedback is an important role of budgeting for attaining the expected quality and standards in
16
lanning, control and leadership and staffing. According to Cook (1968), feedback is generally
,ositively associated with budget performance. Feedback focuses on the extent to which
~mployees have achieved expected levels of work during a specified time period. Budgets being
i standard for performance are also used to evaluate managerial performance (Srinivasan, 1987).
similarly, Douglas (1994) used a case study approach and found that budgeting places a high
[rnportance on the budget-to-actual comparison for performance evaluation purposes both at the
~orporate and the subsidiary levels.
Anderson (1993) also supported this view, stating that in most US companies the development of
budget is still used as the main performance measurement system. Weisenfeld and Tyson (1990),
in a sample of 68 US managers from two companies, found that budgeting and variance analysis
can be positive tools, if the accounting information/communication process is functioning
appropriately. A total of 90 percent of the respondents indicated that variances were a good way
to measure their performance. All of them agreed that variance reports positively influenced
them to improve performance and increase their bonuses.
2.3 Contributions of budgeting on financial performance
According to Ghiselli et al, (2001); budget monitoring in China is used to measure how closely
an organization is meeting its objectives in terms of its finances. Comparisons of actual income
and expenditure against the budgeted income and expenditure need to be done regularly. To do
this, you need to be able to prepare a variance report. It shows month by month, where firms are
over-spending, under-spending or on target. In order to be able to do a variance report and in
order to be able to do cash flow projections, they need to break their overall budget up into a
monthly budget. The monthly breakdown is what gives management tool. For an example of a
monthly breakdown of a budget, go to the example of a monthly breakdown. The purpose of
reporting against managers’ budget in Nigeria is to show those to whom they are accountable, or
those who are involved in their work, whether or not they are doing the work stipulated and
whether or not they are going to have the resources they need to complete the work. When they
report against their budget they are reporting on how close financial planning has been to actual
financial performance (Drury 2000).
The variance statement of budget compares the expected income and expected expenditure with
the actual income and expenditure. The variance statement gives an overview of what has
17
happened in the reporting period (one month, three months etc). It also gives an overview of
financial performance for the year thus far (“year-to-date”). A variance statement shows whether
there are any trends that are developing in financial performance about which shareholders
should be aware. It gives the opportunity to take action to correct problems. So, for example, if
the variance statement shows that are repeatedly spending too much on stationery each month,
could: keep a tighter control over the stationery, recognize that you have under-budgeted on
stationery and either shift some money from somewhere else in the budget to stationery, or try to
raise or generate more money to cover the anticipated shortfall as it is (lone by most firms in
Uganda (Basheka, 2007).
Budgeting system plays an important role to business management, especially in decentralized
firms. A company needs budget to translate all the company’s strategies into short-term and long-
term plans and objectives (Murwaningsari, 2008). Budget is one of the important tools which all
managerial levels use to plan, control firm’s activities, and make the business achieve certain aim
and appropriate operation. Budgeting processes has evolved from a main role in managerial
planning and controlling (Ottley, 1 994) to using for controlling and planning purposes and value
added for the firms, which called strategic budgeting (Libby & Lindsay, 2009).
Allocating resources fairness is referred to the extent in which a firm identify allocating
resources policy and procedures with emphasizes on equity and transparency principles.
Transparency can be defined as “the essential condition for a free and open exchange whereby
the rules and reasons behind regulatory measures are fair and clear to all participants’1 (Roostalu
& Kooskora, 2010). In another word, it implies to openness, communication and accountability.
When transparency is achieved in budget reports, the reliability of information is enhanced; in
turn decision-making is improved (Benito & Bastilda, 2007).
According equity theory, it explains relational satisfaction in terms of perceptions of fair/unfair
distributions of resources within interpersonal relationships (Huseman et al., 1987). Consistently,
procedural justice concerns the fairness and the transparency of the processes by which decisions
are made. It refers to the idea of fairness in the processes that resolve disputes and allocate
resources (Adams, 1965). Procedural justice is also important in budgeting process because it is
comprised of fair procedures, it allows the employees to have a say in the decision process and it
gives employees fair treatment. Perception in procedural fairness is likely to result in favorable
~mployee reactions including improved organizational commitment. Numerous empirical studies
bund a positive relation between perceived fairness and organizational commitment (Parker &
(ohlmeyer III, 2005; Lau and Moser, 2008). Based on the above discussion, this research
issumes that it is more likely that firms that oriented in budgeting ethics by allocating resources
~airness will have greater accounting information reliability, decision making effectiveness,
~mpIoyee commitment, and managerial performance.
2.4. The relationship between Budget and financial performanceDrury (2000); in the Government of Canada, strengthening accountability •for public
expenditures has been an important part of reform efforts in the last decade. These efforts have
focused on bringing the achievement of results and associated expenditures to the forefront of the
parliamentary appropriations process and now, in the management of core enabling processes
such as procurement. This is a fundamental change in culture and accountability and, while
progress has been made, much remains to be done including implementing a new Accountability
Act currently before Parliament (Ghiselli et al, 2001).
According to Lucey (2003); new small business owners in India run their businesses in a relaxed
way and may not see the need to budget. However, if you are planning for your business’ future,
you will need to fund your plans. Budgeting is the most effective way to control your cash flow,
allowing you to invest in new opportunities at the appropriate time. If your business is growing,
you may not always be able to be hands~on with every part of it. You may have to split your
budget up between different areas such as sales, production, marketing etc. You’ll find that
money starts to move in many different directions through your organization budgets are a vital
tool in ensuring that you stay in control of expenditure.
Study carried out in Afghanistan found out that financial statements are usually prepared by
management and presented to the board. Directors/trustees, however, are responsible for making
sure that the financial statements present a full and accurate position of the organization’s
financial situation and that any variants from budget are fully explained. An organization’s
financial statements are not just used to monitor how things are going. They are essential for
borrowing money and reporting to many stakeholders including owners and funders (Drury,
2000). There are a number of benefits of drawing up a business budget in Rwanda, including
being better able to: manage your money effectively, allocate appropriate resources to projects,
19
rionitor performance, meet your objectives, improve decision-making, identify problems before
they occur such as the need to raise finance or cash flow difficulties, plan for the future and
ncrease staff motivation (Basheka, 2007). Basheka (2007) a study on Liberalization Policies and
Management of Higher Education Institutions in Uganda says that wisely using public funds to
achieve specific outcomes on behalf of citizens is central to a well performing public institution.
A robust financial management regime, founded on ethics and values, is the key to integrity in
the use of public funds, including in procurement. Transparency and therefore visibility into
management and financial performance begins with the budget process and has to be reflected
throughout key management processes and practices to support investment decisions, asset
management, procurement, and the in the final results reflected in sound corporate reporting
(Basheka 2007).
In an educational environment, budgeting is an invaluable tool for both planning and evaluation.
Budgeting provides a vehicle for translating educational goals and programs into financial
resource plans-that is, developing an instructional plan to meet student performance goals should
be directly linked to determining budgetary allocations. The link between instructional goals and
financial planning is critical to effective budgeting and enhances the evaluation of budgetary and
educational accountability (Basheka, 2007).
The transparency and visibility essential to management of the entire management life-cycle
from expenditure planning to final results are also essential to ensuring integrity in management,
including in procurement (Basheka, 2007). Mone (2008) states that the budget had grown
beyond a financial tool. It’s above all managerial tools in essence it is the best tool for making
sure that key resources especially performance resources are assigned to priorities and to results.
It is a tool that enables the manager to know when to review and to revise plans, either because
results are different from expectation or due to environmental, economic conditions, market
conditions or technological change, which no longer correspond to the assumptions of the
budget. Budgets should be used as a tool for planning and control.
According to Chowdhury (2006), control involves the making of decisions based on relevant
information which leads to plans and actions that improve the anticipation of the productive
assets and services available to organizations management. Effective control is said to be based
on standards with which actual performance can be compared. If there are no standards, then
20
here can be no effective measure of attainment. Chowdhury identified and elaborated on five
ategories in to which standards fall, they are: quality, quantity, time, complaint and value.
k Budget is basically a yardstick comparison of actual results against which actual performance
s measured and accessed. Control is provided by comparisons of actual results against budget
alan (Egan, 2007). Departures from budgets can then be investigated and the reasons for the
~lifferences can be divided in to controllable and non- controllable factors.
21
CHAPTER THREE
METHODOLOGY
3.0 IntroductionThe chapter will be divided into research design, population of the study sample size Sampling
procedure, research instruments, reliability and validity, data, collection methods and Data
analysis
3.1 Research design
The research was based on both the qualitative and quantitative research designs. A case study
was chosen as the most appropriate research strategy. Saunders et al (2003) define a case study
as “a strategy for doing research which involves an empirical investigation of a particular
contemporary phenomenon within its real-life context using multiple sources of evidence”. This
fitted well with the author’s intention to investigate a real-life issue through a variety of data
collecting methods. Jankowicz (2000) suggests the appropriateness of a case study when the
thesis focuses on a set of issues in a single organization. The qualitative research design was
descriptive in nature and enabled the researcher to meet the objectives of the study. A statement
was used to assign variables that would not adequately be measured using numbers and statistics.
The quantitative research design was used in form of mathematical numbers and statistics
assigned to variables that would not be easily measured using statements or theme. These
approaches were adopted to enable the researcher get and analyze relevant information
concerning people’s opinions about the role of budgeting in financial performance of public
firms.
3.2 Locale of the study
The study focused on the role of budgeting and financial performance of public sector with
specific reference to UTARMS is a public company located in Mulago in Kampala in Central
region of Uganda. The researcher chose UIAHMS- Mulago because the organization does
budget but its financial performance seems not to have improved.
3.2 Population of the study
The researcher conducted the study in UIAHMS which has a population of sixty (60) Workers.
The study population included factory workers in the departments of; administration block
22
Principles office), procurement, I.T and finance department which consisted of a population of
50 workers where 20 are from the Administration Block, (procurement) 15, I.T 10, (Finance
iepartment)1 5 Therefore the researcher used 60 as the study population from which 25
:espondents was selected to represent the study population.
The researcher used a sample selected from the study population as representative sample
representing the entire study population of 60 elements. This selection of sample size helped the
researcher to minimize resources such as; time and money in addition to other resources.
3.3 Sample sizeThe sample size comprises of a representative sample of twenty-live (25) employees in total with a
sample selection of 10 from Administration Block, and 07 from procurement, 05 from finance
department 03 from I.T two from various departments. This selection of sample size helped the
researcher to minimize resources such as; time and money in addition to other resources.
Finance department
Total
Source: Prinuny Data 2019
The researcher used a sample
obtain reliable information.
3.4 Sampling procedureSampling method is defined as a method used in order to obtain the required sample from the
study population; during the process of data collection, Probability sampling technique was used
in order to get the sample study size. Stuart (1984) defines probability sampling (simple random
Table 1: Showing Sample Size
Category Target population Sample size Sampling technique
Administration 20 10 Stratified random
Procurement 1 5 07 Stratified random
I.T 10 03 Simple random sampling
15 05 Simple random sampling
60 25
size of 25 respondents because it was enough for the study to
LL~
sampling) as the kind of sampling in which “every element in the population has a non-zero
Dhance of being selected.” Each individual in a sample frame drawn from the population is
selected by chance and at random. When probability sampling is used, according to Ary et a!.,
(2002), “inferential statistics enable researchers to estimate the extent to which the findings
based on the sample are likely to differ from what they would have found by studying the whole
population” (p. 165).
In this way, stratified probability sampling technique was employed by using the following
formulae.
P= F/N * n. Where; F= Number in the category
N Total population.
P = Number of respondents in the category obtained from the group
n = Total number of the respondents
Stratified random sampling is “a process in which certain subgroups, or strata, is selected for the
sample in the same proportion as they exist in the population.” In stratified sampling, the
researcher first identified the strata of interest and then randomly drawn a specified number ot~
subjects from each stratum; either by taking equal numbers from each stratum or in proportion to
the size of the stratum in the population. Popham (1993) warns, however, not to simply
subdivide a population into age, sex, and socioeconomic subgroups unless the researcher
believes these dimensions are relevant to the things being measured.
3.5 Research Instruments
3.5.1 Questionnaire
According to Robson (1993), a questionnaire is commonly applied to research, designed to
collect data from a specific population or a sample from that population. Questionnaires are
commonly used as research instruments because of the distinct advantages they yield (Leary,
1995). The researcher therefore chose a descriptive research methodology and designed a
questionnaire to collect the required data. The questionnaire was divided into two sections. The
first section was intended to provide demographic information that would provide a clear
24
inderstanding of the sample attributes. The second section was intended to provide data on the
rieasurement of the research variables.
3.5.2 Interview guide
kn interview guide was drafted with a set of questions that the researcher asked during an
nterview. The researcher personally should record the responses as per the study respondents
luring the process of carrying out an interview.
The researcher used a semi structured interview guide when collecting data on lower level
employees from the finance department. The researcher designed an interview guide which
contained both closed and open ended questions. The researcher also designed questions to the
respondents related to the topic under study because it assisted the researcher to collect adequate
data from the respondents who could not read and write and therefore it made the work easy and
guided the researcher to collect the required data effectively. A semi-structured interview guide
was administered to knowledgeable persons, according to the following main themes as the role
of budgeting, contributions of budgeting, Relationship between the role of budgeting and
financial performance.
3.6 Validity and Reliability.
Validity of an instrument to be used in this study will be consistent with the definition provided
by Miles and Huberman (1994), as the” extent to which the items in the instrument measure what
they are set out to measure.” The validity of the instruments was established by the supervisor.
Validity: After constructing the questionnaire, the researcher contacted two research experts in
order to understand whether her questionnaire would be valid in a way of collecting information
that would be used to understand the research problem. Hence the researcher constructed the
validity of the instruments by using expert judgment method as suggested by Gay (1996). The
instrument was refined based on experts’ advice. The following formula was used to test validity
index.
CVI = No. of items rçgar~e~ releyai~t by judge~
Total No. of items
The questionnaire was considered valid, because the generated coefficient was 50% and above as
recommended by Amin (2005).
25
~eIiabiIity, according to Miles and Huberman (1994), has to do with the extent to which the
tems in an instrument generate consistent responses over several trials with different audiences
~n the same setting or circumstances”. The reliability of the instruments and data was established
following a pre-test procedure of the instruments before their use with actual research
respondents.
Reliability. The reliability of the questionnaire was established using the Chronbach Alpha
coefficient. The Chronbach Alpha formula below was used to establish reliability of the
questionnaire.
aJc I- ~7k—I a
Where a = reliability Alpha coefficient (Chronbach)
K = Number of items in the instrument
~ak= variance of individual items
a2 variance of the total instrument
~= summation. The researcher considered the questionnaire as appropriate, if a coefficient
generated is more than 50% as proposed by Amin (2005).
3.7 Data collection methods
The study incorporated the use of various methods in the process of data collection in a bid to
come up with sound, concrete and credible research findings. The researcher therefore
amalgamated the use of questionnaire, and interviews in the process of collecting primary data
3.7.1 Questionnaires
The questionnaire is a set of questions to which the respondents to which the respondents were
allowed to fill the questionnaire in their own time and this made respondents feel free to give
answers to sensitive questions. The questionnaire tool collected data from the UIAHMS staff and
the UIAHMS employees were selected from the study population. The questionnaire tool of data
collection was chosen because it was cheap to administer to respondents scattered over a large
area and at the same time the method provides information with maximum errors.
26
3.7.2 Interviewing
The researcher used formal interviewing as a method of data collection and the interviews
offered a chance to explore topics in depth and allowed interaction between the researcher and
the respondents such that any misunderstanding of the questions and answers provided could
easily be corrected. The researcher interviewed the respondent of the UIARMS worker and
management in Mulago using the interview guide. This was used to tap the vital information that
would be collected using the questionnaires from the employees, manager & administrators.
The researcher used formal interviewing as a method of data collection and the interviews
offered a chance to explore topics in depth and allowed interaction between the researcher and
the respondents such that any misunderstanding of the questions and answers provided would
easily be corrected. The researcher interviewed the lower level employees of the organization
using the interview guide. This tool was used to collect information from respondents selected
from finance department.
3.8. Data Analysis
Data analysis was done as follows;
Data editing; Editing involved sorting of the collected information in order to get information
that was relevant to the study variables. At this stage all the responses looked through by the
researcher while writing the useful information and ignored the useless as was provided by the
respondents.
Coding; after the data has been edited, it was then presented inform of frequency tables after
which the data was able to be ready for interpretation. Graphs and pie-charts were developed by
the use of computer packages as; Micro Soft Word and Micro Soft Excel. However, qualitative
data was analyzed by developing themes (headings) or sub themes, which was derived from the
study objectives.
Tabulation: After collecting all the necessary data, these data were coded and edited, analyzed
and rephrased to eliminate errors and ensure consistency. It involved categorizing, discussing,
classifying and summarizing of the responses to each question in coding frames, basing on the
various responses. This will be intended to ease the tabulation work. It will also help to remove
unwanted responses which would be considered insignificant. Data will be collected from the
field with the use of study instruments will be classified into meaningful categories. This enabled
27
he researcher to bring out essential patterns from the data that would organize the presentation.
Jata will be entered into a computer and analyzed with the use of SPSS. Finally, a research
~eport will be written from the analyzed data in which conclusions and recommendations were
riade.
28
CHAPTER FOUR
PRESENTATION, ANALYSIS, AND INTERPRETATION OF THE
DATA.
tO Introductionfl-ic study focused on the role of budgeting in financial performance of public firms in Uganda
~aking a study of UIAHMS- Mulago. The findings from the study were presented and analyzed
Dhronologically based on objectives of the study as were formulated in chapter one of this report.
This was done with the aid of computer packages Ms Word and Ms Excel where by graphs and
charts were presented.
This chapter gives presentation, analysis and interpretation of the data to solve the research
problem. In the presentation of findings, tables, frequencies, percentages and pie-charts were
used to describe the findings. It is fiorn these findings that the study helped the researcher to
draw conclusions and make recommendations that can be useful in organizations. This is an
exploratory study, which involved the whole structure of UIAHMS from Top Management to
operational staff members.
It aimed at revealing a number of issues relating the chapter involves presentation of issues
relating to the roles of budgeting on the financial performance of public firms, contribution of
budgeting on the financial performance of public firms, to establish the relationship between
budgeting and financial performance of public firms, limitations of budgeting in an organization.
4.1 Biographic characteristics of the respondents
4.1.1 Gender distribution of respondents
The gender distribution of respondents was established. This aimed at knowing how males and
females as community members actively participate in public firms and how they the perceive
budgeting. The study targeted both male and female which gave a variety of findings that were
not biased making it gender sensitive as in table I below.
29
Table 2: Showing gender distribution of respondents
Gender Frequency Valid Percent Cumulative Percent
Male 21 85 85
Female 04 15 100
Total 25 100
Source: Primary Data 2019
The study found out that the majority of the respondents were male as compared to the female.
The number of males who participated in the study was represented by 2 1(85%) as compared to
04(15%) of the respondents who were female. This is because the UJA1-IMS- Mulago work
involves a lot of standing, lifting heavy weights and working under hot conditions like in
production that can not say favors a pregnant woman. Since this is a big factory, it needs strong
men. The given gender of the study respondents would imply that men could still be dominating
women in the process of budgeting within the public firms in Uganda.
This was analyzed as per the pie chart below
Figure 1: Showing gender distribution of respondents
4.1.2 Age distribution of respondents
The age distribution of the study respondents was also as an important factor in the process of
understanding the role of budgeting in financial performance of public firms in Uganda. This
was because different age groups understood the role of budgeting in financial performance of
public firms in Uganda differently yet considered vital to the study. According to the study
findings the respondent’s views were as follows;
Female
15%
85%
Source: Primaiy Data 2019
30
fable 3: Showing age distribution of the respondents
Gender Male Female Frequency I Valid Percent Cumulative Percent
15-25 03 01 04 15
26-35 03 03 06 23 38
36-45 07 03 10 39 77
46—55 03 01 04 15 92
Above 55 01 00 01 08 100
Total 17j 8 25 100
Source: Primaly data 2019
The table above shows that most of the respondents were between the ages of 36-45 accounting
for 10(39%). This implied that were likely to understand better the role of budgeting in financial
performance of public firms in Uganda particularly at UIAHMS- Mulago which they could be in
position to provide to the study as majority reported to had worked at the factory for a long time.
The other category of the respondents was in the age range of 26-3 5 reported by 06(23%) of the
study respondents and these respondents’ views were very important for the study as some of
these respondents were participating in budgeting process of the company in addition to them
being in position of controlling financial resource at the Company.
More, 04 (15%) of the study respondents comprised of those who were in the age blanket of 15-
25 and 46— 55 each respectively. These respondents’ views were so great in the process of
analyzing the study variables that helped to understand the problem that was at hand.
Lastly, 01(08%) comprised of the respondents who reported to have their ages above the range of
55 and above years. The age composition of the study respondents could therefore be important
factor in generating valid yet reliable information in relation to the issues concerning the role of
budgeting in financial performance of public firms in Uganda.
4.1.3 Marital status of the respondents
The marital status of the respondents was also covered and analyzed to assess their views in
relation to role of budgeting on financial performance. This contained of those who were
married, single, widowed, and separated as indicated in the table below.
31
Table 4: Showing marital status of the respondents
Marital status ~ Frequency Valid Percent Cumulative Percent
Married 10 05 15 61 61
Single 06 03 09 37 98
Widowed 00 01 01 2 100
Separated 00 00 00 00 100
Total 16 09 25 100
Source: Priiizary data 2019
As seen in the table above, majority of the study respondents constituting 15(61%) were married
and these were followed by respondents who were single as was reported by 09(37%) of the
respondents, then 01(02%) who was widowed The study further established that most of the
respondents who were married had stayed in the company as employees.
All these respondents of the study regardless of their status were all willing to provide the
information that was required by the study that helped in understanding the study problem that
was under investigation. That their views were very important as were relevant to the study.
4.1.4 Level of education of the respondents
In order to get information from all categories of people with different levels of education were
all approached during the study process. This established the levels of education of the
respondents as indicated below.
Table 5: Showing level of education of the respondents
32
Degree 13 01 14 55
Master 01 00 01 05 ~/2
Others(diplorna) 05 02 07 28 100
Total 21 04 25 100
Source: Primaiy data 2019
Figure 2: Showing level of education of the respondents
Source: Primaiy Data 2019
As revealed in table above, most respondents constituting 14(55%) had attained degree level of
education. These had the highest level of education and hence more likely to have understanding
of the role of budgeting on financial performance. In their different positions at UIAHMS were
making budgets for their tasks.
The other 07(28%) of the respondents were mostly educated to others (e.g. Diploma). These
were likely to believe in budgeting of financial resources at their disposal in the Company. These
respondents provided very vital information that helped the researcher in the process of writing
her report as the study problem at hand was clearly revealed.
Further more, 03(12%) of the respondents were educated to secondary level and further
establishment, it was indicated that all these reported to be in the production department at the
Company where the study was carried out. They showed that budgeting to any business
organizations is very important as were also able to provide different reasoning to the study
variables that were very crucial to the study.
Frequency
Q Primary
0Secondary~ Degree
~ Masters
~Others (e.g.
Diploma)
Level of education
33
Phe least 01(05%) of respondents were educated up to master’s level. These respondents were of
he view that budgeting is guideline to the financial performance of the company. This also
;howed that these respondents’ views were vital in relation to the study variables of budgeting
~nd financial performance in public firms in Uganda.
4.1.5 Length of service
Table 6: showing length of Service
Table showing length of
service : Years
Less than 1 year
Between 1 — 2 years
Between 2 — 4 years
4.1.6 Departments of the respondents
The researcher also considered the education levels of the respondents to establish how it relates
to the role of budgeting on financial performance of public firms in UIAFIMS. The findings are
presented in the table below;
Table 7: showing the department of the respondents~dPe~ent
Administration 10 [40
Procurement 07 28
I.T 03 12
~
~
Frequency
Valid Percent Cumulative Percent
00 ~oo00 00
27 27
Above 4 years 18 73 100
Total 25 100
Source: Primary data 2019
From the respondents interviewed, 73% had worked for the UIAHMS for more than 4 years and
these mostly included employees from outside Uganda more especially Kenya and some
Ugandans. This is a quite a good experience for the respondents to give informed responses on
the role of budgeting on the financial performance of public firms. They therefore had extensive
experience in the field and helped to reveal how the role of budgeting are exercised in UIAHMS.
)
34
~ource: Primary Data 2019
Co the researcher finding from the study, production and operation participated more than any
)ther officers because they were easily found less busy compared to the rest of UIAHMS
~mp1oyee who hardly got time to respond to the researchers’ request. However,
)ther respondent’s views were equally important even when they did not have enough time to
espond to the researcher.
From the study findings, slightly over 12% respondents were found working at the I.T, and 40%
of respondents were from Administration department and 20 % were from Procurement, and 28
% were from Finance departments.
4.2. Roles for budgeting in public firms
The above aspect was covered by the study in order to establish the roles thr budgeting in public
firms and the results were revealed as follows.
4.2,1 Respondents views on whether they understand the term budgeting
The study respondents were required to indicate whether they could understand the term
budgeting. According to the study findings all 25(100%) of the study respondents said were
under standing the meaning of the term budgeting as in the table below;
Table 8: Showing whether respondents understand the term budgeting
Source: Prima;y data 2019
35
After establishing that all the study respondents knew what the term budgeting is, it was
important to establish how the company was often performing budgeting and this was
established as follows.
Table 9: Showing how the company budgeting is often done
Response Male Female Frequency Valid Percent Cumulative Percent
Quarterly 06 01 07 31 31
Monthly 06 01 07 27 58
Yearly 09 02 11 42 100
Total 21 04 25 100
Source: Primaiy data 2019
According to the study finding, majority of the respondents 11(42%) said that the company of
UIAHMS was performing its budgeting process yearly, followed by the respondent who revealed
that the company was performing its budgeting quarterly that constituted 07(3 1 %) of the
respondents, finally 07(27%) who reported that budgeting was being performed monthly. The
above information implies that at least the company was performing budgeting for its proper
financial performance.
On further understanding by the study, it was established that they are reasons for why budgeting
was performed at UIAHMS. This is because all the study respondents were in position to
indicate that the company was performing budgeting process for reasons and these include the
following.
Table 10: Showing role for budgeting
Roles for budgeting Male Female Frequency Valid CumulativePercent Percent
Planning purpose 06 01 07 27 27
Control 03 01 04 17 44
Evaluation of 06 00 06 23 67
Performance
Continuous comparison 03 02 05 20 87
of results~Creation of 03 00 3 13 100
36
esponsibility centers
Fotal
coiirce: Primaiy data 2019
~s presented in the table above, majority of the study respondents totaling 07(27%) said that
~lanning was the main reason for budgeting at IJIAHMS. Respondents said that when the firm is
planning for the financial year or for the purchase of raw materials, it always budgets for the
funds, time and the amount of resources to bring into the company with the budgeted funds. Still
that budgeting allows the company to attain its goals through planning how to use its revenue
and how to make expenses. Respondents on this issue also said the public companies should do
budgeting to look back at previous time periods and to look forward at future time periods.
Also evaluation of performance was also another reason why public firms like UIAI-IMS carry
out budgeting as revealed by 06(23%) of the respondents. That setting and evaluation of
performance targets helps the firms to know how they are going to use the available resources for
the better performance of the firm. Respondents said that through budgeting long and short term
targets are set that are later evaluated for performance measurements. Respondents also said that
budgets are a valuable tool for owners of public firms to use to evaluate the performance of their
firm at the end of the time period that the budget covers.
Also 04(17%) of the respondents said that control in public firms are done by proper budgeting.
The respondents said that through budgeting that overstocking and under stocking of materials
can be controlled. To this, public firms’ owners use budgeting as a tool to make sure that the
processing materials are available at the right time and in the right place which can later lead to
better performance and achievement of the firms’ goals and objectives.
The study respondents 05(20%) also said that budgeting involves the continuous comparison of
actual results against budgets to form a basis of standards and taking corrective action. Actual
performance should be frequently compared against budgeted performance in order to take
corrective action in case of any variances. Budgeting, therefore, in essence is budgetary control.
That, public firms also use budgets for the purpose of control. If owners have a master budget to
follow, then they can carefully control expenditures during the time period of the budget by
comparing them to the master budget. Budgets help prevent overspending. The budget also gives
the company a benchmark to use by which to evaluate the firm.
37
Still that creation of responsibility centers was cited by 03 (13%) of the covered study
respondents among the reasons for budgeting in public firms in Uganda. The study revealed
building up creational responsibility centres. Still that for effective control of activities, a large
firm is divided into meaningful segments of departments. Each subunit has certain activities to
perform and its manager is assigned specific authority and responsibility to carry out those
activities and is held responsible for his/her decisions affecting those activities. These sub-units
of an organization for the purpose of control are called responsibility centres or decision centres.
4.3 Contributions of budgeting on financial performanceThe study also wanted to establish the contributions of budgeting on the financial performance.
Views fiom the respondents selected during the process of data collection revealed the following.
Table 11: Showing whether budgeting has contributions on the financial performance
Responses ____________
Yes
Male Female Frequency Valid Percent Cumulative Percent
21 03 24 98 98
00 01 01 02 100
21 04 25 100
No
Total
Source: Primary data 2019
Figure 3: Showing whether budgeting has contributions of budgeting on the financial
Performance
38
Source: Primary Data 2019
The findings above show that majority of the respondents 24(98%) said that budgeting has
contributions of budgeting on the financial performance of public firms as compared to 01(02%)
of the respondents who said that budgeting does no contribution on the financial performance of
public firms in Uganda. To this, the respondent said that whether there is budgeting or not public
firms in Uganda’s financial performance still exits as budgeting involves a lot of costs.
On further understanding by the researcher, the respondents who believed that budgeting has
contributions of budgeting on the financial performance of public firms in Uganda were able to
report the following information in such relation that;
Budgeting ensures proper planning of firm’s resources in terms of cash and this helps in the
financial performance of public firms. That through budgeting, periodic budgets like budgets for
the year, monthly, quarterly, weekly among others are drafted with the help of the master budget
for the resources available in the firm.
More that, it is through budgeting that costs are managed and controlled and therefore through
this, budgeting contributes to the financial performance of public firms. In this, the firms through
budgeting can realize when costs are high and make some adjustments and that the firms can set
targets to meet through budgeting and that by doing this cost are n managed and controlled.
Still that budgeting helps in the performance measurements and therefore contributes on the
financial performance of public firms in Uganda. Respondents revealed that through budgeting,
firms understand which department performs better with the best performers in the financial
resources identified which actually motivate other departments to perform well for increased
profits. This implies that budgeting contributes on the financial performance of public firms in
Uganda through the performance measurement.
According to the study findings, it is through budgeting that can lead to better performance of
public firms. That budgeting allows proper allocation of resources depending on the capability of
the department in an organization to make profits. Thais helps in facilitating the workers for
better performance in such organization that improves on sales revenue for increased profits of
the organization.
39
1.3.1 Budgeting has a significant role on financial performance of public firms in Uganda
[he study also wanted to show how budgeting has significant roles on the financial performance
)f firms in Uganda. This can be mentioned as below.
[able 12: Showing whether budgeting has significant role
public firms in Uganda~
role on financial
performance of public firms
in Uganda”
~sagree
L~gree
[otal
Source: Primary data 2019
From the table above, 24(98%) of the respondents agreed that budgeting has a significant role on
the financial performance of public firms in Uganda as compared to 1(02%) of the respondents
who said that budgeting has no a significant role on the financial performance of public firms in
Uganda as they disagreed with statement. The respondent who disagreed claimed that firms’
financial performance depends on other factors like hard work, quality of the produced products
and type of business carried out but not budgeting.
However, those respondents who were in the agreement with the statement gave different
reasons in relation to the same view as significances of budgeting on the financial performance
of public forms in Uganda and these are as follows;
It was revealed that proper planning of funds is one of the significant roles of budgeting. To this,
respondents indicated that through planning, targets are set in financial budgets that are based
upon in the process of reviewing the performance. Also, that budgeting helps to even distribute
the resources in all departments that assist firms to achieve their desired financial status hence
good performance.
Tn addition, that budgeting performs a significant role on financial performance of public firms in
Uganda in a sense that it helps firms to make profits after they have especially budgeted for the
on financial performance of
Valid
Percent
40
government revenues and other expenses. They added that budgeting helps public firms to plan
on now to spent and earn funds for their expansion which later leads to higher output, better
profits and the end results is the financial performance which is very high.
More, that budgeting plays a significant role in the financial performance of a public form
through creation of a strong foundation on the use of available resources and this provides
direction to the future progress of the firm. This is common to the beginners who always have
limited resources and want to manage them. It is through budgeting that these limited resources
are allocated such that they can help the form to expand the future and there for better financial
performance.
Through budgeting it was revealed that costs are controlled on the firm for better investment.
From the study findings, forms always want to use their revenues in a proper may and these are
budgeted for such that they can enhance better investment and future expansion of the firms.
This clearly shows how budgeting a significant role plays in the financial performance of the
public firms.
4.4 Whether budgeting and financial performance of public firms are
significantly related.
The study also looked at whether budgeting and financial performances of public firms were
significantly related. The views as per the study respondents are represented below.
Table 13: Showing whether Company budgeting was influencing its financial performance
~ Frequency Valid Cumulative
Percent Percent
Yes
No
Total
21 04 25 100 Tób~00 00 00 00 100
21 04 25 100
Source: Primary data 2019
According to the above table all the 25(100%) respondents believed that company budgeting was
influencing its financial performance as none of the respondents was in the disagreement with
the same statement. To this budgeting controls the misuse of funds, allocation of resources and
therefore financial development which later heads to better financial performances. The above
41
information as per the study respondents significantly implies that budgeting influences the
financial performance of public firms in Uganda.
4.4.1 Kind of influence of budgeting on the financial performance
The study also wanted to establish the kind of budgeting influence on the financial performance
of public firms. To this, respondents cited differing views as revealed in table below.
Table 14: Showing kind of influence of budgeting on the financial performance of public
firms
Kind of influence Male Female Frequency Valid Percent &~tilativ~~1Percent
Positive 17 03 20 80 80
Negative 04 01 5 20 100
Total 21 04 25 100
Source: Primaiy data 2019
From the table above majority of the respondents 20(80%) said that budgeting has a positive
influence on the performance of a public firms. Respondents claimed that budgeting has a
positive influence on the financial performance of a public firm said that as it helps in planning,
allocation of resources, purchasing, sales and employment of staff and everything concerned to
human resources management all of which improve on the performance of the company for
improved performance of the company as one of the study respondents said “budgeting drives to
better allocation 0/resources and this renders goodfinancial performance based on the pro/its
However, some of these respondents said that the positive influence on budgeting depends on
how it is drafted and implemented by the firms.
Also that, 5(20%) of the respondents said budgeting has a negative influence on the financial
performance of public firms. These same respondents believed that, budgeting involves a lot of
costs, inconsistence as there is over pricing, under payment of workers and wastage of resources
and time that all of which reduces the performance of particular firm hence reduce on the
financial performance as workers tend to be dernotivated due to budgets placed at their hand.
Basing on the most of the respondents, the study therefore established that there is a positive
influence of budgeting on the performance of public firms in Uganda as was revealed by
48(80%) of the covered respondents.
42
4.4.2 “Budgeting has a significant relationship on the financial performance of this
Company”
The study also wanted to establish if budgeting had a significant relationship on the financial
performance of UIAHMS. Responses got from the study respondents showed the following as
below.
Table 1 5: Showing whether budgeting had a significant relationship on the financial performance
of the Company
“Budgeting has a significant Male
relationship on the financial
performance of this company”
I disagree
I agree
Total
Source: Priina;y data 2019
According to the study findings, 22(95%) said that that budgeting has a significant relationship
on the financial performance of the UIAHMS. They added that the firm’s performance was
depending on its budgets.
However, 03(05%) of the respondents disagreed that budgeting had a significant relationship on
the financial performance of the Company that was under investigation during the study. This
implies that budgeting is an important tool for the financial performance of public firms as was
established by the study.
4.4.3 Whether there is a relationship between budgeting and financial performance of
public firms in Uganda
The study wanted to establish whether there was a relationship between budgeting and financial
performance of public firms in Uganda. The findings were reveals as shown below.
Table 16: Showing whether there is a relationship between budgeting and financial
performance of public firms in Uganda~
43
Total j_~ L°~Source: Primmy data 2019
According to above table, most of respondents 22(95%) indicated a relationship between
budgeting and financial performance of public firms in Uganda as compared to the least number
03(05%) of the respondents who reported that there is no relationship between the two variables
of and financial performance of public firms in Uganda. Respondents said that financial
performance depends on the workers and their efforts but not on budgeting. However, those who
said that budgeting has a relationship with the financial performance of firms in Uganda said that
budgeting helps the public firms in Uganda to spend within the limits of their operations. And
that this results into better resources management that later leads to better financial performance
adding that good financial performance depends on a detailed good budget.
The study also showed that budgets enable the firms in Uganda to monitor the funds, and other
resources like workers. The above findings clearly showed that there is a relationship between
budgeting and the financial performance of a firm however; the kind of relationship depends on
how the budgeting process is done as revealed by the majority of the covered study respondents.
. 25 H00
44
CHAPTER FIVE
DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS
.0 Introduction:
n this chapter, discussion, conclusions and recommendations are made basing on the findings
torn chapter four. The discussion, conclusions and recommendations were done according to
riajor study themes in relation to the study objectives.
.i Discussion of the study findingsThe study established that there are number of reasons for budgeting in the public firms
ncluding; planning, evaluation of performance, for control purpose, continuous comparison of
ctual results against budgets to form a basis of standards, and creation of responsibility centers
n organizations.
.i.i Roles of budgeting
These study findings can be compared with Pefa (2005); Budgeting in Sierra Leone has improved
ommunication in which organizations are designed to provide employees with explicit
nformation pertaining to the level of performance expected of thent Managers must understand
nd enthusiastically support the budget first. Through the budget, top management
ommunicates its expectations to lower-level employees, so that all members of the firm may
inderstand the organization’s goals and coordinate their efforts to achieve them. Similarly,
)udgetmg has promoted coordination through the meshing and balancing of all departments
)perations and functions so that an organization’s goals are realized. Therefore, budgets enforce
nanagers to examine the relationships between their own operations and those of other
lepartments, and in the process, to identify bottlenecks or weaknesses (Pefa, 2005).
[The study also indicated that budgeting and financial performance of public firms is significantly
elated. This was reported by all 60(100%) respondents who believed that the company
)udgeting has a great significance on the financial performance. They said that if well drafted,
)udgeting controls the misuse of funds, allocation of other resources and therefore financial
ieveloprnent which later leads to better financial performances. Still that proper planning of
~unds is one of the significant roles of budgeting. To this, respondents indicated that through
lanning targets are set in financial budgets that are based upon in the process of reviewing the
45
erformance. Also, that budgeting helps to even distribute the resources in all departments that
ssist firms to achieve their desired financial status hence good performance.
~s presented in the table 4.9 above, majority of the study respondents totaling 16(27%) said that
lanning was the main reason for budgeting at UIAHMS. Respondents said that when the firm is
)lanning for the financial year or for the purchase of raw materials, it always budgets for the
linds, time and the amount of resources to bring into the company with the budgeted funds. Still
hat budgeting allows the company to attain its goals through planning how to use its revenue
nd how to make expenses. Respondents on this issue also said the public companies should do
)udgeting to look back at previous time periods and to look forward at future time periods.
n support of the above findings, it is stated by Kanyerezi (2000) who argued that all levels of
nanagement must be cost-conscious, and possess cooperative attitudes toward budgetary control.
Budgeting helps bring and keep short-range steps in line with all long-range goals. Therefore,
Long-range planning (strategic planning) is often affected either directly by budgetary
information or indirectly by the thinking developed from dealing with budgets.
5.1.2 The contribution of budgeting on the financial performance of public firms
Basing on the findings, majority of the respondents 59(98%) said that budgeting has
contributions of budgeting on the financial performance of public firms as compared to 01(02%)
of the respondents who said that budgeting does no contribution on the financial performance of
public firms in Uganda. To this, the respondent said that whether there is budgeting or not public
firms in Uganda’s financial performance still exits as budgeting involves a lot of costs.
59(98%) of the respondents agreed that budgeting has a significant role on the financial
performance of public firms in Uganda as compared tol (02%) of the respondents who said that
budgeting has no a significant role on the financial performance of public firms in Uganda as
they disagreed with statement. The respondent who disagreed claimed that firms’ financial
performance depends on other factors like hard work, quality of the produced products and type
of business carried out but not budgeting.
46
~urthermore, respondents identified that, the key benefit of business planning is that it allows
you to create a focus for the direction of your business and provides targets that will help your
Dusiness grow. It will also give you the opportunity to stand back and review your performance
~nd the factors affecting your business. Business planning can give you: greater ability to make
Dontmual improvements and anticipate problems, sound financial information on which to base
decisions, improved clarity and focus and greater confidence in your decision-making. Managers
have a responsibility for achieving the objectives of the operation. Operational objectives are
usually derived from the strategic plans, or more often in larger organizations the business plans
(Pefa, 2005).
In addition, that budgeting performs a significant role on financial performance of public firms in
Uganda in a sense that it helps firms to make profits after they have especially budgeted for the
government revenues and other expenses. They added that budgeting helps public firms to plan
on how to spent and earn funds for their expansion which later leads to higher out put, better
profits and the end results is the increased financial performance.
The above study findings can be related with Basheka (2007) who says that wisely using public
funds to achieve specific outcomes on behalf of citizens is central to a well performing public
institution. A robust financial management regime, founded on ethics and values, is the key to
integrity in the use of public funds, including in procurement. Transparency and therefore
visibility into management and financial performance begins with the budget process and has to
be reflected throughout key management processes and practices to support investment
decisions, asset management, procurement, and the in the final results reflected in sound
corporate reporting (Basheka 2007).
5.1 .3The relationship between budgeting and financial performance of public firms
Concerning the relationship between budgeting and financial performance of public firms in
Uganda, it has been found out that there is some relationship as supported by 57(95%) of the
respondents. This implied that to a large extent budgeting has lead to improvement of financial
performance of public in Uganda. This was based on the fact that better resources management
are done through budgeting that later leads to better financial performance adding that good
financial performance depends on a detailed good budget. That, there are a number of benefits of
drawing up a business budget in Rwanda, including being better able to: manage your money
effectively, allocate appropriate resources to projects, monitor performance, meet your
47
bjectives, improve decision-making, identify problems before they occur such as the need to
aise finance or cash flow difficulties, plai~ for the future and increase staff motivation (Basheka,
~007).
)n the issue of contribution of budgeting on the financial performance of public firms,
espondents stressed that, budgeting has been effective in promotion of financial performance of
)ublic firms in Uganda. This can be seen in the way that through budgeting that costs are
nanaged and controlled and therefore through this, budgeting contributes to the financial
,erformance of public firms. In this, the firms through budgeting can realize when costs are high
md make some adjustments and that the firms can set targets to meet through budgeting and that,
~y doing this cost are managed and controlled for increased financial performance. This can be
compared with Drury (2000) who indicated that purpose of reporting against managers’ budget
in Nigeria is to show those to whom they are accountable, or those who are involved in their
work, whether or not they are doing the work stipulated and whether or not they are going to
have the resources they need to complete the work. Wben they report against their budget they
are reporting on how close financial planning has been to actual financial performance
5.2 Conclusions
5.2.1 Roles of budgeting
The study concludes that there are number of reasons for budgeting in the public firms including;
planning, evaluation of performance, for control purpose, continuous comparison of actual
results against budgets to form a basis of standards, and creation of responsibility centers in
organizations.
The study concludes that budgeting performs a significant role of budgeting on the financial
performance of public firms in Uganda as it is through budgeting firms can effectively and
efficiently do their operations activities for improved financial performance.
The researcher further concludes that, budgeting system plays an important role to business
management, especially in decentralized firms whereby a company needs budget to translate all
the company’s strategies into short-term and long-term plans and objectives. They further
demonstrated that, budget is one of the important tools which all managerial levels use to plan,
control firm’s activities, and make the business achieve certain aim and appropriate operation.
48
;.2.2 The contribution of budgeting on the financial performance of public firms
)n the issue of contribution of budgeting on the financial performance of public firms, it is
~oncluded that budgeting contributes greatly on the financial performance of public This is
ommonly so, that through budgeting that costs are managed and controlled, can realize when
~osts are high and make some adjustments and that the firms can set targets top meet through
)udgeting and that by doing this cost area managed and controlled for increased financial
erformance.
5.2.3 The relationship between budgeting and financial performance of public firms
Concerning the relationship between budgeting and financial performance of public firms in
Uganda, the study concludes that the relationship between the two variable exist and this was
also supported by the tested study hypothesis that further realized a relationship as the computed
value of X2 = 6.67 was greater than the critical value of X2 = 3.841 at Ilevel of freedom and 5%
level of significance that made the study to conclude that a relationship was existing between the
two variables.
In addition, it can be concluded that, budgeting and financial performance of public firms are
significantly related. This is because well drafted budgeting controls the misuse of funds,
allocation of other resources and therefore financial development which later leads to better
financial performances. Still that proper planning of funds is one of the significant roles of
budgeting and that budgeting helps firms to make profits after they have especially budgeted ~or
the government revenues and other expenses.
It further concludes that budgeting is limited by a number of factors including; financial, lack of
skilled personnel to carryout clear budgeting process effectively, negative attitude of human
resource in an organization, time, uncertain of the economy like price fluctuation, unreliable
information.
5, 3 RecommendationS
Basing on the study findings as well as study conclusions, the researcher recommends the
following;
That, public firms should employee workers who are qualified for improved financial
performance. This can be done through the process of selection and recruitment process that will
49
ielp in the selection of people with skills and knowledge that will improve on their performance
lue to increased out put.
Fhe ministry of finance should encourage public firms in developing countries and Uganda in
articular to always perform budgeting process. By doing this, all the departments in public firms
Nil1 get to know of what is expected out of them and able to adjust towards achieving it for
rulfilling the firms’ goals and objectives since budgeting serves as performance indicator, model
af communication, measure of control, means of motivation.
The study further recommends that human resource in public firms to always conceive and
adhere to budgeting in a positive way as it is drafted and follow its contents in the day to day
running of the firms’ activities because it contributes much to the financial performance of public
firms. By doing this negative attitude of the human resource in such public firms will be reduced
that will result into proper allocation of resources.
The ministry of finance and economic development needs to encourage public firms to operate
on budgets because budgeting and financial performance of public firms are significantly related.
This will track all the costs even banks will support such firms that operate under the budget
after seeing the forecasted cash flows in the drafted budget.
5.4 SUGGESTED AREAS FOR RESEARCH
The study focused on budgeting and financial performance, for comprehensive and exhaustive
study to draw conclusion, the study suggested the following for research.
V The relationship between budgeting and employees’ performance of organizations in
Uganda
V The impact of tax on the financial performance of Companies in Uganda.
50
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Hludson& Andrew, (2009). “Establishing Credit Guarantee System for SMEs Loan”, In: china
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54
APPENDIX I: TIME FRAME
55
Proposal Writing
Data collection
Data Analysis
Submissiondissertation
APPENDIX II: PROPOSED BUDGET
tern Amount
tationary 50.000/
~papers and pens
fransport 30.000/
Phone calls 20.000/
Internet usage 25.000/=
Typing and printing 90.000/
Miscellaneous 35.000/
Total 250.000/
56
APPENDIX HI
RESPONDENTS’ QUESTIONNAIRE
Dear Respondent,
[Nyakato Joseline a student of Kampala International University offering Bachelor’s Degree in
Business Administration. As part of the requirements for the completion of the Degree Program,
I’m carrying out a study on the topic “Budgeting ,izd financial peiftrmonce of public
firms in Uganda case study of UIAHMS- Mulago “. The information you give will only be
used for academic purposes. Hence you are requested to answer the questions as freely as
possible
Answering Mode: Tick the appropriate answers or write in the space provided.
SECTION A: BACKGROUND INFORMATION
1. Gender
1. Male I____ 2. Female ____I
2. Age of the respondent _____
1. 15-25 years 4. 26-35 years I
2. 36-45 years 5, 46-55 years FZ~3. Above 55 years I____
3. Marital status
Married Single _____ r ~j
Widow(er) separated L~i I____
4. Education level
1. Primary ____ 2. Secondary
3. Degree _____ 4. Masters r j
5. Others (specify)
5. Length of service in the Company (years)
57
H Budgeting contributes much on the management of on growing
activities
The Relationship Between Budgeting and Financial
Performance of Firms.
12 Do budgeting have any relationship with financial performance infirms in UIAHMS- Mulago?
13 Does the company budgeting influence the financial
performance?
14 Do you think budgeting influence the financial performance?
fl~l~ctbooi~thefi~
SECTION B: COLLECTING DATA ON INDEPENDENT VARIABLES
Use the information to choose or tick the right alternative that fits your opinion on the role of
budgeting in financial performance in firms as follows:
Strongly Disagree~SD, DisagreeD, AgreeA, Strongly AgreeSA
NO The role of budgeting in financial performance SD D A SA~
Do you understand the term budgeting?~
If you agree in question one, do you know the department
responsible for budgeting?~
According to your experience, do you think budgetmg have any
impact in financial performance in UIAHMS- Mulago?~4 Do budgeting have any impact on your performance?~5 Does the company do budgeting?
6 Do you think there are roles for budgeting in a company?
B2: Contributions of budgeting on financial performance. SD D A SA
~7 Do you think budgeting has contributions on financial
performance of Firms?~
8 Budgeting has significant role on the financial performance of
firms in Uganda?”~9 Do you think budgeting has any impact on effectiveness in
implementation?~
10 Budgeting contributes much on efficiency measures.~
SD D A SA
58
16 Have budgeting affect the overall performance pattern offinancial performance in firms in UTAHMS- Mulago?
17 Are there measures that can be put in place to enhance budgeting
in private firms?
18 Do budgeting has any effect on the effectiveness of financial
planning and management control in UIAHMS- Mulago?
19 Do you think there is a relationship between budgeting and
financial performance of firms in Uganda?
20 In your opinion, do you think are there ways to improve financial
performance of public firms in Uganda?
21. How do you think budgeting have any impact in financial performance in UIAHMS
Mulago?
22. What are the contributions of budgeting on financial performance of Public Firms?
23. How does budgeting influence the financial performance in public firms?
24. What is a relationship between budgeting and financial performance of public firms in
Uganda?
59
~5. Explain the ways you think financial performance of public firms in Uganda should be
mproved?
26. What are your recommendations on the role of budgeting on the financial performance of
public firms in Uganda?
20. What is your conclusion about the role of budgeting on the financial performance of public
firms in Uganda?
THANK YOU FOR YOUR COOPERATION
60
APPENDIX IV
RESPONDENTS’ INTERVIEW SCHEDULE
1. Gender of the respondent
2. Age of the respondent
3. Marital status
4. Education level
5. Respondent’s length of service in the firm (years)
6. Position held in the firm
7. Does the firm do budgeting?
8. How often does the firm do budgeting?
9. What do you think are the reasons for budgeting in this company’?
10. How budgeting and financial performance are related?
11. What are the contributions of budgeting on the financial performance in this company?
12. What do you think are the limitations of budgeting in this company?
13. What is done to reduce on the limitations of budgeting in this company?
14. Do you think there is a relationship between budgeting and financial performance of public
firms in Uganda? Why?
15. What do you think should be done by private firms to improve on their financial performance
in Uganda?
16. What are your recommendations on the role of budgeting on the financial performance of
public firms in Uganda?
17. What is your conclusion about the role of budgeting on the financial performance of public
firms in Uganda?
THANK YOU FOR YOUR COOPERATION
61
A A~ fl A A . Ggaba Road, Kansanga* P0 BOX 20000 KampaLa, UgandaT~: 4256 777 295 599, Fax: +256 (0) 41 - 501 974
INTERNkT~ONAL E-maiL:josephk~gmai1.corn,
~ UN!VERS~~Y
- COLLEGE OF ECONOMICS AND MANAGEMENTDEPARTMENT OF ACCOUNTING AND FINANCE
1st10712019
To whom it may concernDear Sir/Madam, .
RE: INTRODUCTORY LETTER FOR NYAKATO JOSELINE i161~050i4~04239
This is ~o introduce to youthe above nam~d student, who is a bonafide studentof Kampala International University pursuing a Bachelor’s Degree in BusinessAdministration Accounting and Finance, Third year Second semester.
The purpose of this letter is to request ypu avail her with, all the necessaryassistance rega rdirig her rêsearth. .
TOPIC: BUDGETING~AND FINANCIAL PERFORMANCE OFPUBLIC FIRMS IN UGANDA
CASE STUDY: UGANDA INSTITUTE OF ALLIED HEALTH ANDMANAGEMENT SCIENCES MULAGO
Any information shared with her from your orgahization shall be treated withu~rnost confldentiality~
/ IWe shall be g~teful ftr your positive response
Yours truly,
i~r (iDR~~ ,
HOD — ACCOUNTING AND FINANCE0772323344 ~
