Budgeting and Budgetary Control in the

Management of Finances in Tertiary

Institutions and Public Agencies

By
Essien Akpanuko
Department of Accounting
University of Uyo,
Akwa Ibom state
Mobile: +2348023223518
Email: eakpanuko@yahoo.com
essienakpanuko@uniuyo.edu.ng
 The
Misconception

Budget is not just an annual statement

of receipts and expenditures; it is an
instrument for fulfilling the obligations
of the state or an organization.
Budgets are statement of
the priorities set by an
organization in resource
allocation. Thus where
there are limitations to
the budget within the
scare resources, there
would be a need to
reprioritize the current
allocations and adjust the
budget.
Also preparers of budget
do not adhere the rules
and formats. They have a
poorer understanding of
the concept of budget
and budgeting, its role in
managing organizational
finances and the
strategies for making
budgets work effectively.
Learning objectives
1. What a budget is not
2. The role of Budget in the Management
of Finances
3. The Process for Budget Preparation in
the Public Sector
4. Budgetary Control and Budget
effectiveness
5. Understand the requirement of
IPSAS/PEFA in Budget process;
6. The IPSAS Compliant Budget
Templates
What a budget is not
 Written in stone
 Simply a record of last year’s
expenditure, with an extra
15% added on to cover
inflation. Every year is
different.
 Just an administrative and
financial requirement of
donors.
An optimistic and
unrealistic picture of
what things actually
cost ( hence they
underestimate what
things really cost in the
hopes that this will
help them raise the
money needed).
A budget is not a forecast.

Budgets and forecasts

refer to the anticipated
actions and events.

However, there are wide differences

between budgets and forecasts
A budget is a document that
translates plans into money -
money that will need to be
spent to attain planned
activities (expenditure) and
money that will need to be
generated to cover the costs of
getting the work done
(income). It is an estimate, or
informed guess, about what is
needed in monetary terms to
attain organisation’s goals or
meet obligations.
The role of Budget in the
Management of Finances
 WHY BUDGET?
Without a budget, you are like a pilot
navigating in the dark without instruments.
The role of a budget is explained by the
diagram below.
The budget tells you how
much money you need to
carry out your activities.
The budget forces you to
be rigorous in thinking
through the implications of
your activity planning. There
are times when the realities
of the budgeting process
force you to rethink your
action plans.
Used properly, the budget
tells you when you will need
certain amounts of money to
carry out your activities.
The budget enables you to
monitor your income and
expenditure and identify any
problems.
The budget is a basis for
financial accountability and
transparency. When everyone can
see how much should have been
spent and received, they can ask
informed questions about
discrepancies.
You cannot raise money from
donors unless you have a budget.
Donors use the budget as a basis
for deciding whether what you are
asking for is reasonable and well-
planned
The Process for Budget
Preparation in the Public Sector
Budgeting therefore is a decision making
process. This process is defined by the
need for a budget. It involves 7
processes, namely:
1. Problem identification
2. Specification of objectives
3. Identification of possible
strategies
4. Evaluation of alternative
strategies
5. Selection of best strategy based
on available resources
6. Implementation of best option
7. Feedback and control
The planning process is shown in the diagram below
Budgetary Control and
Budget effectiveness
BUDGET CONTROL MONITORING

Monitoring the budget is not just something

that you do so that you will know more about
your financial performance as an organisation
or a project. You need the information to be
able to take decisions.
The cycle looks like this:
The success of the process is dependent on the ability of those
with management responsibilities to make decisions and take
action. The steps involved are:

1. Prepare your baseline

information. (Budget,
monthly break down)
2. Get information on
financial performance.
3. Analyse the information
and work out what it is telling
you.
4. Look at the potential
consequences to your
financial strategy and plans.
5. Draw up a list of options for
action.

6. Get consensus and a mandate to

take action.

7. Share adjustments and plans with

the rest of the organisation and, if
necessary, your donors.

8. Implement.

9. Monitor.

10. Build your learning into future

budgeting processes.
The budget is the most important tool you have for
monitoring the finances of your organisation, project or
department. You use the budget to:

Monitor your income and

expenditure to see whether
or not you are on target

Report how you are doing

financially to your staff,
board and donors

Do cash flow projections

and

Make financial decisions.

LIMITATIONS OF BUDGETS AND
BUDGETARY CONTROL

The benefit of the budget must

exceed the cost
Budget information may not be
accurate
The budget may de-motivate
Budgets may lead to
dysfunctional management
Budgets may be set at too low a
level
Requirement of IPSAS/PEFA
in Budget process
PUBLIC EXPENDITURE AND
FINANCIAL
ACCOUNTABILITY (PEFA)
PEFA is a tool for assessing the status of
public financial management. A PEFA
assessment provides a thorough,
consistent and evidence-based analysis
of PFM performance at a specific point in
time. The PEFA methodology can be
reapplied in successive assessments to
track changes over time. IT REST ON 7
PILLARS
REQUIREMENT OF IPSAS
The IPSAS Compliant Budget is carried
out to achieve the following objectives:

1. The Budget of the Government

entity can be seen at a glance
2. The summary of all the
segments of the budget are
highlighted
3. Consolidation of all functional
budgets to present overall
organizational objectives
during the forthcoming
budget period(s);
The IPSAS Compliant Budget is carried
out to achieve the following objectives:

4. Consolidation of all budgets based

on Programmes and Projects of the
government entity
5. Comparison of the Consolidated
Actual Performance against Budgets
6. Funds available for development
can easily be known
7. It assists top management in
decision making
The IPSAS Budget PROCESS:

The Budget process involves a

number of ongoing activities
in a circle through out the
year.
It starts with macro-economic
policies and objectives, setting
revenues and expenditure
ceilings, approval and its
execution.
The following are important steps
in the preparation of the Budget.
1. Issuance of Call Circular;
2. Communication of the contents of the Call
Circular to all stakeholders;
3. Budget defense at all Levels;
4. Collation of Financial Estimates by the Budget
Office (Federal/State/LGC);
5. Submission of the Financial Estimates to the
Chief Executive (President/Governor/LG
Chairman)
6. Presentation of Appropriation Bill to the
Legislature;
7. Passage of the Appropriation Bill;
8. Assent of the Appropriation Bill by the
President/Governor/LG Chairman into Budget
 IPSAS COMPLIANT
BUDGET
 Documents\Master\Desktop\CONFERE
NCE REPORTS\National Workshop
Papers & Templates\IPSAS Budget
Compliant -Final.xls
CONCLUSION
In conclusion, there is
something you should not
do when you are developing
a budget; “that is making it
up as you go along”. As
with most good practice in
managing an organisation,
good practice in budgeting
involves clarity of purpose,
detailed planning and
considerable thought.
1. Preparation of budgets is
the first step in the
budgetary control system.
2. Implementation of
budgets is the second
phase.
But preparation and
implementation of budgets
alone will not achieve much
unless a comparison is made
regularly between the actual
performance and the
budgeted performance
1. Continuous and proper reporting
makes this possible.
2. To ensure the success of budgetary
control system, proper follow up action
has to be taken immediately for the
reports submitted.
3. The government budget is indeed a key
and strategic tool that is used to
provide services to the public. The
processes and activities involved in
budget management require attention
of all stakeholders to ensure efficiency,
accountability and transparency
 Thanks
for
Listening !

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