CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Budgeting is fundamental to every project management. It is imperative because it is a means to ensure that desired organizations objectives are met. This is also accomplished by exercising control over scares resources. Strategically, for an organization to run effectively, there are four critical factors: organizations objectives of where it intends to go, plans or how it intends to accomplish such objectives, coordination or whether individual plans fit in the overall organization objectives and control or whether operation relating to that period. With this, budgeting and budgetary control are the devices that an organization makes use of for all these purposes. Budgeting is an integral part of planning and coordinating, it is becoming increasingly important.
While control is comparing where you are supposed to be so that corrective action can be taken when there is a deviation. When there is no plan, there is no control. It is almost for an organization to exist and survive without some sort of budget. To be without one is like a ship without cores, cross along while being unaware of how far of the route it is or which rock it is likely to hit, only luck can save it from a catastrophic end and misadventure. Individuals in their private affairs employ the use of budgets in their day to day activities. The practice of budgeting and its control is now established on a world-wide basis and it’s still growing rapidly. Almost every company in Nigeria, indeed in the world at large has its budgeting and budgetary department. In general terms, a budget is a plan. It also forms the standard with which to measure the actual achievement of people, departments, firms and even governments.
A budget can be viewed as the plan of the dominant individuals in an organization expressed in monetary terms and subject to the constraint imposed by other participant and the environment indicating how the available resources may be utilized to achieve whatever the dominant individuals agree to be the organization’s priorities. It is one thing to plan a budget using the best project figures; it is another thing to ensure that the process of establishing the budget is both highly efficient and effective; in accomplishing the set objectives.
Thus, the simple term is basically what budgetary control entails. All of this is necessitated by the economic concept of Scarcity. Though “scarcity” is a relative term, it is right to note that resources are scarce, consequently, they serve as constraints to management, in terms of materials, manpower, money and time. Resources must however be utilized in order to achieve an organization’s primary and secondary objectives, (that of profit maximization and survival, growth, market share etc.).However budgeting as a tool of planning and control expressed in financial terms, based on predetermined objectives must represent what is likely to happen after a careful balance has been stuck between the ambition of management and the constraints facing the business.
