1. 0 Background of the Study The success of any organization either non-profit organization or profit oriented entities is generally influenced by its planning and control mechanisms. The two concepts of planning and controlling must be balanced so as to attain success and development in an organization. At the planning stage an organization usually stipulates its objectives, missions, visions, goals and means of attaining those objectives with formulation of policies and strategies.
While at the controlling stage an organization will concentrate on comparing the actual performance with the budgeted performance and then take any appropriate corrective actions to secure organizational goals or to provide basis for policy revision. Sometimes the planned targets become difficult to be attained due to uncertainties ie;inflation,scarcity of materials, increasing transport costs, natural hazards,etc. Such uncertainties may enforce an organization to alter or adjust its plans and performance standards. Therefore planning and controlling are inseparable processes that are continuously maintained in an organization .
Having good plans while the controls are not effective will not enable the organization to perform well, this is the same as having good controls while the plans are poor. The effective performance in an organization is attained when good plans are married with effective control systems. Most organizations conduct their planning and control processes through implementation of budgetary control system. Budgetary control system is the system of using budgets as a means of planning and controlling all aspects of producing or selling commodities and services (By J. Batty)
An organization will never lose direction and means of measuring performance if it will implement the budgetary control system. The budgetary control system is useful to all managers in planning and controlling all activities of the organization. The effective budgetary control system is influenced by proper establishment of objectives, strategies and policies, provision of budget education to all employees, planning the standards of performance that are attainable, good communication and co-ordination system etc.
The budgetary control systems exercised in non profit organizations i. e.central and local governments, schools, colleges, hospitals and a range of other organizations is slightly different as compared to trading entities. Lucey (2004) agreed that, although many of the principles of budgeting apply equally to NPO’s and profit seeking organization, a key different is that the latter organization’s budget focus on the relationship between input (expenditure) and output (sales revenue). In NPO’s output are much more difficult to measure so traditionally budgeting has been concerned with making sure that for each expenditure heading actual spending does not exceed the budget authorized cash limits.
This has been criticized by Farry for concentrating on what the money is spent rather than what is obtained from the money. Another problem for NPO’s is that many of their activities and the level of costs are determined elsewhere and thus are much less controllable. Take for example a budget for a local managed school. A major item, often accounting 70% of costs, is teacher’s salaries. The level of salaries is determined nationally and legislation and norms largely govern the number of teachers. As a consequence, a high proportion of costs are not controllable to any significant degree at the school level.
Different is that in trading entities managers are able to control their inputs and outputs in terms of quantity and quality this is due to fact that trading entities have precious objectives and goals to be attained in a given financial year i. e. producing a certain level of output with a specified quality standards. But NPO’s and government sectors are mostly services oriented organizations, hence they lack precious goals (that are quantifiable) to be attained in a given financial year.
Due to this intrinsic problem there is high need of effective budgetary control systems in government sectors and in NPO’s in order for them to become economical and efficiently in spending and collection of revenue. Despite of having budgetary control systems in all government sectors and NPO’s in Tanzania but still most of them are faced with serious problems of overspending, poor control over resource, poor achievement of targets etc. this happens because most of these organizations do not implement effectively the budgetary control system. From 199O’s most of government co-operatives and companies had been privatized because they failed to control themselves.
Therefore this study is aimed at identifying the effects of budgeting policies, procedures, methods and controls processes at the MFAIC and assess the effectiveness of the overall budgetary control system. In addition a researcher will provide a valuable recommendations and opinions at any angle where the study will reveal weakness in the budgetary control system at the MFAIC. 1. 1 HISTORICAL BACKGROUND OF MINISTRY OF FOREIGN AFFAIRS AND INTERNATIONAL COOPERATION The history of ministry of foreign Affairs and International cooperation dates back soon after independence in 1961.
Up to December 1963 it was department under prime minister’s office, and the first minister was Hon. Oscar. S. Kambona In 1964 it becomes a fully fledged ministry under the name of Ministry of External Affairs and its first minister was Hon. Stephen Mhando. Since the election of 1975 the name of the ministry has changed twice from External Affairs to Foreign Affairs and Foreign Affairs to current Foreign Affairs and International Cooperation. During this period the following ministers have led the ministry; Hon. Israeli Elinewinga, Hon. Ibrahim kaduma, Hon.
Benjamin William Mkapa, Hon. Salim Ahmed Salim, Hon. Joseph Rwegasira, Hon. Ahmed Hassan Diria, Hon. Jakaya Mrisho Kikwete, and Hon. Dr Asha Rose Mtengeti Migiro And currently under the leadership of Hon. Benard Membe 1. 1. 1 The Organization Structure of the MFAIC. The MFAIC is among the potential Ministries of the URT Government structure. The MFAIC is headed by the Minister of Foreign Affairs and International Cooperation (currently Hon. Bernard Membe ) assisted with two deputy Ministers (Deputy minister on Political affairs & Deputy minister on Economic affairs ).
Adjacent to this level there is Permanent Secretary who is assisted by Deputy Permanent Secretary. The MFAIC consists of thirteen departments i. e. Administration & Human Resource, Finance and Accounts, Protocol, Legal Unit, Internal Audit, Procurement Management, Africa department, Middle East department, Europe & America department, Asia & Australia department, Regional Cooperation department and Multilateral Cooperation department. Departments are headed by heads of departments. Other departments had been further classified into Divisions and Sub-divisions e.g. Africa department, Multilateral department e. t. c.
(For more detail on organization structure see-Appendix 3, 4 & 5) 1. 1. 2 Vision, Mission and Core Values of the Ministry. Through its Foreign Policy, the Ministry of Foreign Affairs and International Cooperation has its Vision, Mission and Core Values which are as follows: Vision of the Ministry: To become an effective promoter of Tanzanian’s economic and other national interests abroad Mission Statement: “To conduct an active diplomacy which will generate economic activities.
and facilitates Tanzania’s rapid transformation and sustainable development. The Ministry of Foreign Affairs and International Cooperation is a coordinator of the country’s foreign policy will timely and effectively cooperates with other ministries and institutions in ensuring the achievement of Tanzania’s Foreign Policy” Core Values: The Ministry of Foreign Affairs and International Cooperation has the following core values: 1. To provide excellent services, to be creative, innovative and continuously strive to improve performance by enhancing knowledge and skills.
2. Impartiality 3. Integrity on exercise of powers within specified boundaries. 4. Accountability to the public. 1. 1. 3 Background of the New Foreign Policy of the URT of 2001 The URT has undergone tremendous changes since its union in 1964. These changes are evident in the social, political and economic spheres as the country has moved to consolidate its unity, foster greater political pluralism and promote economic liberalization. There have been equally significant changes in the international system.
The end of the cold war and the emergence of a single super- power, the global shift towards market-led economies and the processes of regionalization, globalization and liberalization which are powering it, the shift from development aid to trade, the resurgence of intra-state and inter-state conflicts, the movement towards greater embrace of democracy, human rights and good governance, the emergence of new shared challenges such as international terrorism, illegal migration, drug trafficking, the preservation of the environment, the phenomenal advances in science and technology as well as the end of Apartheid in South Africa, have combined to fundamentally alter the international system and created the imperative for adjustment in the URT.
Central to that imperative for adjustment is the mainstreaming of economic considerations in the formulation and conduct of URT’s foreign policy, while at the same time consolidating the fundamental principles of freedom, equity and justice, sovereign equality, territorial integrity and political independence, good neighborliness, non-alignment, non-interference into the internal affairs of the states, the promotion of African Unity as well as support for the United Nations (UN) in its development and peace agenda which have traditionally been its cornerstone since independence. The conduct of a country’s foreign policy has to find context in the international environment in which it operates.
It is altruism that, the present international environment has changed so radically that some of the assumptions on which the URT’s foreign policy had been predicated, no longer hold full relevance All those mentioned changes and other contemporary issues that have emerged in recent times have compelled the URT to review its foreign policy in 2001 in order to accommodate the emerged changes The URT New Foreign Policy of 2001 Given the economic and socio-political shift that has occurred in the domestic and international scene, The URT adopted a Foreign Policy focusing on economic diplomacy to secure the core national interest as a sovereign state.
The Policy manifest itself in active international engagement, which is basically leveraged upon the pursuit of economic objectives, while at the same time preserving the gains of the past and consolidating the fundamental principles of Tanzania’s traditional foreign policy. The principles of the new foreign policy shall be: 1. 1. 4. 1 Principles •Safeguard the sovereignty, territorial integrity and political independence of The United Republic of Tanzania. •Defense of freedom, justice, human rights, equality and democracy. •Promotion of good neighbourliness •Promotion of African Unity •Promotion of deeper economic cooperation with or without development partners.
•Support for the practice of the policy of non-alignment and south- south Cooperation and •Support for the United Nations in its search for international economic development, peace and security 1. 1. 4. 2 Objectives The URT’s New Foreign Policy has the following main objectives. •To project, promote and protect URT’s political, economic, social and cultural interests through active and sustainable economic diplomacy •To ensure that URT’s relation with other nations and international entities are also driven inline with economic interests, •To build a self sustaining economy, preservation of national peace and security as well as supporting regional and international endeavor for the creation of better and peaceful world.
•To accelerate the political and social economic integration for the region and •To create the necessary conditions which shall enable URT to participate effectively in the regional and international negotiations 1. 1. 4. 3 Strategies •Buildings Facilitative Internal Environment •Forging International Partnership, •Redefining Bilateral Diplomacy, •Strengthening Multilateral Diplomacy, •Promoting Good Neighborliness, •Enhancing Regional Peace and Security, •Strengthening Regional Economic Integration (EAC, SADC,IOR-ARC), •Upholding African Union (AU), •Reaffirming Non-Alignment, •Promoting South-South Cooperation, •Enhancing the Commonwealth Organization, •Promoting the United Nations Organization, •Readdressing Financial Issues and external Debt.
•Cooperating with Multinational Corporations and •Supporting Effective NGOs Therefore the ministry of Foreign Affairs and International Co-operation, as a coordinator of the country’s foreign policy shall cooperate with other ministries and institutions in ensuring the principles and the objectives of the policy are implemented and function. 1. 2 Statement of a Problem Most of government sectors in Tanzania are still facing great problems in managing and controlling their financial and non-financial activities. Since1990’s to date most of government entities had been privatized to foreigners due to failure in controlling and managing their affairs.
Most of government sectors and non-profit organizations in Tanzania are hindered with problems of overspending, poor control over scarce resources, low rate of target achievement, poor financial control, and failure in meeting operating expenses, poor coordination of activities e. t. c. The essence of all above problems in government sectors and NPO’s is traced within the planning and controlling mechanisms of these entities The process of planning and controlling of organizational activities is done through implementing the budgetary control system. The budgetary control system is the system that uses budget as a means of planning and controlling all aspects of producing or selling commodities and services in an organization. The effective implementation of budgetary control systems in government sectors and NPO’s will results into high performance and economic use of public fund as well as target achievements.
Therefore we may agree that most of government sectors and NPO’s in Tanzania perform poorly because they fail to give due importance on the implementation of the budgetary control system. Budgetary control system requires coordination, communication and interaction among different departments of the organization. As a tool of planning the budgetary control system will enable the government sectors and NPO’s to forecast the future uncertainties that might affect the entity i. e. inflation, scarcity of potential materials/resources, rise of production cost, situation changes e. t. c. Such predictions enables an organization to adjust plans in terms of objectives and standards of performance-so as to ensure that the planned targets are met.
Good planning in an entity is of great importance because it enables an organization to predict the cost of future operations (activities to be done) and setting of standards of performance that are attainable. As a tool of controlling, the budgetary control system assists organizations to arrest any adverse situation that might emerge and implicate the achievement of planned targets. In Tanzania most of organizations are faced with great problems in controlling and effecting the planned targets-thus, they have good plans but control measures are weak . Effective control requires continuous comparison between actual and planned targets so as to ensure that the current operations is inline with the planned targets and objectives. Therefore having good plans without effective controls is the same as “building good house without occupying it”.
The effective implementation of budgetary control system in government sectors and NPO’s in Tanzania could be the only solution of eradicating the problems of overspending, poor control over resource, failure in meeting targets etc. Therefore within this context and by considering the past and contemporary performance of government sectors and NPO’s in Tanzania, this study is set out to assess the effectiveness on implementation of the budgetary control systems in government sectors and NPO’s in Tanzania. 1. 3 Objectives of the Study 1. 3. 1 General objective The study is generally intending to assess the effectiveness of implementing budgetary control system at MFAIC. 1. 3. 2 Specific Objectives Specifically the study would broaden into the following issues;
?To identify whether the implementation of the budgetary control system at the MFAIC leads to effective performance. ?To analyses the extent of awareness on budget and budget education among employees at the MFAIC. ?To reveal the relationship that exists between top management and lower level employees during budgets preparation and implementations. ?To identify the extent at which the MFAIC operations and decisions are adhered to the budget stipulations ?To identify the weak spots in the budgetary control systems at the MFAIC. 1. 4 Research Questions ?Does the implementation of budgetary control system at the MFAIC results to effective performance?
?Are the employees at the MFAIC well equipped with budget education? ?Is the budgeting process at the MFAIC participatory? ?Does the managers and employees at the MFAIC adhere to budgets stipulations? ?Is there any limitation on the budgetary control system at the MFAIC? 1. 5 Significance of the Study To the host organization The study provides information that will help the management at the MFAIC to adopt corrective measures in terms of methods procedures and policies that are applied by the MFAIC to implement the budgetary control system. Furthermore, the study provides the basis for future policy formulation regarding budget implementation at the MFAIC. To the researcher.
It helps the researcher to gain knowledge on Accounting professional. Apart from that also the study enables the researcher to fulfill part of the requirements for the award of Bachelor of Accountancy and Finance offered by Mzumbe University To academicians The study acts as a stimulus to other researchers who wish to conduct a research on the topic under study or any other related topic to this study 1. 6 Limitations of the Study The researcher faced the following problems in conducting this research; ?Shortage of time The total time allocated to complete this research study was 15 Weeks, the allocated time was too short to collect the reliable and adequate data.
Therefore the results of this finding may not be very accurate as intended. ?Shortage of fund The total fund allocated to the researcher for furnishing this research study was not sufficient. This was highly contributed by the rising prices of goods and services due to the emerged inflation. ?Poor transport facilities The researcher faced a great problem in traveling from his domicile area to the field centre. There were few commuter buses and high car congestions on the road that moves to the field centre. ?Poor cooperation Some of respondents failed to return the questionnaires; also other documents were not available when needed by the researcher.
Moreover, most of potential respondents were busy while others were reluctant in conducting interview. CHAPTER TWO 2. 0 Importance of literature Review It has been established that literature review is of crucial significance to the researcher as it makes him understand the concepts and theories in the area of the study and other related fields. It helps the researcher to discover what other researchers have researched on and what remains to be researched thus avoiding duplication. Furthermore, it is agreed that by reviewing literature –the researcher will be able to plan and establish theoretical basis for their project and obtain empirical evidence on their hypothesis and assumptions.
Forgetting not to mention the fact that literature review marks the starting point for the research work and hence a point of departure for research topic from the rest of the fields. 2. 1 Definition of Budget Budgeting means deciding or estimating in advance the courses of action to achieve a particular target or objectives in a given period of time, along with numerical expression on the input and output to be achieved. The budget statement is expressed in quantity and financial terms. According to the Oxford Advanced Learners Dictionary(2000) the word budget means any of the following; ?Estimate of plan on how money will be spent over a period of time in relation to the amount of money available ?
Annual Government statement of country expenditure and how it will be financed. Amount of money needed or allotted for specific purposes According to Cambridge International Dictionary of English the word budget means any of the followings; ?A plan to show how much money a person /organization will earn and how much they will or be able to spend ? Plan on how to spend ?To save money in a planned way Also Mwisho (2002), defined budget as a short term financial plan or an action plan to guide managers in achieving the objectives of the firm, alternatively it may be defined as a comprehensive and coordinated plan expressed in financial terms, for the operations and resources of the firm for some specific period of time.
According to Mwisho the basic elements of budget are; ?It is comprehensive and coordinated plan ?It is expressed in financial terms ?It is plan for the firms operations and resources ?It is a future plan for a specified period Drury (1990) defines budget as a detailed plan that coordinates various activities within company for further action. On other hand, Edey (1964), has defined budget as statement about what is expected or planned to happen while Owler and Brown (1975) said budget is a financial or quantitative statement, prepared or approved prior to the defined period of time of the policy to be pursued during that period for the purpose of attaining the given objectives.
It may include income expenditure and the employment of capital. 2. 2 Objectives of Budgeting The annul budgeting has several objectives as pointed out by Shillinglaw & Mayers (1982). The following are outlined objectives of budgeting in NPO’s and profit oriented organizations. oTo compel planning and formulating the expected standard of Performance oTo provide framework for evaluation of performance. oTo enhance Coordination and communication within the Organization oTo force the managers to analyses Companies activities critically and creatively. oTo provide a reference point for control purpose, thus it becomes the basis for evaluating actual results.
oTo enable the management to anticipate problems and deal with them effectively oTo reinforce managers motivation to work effectively in order to achieve organizational goals and objectives oIt acts as a remainder to the plan for managers oTo promote cost conscious and cooperation altitude towards budgeting control. It must permits all levels of management. Top management must understand and atheistically support the budget and all aspect of control system Therefore budget assists the managers as constant remainder of the plan they have adopted. Hence it gives the photographic print they can consult from time to time as they implement the plan. It also saves as a general instruction to departments and divisional managers to take the results they have accepted to make great efforts for.