APPLICATION OF BUDGETING AND BUDGETARY CONTROL OF NON PROFIT MAKING ORGANIZATION

CHAPTER ONE

INTRODUCTION

1.1 OVERVIEW OF THE STUDY

The origin of budgeting could be traced to the cradle of civilization where Joseph according to the Bible (Genesis 41:33-36) made a forecast (budget) of corn supplies and planned Pharoah’s investment and consumption policy in light of it budget was used in England as early as the eighteenth century to control the King’s power of taxation which provided the revenues and to control governmental expenditures. The budget principles of supply as well as the use of funds is still fully recognized in modern business budgeting. The idea of government budgeting were brought into United States and carried by English Immigrants. According to Horngreen and Foster (1987), Budgeting system are more common in large companies, where formalized techniques oen serve management. Still, small concerns also use budget. All organizations whether incorporated or unincorporated, public or private, religion or traditional, have some objectives/or goals which it aims to achieve. The objectives could be the maximization of profits or rendering of services. The realization of an organization’s objective requires the acquisition and utilization of both human and material resources. To achieve these objectives, the organization tries to economize resources and change the course or means of achieving its pre-determined goals. With these resources, the organization determines the most effective way of achieving its goals. Goals optimization is achieved only by the properly planned use of available resources when the different activities are efficiently co-ordinated and the various decisions are policy oriented or controlled.

Modem religious organizations require the use of some technique in the formulation and adoption of planned and defined systems include budgeting variance analysis, and budgetary control. The process of setting goals or objectives to be achieved in some future time and determining how these goals are to be reached is described as planning, translating this planning into religion targets can be described as budgeting in religious organization. According to Terry Lucey (1996) preparing a short term and detailed plan of activities of an organization and so converting the strategic long term plan into action. The degree of importance attached to this plan and the efforts made in controlling the deviation from the planned performance differs among business organizations. A budget can be defined as a quantitative financial statement showing estimated incomes and expenditures of an organization for a specified period of time. It is a predetermined statement of management policy during a given period which provides a standard for comparison with results actually achieved.