Factors Affecting Budget Preparation: A Case Study of USIU-Africa

Abstract

The study intended to determine the factors that influence budget preparation and it was guided by the following research objectives. To determine the external factors that influence budget preparation, to determine the internal factors that influence preparation of Organizational budgets, to investigate the challenges in budget preparation and to determine what can be done to enhance budget preparation. The study used a descriptive survey and the population under study staff of United States International University of Africa based in all the departments. The study therefore focused on about 38 departments with knowledge on budget preparation however only 30 responded giving a 79% response rate. Data was collected through the administration of questionnaires to the relevant people. Data was first input and coded in excel before exporting into SPSS for analysis, the result was presented in figures and tables. The study established that inflation, inflationary levels, taxation and product pricing affected budget preparation. On the other hand, most respondents were neutral on whether inclusion of supply chain management, Receipt of Funding, Politics and incremental Budgeting affected budget preparation at USIU-A. It was also noted that availability of financial resources was a major factor in budget preparation while staff involvement improves accountability. The correlation findings revealed that the receipt of funding in foreign currency r(28)=0.713, p<0.05; inflation in the funded countries r(28)=0.623, p<0.05; taking into account variances caused by inflationary levels r(28)=0.438, p<0.05; had a significant impact on budgeting The study established the challenges in budget preparation as lack of Budget preparation skills, lack of training, rigid and non-adaptable budgetary planning and control systems and failure to respond to environmental changes, To Improve budgeting, USIU-A should allocate more resources to the activities or departments that generate more profit. A Pearson correlation done revealed that availability of financial resources r(28)=-0.400 p<0.05; The managers skill in presentation of budgetary and financial information r(28)=-0.584 p<0.05; Lack of enough skilled manpower r(28)=-0.461 p<0.05; managers’ Participation in budgeting r(28)=-0.408 p<0.05; and continuous budget monitoring r(28)=-0.757 p<0.05 had a significant impact on the budgeting process. It was revealed that to enhance budget preparation training of personnel involved in the budgeting process will help enhance budget preparation. A correlation done revealed that Training of personnel involved in the budgeting process r(28)=-0.631 p<0.05, and adoption of flexible budgets r(28)=-0.421 p<0.05 significantly affected Budgeting. The study concluded that internal factors in USIU-A have the potential of influencing budgeting, such include continuous monitoring, lack of Budget preparation skills and lack of training in budget preparation. It was also concluded that when firms undertakes the necessary training of personnel it enhance budget preparation, and there is a need to adopt flexible budgets which will help enhance the budgeting . The study recommended that it is essential for the institution to plan well and devise ways of mitigation. Such could include putting up inflation allowance and making prompt payments where applicable. USIU-A needs to device other ways of generating revenues to avoid shortage of financial resources. The firm also needs to undertake regular periodic evaluation to deter mismanagement. The organization needs to consider equipping its employees with budget preparation skills through offering training in budget preparation. For further studies there is a need for a similar study to be undertaken across other private university so as to be able to generalize the findings. There is also a need to access the exact training needs required in the organization.