The effect of proper budgeting and accountability to the development of the public sector

CHAPTER ONEINTRODUCTION1.1 BACKGROUND TO THE STUDYThe world today has embraced globalisation, a complicated process, focusing on how events,decisions and activities in one part of the world can have consequences in other parts of theworld (Lee & Collin 2005), to achieve a defined business purpose. However, just when wethought we had seen the depth to which an otherwise healthy economy can reach, worldevents continue to occur that change every business plan significantly (Lalli, 2003). Theharsh reality of this decade is that it is comprised of massive corporate layoffs, lower profits,bankruptcies and even in the public sector, cases of corruption and mismanagement of fundsremain rampant. In fact, resources are drained and redirected but the greatest accountants,brightest economists, most insightful analysts, and professional budget masters still continueto evolve theories to ensure that financial information is produced, implemented andadequately accounted for.According to CIMA, a budget is defined as “a quantitative statement for a certain period oftime, which include revenues, assets, liabilities and cash flows. According to Dubnick (2002),the beginning of the contemporary concept can be found to be the reign of William I, in themany years succeeding the 1066 Norman conquest of England. Accountability is one of thosegolden concepts that no one can be against (Bovens, 2005). It is used as a synonym for manyloosely defined political desiderata, such as transparency, equity, democracy, efficiency,responsiveness, responsibility, and integrity (Mulgan 2000; Behn 2001; Dubnick 2002). Theterm ‘has come to stand as a general term for any mechanism that makes powerfulinstitutions responsive to their particular publics’ (Mulgan 2003) and for O’Connell (2005),Accountability is present when public services have a high quality, at a low cost and areperformed in a courteous manner. Accountability could be looked at from two different angles. In its broad sense, it is anessentially contested concept, because there is no general consensus about the standards foraccountable behavior, and they differ from role to role, time to time, place to place, and fromspeaker to speaker. Accountability in its narrow sense however, refers to a specific set ofsocial relations that can be studied empirically and a great many social relationships carry anelement of Accountability within (Bovens, 2006). In all, Accountability forces administratorsto trace connections between past, present and future ( Hart,2001) and Public Accountability1 is equally of importance because ultimately, it can help to ensure that the legitimacy of thepublic administration remains intact or is increased and “public processes of calling toaccount would create the opportunity for penitence, reparation, and forgiveness and can thusprovide social or political closure” (Harlow 2002).However, Accountability is not complete without Accounting, Transparency andResponsibility. Transparency, which is often used as a synonym for Accountability is notenough to qualify as a genuine form of Accountability, because it only sees to the element of“public” in public Accountability, to the disclosure of information, the accessibility of thedebates to the general public or the disclosure of the judgment (Fisher, 2004). Also,Accountability cannot exist in the absence of proper accounting practices and an entity isrequired to give account only when it has been given responsibility over something byanother entity as ’an agent is accountable to a principal only if the principal can exercisecontrol over the agent’ (Lupia,2003). In the case of the public sector, the government is accountable to the citizens and members ofthe public as it has been given responsibility to use the resources of the country to providesecurity and economic stability. Accountability’ does not refer to sovereigns holding theirsubjects to account, but to the reverse, it is the authorities themselves who are being heldaccountable by their citizens (Bovens, 2006). But these hierarchical, financial or legalmechanisms are not mechanisms of Accountability per se, because they do not in themselvesoperate through procedures in which actors are to explain and justify their conduct to forums(Mulgan,2003), hence the need for a sound budgeting system.Budgeting has been a concept which has been applied widely in different sectors and worksof life, from the private to the public, to even meager not for profit organizations andassociations. Budgeting is also viewed as a process of identifying, gathering. summarisingand communicating financial information of an organization’s future activities.Blumentritt (2006) further explained that budgeting processes include a review and study of the prior period’s financial results, projectionsfor sales, operating expenses (fixed, variable, and semi-variable) and financing expenses,examination of proposals for capital expenditures, and means of rolling up and rationalizingfigures from different functional departments to ensure they meet company-wide profitexpectations. Budgeting, according to Hyde (1992), is partly political, partly economic,2 partly accounting, and partly administrative and distilling the wisdom of the budget theorists(Stourm, 1917; McKinsey, 1922; Stedry, 1960; Hofstede, 1968; Wildavsky and Jones, 1994;Schick, 1997; Campos and Pradhan, 1999), we can conceive a hypothetical governmentbudget control system as having five major components—focus, estimation, scarcity, criteria,and choiceBudget, a word derived from the French word ‘bougette’, is simply a quantified financial planfor a forthcoming accounting period (Eaton, 2005), but what this definition fails to identify isits reverence as a tool for Accountability and stewardship at all levels. Olabode (2005)described Budgeting as the annual statement of income and expenditure at the National, Stateor Local Government levels. He also stated that it functions as a tool for Accountability andcontrol government finance, tools for planning and management and for economic policyprescriptions. In fact it was the Budget preparation and implementation of Tekunbo (2006)that contributed to the trends which led to economic planning and budgeting as a tool inpolitical administration.The annual budget is a relatively new invention but its originshowever lie in centuries of monarchs mismanaging their countries’ finances and manyminorities in countries down the ages and around the world have taken steps to preservewealth from rulers, both unelected and elected, who have them simply because of their beliefsand colours and this remains a problem even today according to Cotterill (1990).In Nigeria, numerous budgets have been set and many of them have been policies. Thesebudgets have all tried to match our standard of living as a nation and even though some havefallen just short of depicting our socio-economic crisis, the constant problem has been theproper implementation of this laid down policies. This problem of proper implementation hasstemmed out of the lack of Accountability in the system especially in the public sector and inthis study, with particular reference to the Ministry of Finance in Lagos state, we wouldattempt to understand the relationship between these concepts looking at the current and pastaffairs of the ministry and we would try to identify new measures that could improve thelevel of Accountability and Budget Implementation in the ministry and subsequently in theworld at large