Budgeting as a Control Tool in Govt Accounting in Nigeria Prof Oyedokun.pptx

Budgeting as a Control Tool in Government
Accounting in Nigeria
Being a Paper Presented at the Nigerian Maritime Administration and Safety Agency (NIMASA)
Budget Office Staff at Sojourner Hotel, GRA, Ikeja Lagos on Saturday 8th June, 2024.
Prof. Godwin Emmanuel
Oyedokun
Professor of Accounting and Financial
Development
Department of Management & Accounting
Faculty of Management and Social Sciences
Lead City University, Ibadan, Nigeria
Principal Partner; Oyedokun Godwin Emmanuel &
Co
(Accountants, Tax Practitioners & Forensic Auditors)

ND (Fin), HND (Acct.), BSc. (Acct. Ed), BSc (Fin.), LLB., LLM, MBA (Acct. & Fin.), MSc. (Acct.), MSc. (Bus &Econs), MSc. (Fin), MSc.
(Econs), Ph.D. (Acct), Ph.D. (Fin), Ph.D. (FA), CICA, CFA, CFE, CIPFA, CPFA, CertIFR, ACS, ACIS, ACIArb, ACAMS, ABR, IPA, IFA,
MNIM, FCA, FCTI, FCIB, FCNA, FCFIP, FCE, FERP, FFAR, FPD-CR, FSEAN, FNIOAIM, FCCrFA, FCCFI, FICA, FCECFI, JP
Prof. Godwin Emmanuel
Oyedokun
Professor of Accounting and Financial
Development
Department of Management & Accounting
Faculty of Management and Social Sciences
Principal Partner; Oyedokun Godwin Emmanuel &
Co

Budgeting as a Control Tool
in Government Accounting in
Nigeria

Contents
Introduction
Overview of
Budget and
budgeting
Types of
Budgets in
Government
The
Budgeting
Process
Primary
Purposes of
Budgeting in
Government
The
Importance of
Budgeting in
Government
Challenges of
Budgeting
The
Budgeting
Process in
Government
Budgetary
Control
Mechanisms
Best
Practices in
Budgeting
Benefits of
Effective
Budgetary
Controls
Challenges in
Government
Budgeting
Improving
Budgeting as
a Control Tool
Ways
Budgeting
Can Be a
Control Tool
in Governmnt
Accounting
Budgeting as
a Control Tool
in
Government
Case Studies
of Corporate
Budgeting
Conclusion
Recommenda
tions

Introduction
Budgeting as a control tool in government establishments is an essential
mechanism for ensuring fiscal responsibility, accountability, and effective
allocation of resources
Budget serves multiple functions, including planning, coordinating,
controlling, and evaluating governmental financial activities
Budgeting is not merely about allocating funds; it is a strategic tool for
ensuring financial discipline, enhancing transparency, and achieving policy
objectives
As budget office staff, your role is crucial in developing, implementing, and
monitoring budgets that align with governmental priorities and promote
efficient use of public resources

Overview of Budget and budgeting
• A budget is a financial plan that outlines an entity’s projected revenues and expenditures
over a specified period, typically a fiscal year
• It serves as a blueprint for financial management and resource allocation, guiding both
day-to-day operations and long-term strategic planning
Budget
• Budgeting is the process of creating, implementing, and monitoring a budget
• It involves estimating revenues, forecasting expenditures, setting financial goals, and
evaluating performance against those goals
• Budgeting is an ongoing cycle that ensures financial discipline and strategic resource
allocation
Budgeting

Types of Budgets in Government
Operational
Budget
Covers the
day-to-day
expenses
necessary to
run an
organization
, such as
salaries,
utilities, and
office
supplies
Capital
Budget
Allocates
funds for
long-term
investments,
such as
infrastructur
e projects,
equipment,
and real
estate
Cash Flow
Budget
Tracks the
inflow and
outflow of
cash to
ensure that
the
organization
has
sufficient
liquidity to
meet its
obligations
Zero-Based
Budget
Requires
each
expense to
be justified
from
scratch,
starting from
a "zero
base," rather
than relying
on previous
budgets
Incremental
Budget
Uses the
previous
year’s
budget as a
base and
adjusts for
changes in
revenues
and
expenditure
s
Performance
Budget
Links funds
allocated to
measurable
outcomes
and results,
focusing on
efficiency
and
effectivenes
s

Primary Purposes of Budgeting in Government
Allocating
Resources
• Distributing available
financial resources
to various
departments,
programs, and
activities in
alignment with policy
goals and public
needs
Planning
• Establishing a
financial plan that
guides government
operations and
ensures the
achievement of
policy objectives
Controlling
• Monitoring and
regulating
expenditures to
prevent
overspending and
ensure efficient use
of resources
Evaluating
• Assessing the
effectiveness and
efficiency of
government
programs and
activities in
achieving intended
outcomes

The Importance of Budgeting in Government
Ensures fiscal discipline and responsible spending of
public funds
Promotes transparency and accountability to citizens
Facilitates informed decision-making about resource
allocation

Importance of Budgeting in Government Accounting
• Budgeting facilitates the allocation of limited resources among competing needs
• By prioritizing expenditures, the government can ensure that essential services and development projects are
adequately funded
Resource Allocation
• Through budgeting, the government can control its finances by setting limits on expenditure and ensuring that spending
does not exceed revenue
Financial Control
• Budgets set benchmarks against which the performance of government agencies and programmes can be measured
Performance Measurement
• It provides a clear plan for revenue and expenditure, which can be scrutinized by the public and oversight bodies
Transparency and Accountability
• Through fiscal policy, the government can influence economic activities, control inflation, and promote growth
Economic Stabilization

Impact of Budgeting on Governance
Improved Service
Delivery
• A well-planned
and executed
budget ensures
that public
services such as
healthcare,
education, and
infrastructure are
adequately
funded, improving
the quality of life
for citizens
Enhanced Fiscal
Discipline
• Budgeting
enforces fiscal
discipline by
controlling
expenditure and
ensuring that
spending is
aligned with
revenue
Increased
Transparency and
Accountability
• The budgeting
process,
particularly if
participatory and
transparent,
enhances
accountability,
allows
stakeholders to
hold the
government
accountable for its
financial decisions
Economic Growth
and Development
• It ensures that
investments in
critical sectors
such as
agriculture,
industry, and
infrastructure are
prioritized
Trust in
Government
• A credible and
transparent
budgeting
process can build
public trust in
government
institutions

Challenges of Budgeting
Revenue Uncertainty
• Fluctuations in revenue can
complicate budget planning
and execution
Political Influence
• In government, political
considerations can affect
budget decisions, leading to
suboptimal resource allocation
Complexity
• Large and complex
organizations may struggle
with coordinating and
integrating various budget
components
Performance
Measurement
• Linking budget allocations to
performance outcomes can be
challenging, especially for
programs with long-term or
intangible benefits
Compliance and Fraud
Risks
• Ensuring compliance with
budgetary guidelines and
preventing fraud requires
robust internal controls

Budgeting Process in Nigeria
Preparation
• Call Circular
• The process begins
with the issuance of a
budget call circular by
the Ministry of Finance
or the Budget Office
• This document outlines
the guidelines for the
preparation of the
budget by various
government ministries,
departments, and
agencies (MDAs)
• Submission of
Proposals: MDAs
prepare and submit
their budget proposals
based on the guidelines
• These proposals
include estimates of
revenue and
expenditure for the
upcoming fiscal year
Review and Approval
• Budget Defense
• The budget proposals
are reviewed and
defended before the
Budget Office and the
relevant legislative
committees
• This stage involves
scrutiny to ensure that
the proposals are
realistic and align with
government priorities
• Approval by the
Legislature
• The consolidated
budget is presented to
the National Assembly
for approval
• The legislature reviews,
amends, and eventually
passes the budget,
which is then signed
into law by the
President
Implementation
• Release of Funds
• Once approved, the
budget is implemented
through the release of
funds to MDAs based
on the approved
estimates
• The release of funds is
often done quarterly to
ensure control and
monitoring
• Execution
• MDAs execute the
budget by undertaking
the approved projects
and activities
• This involves
procurement, project
execution, and service
delivery
Monitoring and
Evaluation
• Monitoring
• The implementation of
the budget is closely
monitored to ensure
compliance with the
approved estimates
• This involves tracking
expenditures and
assessing whether the
funds are used for their
intended purposes
• Evaluation
• Periodic evaluation is
conducted to assess
the outcomes and
impact of the budget on
the economy and
society
• This includes
performance audits and
reviews by the Office of
the Auditor-General and
other oversight bodies.

Budgetary Control Mechanisms
• Spending Limits
• Budgets establish spending limits for various departments and programs, preventing overspending and
ensuring financial discipline
• Fund Allocation
• Ensures that funds are allocated according to priorities and policy objectives, minimizing waste and
inefficiency
Financial Control
• Performance Monitoring
• Budgets link financial resources to performance targets, enabling monitoring of whether departments and
agencies achieve their objectives efficiently
• Accountability
• Budgets enhance accountability by requiring departments to justify their expenditures and performance
Operational Control
• Regulatory Compliance
• Ensures that expenditures comply with legal and regulatory requirements, reducing the risk of fraud and
mismanagement
• Internal Controls
• Establishes internal control mechanisms, such as approvals and audits, to safeguard public funds
Compliance Control

Technology and Budgetary Control
Budgeting Software
• Streamlines the budgeting
process, facilitates data
analysis, and enhances
reporting capabilities
Financial Management
Systems
• Integrates financial data from
various government agencies,
enabling comprehensive
monitoring and oversight
Data Analytics
• Utilizing data to identify
spending trends, potential
inefficiencies, and
opportunities for cost savings

Best Practices in Budgeting
Strategic
Alignment
Ensure that the budget aligns with the organization’s strategic
goals and priorities
Participatory
Approach
Involve various stakeholders in the budgeting process to enhance
buy-in and accountability
Use of Technology Leverage technology and data analytics for accurate forecasting,
monitoring, and reporting
Regular Monitoring
and Adjustment
Continuously monitor financial performance and make adjustments
as needed to address any variances
Transparency and
Communication
Maintain transparency in the budgeting process and communicate
clearly with stakeholders about budget decisions and performance
Training and
Capacity Building
Invest in training for staff involved in budgeting to enhance their
skills and understanding of financial management

Benefits of Effective Budgetary Controls
Reduces
Overspending
• Helps to prevent government
agencies from exceeding
their allocated budgets
Improves Efficiency
• Encourages government
departments to seek cost-
effective solutions and
eliminate wasteful spending
Enhances
Transparency
• Provides a clearer picture of
government spending and
resource allocation to the
public

Challenges in Government Budgeting
Revenue
Uncertainty
• Fluctuations in
revenue can
complicate
budget
planning and
execution
Political
Influence
• Budget
decisions can
be influenced
by political
considerations,
leading to
suboptimal
resource
allocation
Complexity
• The size and
complexity of
government
operations can
make
budgeting and
financial
management
challenging
Performance
Measurement
• Linking budget
allocations to
performance
outcomes can
be difficult,
especially for
programs with
long-term or
intangible
benefits
Public Demand
• Balancing the
diverse and
often
competing
demands of the
public can be
challenging
within budget
constraints

Improving Budgeting as a Control Tool
Performance-
Based
Budgeting
• Implementing
performance-based
budgeting to
strengthen the link
between funding and
outcomes
Transparency
and Participation
• Increasing
transparency and
public participation in
the budgeting process
to enhance
accountability and
trust
Technology and
Data Analytics
• Leveraging
technology and data
analytics to improve
budget forecasting,
monitoring, and
evaluation
Capacity
Building
• Strengthening the
capacity of budget
officers and financial
managers through
training and
professional
development
Integrated
Financial
Management
Systems
• Implementing
integrated financial
management systems
to improve financial
control and reporting

Challenges in Budgeting as a Control Tool
• Nigeria's heavy reliance on oil revenue makes its budget susceptible to fluctuations in global oil prices, this volatility
can lead to unpredictable revenue streams, complicating budget planning and execution
Revenue Volatility
• Corruption and financial mismanagement are significant issues in Nigeria, affecting budget implementation as funds
are often diverted or misused, leading to inefficiencies and wastage
Corruption and Mismanagement
• Inaccurate economic forecasts and poor planning can result in unrealistic budgets, i.e., overestimation of revenue or
underestimation of expenditure can lead to budget deficits and unmet targets
Poor Planning and Forecasting
• Delays in the legislative approval of the budget can disrupt the fiscal year’s planned activities, leading to rushed
implementations and reduced effectiveness
Delay in Budget Approval
• Weak monitoring and evaluation mechanisms can result in poor oversight of budget implementation which can allow
deviations from the budget and reduce accountability
Inadequate Monitoring and Evaluation

Ways Budgeting Can Be a Control Tool in Government Accounting
Setting
Expenditure
Limits
• Establishing
maximum
spending limits
for ministries,
departments,
and agencies
(MDAs) to
ensure
expenditures do
not exceed
approved
budgetary
allocations
Resource
Allocation and
Prioritization
• Allocating
resources to
priority sectors
and projects to
ensure alignment
with national
development
goals and
objectives
Revenue
Projections and
Control
• Developing
accurate
revenue
forecasts and
setting targets to
ensure that
spending is
based on
realistic revenue
expectations
Periodic Budget
Reviews
• Conducting
regular reviews
and adjustments
to the budget to
reflect changes
in economic
conditions and
revenue
performance
Fund Release
Control
• Implementing a
phased release
of funds (e.g.,
quarterly
allocations) to
ensure that
spending
remains within
budgeted limits
and to monitor
ongoing projects

Performance-
Based
Budgeting
Linking budget
allocations to
performance
metrics and
outcomes,
ensuring that
funds are
allocated based
on the
achievement of
specific goals
and objectives
Compliance
Audits
Conducting
regular audits to
ensure that
expenditures
are in line with
budgetary
provisions and
identifying any
deviations or
irregularities
Public Financial
Management
Systems
Utilizing
integrated
financial
management
information
systems
(IFMIS) to
monitor and
control
government
expenditures in
real-time
Expenditure
Tracking and
Reporting
Implementing
mechanisms for
tracking and
reporting
expenditures to
enhance
transparency
and
accountability
Legislative
Oversight
Ensuring that
the National
Assembly
reviews and
approves the
budget and
monitors its
implementation
to prevent
unauthorized
spending

Internal Control
Systems
Establishing robust internal control systems within MDAs to prevent fraud,
waste, and abuse of public funds
Transparency and
Public
Participation:
Engaging the public and civil society in the budgeting process to increase
transparency and ensure that public funds are used effectively
Medium-Term
Expenditure
Framework (MTEF)
Adopting a medium-term expenditure framework to plan expenditures over a
multi-year horizon, ensuring sustainability and better fiscal management
Zero-Based
Budgeting
Implementing zero-based budgeting where every expense must be justified
for each new period, rather than carrying forward previous budgets
Fiscal
Responsibility
Laws
Enforcing fiscal responsibility laws to ensure that government borrowing and
debt levels remain within sustainable limits

• Enhancing the
capacity of
government
officials and
MDAs in budget
preparation,
execution, and
monitoring
through training
and technical
assistance
Capacity
Building
• Conducting
cost-benefit
analyses for
major projects
and programs
to ensure that
resources are
used efficiently
and deliver
maximum value
for money
Cost-
Benefit
Analysis
• Including
contingency
funds in the
budget to
handle
unforeseen
expenditures
and
emergencies
without
disrupting
planned
activities
Contingenc
y Planning
• Requiring
regular budget
performance
reports from
MDAs to
assess
progress and
make
necessary
adjustments to
ensure
compliance with
budgetary goals
Budget
Performanc
e Reports
• Implementing
mechanisms for
evaluating
budget
outcomes and
incorporating
feedback into
future
budgeting
cycles for
continuous
improvement
Evaluation
and
Feedback
Mechanisms

Case Studies and Best Practices of Government Budgeting
The federal budget
process involves
multiple stages,
including proposal
by the executive
branch, review and
modification by
Congress, and
implementation by
various federal
agencies, it aimed
at balancing fiscal
responsibility with
policy priorities
United States
Sweden uses a
multi-year
budgeting
framework that
provides a longer-
term perspective
on fiscal planning,
enhancing stability
and predictability
Sweden
Known for its
performance-
based budgeting
system, which
links budget
allocations to
measurable
outcomes and
enhances
transparency and
accountability
New Zealand
Implements an
integrated financial
management
information system
(IFMIS) that
enhances budget
preparation,
execution, and
monitoring
South Korea

Case Studies and Best Practices of Corporate Budgeting
Toyota
Uses a
combination of
zero-based
budgeting and lean
management
principles to
ensure efficient
resource allocation
and continuous
improvement
Procter & Gamble
Employs rolling
forecasts and
flexible budgeting
to adapt to
changing market
conditions and
maintain financial
agility

Conclusion
Budgeting is not just an administrative exercise but a powerful control tool in government
accounting, particularly in a complex economic landscape like Nigeria's
It plays a vital role in setting financial priorities, enforcing fiscal discipline, and enhancing
transparency and accountability in the use of public funds
Despite the challenges of revenue volatility, corruption, and inadequate planning,
effective budgeting can significantly improve governance and public service delivery
When executed with precision and integrity, budgeting can ensure that limited resources
are allocated efficiently, critical projects are funded adequately, and the public can hold
the government accountable for its financial decisions
As Nigeria continues to navigate its economic and governance challenges, strengthening
the budgeting process is imperative for sustainable development and enhanced public
trust

Recommendations
Improve the accuracy of revenue
forecasts by utilizing advanced data
analytics and economic modeling
techniques to reduce the impact of
revenue volatility on budget planning
Enforce strict adherence to budgetary
limits and introduce penalties for
unauthorized expenditures to maintain
fiscal discipline and prevent budget
overruns
Implement stringent anti-corruption
measures and establish robust internal
controls within government agencies
to prevent the diversion and misuse of
public funds
Invest in capacity building for
government officials involved in the
budgeting process to enhance their
skills in economic forecasting and
financial planning
Streamline the budget approval
process to minimize delays and
ensure that the budget is passed and
implemented in a timely manner,
aligning with the fiscal year

Recommendations
Develop
comprehensive
monitoring and
evaluation
frameworks to
track budget
implementation,
assess
performance, and
ensure that funds
are used for their
intended purposes
Encourage
greater public
participation in the
budgeting process
to ensure that
budget allocations
reflect the needs
and priorities of
citizens, thereby
enhancing
transparency and
accountability
Utilize integrated
financial
management
systems and
digital platforms to
improve budget
planning,
execution, and
reporting,
enabling real-time
tracking of
financial
transactions
Conduct regular
audits and
financial reviews
by independent
bodies to assess
compliance with
budgetary
allocations and
identify any
discrepancies or
irregularities
Make budget
documents and
financial reports
publicly
accessible to
enhance
transparency and
allow for public
scrutiny of
government
spending

Prof. Godwin Emmanuel Oyedokun
Professor of Accounting & Financial Development
Principal Partner; Oyedokun Godwin Emmanuel & Co
godwinoye@yahoo.com; godwinoye@oyedokungodwin.com
+2348033737184 & 2348055863944

Budgeting as a Control Tool in Govt Accounting in Nigeria Prof Oyedokun.pptx

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