An Economy without a Budget

AN ECONOMY WITHOUT A BUDGET

The growth of an economy is of great advantage if it is effectively planed budgetary. 9planning helps in deciding on positive achievements).  Planning helps the management in deciding on how to attain to its positive goals budgetary planning aid organization state to succeeds to its goals, without planning it will fail.

Therefore one mechanism for ensuring effective performance is the budget of resources.

Budget is of great important both in the organization and state. Decision and control on budget constitutes an important determinant of the economy decisions.

• THE ORIGIN OF BUDGET

The word “Budget” emanate from French word meaning large size purse which travelers in former centuries hung on saddle of their horse.  The treasurers budget was the predecessor’s of the smaller leather case from which the finance ministries in countries like Britain and Holland present their yearly financial plan.

Phonemically, budget was used historically as a financial control tool for the business enterprise from 1920.

Before the independence in 1960 budget was used to run the economy affairs in Nigeria by the Colonial government.

During the era of the colonial government were few business were strictly managed that this concept was discovered after the independence.  Such concept is applicable today in the economy and to most firms admit has been view as one major purpose or the other and its importance.

• DEFINITION OF BUDGET

Budget has been defined by various institutions, thus definition are: According to institute of cost and management accountants (ICMA) defined budget as a financial and/or quantitative statement, prepared and approved prior to a defined period of time, of policy to be pursued during the period for the purpose of attaining a given objective.

Budget can be define as a financial plan that sets goals and allocates resources for the coming period (Allen & Haold 1976).

Business dictionary state the definition of budget as an estimate of the income and expenditure for a future period of time usually one year, or a plan set or a systematic estimate for a future period of a business.

Budget is the money available to an individual and organization and a plan on how it will be spent over a period of time. (Oxford Advanced Learner’s Dictionary).

Base on the above definitions it can be view that a budget has the following distinct characteristic.

• It’s elaborates the financial terms;
• It is a forecasted comprehensively and co-ordinate plan;
• It is a future plan for a specific period.

• AIMS OF BUDGETING

The concept budgeting has been views in economy for its

paramount objectives.

The aims of budget are:

• Explaining and stating bow the funds are spent on the allocation proposed by the executive through the legislature;
• It shows the collection and disburse of funds to the nations;
• Its states the proposed allocation of resources;
• Budgeting aim in making plans of the future, implementing these plans and monitoring activities to see whether they conform to the plan; this requires co-ordination and control;
• Also one major aim is to documentarily show the government policies development and how to improve the economy growths and its achievements.

• THE COMPOSITION OF THE BUDGET

The budget composes of he following:

1. The economy performance of the previous year budget;
2. Indication of expenditure and revenue as per current and capital groupings;

• The control of fiscal monetary polices by government through tax and lending or borrowing.

1. Balances on the terms of international trades, such as foreign exchange, import and export payments.

• BUDGETING PROCESS

The process of budgeting is a sequential events that occurs

every year it involves four phase:

1. Preparation and submission by executive;
2. Consideration and enactment by legislature;

• Its implementation or execution if approved;

1. Auditing review.

• THE FIRST PHASE

Executive preparation and submission. Advance proposal made by ministries, department and other

governmental agencies are articulated with the government objectives in terms of economic, social and public utilities which is notified by the ministry of budget.  Also if there is any capital projects, it is cleared with the department of national planning alongside with other proposal of budgeting.  Thus such proposal will be clarified and reconcile by the treasury department of national planning and the federal ministry of work both known as budget ministry.

At the end of this, a submission is made to president-in-council for consideration and they include:

1. review of the economy;
2. legislative initiatives for the budget year;

• expected revenue for the budget year;

1. tentative proposals of ministries;
2. recommendations on the overall priorities;
3. suggested budget ceilings

• THE SECOND PHASE

Legislative consideration and enactment: This phase is expected to be completed before the beginning of the budget year.  It involves where more political factors are brought to bear on the draft budget.

• THE THIRD PHASE

Execution:

The phase shows incurring expenditure delivery services and accounting for the transaction and events relating to budgets are appropriations.

• THE FOURTH PHASE

AUDITING REVIEW:

The auditing review is done at eh end of the budgeting years.

The budget accounts signed by the federal government is presented to the auditor general of the federation for auditing review or examination within the seven months after the end of the financial year.  In Nigeria, such situation has not been possible fro many years gapping the end of the financial year and the time the accounts is presented for auditing.

It view that budgetary problem is clearly identified as follows; lack of budgetary data, development o feasible solution; and the setting up of administrative structure who are to monitor and ensure that the economy goals are achieved.

The process of budget and plan is of good people enhancing the growth of the economy.

• ADVANTAGES OF BUDGET

Budget is very essential, it aid in forecasting a plan for the

fiscal period to individual private and public enterprise and government.  It’s merits are:

1. It oblique the government to forge ahead to plan by requiring there formalizing it;
2. It uncovers potential bottlenecks before they occur.

• It provides definite goals and objectives which serves a bench makes for vaulting subsequent performance;

1. It co-ordinates the activities of the entire organization by integrating the plan and objective of the various ministries, parastatals agencies, corporate business unit etc.;
2. It is a device for communicating government plan to various responsibility centres.

• PROBLEMS OF BUDGETING

Nigeria economy have been encountering problems of budget,

this have affect the growth of the economy.

Thereby bringing the economy to a half. The problems are:

• The delay in the preparation presentation and implementation of budget;
• Effective management and implementation of budget is a per-requisite to the survival of an economy;
• An economy can’t survive or grow without a budget.

• KEY INSTITUTION INVOLVED IN BUDGET PREPARATION

• the president in council;
• the ministry of budget and planning ministry;
• ministries and other agencies treasury department;
• the auditor general for the federation;
• The public accounts committee.

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