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THE IMPACT OF BUDGET CONTROL ON FRAUD

CHAPTER ONE

INTRODUCTION

1.0 Background

In today’s business environment, organizations employ various processes and techniques to enhance planning and control functions. Among these, budgeting stands out as one of the most critical and widely adopted practices. Budgeting entails setting predetermined goals, tracking actual performance, and assessing outcomes against those goals. Budgetary control systems serve as fundamental tools for financial planning, offering a framework to forecast revenues and expenditures by modeling potential financial outcomes based on specific strategies and plans (Churchill, 2001).

Most organizations rely on budget control as a primary internal control mechanism, facilitating efficient resource allocation. It enables management to plan, execute, and monitor activities to ensure alignment with organizational objectives. Effective budgetary control is essential for successful budget implementation (Carr & Joseph, 2000).

Organizations often adopt either broad or narrow budgetary control approaches. Broad budgetary control encompasses the entire budget cycle—preparation, execution, monitoring, and evaluation—while narrow control focuses on performance comparison, variance analysis, and corrective actions (Hokal & Shaw, 2002).

Budgetary control involves creating a financial plan and regularly comparing actual spending against projections to identify deviations and adjust accordingly. This process is crucial for financial discipline, helping businesses, governments, and even individuals manage expenditures responsibly (Dunk, 2009).

As a management tool, budgetary control compares planned and actual financial performance, allowing firms to assess compliance and make necessary adjustments. It serves as a key technique for financial oversight, where estimated budgets are compared with actual results to identify inefficiencies and hold responsible parties accountable (Epstein & McFarlan, 2011).

Despite the Uganda National Bureau of Standards (UNBS) implementing strategic measures to enhance procurement and contract management, service delivery remains subpar. Issues such as poor-quality deliverables, contract cancellations, delays, overpricing, and missing documentation persist (Mubangizi, 2013).

1.2 Research Problem

Budgetary control is widely used to optimize resource management, enabling organizations to assign financial responsibilities and compare actual performance against budgets. This process helps distinguish between controllable and uncontrollable variances, improving efficiency (Joshi & Abdulla, 1996).

Many NGOs in Uganda have prioritized budgetary control to enhance operational effectiveness, establishing dedicated departments and monitoring committees (NGOs, 2013). However, UNBS procurement reports (2012) reveal significant gaps—over 200 awarded contracts in 2011/2012 lacked proper service delivery tracking. Mubangizi (2013) highlights rampant issues, including 30% contract cancellations, undelivered or partial deliveries (5%), delays (10%), late payments (60%), inflated pricing, and missing documents. This study seeks to examine the impact of budget control on fraud.

1.5 Purpose of the Study

The study aims to evaluate the influence of budget control on fraud.

1.6 Specific Objectives

The research will address the following objectives:

1. To examine the benefits of budget control.
2. To identify the causes of fraud.
3. To assess the challenges posed by fraud.

1.7 Research Questions

The study will be guided by:

1. What are the benefits of budget control?
2. What factors contribute to fraud?
3. What challenges does fraud present?

1.8 Scope of the Study

1.8.1 Content Scope

The study will explore:

• Benefits of budget control.
• Causes of fraud.
• Challenges of fraud.

1.8.2 Geographical Scope

The research will be conducted at NSSF, located at Plot 95, Kampala Road.

1.8.3 Time Scope

The investigation will span February to September 2017.

1.9 Significance of the Study

• The findings will recommend service delivery improvements to UNBS management.
• The study will inform policymakers on the role of contract management in service delivery.

Key Improvements:

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