TRADE PROJECT

THE IMPACT OF BUDGETING ON

ORGANISATIONAL PERFORMANCE IN
NAKURU.

PRESENTED BY: MERCY JEMWETICH

INDEX NO.: 5520010385

PRESENTED TO: KENYA NATIONAL EXAMINATION COUNCIL

IN PARTIAL FULFILLMENT FOR THE AWARD OF DIPLOMA
IN ACCOUNTANCY

PAPER CODE:2804/307A

SUPERVISOR: MR. KOECH

EXAM SERIES: NOVEMBER 2022

DECLARATION

I declare that this trade project is my original work neither has it been written by other
person or submitted for any award.

No part of this trade project is penetrated by any means of its photocopying, duplicating
or any other means without my knowledge as the author.

NAME : MERCY JEMWETICH

SIGN : ----------------------------------- DATE : ------------------------------------

SUPERVISOR’S NAME : MR. KOECH SHADRACK

SIGN : ------------------------------------ DATE : ------------------------------------

DEDICATION.

This trade project, I dedicated it to my parent, my true friends and my teacher MR.
SHADRACK KOECH who supported and assisted me throughout the complications of
this trade project.

I thank you all, may our almighty father bless you abundantly.

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DEDICATION

With gratitude and respect I dedicate this project to my family, friends for the support and
love during my training at Rift Valley Institute

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ACKNOWLEGEMENT

My foremost thanks goes To Almighty Father who is above for the gift of life and good
health he has given me while I was in the process of writhing and compiling this trade
project.

Much applications and my sincere gratitude goes to my parents, my brothers and sister for
their support throughout my studies.

I won’t forget my supervisor MR. KOECH SHADRACK for his kindness and tireless
efforts to see I achieve my goals.

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Contents
DECLARATION...................................................................................................................i

DEDICATION.....................................................................................................................ii

ACKNOWLEGEMENT.....................................................................................................iii

ABSTRACT.......................................................................................................................vii

CHAPTER ONE...................................................................................................................1

1.0 INTRODUCTION....................................................................................................1

1.1 Background of the study.............................................................................................1

1.2 Statement of the problem............................................................................................1

1.3 Objective of the Study................................................................................................2

1.4 Research Questions.....................................................................................................2

1.5 Significance of the Study............................................................................................2

1.5.1 Cement Manufacturing Firms..............................................................................2

1.5.2 Researchers and scholars.....................................................................................2

1.5.3 Regulatory Authorities........................................................................................3

1.6 Scope of the Study......................................................................................................3

1.7 Definition of Terms....................................................................................................3

1.7.1 Budget..................................................................................................................3

1.7.2 Budgetary reporting.............................................................................................3

CHAPTER TWO..................................................................................................................4

2.0 LITERATURE REVIEW...........................................................................................4

2.1 Introduction................................................................................................................4

2.2 Budgetary Control Systems used Simba Cement Company Nakuru.........................4

2.2.1 Classifications and types of Budget.....................................................................5

2.3 Effect of Budgetary Control on Employee Behavior.................................................6

2.3.1 Budgets and Human Behavior.............................................................................7

2.3.2 Behavioral Features of the Budgeting Process....................................................8

2.4 Relationship Between Budgetary Control and Firms Financial Performance............9

2.4.1 Financial Performance.........................................................................................9

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 2.4.2 Concept of Control............................................................................................10

2.4.3 Budgetary Control.............................................................................................11

CHAPTER THREE............................................................................................................13

3.0 RESEARCH METHODOLOGY.............................................................................13

3.1 Introduction..............................................................................................................13

3.2 Research Design.......................................................................................................13

3.3 Population and Sampling Design.............................................................................13

3.3.1 Population..........................................................................................................13

3.3.2 Sampling Design................................................................................................13

3.4 Data Collection Methods..........................................................................................15

3.5 Research Procedures.................................................................................................15

CHAPTER FOUR..............................................................................................................17

4.0 RESULTS AND FINDINGS....................................................................................17

4.1 Introduction..............................................................................................................17

4.1.1 Response Rate....................................................................................................17

4.2 Background Information...........................................................................................17

4.2.1 Gender of the Respondents................................................................................17

4.2.2 Age of the Respondents.....................................................................................18

4.2.3 Education Levels of the Respondents................................................................18

4.2.4 Years of Experience...........................................................................................18

4.2.5 Management Level............................................................................................19

4.3 Budgetary Control Systems used at the Simba Cement Company...........................19

4.4 Effect of Budgetary Control on Employee Behavior...............................................20

4.5 Relationship Between Budgetary Control and Firm Performance...........................21

4.5.1 Simba Cement Company Sales Turnover..........................................................21

CHAPTER FIVE................................................................................................................23

5.0 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS............................23

5.1 Introduction..............................................................................................................23

5.2 Summary of the Study..............................................................................................23

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 5.3 Discussion.................................................................................................................24

5.3.1 Various Budgetary Control Types in Simba Cement Company........................24

5.3.2 Effect of Budgetary Control on Employee Behavior........................................26

5.3.3 Relationship Between Budgetary Control and Firm Performance....................27

5.4 Conclusion................................................................................................................28

5.4.1 Effect of Budgetary Controls on Sales Turnover..............................................28

5.4.2 Effect of Budgetary Control on Employee Behavior........................................28

5.4.3 Relationship Between Budgetary Control and Firm Performance....................28

5.5 Recommendations....................................................................................................29

5.5.1 Recommendations for Improvement.................................................................29

REFERENCES...................................................................................................................30

APPENDICES....................................................................................................................38

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 ABSTRACT

Budget is part of managerial accounting in this process organizations decide their budget
for future goals and development. Through this process, the organization will be prepared
an effective budget for the business. According to the selective article, Companies is to
higher institutions (Central Management Company and Service Management Company)
to make a budget in this article, organizations use different approaches for their prepared
their budgeting. The main purpose of the budget is to develop the business and decreased
the level of miss-use resources and expenses. According to the literature review, most of
the organization fail in their budget process. Because who uses incomplete information
for the budgeting process. Most of the organization can't use effective technology in their
business, so that's why who face problem in the evaluation process. Development
companies use high-level technology for their budgeting process, because through
technology systems who collect accurate information which is must be needed for the
budgeting process and easily control their business performance and analysis the result if
the results not good so who will make the change immediately in their budgeting process
with the help of technology. The top-down approach uses to top management to make a
budget and in bottom-up approach authorities divide in the down level and who make
their budget for their department. In the selective article, organizations use the traditional
budgeting process due to the inflation rate, government policy, customer demand, and
wants. As I recommended the traditional budgeting process is best for business because as
I mentioned COVID 19 problem is a highly effective business and world economy. With
the help of the traditional budgeting, process organization will make changes in their
budget due to any crisis or problem.

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CHAPTER ONE

1.0 INTRODUCTION
1.1 Background of the study
Budgeting is the process of designing, implementing and operating budgets.(Edward
2004) the types of budgets include, balanced budget, surplus budget and deficit budget.
Balanced budget is said to be balanced when its estimated revenues and anticipated
expenditure are equal.it implies that the government raises funds in means of taxes and
other means. A balanced budget was considered an effective check on extra vacant
expenditure of the government. Surplus budget is when government expenditure are more
than the estimated government expenditure. It is used either to reduce government public
debt or increase its savings. Deficit budget is when government estimated receipts are less
than government expenditure.

Organizations use budgets in setting priorities through assigning limited resources to

those events and activities that are more crucial to the organizations operations, thus
effective management of the firms budget insures effective allocation of resources
budgeting is used as planning tool. There is a high rate of falling by small and medium
firms soon after they are established. The theories on which this study in anchored
include; budget incremental theory, the priority. Based theory of budgeting and risk based
theory of theory. The budget incremental theory suggest that the firm’s future budgets
allocation should be based on its current allocation to enhance efficiency and
improvement on performance. The priority based budgeting has an underlined assumption
of priority driven budgeting. Risk based budgeting theory alternatively suggests that when
budgeting, the managers also consider the risk.

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1.2 Statement of the problem
The listed companies contribute significantly to the economy of the world because of the
large investments. A budget is a tool which is utilized by the government of Kenya with
the aim of archiving both operational and development activities in the short and long
term especially in the bid to achieve the vision 2030 economic, social and political pillars
as a strategic objectives. Budgeting as a tool in financial management regularly prepares
performance plans and budgets requests that describes performance goals, measures of
output and outcomes in various activities aimed in archiving performance goals. This
helps in sense in annual plans set forth in measurable terms form the level of performance
for each objective in the budget period (Larson, 1999).

A standard budget implementation process should ensure that the intended government
programs are achieved in the most efficient, transparent and fair manner according to
shard & david(2010). Government budgets are either be classified as surplus exceeds
expenditure, deficit budget when expenditure and revenue are equal as enunciated by
(Smith et al,2004).

1.3 Objective of the Study

The general objective of the study is to assess the effect of organizational budgetary
control system on the performance of the Simba Cement Company Limited.

1.4 Research Questions

In conducting the research, the study will attempt to answer the following questions:
1.4.1 What are the budgetary control systems used at the Simba Cement Company?

1.4.2 What is the effect of budgeting planning on organizational planning?

1.4.3 Is there a relationship between budgetary control and firm performance?

1.5 Significance of the Study

The beneficiaries of this research are:

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1.5.1 Cement Manufacturing Firms
This study is expected to enable the identification of budgetary control methods that are
essential to the general performance and decision-making in cement Industry as a
Multinational corporation.

1.5.2 Researchers and scholars

This research will also help other companies, NGOs and government to evaluate their
budgetary control systems and do improvement where necessary. This research paper will
be available online for easy access by scholars and researchers.

1.5.3 Regulatory Authorities

The research work shall enhance the regulator’s and policy maker’s formulation of
appropriate policies, which enhance budgetary control, general performance and very
good decision making.

1.6 Scope of the Study

The focal point of this study is on the Simba Cement Company Limited situated in
Nakuru County. The firm is listed in the Nairobi Securities Exchange. Particular attention
will be given to the period 2012-2017.

The limitation of this study is that some respondents may not be willing to give out
information regarding the firm under study. The researcher assured respondents that
information sought would be treated with utmost confidentiality and for academic
purposes only.

1.7 Definition of Terms

1.7.1 Budget
A budget is a financial statement, prepared and approved prior to a defined period, which
should be pursued during that period with the aim of achieving certain objectives. It is a
predetermined statement of managerial policy during the given period which provides a
standard for comparison with the results actually achieved (Moretti, Downes and Nicol,
2017).

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1.7.2 Budgetary reporting
The financial status, income and expense data can change on a daily basis for a company.
Financial data is documented and recorded in a budget report, also often referred to as a
financial report. While a budget report can be a detailed documentation, the business
owner can also choose to make it brief and simple. This decision is often affected by the
overall use and readership of the report. Budgetary reporting is the process of establishing
budgets related to various activities and comparing the budgeted figures with the actual
performance for arriving at deviations, if any (Robinson, 2009).

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 CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction
This chapter presented literature review on previous studies on the effect of budgets and
budgetary controls on financial performance of firms. Section 2.2 of the chapter looked at
the various budgetary control systems used at the East African Portland Cement Company
and the related theories. Section 2.3 was about effect of budgetary control on employee
behavior. Section 2.4 analyzed the link between budgetary control and firm performance.
All the sections attempted to address the specific objectives and fulfill the general
objective of the study. Finally, section 2.5 summarized the whole chapter.

2.2 Budgetary Control Systems used Simba Cement Company Nakuru

Olden day budgeting dates way back to the stone age period when the early man was
forced to manage and plan the little that he usually had in terms of food and other
necessary essential items. This is because the early man failed to get all that he needed at
any given time. The early man could ration food and other necessities over time to avoid
starvation.

Although his needs were very small compared to the modern man’s, the early man could
not get all that he needed to achieve utmost satisfaction. He preserved considerable
amount of fruit he plucked during glut period to avoid starvation during periods of dry
spell. He would also preserve excess bush meat because he was not sure of killing
animals daily. Despite all the aforementioned measures to mitigate uncertainties
associated with the future, the early man’s budgeting style was considered primitive
(Siyanbola, 2013).

According to Adeyele (2016), modern day budgeting started during the Roman and
Egyptian civilization periods around 500BC and 2500BC respectively. Merchants
matched expected expenditure against expected income to be able to establish whether
their businesses were making profit or loss. Siyanbola (2013) argue that formal
preparation of budgets can be traced to the middle age period in England when the
Chancellor of the Exchequer prepared annual accounts in a scroll, usually kept in a bag to

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be read in parliament. During time of discussing state finances, the Chancellor could
always refer to the statement of accounts contained in the bag. This bag, whose original
name is (boguette) in French, is referred to as the budget. Over the years, governments’
financial statements have taken over the name of the bag, thus the statement of finance for
any government today is referred to as the budget.

History has it that the first annual national budget was adopted in Britain in 1787. The
British parliament passed the Consolidated Fund Act, paving way for a single general
fund for recording all receipts and expenditure, which formed the basis for the modern
budgeting system. By 1822, the British Chancellor for the Exchequer, an equivalent of
Finance Minister in other commonwealth jurisdictions, had gotten used to the presenting
annual budget statements to the British Parliament account committee for review. The
Audit Act, which existed then, provided independent post audit review of the said budget.
Elsewhere in other developed countries jurisdictions, the United States of America
adopted this system in 1912, the same year the budget and accounting Act was set up by
the federal budget system. By 1931, the French government had adopted the system
(Barclay, Schalkwyk and Pauw, 2011).

2.2.1 Classifications and types of Budget

According to Isaac et al., (2015), budgets can be classified as follows: short-term budget,
long-term budget, fixed budget, flexible budget and zero based budgets. Other
classifications include rolling budgets, activity-based budgeting, incremental budgeting
and planning, programming budgeting systems.

2.2.1.1 Short-term budgets

These are budgets established for use for control purposes over a short period, usually less
than one year. They are commonly used in manufacturing industries due to their
complexity and dynamism. They can easily match with the ever-changing working
environment in which they operate.

2.2.1.2 Long-term budgets

These budgets are also sometimes referred to as development plans. They are normally
applicable for a minimum duration of 5 years and are at times, referred to as an
organization’s strategic plan. Just as governments usually prepare 5-year Development
Plans that can be rolled over after every five years, manufacturing firms also prepare 5-

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year strategic plans, which are usually broken into annual budgets that are rolled over
from one year to the other.

2.2.1.3 Fixed budget

As the name suggests, a fixed budget will remain the same regardless of the subsequent
changes in activity costs or revenues. It usually serves as a benchmark in performance
evaluation.

2.2.1.4 Flexible budget

Flexible budgets are budgets that are designed to change as the level of activity achieved
changes. They recognize the existence of fixed, variable and semi-variable costs and
change in relation to the actual volume of output over time.

2.3 Effect of Budgetary Control on Employee Behavior

The realization of organizational control is dependent on top managements’ actions and
sound working relationships between different levels of an organization’s hierarchy.
During budget making process, a management accountant may motivate as well as
improve managers’ attitude towards budgetary control improved. Consequently, lower
level employees and managers are motivated when required budget levels are realized.

Therefore, culture, management style and managers’ attitude towards firm employees will
influence the budgeting approach within an organization (Polisetty, 2016).

There are three commonly used approaches to development of final budgets. The first one
is the imposed or top-down budget approach whereby top management decides on the
budget and lower level managers implement it as it is. The advantage synonymous with
this approach is reduced decision-making time. The second approach is referred to as the
participative or bottom-up approach. This approach takes into consideration the input of
the lower cadre managers. The third approach is the negotiated budget, which adopts both
the imposed and participative styles of budgeting thus creating an environment whereby
budget preparation is a shared responsibility (Raghunandan, Ramgulam and
RaghunandanMohammed, 2012).

The budgeting style chosen by a firm would depend on nature and leadership style
applicable in the firm. It is widely argued that budgets developed using the participative
or negotiated approaches attract greater support from firm’s employees and managers

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(Kyei, Kwaning and Francis, 2015). Mere consultation with employees or managers prior
to setting budgetary goals is not participation. Schemes that do not offer real participation
in the budgeting process are highly discouraged. Budgeting process should cultivate a
culture of positive game spirit in every aspect namely target setting, system design,
variance analysis and corrective action (Chong and Chong, 2002).

According to Chong and Chong (2002) the effect of participation is dependent upon
organizational culture, personality and history. Thus, the efficacy of any management
control system depends on the positive relationship between that system and the firm’s
interest. McGregor characterizes management styles into two theories; X and Y. Theory
X argues that employees in an organization are mainly motivated by money and cannot
meaningfully contribute to the firm’s decision-making process. Theory Y on the other
hand argues that job security and the prospect of promotion motivates an employee in a
work place. Although these theories may yield positive results, they may impede
workers’ personal development. For instance, employees who are not committed to the
success of the budgeting process may seek ways of circumventing the process
(Wilkinson, 2009).

According to the organization theory, two theories are used towards the attainment of a
firm’s goals namely: classical theory and human relations approach. The former is
concerned about organizational structure and tasks that should be accomplished to
achieve firm objectives. The latter focuses more on people, their motives and behavior
and not structures and activities, which must be harnessed to achieve organizational goals.
This theory emphasizes on the importance of individual needs, therefore organizational
structure should be geared towards individuals, and not the other way round (Edwards,
2013).

2.3.1 Budgets and Human Behavior

The success of a firm’s budgetary control is dependent upon top management and their
appreciation of the importance of sound interpersonal relationships between different
employee job cadres. Senior management can motivate lower cadre employees through
budgetary control. It is important to note that culture, management style and attitude
towards employees pay a crucial role in determining the approach to budgeting within a
firm (Raghunandan, Ramgulam and Raghunandan-Mohammed, 2012).

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The three main approaches employed by firms in developing budgets include; Firstly,
imposed or top-down budgeting approach. This approach is supportive of the oppressive
or autocratic style of leadership where top management decides on the budget and lower
level management is only responsible for the execution. Secondly, participative or
bottom-up budgeting process. This budgeting approach is supportive of the democratic
style of leadership where lower level management input is given recognition in the
budgeting process. Lastly, negotiated budgeting approach. This type of budgeting
approach adopts not only the imposed budgeting approach, but also the participative
styles of budgeting and creates an environment where there is shared responsibility for
budget preparation (Kim and Park, 2006). It is widely believed that participative
budgeting approach elicits greater employee support in most organization compared with
autocratic budgeting process.

According to Mohamed and Nor (2013), the impact of participation is dependent on

personality, firm history and organizational culture. Thus, the success of any management
control system depends on the degree with which it impacts on employee behavior in the
organization’s best interest. According to McGregor’s X and Y theories, theory X
presumes that workers are motivated mainly by money and are not able to contribute
much to the firm’s decision-making process. On the other hand, workers who are
motivated by other factors such as the possibility of promotion or job security are classed
as Theory Y workers. It should be noted that whereas the authoritarian method may yield
results, it may be source of frustration and an impediment to an employee’s personal
development. In addition, employees in a firm are not personally committed to the
accomplishment of the budget, thereby try to seek out ways and means of dodging the
budget process (Arslan and Staub, 2013).

2.3.2 Behavioral Features of the Budgeting Process

The level of employee participation in performing a task should match the level of job
complexity. Previous empirical studies on this phenomenon indicate that the job difficulty
has a relationship with participation effectiveness. When a task is simple, an imposed
budget is easily accepted, but when a job is difficulty, the reverse is true (Ganta, 2014).

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According to Patel (2015), caution should be observed when responding to behavioral
responses based on the participation chemistry. Some managers may inflate their
departmental estimates when competing for the scarce resources. The firm should
therefore carry out cost benefit analysis aimed at achieving effective and efficient
resource allocation across departments. The Hawthorne experiment of the 1920s revealed
that human and social factors in a work environment affect productivity than physical
factors. These theories revealed that people at a work place, care about their work and are
motivated by other factors and not necessarily by money (Levitt and List, 2011).

People participating in an organization’s budgetary process must be aware of the purpose

and the benefits of the process. Besides, the long-term objectives of the organization,
which the budget must accommodate, should be communicated to the budgeters.
Employees must be aware of organizational goals such as employee welfare, product
quality, profitability, customer service, growth etc. (Hawke, 2007). Performance feedback
should also be provided regularly to facilitate management to take any necessary
corrective actions. Views regarding commitment versus employee performance in the
budgetary process are varied. Raghunandan, Ramgulam and Raghunandan-Mohammed
(2012) disagree with the view that there is a relationship between participation and
commitment. This position can only be true in a working environment where mistrust
exists, for instance subordinates questioning attempts by management to prompt
participation. Mark Young (1985) however from their research found out that
participative budgeting did not result in the optimal utilization of a firm’s resources.

2.4 Relationship Between Budgetary Control and Firms Financial Performance

2.4.1 Financial Performance
Financial performance simply means an attempt by a business organization to maximize
profits. Technically, however, the term refers to the process of measuring a firm’s
outcome in monetary terms. Financial performance is used to gauge an organization’s
overall performance over a given period or compare the performance of similar
businesses within an industry either in isolation or in aggregation.

Financial performance can be measured using three indicators namely; internal based
performance measures such as Return on Assets (ROA) and Return on Investments
(ROI), market-based performance measures such as Tobin’s Q model computed as
Price/Equity’s Book Value, sales and market share and lastly, shareholders return

10
measured in terms of total shareholder return or economic value added. For purposes of
this study, Return on Assets (ROA) will be used as a measure of performance. Reason
being, ROA is a better measure of a firm’s financial performance since it gives a clear
picture of the extent by which a firm utilizes its assets to make profit as opposed to
simply showing healthy return on sales (Akeem, Terer, Kinyanjui and Kayode, 2014).
The other ratio to be used is the Gross Profit Margin.

Financial performance of a firm can be presented in three ways namely: as a measure of

the market which reflects stakeholders’ level of satisfaction in the market, as an
accounting measure reflecting business efficiency level and as surveys depicting
estimated financial performance (Javed, Younas and Imran, 2014). Therefore, as argued
by Iavorskyi (2013), financial performance assists various stakeholders in the business to
answer the following two fundamental questions: What is the organization’s financial
position now? How is the firm’s financial performance over a given period? These
questions are answered by utilizing the firm’s financial statements through a process
called financial analysis. According to Pratheepkanth (2011), financial statements entails
a set of data, that is usually analyzed using certain accounting procedures with a view to
conveying certain financial characteristics of an organization.

Financial performance analysis incorporates interpretation of financial statements with the

aim of establishing the financial soundness a firm (Osuji and Odita, 2012). Financial
performance often scrutinizes a firm’s performance in terms of productivity in general.
Such generalization comprises total business performance measured in terms of a firm’s
overall liquidity, profitability, fixed asset performance, working capital management,
cash flow performance as well as social performance. Thus, liquidity performance
indicators may be used by creditors to gauge a firm’s creditworthiness for purposes of
investing in it. Likewise, cash flow performance may be useful to shareholders since they
can be used to gauge a firm’s future growth prospects (Nasimi, 2016).

2.4.2 Concept of Control

The aim of control in an organization is to ensure that performance conforms to set targets
or plans. Controlling demands that organizational activities are geared towards the
attainment of the firm’s set goals. Control regulates work activities according to some
predetermined plans so that a firm can accomplish its objectives. Controls operate
through standards, which are used as benchmarks for performance. Any deviation from
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the set standards are reviewed and appropriate corrective measures undertaken to address
the variations.

Steps involved in the control process include setting organizational goal, recording actual
activity performance, creating a mechanism of comparison between set goals and actual
performance and extracting variance between set target and actual activity. Other steps
include investigating the causes of the aforementioned variances and taking appropriate
action regarding the said variance (Igbinosun and Ohiokha, 2012).

Control ensures that objectives as laid down in the budgets are achieved. Management is
able to know about this through information availed to it by subordinates. Control ensures
that objectives are achieved. A comparison is therefore made between plans and actual
performance; the difference between the two is reported to management for taking
corrective action. This control process is not possible without planning. An effective
control system helps accomplish the purpose for which it is designed. Effective control
systems rely on good information that is well communicated, well-coordinated, timely
and economical to the organization (Bento and Bento, 2006).

2.4.3 Budgetary Control

Once a budget is in place, it can be used as a control instrument to compare actual
performance with budgeted performance. Since most organizations’ activities are
expressed in financial terms, it is possible to quantify these activities. Thus, budgetary
control is a form of responsibility accounting within a firm whereby costs are matched
with revenues and analyzed accordingly through effective financial monitoring systems
(Adongo and Jagongo, 2013).

Budgetary control demands that each manager of a cost center is responsible for the
expenses of that cost unit. According to Robinson (2009), budgetary control is defined as
a policy established by firm’s executive for comparison purposes between actual and
budgeted results associated with attainment of a particular objective. Hence, emphasis is
placed on control achieved through comparison of the actual results against budgeted
plans.

Abdullahi et al., (2015) contend that budgetary control is a process that compares actual
results with set targets and reports any variation arising therein called variance.

12
According to Robinson (2009), this sets a control mechanism within which expenditure
can be kept within reasonable limits, deviations noted and appropriate corrective action
taken on time.

In some exceptional circumstances, organizational goals may be revised.

In a typical business environment, budgetary control involves a departmental head

receiving a copy of the departmental budget. The budget will clearly show positive,
negative or no variance between actual expenditure and budgeted expenditure for each
departmental vote head. From this information, appropriate corrective action should be
taken. This is in line with the common budgeting practice that calls for variance
explanation to be done by the responsible sectional head in a business enterprise. Besides,
the departmental head is expected to act accordingly to avoid future possible adverse
variances (Mohamed et al., 2015).

Budgetary control involves the preparation of a budget, recording of actual achievements,

ascertaining and investigating the differences between actual and budgeted performance
and taking suitable remedial action so that budgeted performance may be achieved
(Kimani, 2014).

Budgetary control is the system of controlling costs through budgets. It involves

comparison of actual performance with the budgeted with the view of ascertaining
whether what was planned agrees with actual performance. If deviations occur, reasons
for difference are ascertained and recommendation of remedial action to match actual
performance with plans is done. The basic objectives of budgetary control are planning,
coordination and control. It is difficult to discuss one without mentioning the other
(Kipkemboi, 2013). Inadequate budgetary controls lead to objectives not being cleared
and performance not being achieved or satisfactory. This reduces output because
employees do not know or are doubtful about what to do, when and how to do it. They
spend a lot of time seeking clarifications from executives. Thus, leading to delays in
identification of deviations from plans, which lead to failure in goal achievement and
hence poor performance (Adongo and Jagongo, 2013).

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 CHAPTER THREE

3.0 RESEARCH METHODOLOGY

3.1 Introduction
This chapter described the research design methodology used to carry out the study. The
study aimed at finding solutions to the specific objectives mentioned in chapter one.
Section 3.2 of the chapter discussed the research design. Section 3.3 was about the
population and sampling design that was used in the study. Section 3.4 scrutinized the
data analysis methods used in the research. Finally, yet importantly, section 3.6
summarized the whole chapter.

3.2 Research Design

A research design refers to the plan of action the researcher intends to use to answer the
specific objectives of the study. It includes all the steps to be followed by the researcher
from the point of coming up with a research proposal to the final point of analyzing the
data in question (Sukamolson, 2007). Odoh and Chinedum (2014), define a research
design as an arrangement aimed at providing answers to the research questions raised in
the study.

This study was designed as a case study of the East African Portland Cement Company
using the survey method. According to Odoh and Chinedum (2014), a case study is
described as analysis of a firm, assuming that the researcher can acquire knowledge
regarding the subject under review from in-depth exploration of a single case. It is a
qualitative analysis that involves careful observation of a situation.

3.3 Population and Sampling Design

3.3.1 Population
According to Singh and Masuku (2013) population is the total sum of elements from
which conclusions are drawn. As far as this study was concerned, the population

14
comprised of employees of East African Portland Cement Company in the finance
department targeting 45 employees. Odoh and Chinedum (2014), describe target
population of a study as the point of focus from which a generalization is made regarding
the research findings.

3.3.2 Sampling Design

A sample is a fraction of the study population. Thus, sampling design refers to the
procedure used by the researcher to select items from the population that will constitute
the sample of the study. A list of all staff was obtained from the Human Resource
department. Data sample was selected using cluster sampling technique to ensure that
respondents were representative of all cadres of employees. Random sampling was then
used to obtain a manageable sample size.

3.3.2.1 Sampling Frame

Sampling frame can be defined as a complete description of all the cases in the target
population from which the sample is drawn (Saunders, Lewis, &Thornhill, 2016). The
sample frame for this study consisted of 40 employees in the finance department of the
East African Portland Cement Company obtained from the human resource office.

3.2.2.2 Sampling Technique

Stratified random sampling method was used for this study. This entailed dividing the
population into mutually exclusive groups, in this case the various job cadres and random
samples were drawn from each group. The researcher selected individuals from each job
cadre representing senior management, middle level management and lower cadre
employees. This saved time and cost of undertaking the study.

3.3.2.3 Sample Size

The target population was staff in the finance department. Due to the nature of the study,
the study only considered staff from the following departments: finance director’s office,
finance officer’s office, senior accountant, credit officer, production manager and risk
management offices. Using the sample formula n = N / (1+N (e) 2) derived from Yamane
(1967) formula (Sekaran and Bougie, 2013),

Where: n = sample size

N = Population e = error

At 95% confidence interval and a population of 45 the sample size was calculated as:

15
n= 45
1+45(0.05)2

= 45
1+0.1125

= 45
1.1125

Sample size = 40
Thus, a sample size of 40 employees is considered representative of the total population.

3.4 Data Collection Methods

Data collection method is logical process a researcher uses to collect data for the study
(Alshenqeeti, 2014). The data will be either primary or secondary. Data is crucial in
research because it forms the basis of analysis. Data collection methods are techniques
applied when collecting relevant data for the research.

According to this study, both primary and secondary data was used. Structured closed
ended questionnaires were used to collect primary data. The questionnaire was divided
into three sections. Section I of the questionnaire captured respondents’ demographics;
Section

II captured data on different budgetary controls applicable to the respondent’s firm;

section III captured data on budgetary control effects on employee behavior; section IV
captured data on effect of budgetary control on East African Portland Cement Company
performance. The questionnaire had questions structured in a Likert scale. To collect data,
the researcher emailed questionnaires to all the respondents who were expected to fill the
questionnaire and email it back to the researcher within a week.

Secondary data was used to establish the level of financial performance at East African
Portland Cement Company. Turnover was used as a measure of budgetary control
16
whereas profit before tax, profit after tax and earnings per share were used as proxies for
measurement of financial performance for the period 2012-2016.
3.5 Research Procedures
The questionnaire was pre-tested on 10 respondents to establish its validity and if need be,
necessary adjustments made. After piloting, the revised questionnaire was emailed to all
respondents. The respondents were given one week to feel the questionnaire. On
collection of the filled questionnaires, the researcher reviewed all the questionnaires to
ensure that all copies issued to the respondents were filled are returned. The returned
questionnaires were coded and run through the Statistical Package for Social Sciences
(SPSS) for analysis.

Regarding the secondary data used in the study, the researcher tested the relationship
between budgetary control and firm performance using financial information of a similar
unlisted firm. The researcher then sought permission from the university’s research office
to carry out a study on the firm. The researcher sought secondary data from the firm’s
audited accounts in the Nairobi Securities Exchange handbooks. Finally, the researcher
analyzed data on the East African Portland Cement Company performance.

17
 CHAPTER FOUR

4.0 RESULTS AND FINDINGS

4.1 Introduction
This chapter provided a descriptive analysis of the background information about the
respondents in general. It was further broken into sections which are arranged based on
the specific objectives of the study. Section 4.3 provided findings on the budgetary
control systems used at the East African Portland Cement Company. Section 4.4
presented findings on the second research question, effect of budgetary control on
employee behavior. Section 4.5 gave findings on the relationship between budgetary
control and firm performance. Generally, data findings were presented in form of tables
and percentages for quicker interpretation.

4.1.1 Response Rate

The researcher managed to collect 35 dully filled questionnaires from the respondents.
This was 87.5% return rate, hence acceptable and good for generalizations. Kothari
(2009) contends that a response rate of 50% and above is representative enough for a
research.

4.2 Background Information

4.2.1 Gender of the Respondents
The research sought to investigate the gender of the targeted respondents. The results are
shown in table 4.1 below. Majority of the respondents were male at 71.42 percent
followed by female at 28.58 percent.

Table 4.1: Response Rate

Variable Frequency Percent

18
 Male 25 71.42%

Female 10 28.58%

Total 35 100%

4.2.2 Age of the Respondents

The study sought to examine the age distribution of the respondents. The study revealed
that most of the respondents were over 36 years of age at 39 percent followed by those in
the category of 31 to 35 years at 29%. The third category comprised the respondents aged
between 26 to 30 years. Those in the age bracket of between 20 to 25 years were 15
percent. Table 4.2: Age of the Respondents

Age Frequency Percent

20-25 5 15%
26-30 6 17%
31-35 10 29%
36 years and Above 14 39%
Total 35 100%

4.2.3 Education Levels of the Respondents

The study also sought to examine the level of education of the respondents. It was
established that majority were undergraduates at 46 percent, followed by graduates at 29
percent. Postgraduates were third at 14 percent while diploma holders were fourth at 11
percent.

Table 4.3: Education Level

Education Levels Frequency Percent
Diploma 4 11%
Undergraduate 16 46%
Graduate 10 29%
Post Graduate 5 14%
Total 35 100%

19
4.2.4 Years of Experience
The study sought to examine the respondents work experience in terms of years spent in
the industry. Fifty one percent of the respondents had worked for a duration of between 7
to 10 years whereas 23 percent had worked for less than three years. Those who worked
for a period of between 3 to six years comprised 14 percent whereas 12 percent had
worked for eleven years and above as illustrated in table 4.4 below.
Table 4.4: Years of Experience
Years of Experience Frequency Percent
Less than 3 years 8 23%
3-6 years 5 14%
7-10 years 18 51%
11 and Above 4 12%
Total 35 100%

4.2.5 Management Level

The study also sought to examine the respondents’ management levels. Majority of
management staff comprise of middle level cadre management staff at 51 percent. Senior
level management was 32 of the respondents. Finally, low level management was 17
percent. The results are as tabulated below:

Table 4.5: Management Level

Management Frequency Percent
Low Level 6 17%
Middle Level 18 51%
Senior Level 11 32%
Total 35 100%

4.3 Budgetary Control Systems used at the Simba Cement Company

The first research question of the study was to investigate the budgetary control systems
used at the East African Portland Cement Company.

20
Table 4.6 presents the summary statistics of the variables used in the study. The average
value for use of short-term form of budgetary control is 4.03 with a standard deviation of
1.26. The mean for application of long-term budgeting in the firm was 3.33 with a
standard deviation of 1.16. The mean for the use of fixed budgeting was 3.61 with a
standard deviation of 1.12 while that of using flexible budgeting in the firm was 3.42,
having a standard deviation of 1.17. On the use of zero based budgeting, the mean was
3.48 with a standard deviation of 1.37. The table also shows that on average the firms
perceived use of rolling budget was at 3.27 with a standard deviation of 1.44. The
respondents also indicated that the average use of activity-based budgeting at East
African Portland Cement Company was 3.30 with a standard deviation of 1.51. The table
further shows that at an average of 3.30, the firm applied incremental budgeting with a
standard deviation of 1.40. A mean of 3.24 indicated that the firm employed planning,
programming budgeting system. Lastly, a mean of 3.55 indicated that the firm used other
budgetary controls other than the ones mentioned above. It had a standard deviation of
1.46.

4.4 Effect of Budgetary Control on Employee Behavior

Table 4.7 presents the summary statistics of the effect of budgetary control on employee
behavior. The average value of realization of organizational control depending on
working relationships between different levels in an organization was 3.42 with a
standard deviation of 1.28. The mean to the effect that employees are motivated when
budgeted levels are realized was 3.55 with a standard deviation of 1.15. The mean to the
effect that culture, management style and managers’ attitude towards firm employees
influences the budgeting approach within an organization was 2.85 with a standard
deviation of 1.44 while that employees in East African Portland Cement Company are
mainly motivated by money and cannot meaningfully contribute to the firm’s decision-
making process without good pay was 3.73 with a standard deviation of 1.28. On effect of
organizational structure on employee motivation, the mean 3.73 with a standard deviation
of 1.42. The table also shows that on average the firms individual needs affects
employee motivation at the firm with a mean of 2.85 and a standard deviation of 1.52.
The respondents also indicated that the average with which workers who participate in the
budget making process understand the goals of that budget system better stood at 3.42
with a standard deviation of 1.52. The table further shows that at an average of 3.45,
challenging budgets motivate managers in the budgeting process to work hard towards
achieving set targets.

21
4.5 Relationship Between Budgetary Control and Firm Performance
4.5.1 Simba Cement Company Sales Turnover
East African Portland Cement Company Ltd sales turnover has been fluctuating between
8.4 Billion Kenya Shillings and 9.2 Billion Kenya Shillings during the period under
review as indicated in table 4.8 below.
Table 4.8: Simba Cement Company Sales Turnover
Year Sales Turnover in Kshs. “000”

2012 8,508,120.00

2013 9,211,462.00

2014 9,057,292.00

2015 8,417,621.00

2016 8,871,456.00

4.4.4 Simba Cement Company Profit After Tax and Return on Equity Ratios

From Table 4.9 below, there existed a positive relationship between pre/after tax profits
and earnings per share for the East African Portland Cement Company.

Table 4.9: East African Portland Cement Company Pre/After Tax Profits and EPS
Year Profit Before Tax in Ksh. “000” Profit After Tax in Kshs. “000” EPS in
Kshs.

2012 376,520.00 327,193.00 3.63

2013 1,419,478.00 1,775,383.00 19.73

2014 (373,700.00) (386,631.00) (4.30)

2015 7,342,071.00 7,157,070.00 79.52

2016 3,734,752.00 4,145,755.00 46.06

4.4.5 Simba Cement Company – Pre/After Tax Profits and Earnings Per Share
Trend Analysis
From figure 4.5 below, the relationship between sales turnover, Profit Before/After Tax
and Earnings per Share for the East African Portland Cement Company Ltd is mixed.

22
Figure 4.1: East African Portland Cement Company Sales Turnover and Pre and
After-Tax Profits and Earnings Per Share Trend Analysis

23
 CHAPTER FIVE

5.0 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction
This chapter provided the summary, conclusions and recommendations based on the
study findings in chapter four.

5.2 Summary of the Study

The study investigated the effect of budgetary reporting system on financial performance
of the East African Portland Cement Company. The study sought to address the following
research questions: What are some of the budgetary control systems used at the East
African Portland Cement Company? What is the effect of budgetary control on employee
behavior? Is there a relationship between budgetary control and firm performance?

The study utilized both primary and secondary data. Primary data was obtained from 35
dully filled questionnaires out of the 40 respondents that were targeted in the study. This
was 87.5% return rate which was acceptable and good for generalizations. Secondary data
was obtained from the audited accounts of the East African Portland Cement Company
Ltd for the five-year period 2012-2016. A data collection instrument was used to record
relevant figures necessary for computation of profitability ratios and earnings per share
figures used as the dependent variables. Other secondary data source of information used
in the study included; review of the East African Portland Cement Company profiles,
recommendations from previous studies, company website, magazines, books and
relevant journals. The primary and secondary data was entered into Microsoft Excel. The
quantitative data gathered was coded and evaluated using descriptive statistics. The mean
and standard deviation were used to describe the variables under study. The data collected
was analyzed using the Statistical Package for Social Sciences (SPSS) to test its
reliability.

The research applied descriptive research design. The population comprised 45 employees
of the East African Portland Cement Company. A sample size of 40, representing
88.89% of the total population was used. After the analysis using Excel and SPSS, the
results were presented in form of tables and figures.

Firstly, the study addressed the first research question on the various budgetary control
systems applicable in East African Portland Cement Company. Using regression analysis,

24
the findings established low correlation between sales turnover and budgetary controls
applicable in the firm. Other factors seem to play a greater role in affecting sales turnover
other than the ones mentioned in the study namely: short-term budgets, long-term
budgets, fixed budget, flexible budget, zero based budgeting and rolling budget. Other
budgetary controls used in the study with low correlation with sales turnover include
activity-based budgeting, incremental budgeting and lastly, planning and programming
budgeting system.

Secondly, the study also addressed the question on the effect of budgetary control on
employee behavior at East African Portland Cement Company. The findings indicated a
high correlation which stood at 54.7%. Thus, attributes such as individual needs,
organizational structure management style play crucial role in motivating employees.

The third and last research question of the study was aimed at addressing the effect of
budgetary control on profitability at East African Portland Cement Company. The study
established that the correlation between sales turnover and profit before tax was high
because it stood at 54.4%. However, the correlation between turnover and both profit
after tax and earnings per share stood at 49.1% hence low.

5.3 Discussion
5.3.1 Various Budgetary Control Types in Simba Cement Company
The correlation between budgetary control and sales turnover is low at 0.323. Thus, the
various budgetary control types for instance, short-term form of budgetary control,
longterm budgeting, flexible budgeting, zero based budgeting, rolling budgeting and
activitybased budgeting are responsible for the low positive correlation. This study is in
agreement with Kimani (2014) study on the effectiveness of budgetary control on
performance of nongovernmental organizations in Kenya. However, the study is in
disagreement with the study on the relationship between budgetary control and financial
performance of Kigali Serena hotel in Rwanda (Harelimana, 2017) and effect of
budgetary control on financial performance of state corporations in Kenya (Adongo and
Jagongo, 2013). Both studies exhibited a significant positive correlation between
budgetary control and firm performance.

East African Portland cement Company needs to incorporate other budgetary controls
other than the ones mentioned in this study to improve its sales turnover. Due to the
everchanging business environment in the cement business, it is necessary for East
25
African Portland Cement to develop and implement budgets that are in sync with its
major objectives as outlined in its strategic plan. A culture of inclusivity should be
adopted by the firm to meet its objectives. Thus, all departments should be involved in the
budgeting process with the view to discouraging any resentment that may lead to delayed
achievement of set targets (Hernández-Medina, 2010).

Budgetary features can be used to gauge a firm’s ability to predict future financial
success. Therefore, human factors such as employee motivation, managerial commitment,
competence and employee training affect an organization’s budget control process. The
budgetary control process influences a firm’s financial performance positively because it
has an influence on the firm’s financial objectives and investment opportunities. To
achieve this, management and staff of an organization should be sensitized on the
importance of budgetary controls towards better financial performance in organizations,
the need to make the budgetary process devoid of political interference and the need to
appreciate that budgets are tools for improving management efficiency (Adongo and
Jagongo, 2013).

According to Chirenje, Giliba and Musamba (2013), many countries in the world have
engaged in different forms of planning and hence a lot of literature on planning is
available. However, little attention went into budgetary controls per se even though
budgetary controls are key instruments for allocating scarce resources efficiently and
effectively for a long time now. It is however important to note that in the recent past,
budgeting and budgetary controls have received a considerable attention hence, literature
in this subject has become a common phenomenon.

Budgeting is now touted as the pillar to economic management. It is important to also

note that despite having elaborate budgeting and budgetary controls in place, a firm may
still fail to meet its set targets. This means that there should be workable and realistic
rules within which such budgets should be formulated and implemented. This fact has
compelled firms and governments alike to come up with budget reform agendas aimed at
coming up with a broader perspective of management of public and private expenditure.
In Kenya, such efforts date back to the 1970s although results are still not satisfactory
enough as expected (Isaboke and Kwasira, 2016).

26
In the recent past, the key recommendation in budget cycles is the need to shift attention
from the traditional annual budgeting practice that has been there for quite some time now
to the medium-term expenditure framework approach of budgeting. Kenya, for instance,
adopted the medium-term expenditure framework approach in the late 90s and
implemented it for the first time in its June 2000 budget ostensibly to observe adherence
to budget ceilings in public spending (Lan, 2012). Despite all the effort, much has not
been achieved because the government is still faced with challenges associated with
budgetary controls. For the case of the East African Portland Cement Company, this
could be evidenced by the strike staged by its employees a few years ago agitating for
better pay, better working environment among other related employee demands.

5.3.2 Effect of Budgetary Control on Employee Behavior

The correlation between budgetary control and employee behavior is high at 0.547. Thus,
the various attributes of employee behavior for instance, employee working relationships,
realization of budget, management style, money factor, organizational structure and
individual needs are responsible for the high correlation. This is in agreement with a
study on the impact of tight budgetary controls on the behavior of managers in the public
sector in Sweden. The study revealed that behavioral factors such as organizational
commitment were negatively correlated with tight budgetary controls whereas stress was
positively correlated with tight budgetary controls. However, the behavioral variables of
satisfaction and motivation no significant results were found (Hemsing and Baker, 2013).

Since time immemorial, budgets have been used in private and public organizations to set
targets and to align and control managers’ behaviour. Whether an organization is private
or public, budgets are established to fulfill certain requirements. When applied in the
private sector, budgeting aims to assist firms make profit in the most cost-effective way.
In public service however, budget achievements are measured in terms of services
provided by a public entity (Onduso, 2013). Since East African Portland Cement
Company is a state corporation, one can deduce that public entities face many challenges
in the way their budgetary control mechanisms have been affected by government and
political interference over the past few years.

of employee activities and strict checks on government spending has been taking place
which has prompted dysfunctional behavior among employees (Hemsing and Baker,
2013).

27
A budget is a financial plan which mediates all activities in a business setup and focusing
more on expenditure. They are not a new phenomenon. Traditionally, it was used as a tool
to manage expenditure and formed the basis of evaluating and rewarding employees in
organizations. It was also meant to align employees’ behavior towards attainment of
organizational goals (Malgwi and Unegbu, 2012).

5.3.3 Relationship Between Budgetary Control and Firm Performance

The study established a positive relationship between budgetary control and the three
measures of firm performance used in the study namely: profit before tax, profit after tax
and earnings per share. The positive relationship between the independent and dependent
variables in the study may be due to higher profits because of improved sales. This study
concurs with Pimpong and Laryea (2016) study on the relationship between budgeting
and non-bank financial institutions performance in Ghana.

According to Abdullahi et al., (2015) on a study of the impact of budget and budgetary
control on financial performance of Tahir guest house in Nigeria, it was established that
proper budget administration and inclusivity in the budgeting process improves both firm
profitability and subordinates’ task performance. The study also concurs with the findings
of the Goal Setting Theory (Lunenburg, 2011) as well as empirical studies by Pimpong
and Laryea (2016), Sugioko (2010) and Onduso (2013).

Kenya is a developing country which must develop her manufacturing industry to realize
her dreams of becoming a developed country by 2030 as envisioned in her vision 2030
strategic plan. The cement industry under which East African Portland Cement Company
falls is a sub-sector of the manufacturing sector of the Kenyan economy. The industry has
existed for several years now. It has gone through a series of development stages starting
with the manual-based system of the early 90s to the current technologically advanced
production methods. Recent trends in the performance and level of activity by
manufacturing firms in Kenya indicate a growing interest in the industry and the potential
for growth. Thus, there is an urgent need by the policy makers to reposition the
manufacturing industry for enhanced performance for the country to realize her vision
2030 dreams.

28
Orebiyi and Ugochukwu (2005) defined a budget as an organization’s plan expressed in
monetary terms aimed at efficiently utilizing the organization’s scarce resources to meet
certain set targets. Osundina and Osundina (2012) defined a budget as an elaborate
financial plan which clearly stipulates how an organization’s goals and objectives can be
achieved.
It is a quantitative statement that is prepared and approved well in advance so that set
targets can be met.

5.4 Conclusion
5.4.1 Effect of Budgetary Controls on Sales Turnover
The study concludes that there is a low positive correlation between budgetary controls
and sales turnover standing at 32.3%. Thus, the various budgetary control types for
instance, short-term form of budgetary control, long-term budgeting, flexible budgeting,
zero based budgeting, rolling budgeting and activity-based budgeting are responsible for
the low positive correlation.

The study also established that budgeting practices are used in the East African Portland
Cement Company. The study revealed that, all the respondents of the firm indicated the
existence of an established budget process at the Company. Thus, an indicator that the
firm’s budgetary process goes through the standard stages of budget planning, budget
control, budget coordination and budget evaluation.

5.4.2 Effect of Budgetary Control on Employee Behavior

On the effect of budgetary control on employee behavior, the study concludes that the
correlation between the two variables was high. Thus, the firm should strive to maintain
or improve on its employee behavior for instance, employee working relationships,
realization of budget, management style, money factor, organizational structure and
fulfilment of individual needs.

5.4.3 Relationship Between Budgetary Control and Firm Performance

The study concluded that there was a high positive correlation of 54.4% between
budgetary control and the dependent variable, profit before tax. However, the relationship
was lower between budgetary control and the two measures of financial performance
namely; profit after tax and earnings per share which stood at 49.1% for both ratios.

29
5.5 Recommendations
5.5.1 Recommendations for Improvement
5.5.1.1 Effect of Budgetary Controls on Sales Turnover
There is a need to increase the level of sensitization among management and employees
of East African Portland Cement Company on the importance of budgetary controls in
enhancing financial performance. The budgetary control process should consider both
firm needs and parameters within the firm during planning to achieve better results.
Budgets should be used both as indicators of management’s performance as well as tools
used by the firm to enhance its financial goals.

5.5.1.2 Effect of Budgetary Control on Employee Behavior

Regression analysis on the correlation between budgetary control and employee behavior
depicted a high correlation. East African Portland Cement Company should strive to
maintain good employee behavior in the work place. This may mean that if budgetary
control increases, employee characteristics such as managerial stress increases.

30
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APPENDICES

Appendix 2: Study Questionnaire

This study is a requirement for the fulfillment of Masters in Business Administration
(MBA) degree. The study aims to investigate the effect of budgetary control on the
performance of the East African Portland Cement Company for the period 2012-2017.
Any information given will be treated with utmost confidentiality. Your assistance will be
highly appreciated.

SECTION A: BIO DATA

Kindly answer the following questions by ticking or commenting on the spaces

provided.

1. Gender? Male Female

2. Age Group?

20-25 years 31- 35 years

26-30 years 36 years and over

3. What is your current position?

Senior management Supervisory

Middle management General Staff [ ]

Other (Specify):

4. Education Level

Undergraduate Post Graduate

Middle leve l College Doctoral

Other (Specify):

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5. How long have you worked for this organization?

Less than 3 years 7-10 years

3-6 years 11 and above

SECTION B: BUDGETARY CONTROLS RELEVANT TO THE FIRM

Kindly indicate the extent to which the following aspects of budgetary controls apply to
your firm. Please (ƴ) tick appropriately on a scale of 1-5. 1- Strongly Agree, 2- Agree, 3-
Uncertain, 4- Disagree, 5- Strongly Disagree.

1 2 3 4 5

1. Short-term form of budgetary control is used in

your firm

2. Long-term budgeting is applicable to your firm

3. Your firm employs fixed budgeting in its

budgetary process

4. Flexible budgeting is used in your firm

5. Zero Based budgeting is a popular budgetary

control mechanism at EAPCC

6. Rolling budget is used in your firm

7. Activity Based Budgeting is applicable at

EAPCC

8. Your firm employs incremental budgeting in its

budgetary control processes

9. Planning, Programming Budgeting System is

indeed an option budgetary control at your firm

40
 10. Other budgetary controls other than the ones
mentioned above are applicable in your firm

SECTION C: EFFECT OF BUDGETARY CONTROL ON EMPLOYEE

BEHAVIOR

Please tick the extent to which you agree with the following statements on the effect of
budgetary control on employee behavior. Please (ƴ) tick accordingly on a scale of 1-5. 1-
Strongly Agree, 2- Agree, 3- Uncertain, 4- Disagree, 5- Strongly Disagree.

1 2 3 4 5
1. The realization of organizational control is
dependent on top managements’ actions and
sound working relationships between different
levels of an organization’s hierarchy
2. Employees and managers are motivated
when required budget levels are realized.
3. Culture, management style and managers’
attitude towards firm employees influences the
budgeting approach within an organization
4. Employees in your organization are mainly
motivated by money and cannot meaningfully
contribute to the firm’s decision-making
process without good pay
5. Organizational structure greatly affects
employee motivation
6. Individual needs play crucial need in
motivating employees
7. Workers who participate in a budgeting
process understand the goals of that budget
system better
8. Challenge budgets motivate managers in the
budgeting process to work hard towards
achieving set targets.
9. Management sometimes uses external
rewards to influence subordinates’ level of
motivation

41
 10. Participation of the lower level managers
and supervisors in the budget process draws
them into the decision making process

SECTION D: EFFECT OF BUDGETARY CONTROL ON FIRM

PERFORMANCE

Please tick the extent to which you agree with the following statements on the effect of
budgetary control on your firm’s performance. Please (ƴ) tick accordingly on a scale of 1-

5. 1- Strongly Agree, 2- Agree, 3- Uncertain, 4- Disagree, 5- Strongly Disagree.

1 2 3 4 5
1. Financial performance is presented as a
measure of the market

2. Financial performance is presented as an

accounting measure reflecting business
efficiency level

3. Financial performance is presented as

surveys depicting estimated financial
performance

4. Your firm's financial position relates to

the financial soundness as of now

5. Your firm's financial position relates to

the financial soundness over a given period

6. Financial performance scrutinizes a firm’s

performance in general.

7. Linking firm’s management with

shareholding improves profitability
8. A firm’s profit margin is measured by the
return on sales

9. Empirical evidence about the impact of

budgetary control on firm performance is
conflicting and mixed

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 10. Budgetary control decisions are crucial to
a firm’s profitability

THANK YOU FOR TAKING YOUR TIME TO ANSWER THIS

QUESTIONNAIRE Appendix 3: East African Portland Cement Company Ltd Data
Collection Instrument in Kshs. "000"
2012 2013 2014 2015 2016
Profit 1,419,478 (373,700) 7,342,071 3,734,752
Before
Tax 376,520
Profit 1,775,383 -386,631 7,157,070 4,145,755

After 327,193
Tax
Earnings 3.63 19.73 -4.30 79.52 46.06
Per
Share

43