AN ASSESSMENT OF HOW THE BUDGETING PROCESS AFFECTS COMPLIANCE TO BUDGET PROVISIONS IN PARASTALS, THE CASE OF ZESCO LIMITED

Abstract

The purpose of this study was to assess the relationship between the Budgetary Process and compliance to Budget provisions of parastatals in Zambia with a focus on ZESCO Limited. The specific objectives of the study were: to determine the effect of the budgeting process which includes a review of past budgets, identifying and forecasting revenues for the target budget period, and then assigning amounts for established expense lines on compliance to budget provisions in parastatals. An effective budgeting process calls for the participation of key budget holders in the spending units or business units, senior management and finance teams across the entity. The study of this relationship was important to enhance conscious participation in the budgeting process which would assist the budget holders to easily comply with the provisions in the budget thus making the envisaged strategic plans more achievable. The government of the republic of Zambia provides the strategic framework within which the approximately 22 parastatals under its control with the Industrial Development Corporation (IDC) exercising oversight on its behalf, operate. One important element in this framework is the elimination of wasteful expenditure. The researcher therefore thought it important to assess how the current compliance levels are as a result of the adequacy or otherwise of the current budgetary processes being undertaken by these parastatals. Problems of inadequate funds in the budgets, the lack of clarity on correct budgets lines in terms of cost allocation, leading to overspending influenced the researcher to carry out this study. The study design was an explanatory non experimental descriptive research design. The target population was the 6,700 ZESCO Limited staff members in the 8 directorates and through systematic sampling the sample size of 364 members of staff was established. The selected respondents in the study showed a fair knowledge of the budgeting process. The study employed quantitative data analysis technique: descriptive and SPSS software was used to carryout inferential statistics analysis using multiple regression. This analysed data was reported using frequency distributions, percentages and charts. During the research, it was noted that ZESCO Limited had fully decentralized budget processes to business units thereby enhancing a good understanding of the process, use of technology, monitoring processes as well as control including virement and supplementary budgeting. There seems to be good adherence to regulatory frameworks, implementation of strong internal controls and close supervisory oversight of the budgeting process in ZESCO Limited. The researcher also noted that effective communication and reporting has enhanced compliance in the company. The study thus concluded that the budgetary process which involves planning, implementation, monitoring and evaluation had a relationship and significantly influenced compliance to the budget of the parastatal. The study recommends that all parastatals should learn from ZESCO Limited and review their policies on staff participation in the budget process, budget monitoring, and enhancement of capacity building programs and use of technology in the budgeting to improve compliance.