Effect of Challenges of Budget Preparation and Implementation on Budget Variance of Non Governmental Organizations in Kenya: a Case Study of World Vision International

Abstract

A budget is a management's plan, in structured form, which projects the desired outcome of financial activity for a specific set of resources, for a fixed period. Budgeting is a means for facilitating the process by which resources are acquired, allocated, and utilized in the achievement of organizational objectives. The objective of the study was to determine the effect of challenges of budgeting on budget variance. To achieve this objective, the research was conducted through a case study since it provides focused and valuable insights to phenomena that may be vaguely known and less understood. Self-administered drop and pick questionnaires were distributed among the target employees as the main data collection method. Descriptive analysis was used mainly to summarize the data collected. The process of budgeting is great challenges to many organizations yet those who embrace it reap from its tremendous benefits. Budgets are too often proposed, discussed, accepted, and forgotten. Variance analysis looks after-the-fact at what caused a difference between plan and actual. Good management looks at what that difference means to the organization. After a budget has been set, its usefulness lies in the review procedures which compare actual results against the budget. The study found that budget variances occur because forecasters are unable to predict the future with complete accuracy hence an organization could have either favourable or unfavourable variance. The concept of variance is intrinsically connected with planned and actual results and effects of the difference between those two on the performance of the entity or organization. Further, it found that there is a positive relationship between the challenges of budget preparation and implementation and the budget variance as reflected by the coefficients in the model Y= 3.009-0.177X1+0.502X2+0.041X3-0.798X4+0.161X5+0.992. The study recommends that budgets should be shared with all the stakeholders to enhance ownership and accountability. In addition, organizations should adopt a proper monitoring and review of the budgeting process; this will ease implementation hence reducing variance.