COMPARATIVE STUDY OF EXPENDITURE CONTROL METHODS IN GOVERNMENT ESTABLISHMENT AND PRIVATE ESTABLISHMENT (A CASE STUDY OF MINISTRY OF FINANCE, ENUGU STATE AND INNOSON GROUP, ENUGU STATE)

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Expenditure control is part of management control process in every organization, both government establishment and private establishment. Expenditure control is defined as the process by which managers use productively and efficiently, the deficit resource in the accomplishment of the organisational goals. Looking at expenditure and control from different perspective. Expenditure is the total amount spent on the process of trying to achieve a specificorganisational goal. Control means to order, limit, instruct, or rule something or someone’s actions. It is utilized by either government officials or organisation managers to put a line on wages increaseimmigrate credit, to mention but a few.

Many researchers have conducted researches on the reason companies and organisationlack expenditure control process. A study of the ministry of finance, Enugu state and Innoson group, Enugu; this means a comparative study of non-profit making organisations, since ministry of finance is government owned while innoson group is privately owned as a category of profit making organisation. Non-profit making organizations are known by the following:

a) there is neither a conscious profit motive nor an expectation of earning net income.

b) No profit of any excess of revenue over expenditure is distributed to those who contributed support through taxes and voluntary donations. In profit making organisations, the reverse of these properties is the case, meaning that their primarygoal is to maximize profit and excess of revenue over expenditure.Government owned establishments pay more attention to services they render to the public, as their primarygoal is to provide services that satisfy. Privately owned establishmentsgo out of their way to render good and quality services to the public, they pay more attention to maximize of profit which is their key objective. Comparative study of expenditure control methods in Government and privately owned establishment which is the mainresearch question in this research work has to do with the different ways and methods by which expenditure is being controlled and managed in each of the establishments so that they will not run into deficit or liquidations. The management control concept which gulps the expenditure control are the same both in profit oriented and non-profit oriented organizations, but the impact of these concepts differ in important respect.

In most developing countries like the Nigerian government involvement in economic activity is usually one of a kind. One major way through which government has interposed in Nigerian economy is through the establishment of public and private enterprises and statutory bodies operating service of an economic or social character in the interest of the government. Since the 1960’s, Nigerian public and private enterprises have attested of a rapid growth unit. Howbeit, after a long period of increase in the economy starts intervention in the Nigeria economy through public, private enterprises, the 1980’s onwards had also attested for a reversed which has sometimes been dramatic in public opinion. This is caused by the continuous losses in enterprises. As a result of this, there has been an urge to carefully look at alternative policy strategies for the accomplishment of economic development. At the foremost part of these strategies is the minimization privatization of public enterprises. In Nigeria today, public enterprises are involved in a complete range of economic activities including agriculture, mining, construction, manufacturing, commerce and services. The division of public enterprises in Nigeria has been sectioned according to the diversities of standard by different authorities. It was discovered that the public service review commission sectioned public sector into; Public utilities Regulatory of service, body Financial institutions, Commercial and industrial enterprises. A firm known as private enterprises when it is founded and managed by an individual or a group of individual;these firms are considered to be registered in the local government from the area they operate. The reason for the institutions of private enterprises is numerous just like establishment of public enterprises. They involve; the provision of employment opportunities generating income for the founder of the enterprises, government interest in profit growth of the enterprises. The interest of general public is mostly in contribution which aids social enlistment which is shown to the environment in which the business is loaded.

1.2. STATEMENT OF THE GENERAL PROBLEM

The general poor financial performance of both government and private organizations in Nigeria has resulted to the mass sack of employees which has ultimately resulted to the rise in the unemployment rate of the country thus having a negative impact on the economy of the country.  Most Nigerian companies or organizations have neglected the expenditure control methods to their own peril. The constant liquidation of companies may not be farfetched from the lack of implementation of expenditure control strategies in other to improve profitability and financial performance in Nigeria.

1.3. AIMS AND OBJECTIVES OF THE STUDY

The major aim of the study is to compare the expenditure control strategies/methods of both government and private establishments. Other specific objectives of the study are to;

1. Examine the importance of expenditure control in organizations.
2. Determine the impact of effective expenditure control methods on the economy of the country.
3. Investigate the effect of expenditure control methods on organizational performance/profitability.
4. Recommend further effective methods of expenditure control strategies in organizations.

1.5. RESEARCH QUESTIONS

1. Is there a significant difference between the expenditure control methods adopted by government organizations and private establishments?
2. What are the importance of expenditure control in organizations?
3. What is the impact of effective expenditure control methods on the economy of the country?
4. What is the effect of expenditure control methods on organizational performance/profitability?

1.6. RESEARCH HYPOTHESES

H0: There is no significant difference between the expenditure control methods adopted by both the government and private organizations in Nigeria.

H1:There is a significant difference between the expenditure control methods adopted by both the government and private organizations in Nigeria.

H0: There is no significant relationship between expenditure control methods and organizational performance.

H1:There is no significant relationship between expenditure control methods and organizational performance.

1.7. SIGNIFICANCE OF THE STUDY

The study would be of immense importance to government establishments, private establishments and the general public as it unveils the importance of effect of expenditure control methods and how it affects organizational performance. the study would also benefit students, researchers and scholars who are interested in developing further research on the subject matter.

1.8. SCOPE AND LIMITATIONS OF THE STUDY

The study is restricted to comparative study of expenditure methods in both government and private organizations using both Enugu state ministry of finance and the innoson group limited as case studies.

LIMITATIONS OF THE STUDY

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview)

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.9. DEFINITION OF TERMS

EXPENDITURE: In accounting, the word "expenditure" is used to indicate a cost that a company pays to acquire equipment or other assets. Expenditures can also reduce liabilities or be disbursed to owners. They can be considered a type of expense, but expenses and expenditures are listed differently on income statements

ENTERPRISE: An organization, especially a business, or a difficult and important plan, especially one that will earn money.

FIRM: A commercial organization that operates on a for-profit basis and participates in selling goods or services to consumers.

BUSINESS:An organization or economic system where goods and services are exchanged for one another or for money.

REFERENCES

Ademolekun K.O. (2003), The Nigeria financial system, London: Macmillian Publisher.

Image E.U.(2005), Principals of Accounting, Enugu: Fourth Dimension Publisher.

Olisa, E.C. (1998), Public Enterprises and Privatization in Nigeria, Nigeria: Longman publisher.

Ostisumi K.O.(2010), Financial Management in Nigeria Public sector, London: Pitman Publisher. Osumbor, O.A.(2001), An overview of Private Enterprises in Nigeria, Business time.

Willy N.Ugwuyi, (1997), The Nigeria Financial System (A systematic approach).