Presentation

By Yibel H. Gebregziabiher

On
“An evaluation of the budgetary control
system of Sur Construction Plc and
its support to the company’s
performance management and
decision making processes”

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 Research topic area
 “An organization’s budgetary control system and its links
with performance management and decision making”
 Reasons for selecting the topic
 within my area of expertise
 sufficient literature
 employer support
 IT skill
 Focus organisation
 “Sur Construction Plc”

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Cont.
 Reasons for selecting
 access to information and employer support
 saves time and cost
 demonstrate research capability to my employer
 Background of Sur Construction plc
 Sur Construction is established in 1992 and engaged in
construction industry in Ethiopia
 Sur is owned by EFFORT, a local rehabilitation institution
 annual turnover, approximately US$ 26 million

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Cont.
 its fixed assets, nearly US$ 30 million
 1600 permanent employees and about 6700 workers
hired on daily basis
 ISO: 1900:2000 certified company
 there were 15 different project contracts
• 9 road projects
• 5 building projects and
• an airfield project

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Cont.
 Its mission
 efficiency and effectiveness
 customer focus
 profitability
 Overall Approach
 Objective of the research
• evaluate the budgetary control system of Sur
• links with performance management and decision making
processes within Sur.
• provide recommendation

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Cont.
 Evaluating Criteria
• administration
• preparation
• control
 Research questions
• how did Sur administer its budget?
• how did Sur prepare its budget?
• how did Sur control implementation of its budget?

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Cont.
 Assessment variables
• budget committee, budget year, budget officer, and follow up?
• policy communication, key budget factor, budgets, coordination and
master budget?
• type of budget?
• performance reports, variance analysis, and frequency?
• feedback, performance evaluation and decision making?
 Information Gathering
 Sources of information
• secondary data

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Cont.
 Methods used to collect information
• locations of sources of information
• information collection
• custody of information collected
• return of documents collected
 Limitations of the information gathering
• accuracy
• discrepancies
• two different copies of budget manuals
• annual financial reports not finalised
• bulkiness of internet resources

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Cont.
 Ethical issues
 integrity
 confidentiality
 Results
 Budget Administration
• a budget manual, with detailed policies and procedures on budget
administration was developed
• but no budget committee, budget officer
• therefore no budget administration
 Preparation
• communication of business plan, standard cost and usage of
resources

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Cont.
• no key budget factor analysis
• sales budget prepared
• individual annual plans prepared, but not expressed in monetary
terms
• plans were not coordinated

 Control
• performance reports produced by construction departments
• finance department prepared revenue and cost reports without
comparison with budget
• comparison made by the construction department was based on
fixed plan
• also the comparison did not involve variance analysis
• encountered problems were indicated but based on experiences

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Cont.
 Analysis
 it became clear that the company did not implement a
robust budgetary control system to enhance company
performance and decision making.
 weaknesses
• little top management commitment
• suitable administration procedures were not in place
• Sur did not prepare budget
• sales volume determined traditionally
• unit volume of construction work plan not prepared

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Cont.
• only plan of activities to be performed were indicated
• resources required were not adequately quantified
• not expressed in monetary terms
• making communication so difficult.
• making coordination impossible
• no direct material purchase plan
• no direct labour plan
• no overhead cost plan
• expenses were paid as they occur, not as planned
• no variances analysis
• flexible plan was not used
• failed to produce well analysed feedback

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 Effects
• poor planning
• poor communication
• no coordination
• poor control as there was no benchmark
• poor Performance Evaluation
• poor decision making
 Conclusion
• weak budgetary control system both in its design and
implementation
• therefore couldn’t be used to evaluate managers’ performances and
cannot be used for decision making purposes.
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 Recommendation
 it is recommended that top management should consider
the weaknesses indicated above and take appropriate
remedial actions.

THE END

 Thank You

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