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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