MINI-DISSERTATION RESEARCH PROTOCOL
Dissertation Title: A critical comparison of budgeting methodologies between a for profit education institution and a public university
Protocol Version: 1.1
Protocol Date: July 23rd 2013
i. Dissertation Supervisor (ICP ) a. Name: Alan Stockdale b. Telephone Number: c. Email:
ii. Degree Path (PMP): Finance
iv. Experimental start date:
1. INTRODUCTION / REVIEW OF LITERATURE
Budget as the monetary plan for a specific period of time in the future of an organisation has been considered more and more important by corporate governance. Many budgeting methodologies have been invented and widely implemented by different organisations to suit the operational and financial culture of each of them.
Appropriate budgeting is crucial to the survival of educational institutions as any other business organisations. However, due to the differences in nature, it is believed that the budgeting methodologies applicable in for profit and non-profit organisations distinguish in certain ways. This research paper is produced to critically compare the budgeting methodologies of educational institutions operating in public and private sector.
1.2 Review of Literature
Numerous studies have been conducted on budgeting and its impacts on organisational performance. Budget is generally defined as an estimation of revenues and expenses over a specified future period of time. Harper (1995) as cited in Northern Ireland Assembly (2010) listed various functions fulfilled by budgeting, which consists of mapping, controlling, co-ordinating, communicating, instructing, authorising, motivating, performance measurement and decision-making. Community Accounting National Network (2008) suggests that the budget is “the conerstone of any financial system”, and that budget is considered “the key element in establishing internal constrol and making sure the organisation does what it should”. A previous research by Merchant (1981) confirms the crucial importance of budgeting on managerial behaviour and performance.
Educational institutions also require budgets to be produced. However, educational institutions operating in public sector and private sector, which are generally viewed as non-profit and for profit institutions respectively, apply different budgeting techniques due to the differences in organisational purpose, governance model and resource allocation approaches (Nutt, 2005). Public sector organisations, especially non-profit educational institutions, operate to the interests of limitless constituencies, participants and stakeholders (Friedman and Miles, 2006), which explains why their budgeting process is usually a compromise of the different objectives and priorities of the stakeholders (Carlitz, 2012). The budgeting process of the public sector organisations are also participatory and transparent as the organisations operate under a great variety of laws and regulations, which put them under the pressure of making disclosure of how the priorities are funded to the public (BealBudget, 2011). In contrast, the budgeting process of the private sector organisations is more of the internal managerial nature (PriceWaterhouse Cooper, 2012). Dr. Nasser et al. (2011) raise the question of how the budgetary process in different universities varies regarding to manager and department characteristics. An intensive research was carried out by Dr. Nasser et al. (2011) whose findings indicate that there is a strong relationship between the manager related variables along with the manager’s experience and the budgeting characteristics of a particular university or department within the university.
Among the commonly used budgeting methodologies listed by Northern Ireland Assembly (2010) are incremental budgeting and zero-based budgeting, which are the two methods most widely used within