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International Research Journal of Applied and Basic Sciences
© 2015 Available online at www.irjabs.com
ISSN 2251-838X / Vol, 9 (4): 538-541
Science Explorer Publications
Investigating the deviation of conventional annual
budget performance across public organizations
(case study: West Azerbaijan general attorney)
Mehran Molavi, Mehdi Sheykhmohammadi
Department of Public Administration, Mahabad Branch, Islamic Azad University, Mahabad, Iran
Corresponding author email: [email protected]
ABSTRACT: The aim of the present study is to investigate the effect of deviation of conventional
annual budget performance across public organizations (case study: West Azarbaijan general
attorney). The statistical population comprises of 83 employers working at West Azarbaijan general
attorney. The sample size was estimated as 70 subjects who were chosen based on stratified
random sampling method. Researcher-developed questionnaire was used to collect the required
data and reliability as well as validity of the questionnaire was determined. The questionnaires were
distributed and analyzed through making use of descriptive and inferential statistics. Also,
Kolmogorov-Smirnov test and one-sample t-test was used to make detailed analysis. The results of
the study manifested that the deviation process of conventional annual performance was affective in
West Azarbaijan general attorney. In addition, factors such as human barriers, structural as well as
organizational factors and technical factors had an impact on deviation of conventional annual
budget performance in West Azarbaijan general attorney.
Keywords: deviation from conventional annual budget performance, human barriers, structural as
well as organizational barriers, technical barriers
INTRODUCTION
Budget is deemed as the main route of the government since the government accomplishes its
financial activities such as getting revenue and paying the expenses for implementing a verity of plans within
the framework of budget law. Hence, budget is considered as the reflection of al programs and activities of
government which has a big role in developing the national economy. Progressed trend of budgeting does not
provide sufficient information regarding the results of expenses for credits and the values of effectiveness and
efficiency. Also, this trend has been planned based on the short-term view and is limited by management power
when it comes to controlling the expense and supervising the affairs of each section. Public organizations that
make use of the approved budgeting are not allowed to use the budget which have been solely devoted for
specific area; however, lack of continuous supervision and meticulous investigations across financial system it
is observed that organizations have violated the rule and spend the budget on other areas which leads to the
way that budget deficit appears.
Deviation of conventional annual budget performance values from the predicted values for budgeting
developmental programs is considered as one of the facts of planning and budgeting system. The main
components of financial decision-making systems are as follows: planning, policy-making and budgeting where
lack of consistency of relationship among these components or the inclusion of weakness will lead to
disintegration in financial decision-making process in a way that no association is observed among the rules,
quantitative goals and quantitative indexes of developmental program and annual budget. In most of the cases,
confliction of budget policies and aiming the proposed plans leads to the change in goals and implementation
plans which are not considered as optimum for planners and leaders (Doshman Ziari, 2010).
Research foundations
Deviation of conventional annual budget performance
Budgeting is concerned with the process of devoting limited resources to infinite demands. Total efforts
made to determine the resources devotion is done to make the maximum use of resources which are not
suffice and are said to be scarce. Hence, it is necessary to make use of every limited resource to achieve
optimum goals in a way that one is able to declare that the maximum use has been made with the lowest
Intl. Res. J. Appl. Basic. Sci. Vol., 9 (4), 538-541, 2015
expense. Inconsistency between the two facts and limited resources lead to the fact that one should make use
of the limited resourced to remove every infinite requirement so that the appropriate extent is met and this is the
first assumption of budget (Aronoson, 2006).
An important part of the budget control responsibility is met through computing the budgeted values
and those obtained by operations. So, it is required that the results of performance and conducted activities in
organization for one financial year as a measurement index are given to the management section. Determined
by implementation, the real performance is revealed by comparing budget and deviation of it. The indifference
between real performance and procedural predetermined plan in organization is identified as the deviation of
performance, it is not necessarily sufficient to estimate the deviations; rather it is required that the estimated
deviations are analyzed meticulously by experts and professionals. In case the real values are less than the
predicted values, the deviation is optimum, otherwise it is inappropriate, it is worth noting that inappropriate
deviations in organization means lack of management qualification. Deviation of budget can be contributed to
controllable factors either as internal or external factors and can be considered in cause and effect relationship
due to appropriate or inappropriate deviation (Esmaeili, 2009).
Reasons for deviating the conventional annual budget performance
Intra-organizational barriers
Human aspect
In case the knowledge of human force is considered in determining the implementation of budget,
human –related factors appear. The level of employers' knowledge is regarded as the human factors when it
comes to exploring the needs of organizations. Regarding the human barriers one can mention the level of skill,
expert and awareness of people who have to do with the financial issues of organization. Lack of skilled
supervision and investigations of officials can lead to the problems in line with correct implementation of budget
to be derived from their expert human force. These factors include: the knowledge expert of planners, the
degree of motif in experts of planning, the degree of developers knowledge, the quality of cooperation in
decision-making, the change of managers and instability of management. Lack of expert and knowledge of
professionals who have taken the responsibility of predicting monetary, time-based and place-based plans can
be regarded as the contributive factors of performance difference and approved budget due to the fact these
predictions are related to budgeting (Bakhtiari, 2003).
Structural and organizational aspect
It is attributed to the factors which have been formed based on the organizational official structures.
These elements which do not undergo the changes easily are in need of fundamental changes in organizational
legal official structure. The components of these factors include: traditional budgeting, strong monitoring
devices, use of feedback of budget program, duration of budget planning period (i.e. not categorized as
years), the financial system of distribution, resource allocation, clear transparency provisions of the budget, the
structure of decision making, coordination, consistency between goals development programs, bureaucracy
levels, expanded size of government, providing required telecommunication and information technology
infrastructures (Irannejad, Parizi & Sasangohar, 2002).
Technical aspect
Budget is said to be technical in that it predicts the required credits in receiving and paying section,
budget-based predictions or credit estimations require the use of determined regulations that have been formed
during the time. Technical aspects of budget processes from the initial levels of providing and determining to
confirming the agenda, the quality of legislative proposal, handling customs, notification procedures and the
quality of executives achievement to the confirmed and approved resources. Important technical factors can be
categorized as total increase of costs, providing on-time credit, incorrect delivery of proposed budget,
acceptable standards, and strong supervising sections as a control device.
Total increase of costs: is one of the important factors of economic instability, the occurrence of which
leads to inflation and the increase of expenses and cost. In case such inflation is not predicted correctly, budget
deficit will be manifested and this causes delay of budget. Lack of timely funding: when the budget is approved
but the source of financial support is not determined and the receiving of budget is delayed, this mode leads to
delay in implementation of budget resulting in deviation of performance in line with approved budget. Failure to
provide proper budget proposed: organization faces problem when there is no comprehensive considerations of
technical, financial and economic aspects in accomplishing the activities. Acceptable standards for control:
when one tends to have an appropriate control system, it is required that there are standards through making
use of which one is able to control the financial activities of organizations so that the credit and budget spend is
determined and controlled (Khoshkrodian, 2010). Strong supervision section: the very initial point to notice
when studying the quality of supervision is the existence of integrated, altered and determined system. In such
a system, the role and responsibly of each financial and budget-based sections as well as the quality of their
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Intl. Res. J. Appl. Basic. Sci. Vol., 9 (4), 538-541, 2015
relationship should be identified and the content of reports to be provided should be clarified, otherwise the
professional would not be able to attain optimum results of supervision. In addition, supervision should not be
viewed only as the modifier and progression-inducer element. In such a case, supervision can be done in an
efficient way and be regarded as the factor to improve the failure of performance. Budget as a tool to control:
budget has lost its real meaning across organizations and public administrations where it is regarded as an
issue of paying cost and expenses. Such a problem can be effective in the resulted chasm (Doshmanziari,
2005).
Related studies
Esmaeili (2009) investigated the factors of budget deviation in Keshavarzi bank form managers'
perspective indicating on six provinces of Khorasan, Fars, Mazandaran, Kerman, Markazi and Hamedan. The
aim of the study was to survey the factors of budget-driven deviations in Keshavarzi bank indicating on 6
provinces and the following hypotheses were provided: 1) Lack of funding diversion program to forecast the
budget led to the deviation in Keshavarzi bank 2) the existence of the account debtors (accounts) led to the
deviation in Keshavarzi bank 3) lack of adequate monitoring and control of budget performance led to the
deviation in Keshavarzi bank 4) Lack of flexibility in the decisions of the Supreme Council of the PBO led to the
deviation in Keshavarzi bank. The above hypotheses were tested by t-test. Also, first, third and fourth
hypotheses were supported.
Mahosh Vafaei (2003) investigated the main factors of performance deviation from the approved
budget in electricity company projects in Fars. Four hypotheses were developed in the study and Wilcoxon as
well as statistical mean test and method were used. It was found through making statistical calculations that
deviation was seen and structural barriers were more affective in relation to this type of deviation.
Beyond the budgeting of revised budgeting in Northern America was the focus of study conducted by Libby and
Linsay (2009). This study was carried out by two medium and large size organizations of Northern America
which had observed the budgeting regulations. The results showed that most of the corporations that observed
these rules could proceed their goals and programs in an optimum way ad changed the problems to
opportunities leading to lowering the extent of budget deviation.
Design of the study
The statistical population comprises of 83 employers working at West Azarbaijan general attorney. The
sample size was determined as 70 using Morgan table and started random sampling was the assumed method.
Surveys were provided to make reviews and researcher-developed questionnaire was employed to collect the
required data which was based on Likert-5 scale items ranging from very low to very high.
Analysis of statistical data
Testing main hypothesis: Deviation of conventional annual budget performance has an impact in West
Azarbaijan general attorney
Table 1. The result of one-sample t-test for the main hypothesis
Standard
deviation
0.318
Mean
Sample size
3.826
70
Test
Mean difference
Test statistic
Degree
freedom
One-sample ttest
0.823
21.632
69
of
Sample size
Level of significance
70
0.000
According to the level of significance for one-sample t-test, since the level of significance is less than
0.05, null hypothesis is rejected with 0.5 confidence. Based on the mean difference (0.823), one can say that
the man is greater than the mean of test. Thus, it is concluded that deviation of conventional annual budget
performance has an impact in West Azarbaijan general attorney
First secondary hypothesis: Human barriers have an impact on the deviation of conventional annual budget
performance in West Azarbaijan general attorney
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Intl. Res. J. Appl. Basic. Sci. Vol., 9 (4), 538-541, 2015
Table 2. The result of one-sample t-test for the first secondary hypothesis
Standard
deviation
0.466
Mean
Sample size
4.700
70
Test
Mean difference
Test statistic
Degree of
freedom
Sample size
Level of significance
One-sample ttest
1.700
19.977
69
70
0.000
According to the level of significance for one-sample t-test, since the level of significance is less than
0.05, null hypothesis is rejected. Thus, it is concluded that human barriers have an impact on the deviation of
conventional annual budget performance in West Azarbaijan general attorney
Second secondary hypothesis: Structural and organizational barriers have an impact on the deviation of
conventional annual budget performance in West Azarbaijan general attorney
Table 3. The result of one-sample t-test for the second secondary hypothesis
Standard
deviation
0.702
Mean
Sample size
3.825
70
Test
Mean difference
Test statistic
Degree
freedom
One-sample ttest
0.825
9.827
69
of
Sample size
Level of significance
70
0.000
According to the level of significance for one-sample t-test, since the level of significance is less than
0.05, null hypothesis is rejected. Based on the mean difference (0.825), one can say that the man is greater
than the mean of test. Thus, it is concluded that Structural and organizational barriers have an impact on the
deviation of conventional annual budget performance in West Azarbaijan general attorney.
Suggestions for further researches
Human barriers:
Since human barriers have an impact on the deviation of conventional annual budget performance in West
Azarbaijan general attorney, following lines are suggested from the respondents' point of view:
Continuous training of expert in the field of budget
Increasing the authorities and motif of experts and managers in decision-making and budgeting processes of
organization
Making use of expert, experienced and knowledge force in budgeting affairs
Training management skills for managers in order to make use of correct risk management
Structural and organizational barriers
Since structural and organizational barriers have an impact on the deviation of conventional annual budget
performance in West Azarbaijan general attorney, following lines are suggested from the respondents' point of
view:
Reducing the size of organization or removing the complexities of organization and lowering the sequential
order of internal affairs of organization in relation to budgeting
Planning the reform of bureaucracy system and reducing the official communications
Establishing and making use of integrated financial system in order to improve the budgeting process
Employing information feedback system as a control factor in budgeting
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Doshmanziari E. 2010. Process of adjusting, approval, implementation and controlling the budget. Tehran, Meharaban Book
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Egtedari AM. 2007. Budget, Public AdmisnitrationTarining Center publications, p. 37.
Esmaeili Gh. 2009. Investigating the affecting factors of budget deviation in Keshavarzi bank from managers' perspective indicating on six
provinces, namely Khorasan, Fars, Mazandaran, Kerman, Markazi, Hamedan. Mazandaran University of Sciences and Techniques
Iranejad Parizi M, Sasangohar P. 2002. Management organization from theory to practice. Iran banking institute, p. 463.
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