(Revised)

6/21/2019
The Effect of the Perceived
Level of Implementation of the
Budgeting Process on the
Financial Performance of
Selected STI Schools
MARK LYNDON C. DE RAMOS
JUNE 22, 2019
Outline
CHAPTER 1 Introduction
CHAPTER 2 Review of Related Literature
CHAPTER 3 Research Design and Methodology
CHAPTER 4 Presentation, Analysis, and Interpretation of Data
CHAPTER 5 Summary, Conclusions and Recommendations
The Effect of the Perceived Level of Implementation of the Budgeting Process on the Financial Performance of
CHAPTER 1
Introduction
1
6/21/2019
Introduction
In this modern world, scarcity of resources is

evident with voluminous wants, where these
resources are wasted and inefficiently utilized by
human factor in the production of goods and
rendering services.
Introduction
Many companies compete to become the best

amongst their industries, but only a few were able
to manage to produce with the least cost to
survive the competition in each industry’s market.
Introduction
Budgeting Process
• An effective and valuable technique of management
accounting that contributes significantly to
organizational growth and development if properly
understood and implemented
• Significantly relates to the organizational goals being
identified, responsibilities for achieving these goals
allocated, and consequently executed
• Enables prudent use of available resources, enriches
decision making, and acts as a point of reference in
measuring organizational performance.
2
6/21/2019
Introduction
Financial Performance
• Used as a measure of the overall financial capability of
an institution over a given period or the degree to
which the financial objectives of an institution are
accomplished.
• Referred to as the degree to which financial objectives
are being or have been accomplished
Introduction
As a known network of schools, STI commences a
complete budgeting process with operational plans. In a
normal planning cycle, the organization will begin with a
strategic planning process. Here they look at the
problems that need to be addressed and the specific role
of the organization in addressing it. This then is related to
what actual activities are needed to be undertaken to
achieve the planned impact or goal. This is the
operational plan, and it is the operational plan that
needs to be “costed.” One cannot prepare a budget until
what it is being planned to do is known (STI HO SMG, 2014)
Background of the Study
• Concentrate on the level of implementation of the
budgeting process in relation to the financial performance
of select STI school as guided by the awareness, policies,
and rules implemented by the STI head office;
• Address the importance of implementing the budgeting
process from managing resources, meeting objectives,
identifying the problems that might occur, improving
decision making, motivating staffs, and monitoring the
performance versus planned outcomes;
• Help all STI schools to improve the implementation of the
budgeting process.
3
6/21/2019
Statement of the Problem
What is the effect of the perceived
level of implementation of the
budgeting process on the financial
performance of selected STI
Schools?
Research Objectives Research Questions
Identify the demographic profile of What is the demographic profile of
the respondents in terms of gender, the respondents in terms of gender,
age, civil status, educational age, civil status, educational
attainment, position in the company, attainment, position in the company,
the length of tenure in the company, the length of tenure in the company,
and monthly income. and monthly income?
Determine the perceived level of What is the perceived level of
implementation of the budgeting implementation of the budgeting
process of the selected STI Schools. process of the selected STI Schools?
Identify the financial performance of What is the financial performance of
the selected STI Schools in terms of the selected STI Schools in terms of
total cost reduction, sales growth, and total cost reduction, sales growth, and
net income. net income?
Research Objectives Research Questions
Determine the effect of the What is the effect of the
perceived level of perceived level of
implementation of the implementation of the
budgeting process on the budgeting process on the
financial performance of financial performance of
selected STI schools. selected STI schools?
Identify the strategic What are the strategic
recommendations that can help recommendations that can help
each STI school to improve its each STI school to improve its
implementation of the implementation of the
budgeting process in achieving budgeting process in achieving
financial performance. financial performance?
4
6/21/2019
Hypothesis
Ho: The perceived level of implementation of the
budgeting process has no effect on the
financial performance of an STI school.
Ha: The perceived level of implementation of the
budgeting process has a direct effect on
the financial performance of an STI school.
Significance of the Study
• Fill the gap in the links between the perceived level of
implementation of the budgeting process and the
• Help the budget officers in each school to prepare the
budget with clear objectives of following the budgeting
process to attain a desired financial performance.
Significance of the Study
• Guide the management of the school and other related
groups to implement the budgeting process for the
improvement of the financial performance of STI schools.
• Improve the differences of each selected STI schools
regarding the level of implementation of the budgeting
process and financial performance.
5
6/21/2019
Scope and Limitations
STI Educations Services Group (STI ESG) is engaged in establishing,
maintaining, and operating educational institutions.
At present, STI ESG offers secondary and Tertiary Programs as well as
post‐graduate and associate programs.
The colleges of STI ESG has Associate Degrees, Baccalaureate
Degrees, Technical Course, and Vocational Courses in the fields of
Information and Communications Technology (ICT), Business and
Management, Hospitality Management, Tourism Management, Arts
and Sciences, Engineering, and Education.
Scope and Limitations
Seven (7) STI Head Office Owned Schools
CUBAO GLOBAL CITY
CALOOCAN FAIRVIEW
NOVALICHES LAS PIÑAS
ORTIGAS‐CAINTA
CHAPTER 2
Review of Related Literature
6
6/21/2019
Budgeting Process
• A definition of budget from the Chartered Institute of Management
Accountants (2008), “'a quantitative expression of a plan for a
defined period.” The definition of the budget includes the planned
volume of sales and revenues, resource quantities, costs and
expenses, assets, liabilities and cash flows.
• CIMA (2008) also defines budgeting as a “process of predicted costs
and resources expressed for a planned course of action over a
specified period. Furthermore, budgeting helps all types of
company to prepare and control their operations and to support
their managerial strategies.
Budgeting Process
• As cited by Mohamed et al. (2015) from the studies that have been
done related worldwide budgetary control, Carolyn, et al. (2007)
observed the link between effects of fiscal restraint on performance
using a sample of large US cities Financial Bonds and found that
adequate level of budgetary control is significantly and positively
related to bond rating.
• Epstein and McFarlan (2011) carried out a survey in Denmark on
measuring efficiency and effectiveness of a non‐profit’s
performance; it found that budgetary control was one of the
essential tools in achieving efficiency of a non‐profit making
organization. It turned out that the results of the study revealed
that effective fiscal control improves the performance of local
authorities.
• Mohamed (2015) examined how budgetary control can impact on
the performance of Dara‐salaam Bank. The researcher used
descriptive and retrospective research designs in Dara‐salaam Bank
Headquarters in Hargeisa Somaliland and concluded that
responsibility accounting, variance analysis, and zero‐based
budgeting enhances budget control and improves efficiency and
productivity.
7
6/21/2019
• Mwangi (2012) examined the impact of the budgetary control
process in the banking industry in Kenya. The researcher conducted
a survey and concluded that continuance commitment concerns an
individual’s need to continue working for the organization based on
the perceived costs associated with leaving the organization to a
very great extent, budgetary participation can be seen as
interventions to increase organizational commitment and
consequently firm performance.
Budgeting Process and Financial Performance
Ngumi (2017), research on the impact of budgeting practices on

financial performance of insurance companies in Kenya. The study
applied descriptive research design. The study found out that CAPEX
variance and performance (ROI) are negative and significantly related,
OPEX variance and performance (ROI) are negatively, and significantly
related, human resource variance and performance (ROI) were
negatively and significantly related while income variance and
performance (ROI) were also positively and significantly related.
8
6/21/2019
Zipporah (2017) determined the effects of budgeting and budgetary
control in the financial performance of country governments.
Joseph (2014) studies the budgeting process of TANESCO (The

Tanzania Electric Supply Company), the study revealed that budget
and budgetary control contributed a lot to the effectiveness of the
organization.
• Adongo (2013) investigated the relationship between budgetary
controls and financial performance of state corporations in Kenya.
• This study concluded that a significant positive relationship exists
between budgetary control and financial performance of state
corporations. This study also proved that budgetary features reflect
the ability to predict financial milestones of organizations. Added in
the results was that human factors within budgetary controls thus
managerial commitment, employees’ motivation, employee
training, competence as well as the attitude affect the budget
control process.
9
6/21/2019
Budgetary control process exhibited a significant positive influence in the
financial performance of state corporations.
• Kibunja (2017), investigated the relationship between budgetary
process and financial performance of Murang’a County
Government in Kenya. The specific objectives of the study were to
determine the effect of budgetary planning, implementation,
monitoring and evaluation of the financial performance of
Murang’a County Government. The study thus concluded that the
budgetary process involving planning, implementation, monitoring,
and evaluation had a relationship and significantly influenced
financial performance of the county government.
Budget Process and Financial Performance
10
6/21/2019
Kimunguyi (2015) studied the effect of the budgetary process on
the financial performance of NGOs in the health sector in Kenya,
applying priority‐based budgeting theory. Regression results
revealed that the budgetary process had a significant influence on
the financial performance of NGOs in the health sector in Kenya
and tests for significance also showed that the influence was
statistically significant. Good budgetary management practices
therefore positively influence the financial performance of NGOs in
the health sector in Kenya.
Sebastian (2018) studied the effects of budgeting on the financial
performance of manufacturing firms in Kinondoni district Dar es
Salaam Tanzania. The findings indicated that more formalized
budgeting planning leads to higher sales revenues. Secondly; the
results revealed that formalized budgetary control leads to higher
growth of profit of a firm. The formal budgeting planning has a
stronger impact on the growth of sales of manufacturing firms,
compared to the formal budgetary control. However; its impact on
the growth of profit becomes very weak compared to formal
budgetary control.
11
6/21/2019
Chircir & Simiyu (2017) examined the influence of budgetary control

processes on the financial performance of Almasi Beverages Group
Ltd, Kenya. The study was guided by four objectives which formed
the independent variables covering planning; human factors;
resource availability, monitoring, and evaluation processes and how
they influence the financial performance of the group. The
researchers, therefore, concluded that the four factors related to
budgetary control influenced the financial performance of ABGL
significantly. This shows that for effective financial performance,
ABGL has to ensure that human resources are adequate, trained
and adequately involved in all budgetary process.
12
6/21/2019
Theoretical Framework
Typical Planning Cycle of STI Company‐owned Schools
Budget Development Process of STI Company‐owned Schools
Budget Cycle for a Fiscal Year of an STI Company‐owned School
Faith's Conceptual Framework on “The Effects of Budgeting Process on
Financial Performance of Commercial and Manufacturing Parastatals in
Kenya”
13
6/21/2019
Conceptual Framework
Researcher's Conceptual Framework
CHAPTER 3
Research Design and Methodology
Research Design
Descriptive research design for data collection through a survey that
provides descriptive information. This study also used analytical
techniques where the researcher analyzed the information already
available.
Survey Method
• Participants answered questions which were administered through
an online and personal survey to obtain responses that can be
statistically analyzed;
• The questionnaire asked a combined perception of the effect of the
perceived level of implementation of the budgeting process on the
14
6/21/2019
Subjects
32 STI Colleges 32 STI Colleges
5 STI Academic Centers 7 STI Academic Centers
Subjects
Subjects
15
6/21/2019
Research Instruments
Four‐point Likert Scales (4) Strongly Agree (SA)

(3) Agree (A)
(2) Disagree (DA)
(1) Strongly Disagree (SD)
Cronbach’s Alpha (α)
Group Alpha
Budget Planning 0.91
Budget Participation 0.89
Budget Sophistication 0.88
Budgetary Control 0.92
Financial Performance 0.94
Overall 0.97
Research Instruments
Survey Questionnaire
TITLE The Effects of Budgeting Process on Financial
Performance of Commercial and Manufacturing
Parastatals in Kenya
AUTHOR Maritim C. Faith
3 Printed Pages
16
6/21/2019
Google Forms
Survey Questionnaire: Microsoft Forms
Data Analysis
Improvised scoring indices to measure the impact of budgetary control
Mean Response Interpretation
The level of implementation of the budgeting process is highly
3.26 – 4.00
evident.
2.51 – 3.25 The level of implementation of the budgeting process is evident.
The level of implementation of the budgeting process is not
1.76 – 2.50
evident.
The level of implementation of the budgeting process not highly
1.00 – 1.75
evident.
17
6/21/2019
CHAPTER 4
Presentation, Analysis, and Interpretation of Data
RO1: Identify the demographic profile of the respondents
18
6/21/2019
RO2: Determine the perceived level of implementation of the
budgeting process of the selected STI Schools
Budget Planning Mean SD
Budget officers are the most prominent people responsible for the
budgeting for their individual schools which are then combined to form
3.35 0.684094
the master budget, and this increases the sales growth potential for the
period.
Top management communicates the budget plan to those preparing the
3.36 0.564858
budget plan, and this helps in reduction of wastage of resources.
The allowance or variance to be made to the various parameters is
3.29 0.655049
specified in the budget for the period.
The managers are responsible for every set of budget and how they
should respond to any expected environmental changes is specified, and 3.33 0.641247
this increases the realization of the school’s financial performance.
A factor that will restrict the financial performance of the organization in
3.29 0.641868
that specific year is specified at the outset to facilitate.
The budgets originate at the lowest levels of management and are
3.28 0.652223
refined and coordinated at the higher levels.
Past data is used as the starting point for producing the budgets. 3.47 0.609215
19
6/21/2019
Budget Participation Mean SD
Employee participation in the budgeting process will enhance
3.43 0.64687
the success of the budget in achieving its financial targets.
It improves information exchange and sharing among all levels
of management and therefore enhancing the acceptability of the 3.44 0.606833
budget and consequently increases the net income.
It avoids a situation where budgeteer deliberately seeks to
obtain approval for easily attainable budgets or understated 3.34 0.643446
budgets.
Participation determines whether budgeting is really an effective
3.39 0.640965
management tool or just a clerical device.
The participation process establishes a position of trust and
confidence with subordinates and thus resulting in increased 3.38 0.612121
financial performance.
Budget Sophistication Mean SD
The use of computers to assist in the budgeting process
has increased its accuracy and therefore the financial 3.47 0.608799
performance of the school.
The organization has offered training and development
programs to the budget committee members to improve
3.27 0.608501
their competency process, and this has led to the
accuracy of the budgets.
The adoption of financial modeling in the budgeting
3.31 0.712515
process has enhanced the accuracy of the budget plan.
The employment of computers in the budgeting process
has improved the inter‐department information transfer 3.44 0.620757
which also led to improved performance of the school.
Budgetary Control Mean SD
Determination of the budget variance helps in the adoption
of management by exception strategy and therefore
3.37 0.596236
relieving the managers to concentrate on other pressing
issues.
Budgeting control enables the organization to achieve its
targets much easier since it helps in aligning the actual 3.38 0.612121
results to the plan.
The management control practice in the organization helps
3.36 0.579792
in linking the strategic planning and operational control.
The operational control in the organization takes the form of
evaluation the actual cost expense against the plan and 3.33 0.614011
taking the corrective action where necessary.
20
6/21/2019
Financial Performance Mean SD
The financial performance of the STI School is improving in
3.45 0.593374
terms of total cost reduction.
3.32 0.652167
terms of sales growth.
3.34 0.587917
terms of net income.
The extent to which your organization financial performance
has been influenced by the budgeting practices adopted: 3.49 0.595507
Total cost reduction
Sales growth
Net Income
Overall Mean Ratings
Verbal Qualitative
Group/Item Rating Parameters
Interpretation Description
Budget Planning 3.34 3.26 – 4.00 SA Highly Evident
Budget Participation 3.40 3.26 – 4.00 SA Highly Evident
Budget Sophistication 3.37 3.26 – 4.00 SA Highly Evident
Budgetary Control 3.36 3.26 – 4.00 SA Highly Evident
Financial Performance 3.41 3.26 – 4.00 SA Highly Evident
RO3: Identify the financial performance of the selected STI Schools in
terms of total cost reduction, sales growth, and net income
21
6/21/2019
22
6/21/2019
RO4: Determine the effect of the perceived level of implementation of the
budgeting process on the financial performance of selected STI schools
Correlation
Budget Budget Budget Budgetary Financial

Planning Participation Sophistication Control Performance
Budget Planning 1.00
Budget
0.73 1.00
Participation
Budget
0.80 0.76 1.00
Sophistication
Budgetary
0.86 0.77 0.83 1.00
Control
Financial
0.73 0.58 0.66 0.72 1.00
Performance
Summary Output
Regression Statistics
Multiple R R Square Adj R Square Std. Error N
0.755 0.571 0.556 2.189 118
ANOVA df SS MS F Sig. F
Regression 4.000 719.912 179.978 37.566 0.000
Residual 113.000 541.376 4.791
Total 117.000 1261.288
Summary Output
Std. Lower Upper

Coefficients t Stat P‐value Sig.
Error 95% 95%
Intercept 4.055 1.427 2.841 0.005 1.227 6.883
Planning 0.384 0.117 3.298 0.001 0.153 0.615 ***
Participation ‐0.042 0.129 ‐0.322 0.748 ‐0.297 0.214
Sophistication 0.152 0.183 0.833 0.407 ‐0.210 0.514
Control 0.452 0.217 2.086 0.039 0.023 0.881 *
23
6/21/2019
RO5: Identify the strategic recommendations that can help each STI school to improve
its implementation of the budgeting process in achieving financial performance
Strategic Recomendation
Additional budgets Budget Committee Budget Feedback Budget Flexibility Budget Forecasting
Budget Goals Budget Implementation Budget Manual Budget Monitoring Budget Orientation
Budget Participation Budget Planning Budget Policies Budget Process Automation Budget Review
Budget Sophistication Budget Submission Budget Variances Budgeting Online System Budgeting Process Review
Budgeting System Communication Continuous Implementation Delay Economic Performance
Employee Involvement Employee Training Level of Priority Personnel Competency Process Specification
Standard Budgeting Process Budget Accessibility Budget Allocation
14%
5% 5% 5%
4%
3% 3% 3%
2% 2% 2% 2% 2% 2% 2%
1% 1% 1% 1% 1%
1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
CHAPTER 5
Summary, Conclusions, and Recommendations
Summary
Only two independent variables, Budget Planning and Budgetary
Control, are statistically significant predictors to financial performance.
These are more relatively important than the two variables, Budget
Participation and Budget Sophistication.
The effect of the perceived level of implementation of the budgeting
process on financial performance was statistically significant, and hence,
the null hypothesis was rejected
These research findings were related to Faith’s (2013) research, which
the budget planning is significant. Of all the independent variables,
budgetary participation was found to be one that affects the most the
firms return on investment.
24
6/21/2019
Summary
As strategic recommendation, it was suggested to continuously
implement the budgeting process and improved budget participation in
terms of employee orientation, involvement, and feedback from the
management about variances between budgeted and actual financial
performance
In terms of actual financial performance, it follows the expectation that
if expenses go up and the revenue decreases, the net income decreases
as well, and vice versa.
Conclusion
Most of the employees involved in the budgeting process are female
under the millennial’s generation and more on career‐oriented
The implementation of the budgeting process is more likely high in
terms of the level of implementation as to its category of the
respondents
Continuous implementation of an effective budgeting process influences
the success of the goals set in terms of the financial performance of the
school
Recommendations
STI should put in place budget practices which assist in accomplishing a
principle and element of implementing the budgeting process.
Budgeting process must promote more positive attitudes and behaviors
on the part of employees, managers, supervisors, and the management
All users and creators of the budget must be involved through periodic
communication and feedback
25
6/21/2019
Recommendations
Must invest in advanced technologies on how to improve the
operational activities specifically on the implementation of the
budgeting process
Staffs should be assessed if they cope up with the implemented process,
and consider recruiting more competent staff
Staff should also be compensated generously by the schools so that
their morale is boosted and encourage maximizing their contribution
towards the organizations objective
Since STI is a network of schools and follows a SOP from the Head
Office, this recommendations can be implemented through the next
budget season
Recommendations
Similar studies need to be conducted in other educational institutions in
Metro Manila to assess whether the study could produce similar
findings regarding the effect of budgeting process on financial
performance.
We all know that every organization regardless of its industry, has their
own budgeting process efficiently achieve their objectives, ultimately,
high financial performance.
26

(Revised)

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

(Revised)

Uploaded by

Copyright:

Available Formats

6/21/2019

In this modern world, scarcity of resources is

Many companies compete to become the best

Ngumi (2017), research on the impact of budgeting practices on

Joseph (2014) studies the budgeting process of TANESCO (The

Chircir & Simiyu (2017) examined the influence of budgetary control

Four‐point Likert Scales (4) Strongly Agree (SA)

Budget Planning 3.34 3.26 – 4.00 SA Highly Evident

Budget Participation 3.40 3.26 – 4.00 SA Highly Evident

Budget Sophistication 3.37 3.26 – 4.00 SA Highly Evident

Budgetary Control 3.36 3.26 – 4.00 SA Highly Evident

Financial Performance 3.41 3.26 – 4.00 SA Highly Evident

Budget Budget Budget Budgetary Financial

Std. Lower Upper

Intercept 4.055 1.427 2.841 0.005 1.227 6.883

Planning 0.384 0.117 3.298 0.001 0.153 0.615 ***

Participation ‐0.042 0.129 ‐0.322 0.748 ‐0.297 0.214

Sophistication 0.152 0.183 0.833 0.407 ‐0.210 0.514

Control 0.452 0.217 2.086 0.039 0.023 0.881 *

You might also like