A Case Study of Kampala Capital City

COST BUDGETING AND QUALITY OF SERVICE DELIVERY IN LOCAL GOVERNMENT

A CASE STUDY OF KAMPALA CAPITAL CITY

AUTHORITY (KCCA)

NIMWESIGA MABLE

07/U/13914/EXT

SUPERVISOR: MR. KAJUMBULA RICHARD

A RESEARCH REPORT SUBMITTED TO COLLEGE OF ECONOMICS

AND MANAGAEMENTSCEINCE IN PARTIAL FUFILLMENT

OF THE REQUIREMENTS FOR THE AWARD OF DEGREE OF

BACHELOR OF COMMERCE OF MAKERERE

UNIVERSITY

JULY 2011

DECLARATION

I Nimwesiga Mable , declare that this is my original work and has never been submitted to any institution for any academic award and where work of other people or information has been referred, it has been acknowledged .

SIGNITURE------Date------

NIMWESIGA MABLE

Reg. NO: 07/U 13914/EXT

APPROVAL

This research work has been under my supervision and is now ready for submission to the examination council for evaluation.

Signed……………………………………………. Date………………………………………

MR. KAJUMBULA RICHARD

SUPERVISIOR

DEDICATION

This report is dedicated to the Almighty God who has enabled me to achieve my dream. I also dedicate this research report to my parents Mr.Mrs. Musebeni Charles and Kamusasire Mable and my brothers especially Mr. Mwine Allan, Dr.Musiime Andrew,Mushabe Alex and Mugabe and my sisters Reachel , Rebbeca , Sarah ,Caro and Phionah.Thank you for your prayers.

ACKNOWLEDGEMENT

I greatly thank the Almighty God for being merciful to me. Indeed God has been there for me in this hard time.With God everything is possible.

Special thanks to my parents Mr. &Mrs. Musebeni Charles and Kamusasire Mable and my brothers Allan and Andrew for your endless financial and parental care. May God reward you abundantly.

Special thanks go to my supervisor Mr. Kajumbula Richard who really spared his time to guide me through this process.Thank you for your persistent help.

I thank my friends like Clare, Evelyn, Agnes, Ambrose, Paul, Mugerwa, Justus, Kato,Deborah, Phillo , Patrick and all colleagues under same supervisor . Thanks for our cooperation and words of encouragement .May the good God bless you.

Declaration

Approval

Dedication

Acknoledgement

Table of contents

List of tables

List of figures

List of acronyms

Absract

CHAPTER ONE

1.0 Introduction

1.1 Background.

1.2 Statement of the problem

1.3 Purpose of the study.

1.4 Objectives of the study.

1.5 Research questions

1.6.0 Scope of the study

1.6.1 Subject scope

1.6.2 Geographical scope

1. 7 Significance of the study

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

2.1 Cost budgeting

2.1.1 Types of costs

2.1.1.1 Labour cost

2.1.1.2 Direct expenses

2.1.1.3 Administration overheads

2.1.1.4 Director material

2.1.2 Definition of cost budgeting

2.1. 3 Indicators of cost budgeting

2.1.3.1 Resource planning

2.1.3.2 Cost estimation

2.1.3.3 Cost control

2.1.3.4 Performance evaluation

2.1.3.5 Flexibility

2.1.4 Types of budget

2.1.4.1 Master budget

2.1.4.2 Direct material usage budget

2.1.4.3 Direct material purchase budget

2.1.4.4 The direct labour cost budget

2.1.4.5 Cash budget

2.1.4.6 Capital expenditure budget

2.1.4.7 Fixed budgets

2.1.4.8 Flexible budgets

2.1. 5 Stages in the budgeting process.

2.1.5.1 Communication

2.1.5.2 Identify the limiting factors or constraints

2.1.5.3 Prepare the budget

2.1.5.4 Coordination and review of budgets

2.1.5.5 Review of budgets

2.1.5.6 Budget acceptance

2.1.6 Local government budgeting process

2.1.6.1 Preparing for the budgeting process

2.1.6.2 Preparing the local government budgets financial plans

2.1.6.3 Finalization and approval of the annual work plan and budget

2.1.7 Positive effects of cost budgeting

2.1.8 Negative effects of cost budgeting

2.2 Quality of service delivery

2.2.1Indicators of quality of service delivery

2.2.1.1 Accessibility

2.2.1.2 Communication

2.2.1.3 Courtesy

2.2.1.4 Reliability

2.2.1.5 Competence

2.2.1.6 Time lines

2.2.1.7 Security

2.2.2 Services provided by local governments

2.2.2.1 Gabbage collection

2.2.2.2 Health services

2.2.2.3 Water and sanitation

2.2.2.4 Education

2.2.2.5 Agriculture and veterinary services

2.2.3 Relationship between cost budgeting and quality of service

2.2.3.1 Resource planning and quality of service delivery

2.2.3.2 Cost estimation and quality of service delivery

2.2.3.3 Cost control and service delivery

2.2.3.4 Performance evaluation and quality of service delivery

2.2.3.5 Communication and quality of service delivery

2.3 Conclusion

CHAPTER THREE

METHODOLOGY

3.0 Introduction

3.1 Research design

3.2 Survey population

3.3 Sampling methods

3.3.1 Stratified sampling

3.5 Sampling procedures

3.6 Data sources

3.6.1 Primary source

3.6.2 Secondary data

3.7 Data collection methods

3.8 Tools

3.8.1 Questionnaires

.3.9 Data collection procedure

3.10 Data analysis, presentation and interpretation

3.10.1 Data analysis

3.10.2 Presentation

3.10.3 Interpretation

3.11 Limitations of the study

3.11.1 Time

3.11.2 Financial resources

3.11.3 Response from respondents

CHAPTER FOUR

PRESENTATION, ANALYIS AND DISCUSSION OF FINDINGS

4.0 Introduction

4.1 Back ground information about respondents

4.1.1 Gender of respondents

4.1.2 Respondents age

4.1.3 Respondents marital status

4.1.4 Respondents level of education

4.1.5 Respondents Departments

4.1.6 Response on occupation of respondents

4.1.7 Response on location of respondents

4.2 Findings on objective one: To examine the cost budgeting system of KCCA

4.2.1 Findings on resource planning at KCCA

4.2.1.1 Whether employees are always present whenever KCCA is making budgets

4.2.1.2 Whether there is allocation of funds based on priorities

4.2.1.3 Whether there is clear identification of responsibilities and delegation of authority at KCC A

4.2.2 Findings on cost estimation at KCCA

4.2.2.3 Findings whether KCCA has a budget committee

4.2.3. Findings on cost control of KCCA

4.2.3.1 Whether KCCA achieves target costs

4.2.3.2 Whether there is decentralization at KCCA

4.2.3.3 Whether KCCA ha a control system in place

4.2.4. Findings on performance evaluation

4.2.4.1Whether there is a relationship between strategic plan and performance measures

4.2.4.2 Whether there is communication and clarification of strategy implementation

4.2.4.3 Whether there is performance evaluation at KCCA.

4.2.5 Findings on flexibility of budgets at KCCA

It is important to prepare flexible budgets to cater for any change to attain a desired objective.

4.2.5.1 Whether budgets prepared by KCCA allows flexibility.

4.2.5.2 Whether there is recognition of cost partners in its flexibility

4.3 Findings on objective two: T o examine the quality of service delivery of KCCA

4.3.1 Response whether services are easily accessed by users

4.3.2 Response on communication of services

4.3.3 Response on whether there is courtesy in providing services

4.3.4 Whether there is reliability in providing services

4.3.5 Response whether there is competence

4.3.6 Response whether timeliness in is considered in providing services

4.3.7 Response whether services provided are safe

4.4 Findings on objective three: To establish the relationship between cost budgeting and the quality of service delivery

4.4.1 Resource planning and quality of service delivery

4.4.3 Whether cost control ensures monitoring

4.4.4 Whether Performance evaluation motivates managers and employees to attain a given goal.

4.4.5 Whether Poor communication reduces information

4.5 The relationship between cost budgeting and quality of service delivery

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary of findings

5.1.2 Assessment of quality of service delivery

5.2 Conclusion

5.2.1 Conclusion of findings on objective one: To examine the cost budgeting system of KCCA.

5.2.2 Conclusion of findings on objective two: To examine the quality of service delivery of KCCA

5.4 Areas of further researcher

REFERENCES

APPENDICES

APPENDIX I

QUESTIONNAIRE FOR STAFF

APPENDIX II

LIST OF TABLES

Table 1: Gender of respondents

Table 2: Age of respondents

Table 3: Marital Status of respondents

Table 4: Academic level respondent

Table 5: Analysis of presence of employees when budgets are made at KCCA

Table 6: Whether KCCA allocates its funds based on priorities

Table 7: Whether there is clear identification of responsibilities and delegation of authority

Table 8: Whether employees are involved in cost estimation at KCCA

Table 9: Whether KCCA compares various alternatives of different alternatives

Table 10: Whether there is a budget committee at KCCA

Table 11: Whether KCCA achieves target costs

Table 12: Whether decentralization exists at KCCA

Table 13: Whether there is a control system at KCCA

Table 14: Whether there is a relationship strategic plan and performance

Table 15: Whether there is communication, clarification of strategy implementation

Table 16: Whether there is performance evaluation

Table 17: Whether KCCA prepares flexible budgets

Table 18: Whether KCCA recognizes cost behavior partners

Table 19: Whether KCCA ensures accuracy of budgets

Table 20: Whether there is easy accessibly of services

Table 21: Whether services are communicated

Table 22: Whether services are provided in e friendly way

Table 23: Whether services are provided on a consistent basis

Table 24: Shows whether services are provided by skillful providers

Table 25: Whether services are provided on the expected time

Table 26: Whether services are provided are safe

Table 27: Whether resource planning helps in policy implementation

Table 28: Whether Cost estimation ensures comparison

Table 29: Whether cost control ensures monitoring

Table 30: Whether Performance evaluation motivates managers and employees

Table 31: Whether Poor communication reduces information

LIST OF FIGURES

Figure 1: Response on departments

Figure 2: Occupation of respondents

Figure 3: Location of respondents

LIST OF ACRONYMS

KCCA: Kampala Capital City Authority

MBE: Management By Exception

MBO: Management By Objective

ABSRACT

The aim of the study was to examine the cost budgeting system of KCCA, to examinethe quality of service delivery of KCCA and establish the relationship between cost budgeting and quality of service delivery in local government using Kampala Capital City Authority (KCCA) as a case study.

A sample of 42 respondents was selected using stratified sampling method to establish the relationship between cost budgeting and quality of service delivery at KCCA. Data was collected by using both primary and secondary. With primary method, data was collected through use of questionnaires while secondary data was collected from budget minutes and financial reports.

The findings from the study revealed that KCCA’s cost budgeting is poor as it does not involves most of its employees in budget preparation. There is no proper allocation of funds based on priorities and clear identification of responsibilities thus poor resource planning, ineffective control system to monitor, poor evaluation of performance of employees of different departments. All in all KCCA carries out budgeting but it does not involve most of its employees hence implementation of budget goals is poor due the fact that there poor allocation of resources and performance evaluation of performance.

The findings also indicated that quality of service delivery by KCCA is poor as is evidenced in the findings that dimensions of quality service such as accessibility, courtesy, communication, reliability, security among others is poorhence there is need to improve them for better service delivery.

The relationship between cost budgeting and quality of service delivery was found out to be positive with the correlation coefficient of 0.626. This meant that the more efforts put in improving budgets, the better the quality of service delivery.

It is recommended that involving all employees and clients in budget preparation would improve performance which in turn would improve the quality of service and also putting in practice the mission of local government which is to deliver services to citizens.

Management should not merely be satisfied simply with how it reacts to complaints but rather to adapt to customer needs. It should therefore develop a greater understanding of the way the beneficiary thinks so as to identify characteristics that satisfy their needs and wants. Once those characteristics are identified, they would assist the KCCA’s effort in increasing beneficiary comfort level which in turn would enhance the feeling of trust towards KCCA.

CHAPTER ONE

1.0 Introduction

This chapter gives the background of the study, statement of the problem, purpose of the study, research questions, scope and significance of the study.

1.1 Background.

Kamukama (2006) defined budgeting as a process of preparing and using budgets to achieve management objectives. A budget is defined as a quantitative plan of actions expressed in monetary terms and is used as a tool to control resources.Cost budgeting is the process of establishing a budget for a project, the estimated costs of work packages in order to establish a cost base line. The cost baseline will help to assure that cost are appropriately allocated and distributed by managing changes and variances which affect the project costs. The inputs to cost budgeting process are; work breakdown structure, contract and cost management plan (Arora, 2000) . Also cost budgeting can be defined as a process of allocating scarce resources between its needs and priorities. This process goes hand in hand with the planning process(Lucey, 1996S). Arora (2000) indicates a number of elements that guide cost budgeting as; resource planning, cost estimation ,cost control, performance evaluation, administration which on planning and monitoring, communication of budgets to employees and the public, cash flow which is associated with capital allocation and cost of finance, production efficiency, flexibility of budget for better achievement of management goals based on priorities..

Balunywa (1996) defined quality of service delivery as a means of conforming to customer expectations on a consistent basis. That is a measurement of how well the service level delivered matches customer expectations.Quality of service delivery is also defined as a means of making effective decisions on prioritization and assignment of work while getting insight into productivity and performance of teams and individuals. (Koltler, 1987) . Balunywa (1996) indicates number of elements that guide quality of service delivery as; easy accessibility that is approachability and ease of obtaining a service, communication that is keeping users informed in a language they understand and listening to their problems, tangibles such as physical objects like tools and equipments that are needed for carrying out a service, credibility that is where service providers are honest and trustworthy, ensuring user satisfaction by being courteous at all times and returning calls as soon as possible after receiving a message and adhering to the code of conduct of office.

Local Government provides services to its citizens like health services through hospitals, garbage collection, construction of roads, security, amongothers. Kampala Capital City Authority (KCCA)is one of Local Governments its head quarters are allocated in Kampala around parliamentary avenue.KCCA is evidenced with problems in relation to quality of service delivery which include; lack of accessibility of services such as poor access to drugs in hospitals, poor communication to users of services that is the public is not informed, poor sanitation and drainage channels this is evidenced by gabages on streets and in drainage channels, inadequate tangibles like scholastic materials in schools, gloves in hospitals, services are not delivered at the right time when they are needed by users and lack of trustworthy of service providers because of their dishonest and services are not provided on a consistent basis(Kampala city hand book 2000).

In attempt to ensure good quality of service delivery, KCCA has prompted measurers such as; ensuring sanitation by collection of gabbages, effective controls of parks and improving on roads to reduce traffic jam, ensuring accessibility by providing hospital with enough drugs, and delivering services at a right time. Despite these measures, some services are still poor like roads with potholes, poor sanitation of the city, inadequate security around the city, lack of enough physicals like public toilets and libraries and this has raised public complaints and under minds the popularity of local governments.

But these problems maybe attributed to seasonal variations like actual licenses some times drop , poor resource planning, poor cost control, poor performance evaluation, ,unreliability in the flow of budgeted funds to agencies and low levels of government, inadequate reporting on financial performance like collected revenue for better allocation of resources, inadequate funding of operation and maintenance, poor accounting systems and no link between policy making, planning, and poor cash management. As a result, this has increased public complaints about the poor quality of service delivery and this undermines popularity of KCCA and it could result into violence(Kampala city hand book 2004).

1.2 Statement of the problem

Despite the emphasis to improve on the quality of service delivery, there is poor quality service delivery by local governments who have failed to perform to public expectation. Service delivery in KCCA is not good as is evidenced with roads with potholes, lack of enough security, poor structures in schools, hospitals, a lot of jam in parks due to poor control among others despite measures like improving sanitation, providing security, cleaning of streets, workingon roads to improve service delivery but the quality of service delivery is still not yet to the expectation of public and this could be attributed poor cost budgeting and as a result, there is poor performance in terms of service delivery and this has raised public dissatisfaction and complaints hence critizing local government. And because of public complaints on poor delivery of social services it has in turn undermined the popularity of KCCA and this may result into violence and loss of lives.

1.3 Purpose of the study.

The purpose of the study isto establish the relationship between costs budgeting and quality of service delivery in local government taking Kampala Capital City Authority as a case study.

1.4 Objectives of the study

a)To examinethe cost budgetingsystem of KCCA.

b) To examine the quality of service delivery of KCCA.

c) To establish the relationship between cost budgeting and quality of service delivery.

1.5 Research questions

To conduct a meaningful research, the aims at providing answerto the following questions.

a) What is the nature of cost budgeting in Kampala Capital City Authority?

b) What is quality of service delivery in Kampala Capital City Authority?

c) What is the relationship between cost budgeting and quality of service delivery?

1.6.0 Scope of the study

1.6.1 Subject scope

The researcher will study cot budgeting asindependent variable by looking at resource planning, cost estimation, cost control,the control of expenditure, budget flexibility, and monitoring quality of service delivery as the dependent variable by looking at, accessibility of service, reliability, credulity, courtesy and communication.

1.6.2 Geographical scope

The study will be carried out in Kampala Capital City Authority located in central Buganda and is the capital city of Uganda and is in Kampala district.

1.7 Significance of the study

a) The study will help administrators of Kampala Capital City Authority on how well can cost budgeting effectively used for better management and better delivery of services.

b) The study will help to provide an up-to-date literature on therelationship between cost budgeting and quality of service delivery.

c) The study will be useful to academicians and researchers who need to carry out further study in the area.