Investigating critical factors of budgeting in higher education

Abstract

The National Development Plan (NDP) of South Africa stipulates that the higher education sector should be an agent for change in a country that is facing a plurality of socio-economic challenges. Achieving this is difficult as the amount of resources being made available to the higher educational sector is limited and steadily decreasing. Given this context, it is of the utmost importance that funding allocated to the higher education sector be utilised in an optimal manner. An efficient budget is one tool that can assist in optimising the allocation of limited resources. The study investigated the critical factors that might play a role in creating an environment where efficient budgets could be produced, specifically in the higher educational sector. Two critical factors were identified in the study: firstly, giving budgets a strategic focus and secondly, the role the human element plays as part of an effective budget. An empirical study was conducted to investigate whether the existence or nonexistence of the above mentioned factors influenced the perceived effectiveness of budgets in an institution. It was found that communication of strategic and budgetary goals, as well as managerial involvement, can play an important role in creating a budgetary environment where employees are motivated to prepare effective budgets.