APPRAISAL OF TECHNIQUES FOR EXPENDITURE CONTROL IN GOVERNMENT OWNED HOSPITALS

CHAPTER ONE

1.1     BACKGROUND OF STUDY

          In all organization, except possibly the tinnest, there is a process called expenditure or as used in the most commercial organizations , cost control process. Expenditure control has been defined as the process by which managers use effectively and efficiently the scare resources of the enterprises in the accomplishment of the organizational objectives. Most studies of the expenditure control techniques have been done in business organizations and most of the new control techniques applied in not – for – profit public corporations were developed in these organizations. Most description of the management expenditure control processes therefore tend to assume, usually implicitly but sometimes explicitly, that the process of expenditure control is taking place in a business enterprises.

          The research report in contrast, is a study of expenditure control in government owned not for profit organization. Its thesis is that the basic control concepts are the same in both profit oriented and non-profit organization but that because of the special characteristics of non-profit organizations, the application of the techniques developed in profit oriented organization are subject to certain modifications before they can be effectively applied especially to the non-profit organizations owed by the government.

          Many business persons, as well as many accountants approach not for profit organizations expenditure control with a certain amount of trepidation because of lack of familiarity with such accounting. There is no real reason for this uneasiness because except for the few special characteristics, non-profit organization expenditure control follow many of the same principles followed by commercial enterprises. One of  the special characteristic lies in the reason for their existence. In over simplified terms, it might be said that the ultimate objectives of a commercial organization is to realize net profit for the stockholders. As such the decisions made by their management are intended to increase (or at least maintain) profits, and success is measured to a significant degree by the amount of profit that these organization earn. Were as the ultimate objective of a government owned non-profit organization is to meet some socially desirable need of the community. The primary concern of the government in relation to its not-for-profit organizations is to inquire whether resources are being used in a manner consistent with goals of alocative efficiency and stabilization of the economy. The role that transcends the narrow concerns of the shareholders and arises from the government functions as a protector of the consumers interest. Thus, the decision made by the management of these organizations are intended to result in the best possible service within the available resources and their success is primarily measured by how much service they render and by how well they render it.

1.2     STATEMENT OF STUDY

          The need for effective management of resource in government owned not-for-profit organizations cannot be over emphasized. This is because while goal attainment is an important index of public service efficiency, the government can no longer pretend that the question of cost is secondary. This has necessitate in government instructing public service organization to “count down costs” as it embarks on its programmes. No wastage of financial resources should therefore, be permitted.

          It is therefore essential, that expenses should not be incurred  more than is just necessary. Extensive expansion within limited supply of funds necessitates an optimum utilization of expenditure control system designed in a manner that can allow for maximum utilization from minimum resources. Also available financial resources can only be managed optimally it there exist effective techniques for expenditure control.

          This study is thus conducted in order to appraise and review some of the available techniques for control of expenditure opened to government owned non profit organization and its applicability to those owned by the Nigerian Government especially hospitals.

1.3     OBJECTIVE OF STUDY

          The study is being carried out in order to:

1.     Examine some of the techniques for control of expenditure applied by government financed and controlled not profit organization.

2.     Highlight the main obstacles and limitations of each of the examined techniques.

3.     Advance some of the techniques that may be appropriate for use in government owned hospitals.

4.     Recommend to management team of such organization a means of improving the techniques already in use in the hospitals.

1.4     SIGNIFICANCE OF STUDY

          It is hope that the study will be valuable to the hospital management as it will enable them to be aware of the several techniques available with which they can use to control expenditure in their organization.

          To the government, the financiers the study will be a revelation because, it will expose the obstacle and limitations of the techniques of expenditure control being applied by the organizations which they finance. It is also believed that if effective techniques are used in controlling expenditure, every naira spent by the government objective of health for all by the year 200 might be reality.

          For the citizen, who pays the tax for the financiers, the study will lead, it is believed to the justification of the taxes which they pay as they will enjoy optimum social benefits for every naira levied on them.

          Finally, this research report will enable students of management especially accountancy student to have an in-depth knowledge of the techniques of expenditure control available to non-profit making organization especially those funded and controlled by the government. For the students of Accountancy this research project will help them to understand the audit of government organizations when the government relinquishes such audit over to certified public accountants.

1.5     RESEARCH QUESTIONS

          The following research questions will be used in testing the hypothesis

i.                   What are the techniques of expenditure control applied by the government owned not-profit-profit organizations

ii.                 How effective are these techniques of control

iii.              What are the main obstacles encountered in the techniques during it application

iv.              What other techniques can be used.

1.6     SCOPE AND LIMITATIONS

          The research earlier had the intention of covering all the government owned hospitals in the Eastern states of Nigeria, however time and financial constraints have hindered this intention. The study is limited to university of Nigeria Teaching Hospital, Enugu and Orthopedic Hospital, Enugu. It is believed by the researcher that the techniques used by these hospitals closely approximate the general practice 

          The accuracy and effectiveness of the report is report in hindered by lack of earlier studies of the topic. This made the review of related literature very difficult. The researcher had to deduce some of the techniques applicable from interviews held with the management and accountants of the respective hospitals.

1.7     LIST OF ABBREVIATIONS

1.     ICMA: Institute of costs and management Accountants

2.     UNTH: University of Nigeria Teaching Hospital Enugu

3.     NOHE: National Orthopedic Hospital Enugu

4.     AICPA: America Institute of Certified Public Accountants

5.     CICA: Canadian Institute of Chartered Accountants

6.     CIFPA: Chartered Institute of Finance and Public

1.8     DEFINITIONS OF TERMS

1.     EXPENDITURE CONTROL: Confinements of expanses with view of avoiding unnecessary expanses incurrence

2.     GOVERNMENT OWNED HOSPITAL: Hospitals funded and controlled by the government whether Federal, State or local authority.

3.     PROSTHESTISTS: Limb makers

4.     TRAUMA UNIT: Emergency ward for accident patients

5.     AUDITING STATEMENT AND GUIDELINES: These are basic principle and practices which members are expected to follow in the conduct of an audit.