A review of the budgeting system in a Maltese elderly care home : a case study

Abstract

Most developed nations around the world are experiencing an ageing phenomenon, due to a combination of falling birth rates and improved life expectancy. Malta is no exception. Elderly Care Ltd. was established in 1992. The organisation can be run in the most efficient and effective manner possible only if a sound budgetary planning system is in operation, which is fundamental to ensure that the goals of the organisation are achieved and that the resources are used in an optimal manner. Unfortunately, a common charge levied against accountants is that in preparing their budgets and designing control and evaluation systems, they do not give sufficient attention to human behaviour, which considerably affects budget acceptance and target achievement. The objective of this dissertation is to evaluate and analyse thoroughly the current budgetary system and the behavioural implications of such system, after which appropriate remarks and recommendations will be forwarded. The primary data required for the compilation of this study was obtained from various personal interviews with members along the management line of the organisation. These interviews focused on the budgetary setting process and the behavioural implications of the budget employed at Elderly Care Ltd. The study revealed some areas for improvement in the current budgetary system adopted at Elderly Care Ltd. At an operational and budgeting stage the adoption of zero-based budgeting is being proposed because the incremental approach, currently employed by the organisation, has certain drawbacks. A budget committee, budget officer and budget manual are being proposed in order to illustrate the procedures involved in the budgeting process and for better coordination. With regards to reporting. a variance report is being proposed to promote better control. The introduction of a balanced scorecard would guarantee better controllability and better performance assessments. In addition, throughout all the budgetary cycle, bottom-line participation is recommended since, by effective participation, the budget will be more attainable and avoids frustration and pressure. Hence, this improves quality of service and job satisfaction. Finally, introducing a fair and just pay related scheme will help further motivate the managers. Through a sound budgetary system, Elderly Care Ltd can strengthen its position as Malta's leading elderly care service provider