The Effect of Budget Control on Financial Performance among State-Owned Enterprises: Towards Enhancing A Budget Management Control Policy
Authors:   emmyhabineza@gmail.com, richardoliverc@gmail.com, AMA University and Colleges, Quezon City, Philippines, Habineza Emmanuel , Cortez Richard 
Published: February 2023

Rwanda’s state-owned enterprises (SOEs) are suffering from poor financial performance. For instance, 60% of them are at a loss from 2016-to-date. For example, five companies, KTRWANDA NETWORKS, MARAPHONE RWANDA, and AFRICA OLLEH SERVICES LTD, which are 49%, 95%, and 49% respectively owned by the government of Rwanda, have accumulated US$5 million in losses each year for the last five years. Based on the above problem, the study intended to assess the link between budget control and the financial performance of SOEs in Rwanda. The study analyzed the seven objectives. The components of budget control understudy include budget planning, budget control, budget implementation, and budget review. The components of financial performance are Liquidity, Profitability, and Solvency. The research is descriptive research using both qualitative and quantitative approaches. It is also correlational research because it tested the relationship between budget control as an independent variable and financial performance as the dependent variable. The respondent of this study is 106 employees of seven selected SOEs. The researcher used the questionnaire to collect primary data and as an instrument of the study. And financial report for secondary data. Descriptive statistics like Frequency and Percentage and mean and inferential statistics Correlation and regression were used to analyze data. Findings showed that in general, the level of budget planning was high with a mean of 3.75. In the general, the level of budget implementation is high with a mean of 3.78. In general, the level of budget review is high with a mean of 3.67. In general, the level of liquidity in the companies was high with a mean of 3.66. In general, the level of profitability was moderate in the last five years, with a mean of 2.96. In general, the level of solvency was high with a mean of 3.59. Generally, there is a low significant relationship between Budget Control and financial performance with a coefficient of correlation of 0.384 with a P-value of 0.000. The multiple regressions showed R Square is 0.217 showing that the budget control contributes 22% to financial performance. The challenges related to budgeting control include unpredictable market, cash flows constraint, overspending versus planned, Rigid Decision-Making, Lack of trained and skilled labor, No clear budget lines in place and absence of regular budget control, limited is available to cash, Unbudgeted activities, Not complying to the rules and regulations of the budget, Insufficient cash to meet the budgeted costs, Unplanned activities due to government priorities, fluctuation in prices for commodities and Cash inflation. The challenges related to financial performance include the Lack of modern technology, High expenses and not achieved expected revenues, lack of a core system that can control all finance modules, Accuracy and timely arrival of monthly management reports, Lack of Ownership of finance performance by all staff, Recovery that may take longer than expected, Risks associated with worldwide inflation, Cost of importation, Poor marketing and reliance on public tenders. Good investment analysis, poorly managed subsidiaries. As recommendations, the management should strive to increase the profitability of their companies from a moderate level to a high level. The management should try to increase the effect of budget control on financial performance which was 22%. The management should make a deep analysis to check why their Budget planning is not affecting their financial performance when it is known that there should be a positive effect.