CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Financial performance has long been a key area of interest among scholars and
practitioners due to its impact on organizational survival and growth (Onduso,
2013). It reflects how well financial objectives are being achieved. The literature
consistently emphasizes maximizing shareholder wealth as a central goal, which is
indicative of growth and risk minimization. High performance is viewed as a sign
of effective resource utilization (Naser & Mokhtar, 2004). As Lazaridis (2006)
noted, financial management must balance liquidity, solvency, and profitability to
enhance shareholder value.
Non-Governmental Organizations (NGOs) serve crucial roles in advocating for
policy reforms, providing essential services, and conducting capacity-building and
research activities. They respond rapidly to crises and humanitarian needs,
highlighting their dynamic role (Seaman & Young, 2010). In this context,
budgeting becomes central to their financial operations and sustainability.
Studies, such as those conducted in Canada, reveal that participatory budgeting
improves decision-making and aligns financial activities with organizational goals
(Simons, 2000). While Simons emphasizes the strategic input from participatory
processes, Merchant (1985) reinforces the importance of involving all departments
to ensure comprehensive financial planning.
Budgeting is more than planning; it encompasses goal setting, resource estimation,
and performance comparison (Smith & Lynch, 2004). This process contributes to an organization‘s coordination, planning, and control. Anderson (2011) argues that
financial stability facilitates timely service delivery, staff payment, and overall
efficiency. This makes budgeting vital to both private and nonprofit sectors.
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Governments and businesses alike increasingly rely on budgets for economic
management (Kiringai, 2002). However, success depends not only on budget
frameworks but also on effective implementation (Schick, 1999). Bartle (2001,
2008) highlights the importance of budgetary controls to ensure alignment with
plans and timely corrections in case of deviations.
With effective control systems, budgets can guide operational policies, promote
accountability, and serve as tools for planning and communication (Lucey, 2004).
Kariuki (2010) and Larson (1999) stress the dual role of budgeting in planning and
evaluation, asserting that budget integration with performance metrics enhances
organizational outcomes.
Strategic budgeting, according to Kaplan and Norton (2001), aligns goals with
financial planning, crucial for nonprofits with limited resources. In developing regions like Bamenda, financial instability necessitates robust budgeting practices
(Horton & Goga, 2005). Transparency and accountability, as emphasized by Abdul
Rahman et al. (2018), are also critical for stakeholder trust in nonprofit
organizations.
Given the limited research on budgeting and financial performance among
nonprofits in Bamenda, this study seeks to fill that gap by investigating the
relationship between budgeting practices and financial performance. This inquiry
is particularly relevant as nonprofits in Bamenda continue to face challenges in
mission fulfillment.
Despite the global recognition of the role of NGOs, many in Bamenda struggle
with sustainability and effective resource use. Financial performance, as a key
indicator of sustainability, must therefore be examined in relation to budgeting
practices to understand how nonprofits can better navigate the local economic
environment.

1.2 Statement of the Problem
Budgeting in a business has benefits and consequences that go beyond the
organizations management and have more to do with financial dimension in
general, key in which, financial performance. Budgeting forces firms ‗management
to do better forecasting. Vague generalizations about what the future may hold for
the organization are not good enough for assembling a budget. Firms‘ management
must put their predictions into definite and concrete forecasts (Tracy, 2013).
Budgeting motivates managers and employees by providing useful yardsticks for
evaluating performance. Budgets provide useful information for superiors to
evaluate firm performance and inform financial allocation strategies across various
components of a firm (Horngren, 2003). Over the years, companies have
undertaken various attempts aimed at improving its budgetary process with the
objectives of imposing greater fiscal discipline on management agencies of both
private and public companies. Today most organizations boast of having a strong
detailed and well laid budgeting legal process which the top executives use as a
tool to allocate revenue resources (Anderson, 1996).
Over the past years in Cameroon, NGOs have made significant achievements in
various sectors, including healthcare, education, environmental conservation, and
community development. For instance, the United Nations Development
Programmed (UNDP) reported in their Cameroon Country Programmed Document
(2018-2020) that NGOs played a crucial role in improving healthcare access,
especially in rural areas, through initiatives such as mobile clinics, health education campaigns, and the provision of essential medical supplies. Additionally, NGOs
like the World Wildlife Fund (WWF) Cameroon have been instrumental in
biodiversity conservation efforts, working with local communities to promote
sustainable land use practices and protect endangered species. In the education
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sector, NGOs have implemented programs to enhance access to quality education
for vulnerable populations, including girls and children from low-income families,
contributing to improved literacy rates and educational outcomes in the country.
These achievements highlight the diverse and impactful contributions of NGOs in
Cameroon, addressing critical social, economic, and environmental challenges.
Budgeting involves forecasting based on previous experiences, which means it
may not be exact. Some aspects may be either underestimated or overestimated,
which can ultimately lead to failure in achieving goals and objectives. Thus, It is
therefore for this reason that this study sick to investigate the extent to which
budgeting influences the financial performances of nonprofit making organization in Bamenda.
1.3 Research Question
1.3.1 Main Research Question:
My main research questions is ―What is the effect of budgeting on the financial
performances of non-governmental organization in Bamenda‖?
1.3.2 Specific Research Questions:
My Specific research questions are
✓What is the effect of budget planning on the financial performance of nongovernmental organization in Bamenda?
✓ What is the effect of budget control on the financial performance of nongovernmental organization in Bamenda?
✓To what extent does cash flow management influence the financial
performance of non-governmental organization in Bamenda?

1.4. Research Objectives
1.4.1 Main Research Objective
My main research objective is ―To investigate the effect of budgeting on the
financial performances of nonprofit marking organization in Bamenda‖
1.4.2 Specific Research Objectives
My specific research objective are
✓ To determine the effect of budget planning on the financial performance of
non-governmental organization in Bamenda
✓To evaluate effect of budget control on the financial performance of nongovernmental organization in Bamenda
✓ To assess the influence of cash flow management on the financial
performance of non-governmental organization in Bamenda