Rjeas

Research Journal in Engineering and Applied Sciences 2(2) 95-105 Emerging Academy Resources (2013) (ISSN: 2276-8467) www.emergingresource.org

Rjeas

GOAL PROGRAMMING: - AN APPLICATION TO BUDGETARY ALLOCATION OF AN INSTITUTION OF HIGHER LEARNING Ekezie Dan Dan And Onuoha Desmond .O. Department of Statistics, Imo State University, PMB 2000, Owerri Nigeria. Corresponding Author: Ekezie Dan Dan
__________________________________________________________________________________________ In this paper we discuss the application of Goal Programming in Budgetary allocation of Institutions of higher learning using Imo State University Owerri as a case study. This paper shall impact positively to the reading community in that, it will enlighten the masses that with the use of Goal programming problems, the aims of an organization can be achieved financially and otherwise. Data on the budget estimates of Imo State University Owerri were collected from Imo State Ministry of Finance and Imo State University Bursary Department between 2006 and 2008. Five goals in the budget estimates of the University namely; Personal cost, Overhead cost, Capital expenditure, Revenue (internally generated) and the Total budget were considered for the study in order of precedence (priorities). The data collected were used to formulate a goal programming problem and the formulated problem was used solved using Simplex method (using TORA software). Based on the solution obtained, it was discovered that the optimum value of Z (Z=4.24) satisfied goal 1(the personal cost goal), goal 3(capital expenditure goal) and goal 5(the total budget goal), but failed to satisfy goal 2 and goal 4, which are Overhead cost and Revenue goals respectively. From the findings, it was concluded that the Imo State University, Owerri should come within 4.24 billion naira to satisfy goal 2 and goal 4, which are Overhead cost and Revenue goals respectively. It was also recommended that the University should have a minimum budget of 4.24 billion naira in 2010 and should be reviewed upward annually, which should be properly and timely monitored by active Government budget monitoring team. Emerging Academy Resources KEYWORDS: Goal Programming, Budgetary Allocation, Aspiration level and Goal Programming Algorithm. __________________________________________________________________________________________ INTRODUCTION Goal Programming provides a way of striving Budgetary allocation is a complex task that requires toward such conflicting objectives simultaneously. cooperation among multiple functional units in any institution. There is need to have a sound knowledge According to Ignizio (1978), Goal Programming is a of organizational budgeting processes in order to tool that has been proposed as a model and approach design an efficient and effective budgetary allocation for analysis of problems involving multiple model. Despite the fact that such allocation procedure conflicting objectives. exists in the University, it is not properly structured due to the presence of multiple conflicting objectives. He pointed out that actual real world problems A formal decision analysis that is capable of invariably involve non-deterministic system for handling multiple conflicting goals through the use which a variety of conflicting non-commensurable of priorities is the Goal Programming Model. objectives exist. Goal programming (GP) is an extension of Linear Programming (LP) which is a mathematical tool to handle multiple, normally conflicting objectives. For example, (i) The Vice Chancellor of any Nigerian University may decide to increase capital expenditure and simultaneously reduce revenue. (ii) A Governor of any Nigerian State may promise to reduce the State debt and simultaneously offer tax relief to workers. In such situations, it will be difficult to find a single solution that optimizes the conflicting objectives.
95

The major strength of Goal Programming is its simplicity and ease of use. This accounts for the larger number of Goal Programming applications in many and diverse areas such as in management of solid waste, accounting and financial aspect of stock management marketing, quality control, human resources, production, transportation and site selection, space studies, agriculture, telecommunication, forestry and aviation (Aouni and Kettani, 2001). Goal programming problems can be solved by widely available linear programming computer packages as either a single linear programming, or in the case of

Research Journal in Engineering and Applied Sciences (ISSN: 2276-8467) 2(2):95-105

Goal Programming: - An Application To Budgetary Allocation Of An Institution Of Higher Learning

lexicographic variant, a series of connected linear programming. Goal programming can therefore handle relatively large number of variables, constraints and objectives. TYPES OF GOALS There are three possible types of goals: A lower, one-sided goal: - This goal sets a lower limit that we do not want to fall under (but exceeding the limit is acceptable). An upper, one-sided goal: - This goal sets an upper limit that we do not want to exceed (but falling under the limit is acceptable). A two-sided goal: - This goal sets specific targets that we do not want to miss on either side. VARIANTS Goal programming formulations ordered the unwanted deviations into a number of priority levels, with the minimization of a deviation in a higher priority level being of infinitely more importance than any deviation in lower priority levels. This is known as lexicographic or preemptive goal programming. Ignizio (1976) gave an algorithm that shows how a Lexicographic Goal Programming (LGP) can be solved as a series of linear programming model. Lexicographic Goal Programming should be used when there is a clear priority ordering amongst the goals to be achieved. BUDGETING Revenue budgeting is an approach to the budget decision rather than a particular budget system. However, revenue budgeting emphasizes on the ascendancy of the revenue constraint in budgeting calculations. Decision makers are constrained by actual limitation on revenue raising power and/or the perception of impending limitations and fears about the revenue sources. The aims are: To increase personnel cost (salary and allowance of staff). To reduce overhead cost; To increase capital expenditure; To increase revenue (internally generated); To reduce the total budget. STATEMENT OF THE PROBLEM: The statements of the problem are as follows: Capital and revenue were allocated inadequately, and without order of importance. This inadequate allocation was due to not using powerful quantitative allocation models. It is observed that allocated funds were not properly utilized with the result that money allocated for the laboratories for example is
96

diverted into hostel maintenance. In the same vain, other diversions also take place. It is not a hidden fact that, the funds allocated to tertiary institutions are often mismanaged. Imo State University, Owerri is not an exception. This retarded the growth of the institution. There is no active budget monitoring team with the result that budgets are allowed to operate any how. If there were active budget monitoring teams the problems of mismanagement and improper utilization would be reduced. THE OBJECTIVES OF THE STUDY The objectives of the study are as follows: To apply goal programming model to a reallife budgeting situation to find a compromise solution among the different conflicting goals of the Imo State University, Owerri. To minimize the total weights associated with meeting the annual budget requirements of the institution. SIGNIFICANCE OF THE STUDY The insight gained from this study will: Guide and assist decision makers of the institution in achieving the institution goals of optimum utilization of funds in improving the institution; Guide the institution in budgeting; Help the institution to forecast its budget annually; Assist in Optimization/Operational Research students for further research. LIMITATION OF THE STUDY The study is limited to the budgetary allocation of Imo State University, Owerri. The budget estimates of the University were used for the study. It is also limited to Goal Programming problems. LITERATURE REVIEW Multi-Objective and Multi-Criteria Decision Analysis Sundaram (1978) and Lee (1972) affirmed that the distinguishing characteristic of goal programming is that it allows for ordinal solution. Ignizio (1978) states that, this approach, known as a Goal Programming, although far from a panacea; often represents a substantial improvement in the modeling and analysis of multi objective problems. This presents state of the art in this field now permits the systematic analysis of a class of multi-objective problems that may involve either linear or non-linear functions in continuous or discrete variables. Further, the goal programming model provides a relatively reasonable structure under which the traditional,

Research Journal in Engineering and Applied Sciences (ISSN: 2276-8467) 2(2):95-105

Goal Programming: - An Application To Budgetary Allocation Of An Institution Of Higher Learning

single objective tools may be viewed simply as special cases. Sundaram (1978) argued that goal programming combines the logic of optimization in mathematical programming with the decision makers desire to satisfy several goals. According to Winston (1994); Goal Programming is the technique used to choose among alternative optimal solutions. According to Winston (1994), Suppose a decision maker has an additive linear cost function of the form: C(x1, x2,, xn) = c1x1 + c2x2 + + cnxn. A decision maker with this type of cost function can often use goal programming to determine his decision. He observed that a cost function of the above form defines the same trade off between each pair of attributes xi and xj. Chowdary and Slomp (2002) considered goal programming as an appropriate powerful and flexible technique for decision analysis of the troubled modern decision maker who is burdened with achieving multiple conflicting objectives under complex environmental constraints. The extensive surveys of goal programming by Schniederjans (1995), Tamiz, et al (1998), and Aouni and Kettani (2001), have reflected this. Therefore, goal programming model handles multiple goals in multiple dimensions. Taha (2003) also said that goal programming technique is for solving multiple-objective models and the aim is to convert the original multiple objective into a single goal. Tipparate (2005) stated that goal programming extended itself by reengineering many of the prior single objective linear programming with multiple and /or conflicting (traded-off) objectives. Wikipedia (2006) described goal programming as a branch of multiple objective programming (MOP), which in turn is a branch of multi-criteria decision analysis (MCDA), also known as multiple criteria decision making (MCDM). It is also thought of as a generalization of linear programming to handle multiple conflicting objective measures. Each of these measures is given a goal or target value to be achieved. Managerial and Financial Concepts The first publication using goal programming was formulated by Charnes, et al (1955), applied to constrained regression. That application applied minimization of the deviational variables as a means to apply least absolute value regression. The reason for that application was that the goal programming formulation gave the ability to constrain results to conform to the managerial salary requirement. This minimized the difference between market offers and
97

the competitors. This idea has developed into a fruitful research area, least absolute estimation. The initial development of the goal programming was due to Charnes and Cooper (1961), in a discussion of which appeared in their text, although they claim that the idea actually originated in 1952. They proposed a model and technique for dealing with certain linear programming problems in which conflicting goals of Management were included as constraints. Contini (1968) proposed stochastic goal programming (SGP) model. He considered the goals as uncertain variables with normal distribution, that the model maximizes the probability that the consequence of the decision will belong to a certain region encompassing the uncertain goal. Thus, this model tries to generate a solution that is close to the uncertain goals. Keown (1978), Keown and Taylor (1980), proposed an adoption of the chance constrained for stochastic goal programming model and transforms the model to a non-linear program, and applied it to budget allocation production problem. Dade (1981) applied goal programming in revenue budgeting. He pointed out that the concern with the process and outcome of the budgeting has regulated the revenue constraint to a position co-equal with variables. Martel and Price (1981) have developed a stochastic goal programming model for human resource planning. De, et al (1982), proposed a chance constrained goal programming model for budgeting in the production area. They considered the following constraint as a mathematical programming model:
m

. . , n,

aijxj bi j = 1, 2, . . . , m
j=1

i = 1, 2, .

xj are the decision variables. aij are the corresponding constraints and bi are the right hand side elements. Helm (1984), Chanchit and Terrell (1993), Nembou and Murtagh (1996), Abdelaziz and Mejri (2001), Easton and Rossin (1996) proposed a stochastic goal programming model for employee scheduling problem. Their model integrated the labour requirements and scheduling decision. They pointed out that this approach allowed reaching satisfactory result. Lee and Olson (1985), on the other hand, proposed an algorithm of deterministic optimization for stochastic case. This is taken into account in 1992, and the

Research Journal in Engineering and Applied Sciences (ISSN: 2276-8467) 2(2):95-105

Goal Programming: - An Application To Budgetary Allocation Of An Institution Of Higher Learning

problem of optimal utilization of resources and reservoir operation problem. Chanchit and Terrell (1993), proposed a model of stochastic goal programming for the management of hydraulic resources. This mathematical model proposed reflects three important characteristics of the reservoir management problem: Multiple objectives; Stochastic inflow; Large-scale nature of the reservoir systems. The proposal of Chanchit and Terrell (1993) enabled Abdelaziz and Mejri (2001) to propose a Chance Constrained Goal Programming (CCGP) model to deal with the operation and the control of Multipurpose reservoir system. They suggested a Multiobjective approach to solve the problem considering the release for drinking and irrigation purposes, the pumping cost and the salinity of the water. Abdulaziz and Majri (2001) considered the control of drinking water supply goal as a random variable. Other recent applications of various formulations of goal programming have been presented by Carrizosa and Romero (2001) and Leung (2001). Lam and Moy (2002) reviewed the intersection of goal programming and Discriminant Analysis beginning with Freed and Glover (1981). The Concept of Satisfaction Functions The concept of satisfaction functions in the goal programming model was introduced by Martel and Aouni (1990). Through the satisfactions, the decision maker may express his/her preferences with regard to the deviations associated with the goals set for each objective. The concept of satisfaction functions was also used for modeling the impression related to the value of the goals. These are expressed through the intervals of which the upper and lower limits are set by the decision maker. Martel and Aouni (1998) and Aouni (1996) concluded that the satisfactory functions have a double role. Rogers and Bruen (1998) explained the decision makers sensitivity to the deviations observed between the set goal and the level achieved on the other hand. They took into account the imprecision or uncertainty associated to the value of the goal. Technology and Planning The first engineering application of the goal programming, due to Ignizio in 1962, was the design and placement of the antennas employed on the second stage of the Saturn V the vehicle used to lunch the Apollo space capsule which landed the first men on the moon.
98

Stam and Kuula (1991) applied goal programming technique for selecting a flexible manufacturing system. They, identified production volume, cost and flexibility as multiple objectives. Shafer and Rogers (1991) used goal programming model for formation of manufacturing cells. Minimum setup time, minimum intercellular movements, minimum investment in new equipment and maintaining acceptable utilization levels were identified as the multiple objectives. Premchandra (1993) used goal programming method for the activity crashing in project networks. The multiple objectives identified were as follows: Crashing time of an activity Project cost Project time Lyu et al (1995) used a goal programming model for which the multiple objectives were as follow: Demand of each boiler; Environmental requirement of the sulphur oxide emission; Heating value requirements; Volatile matter requirement; Inventory. Goal programming approach has been applied for a variety of applications. Problems solved by goal programming technique are as follows: production planning in a ship repair company (Tabucanon and Majumder 1989) and production smoothing under just-in-time manufacturing environment (Kim and Schnierderjans 1993). Kalpic, et al (1995) successfully applied linear goal programming technique for planning objectives which include calculating the optimum production Mix and achieving the capacity and material balance while maximizing the contribution and minimizing the duration of the longest resources management. Nagarur, et al (1997) illustrated the use of zero-one goal programming for the development of a production planning and scheduling model in an injection molding factory with an objective to minimize the total cost of production, inventory and storages. REVIEW OF RELATED VARIANTS AND FORMULATIONS/SOLUTIONS Dykstra (1984) described that an inferior solution is not always a problem as long as the model is correct. It is a problem if the model does not reflect the decision makers actual preference. In some cases, non-inferior solution may not be intrinsically superior to an inferior solution especially in the case of natural resources problem. Dykstra (1984) argued that the initial run with unique weight can be biased, although this technique makes

Research Journal in Engineering and Applied Sciences (ISSN: 2276-8467) 2(2):95-105

Goal Programming: - An Application To Budgetary Allocation Of An Institution Of Higher Learning

weighting more defensive than a subjective weighting. The goal programming solution has a high tendency to be inferior (dominated) with respect to technological constraints. To deal with this drawback, Field et al (1980) presented a technique to ensure non-inferior goal programming solutions. The technique is to apply goal programming and linear programming as a complementary package. Winston (1994) stated that; pre-emptive goal programming problems can be solved by an extension of the simplex known as the goal programming simplex. To prepare a problem for solution by the goal programming simplex, we must compute in rows with the ith row corresponding to goal i. Nembou and Murtaph (1996) presented a chance constrained goal programming approach to solve a hydro-thermal electricity generation planning problem in Port Moresby, Papus New Guinea. Their model considers explicitly the uncertainty and seasonal variation inherent in hydro-thermal electricity demand and supply. Tamiz et al (1998) suggested straight restoration, preference based restoration and interactive restoration which employ cardinal weightings in lexicographic goal programming to ensure noninferior solutions. Tamiz et al (1998) mentioned the case whereby an inefficient objective and an unbounded objective causes the entire model inefficient and unbounded. Hillier and Lierberman (2001) said that Goal programming problems can be categorized according to the type of mathematical programming model that it fits except for having multiple goals instead of a single objective. In the case of non pre-emptive goal programming, all the goals are of roughly comparable importance but in the case of pre-emptive goal programming, there is a hierarchy of priority levels for the goals. Hillier and Lierberman (2001) concluded that goal programming and its solution procedures provide an effective way of dealing with problems where management wishes to strive towards several goals simultaneously. The key is a formulation technique of introducing auxiliary variables that enable converting the problem into a linear programming format. Hillier and Lierberman (2001) stated that to complete the conversion of the goal programming problem to a linear programming model, we must incorporate the definitions of the deviational variables d i+ and d idirectly into the model because the simplex method considers only the objective function and the constraints that constitute the model.
99

According to Romero and Rehman (2003) Both Lexicographic Goal Programming (LGP) and Weighted Goal Programming (WGP) are best known and widely used as goal programming variants. However, the variants lie heavily on the great amount of information that this goal targets, weights as well as pre-emptive ordering of preferences. These requirements can cause possible weakness if the decision makers are not confident of the value of these parameters. In many cases, the decision makers could not specify meaningful information on weights, or the goals are unrelated to each other so that it is not possible to drive objectively measured preference weights. If it is the case, the relative value of the shadow prices of constraints from the unique weight goal programming run can be used to drive the real preference weights. Diaz-Balteiro and Romero (2003) affirmed that weighted goal programming (WGP) and lexicographic goal programming (LGP) can be mixed in a model; for example, weighted lexicographic and min-max lexicographic goal programming. Taha (2003) also contributed that the weights and the pre-emptive methods convert the multiple goals into a single objective function stating that these methods do not generally produce the same solution. Neither method, however, is superior to the other because each technique is designed to satisfy certain decisionmaking preferences. RESEARCH METHODOLOGY/DATA COLLECTION Goal Formulation Let fi(x) be the mathematical representation of the objectives which can be linear or nonlinear (usually linear). Let gi be the aspiration level, three possible goals are (i) fi(x) gi (ii) fi(x) gi (iii) fi(x) = gi In regular Linear Programming, these would be hard constraints but in Goal programming, we measure the deviation from the goal. Goal Programming Formulation The general form of the goal programming model is given by Minimize Z = (d i+ + d i-),
im

Subject to .
n

. (1)

(aij xj + d i- - di+) = bi (i = 1,2,,m)

j=1

(j = 1,2,,n) di+, di- , xj 0,

Research Journal in Engineering and Applied Sciences (ISSN: 2276-8467) 2(2):95-105

Goal Programming: - An Application To Budgetary Allocation Of An Institution Of Higher Learning

where d i+ is the positive deviation variable from overachieving the ith goal; di- is the negative deviation variable from underachieving the ith goal and xj is the decision variables; aij is the decision variable coefficients; It is pertinent to note here that; d i+, di- are called deviational variables because they represent the deviations above and below the right hand side of the constraint i. The deviational variable cannot be basic variables simultaneously, because by definition they are dependent. This implies that in any simplex iteration, at most, one of them can assume a positive value. If the original ith inequality is of the form and its di+ 0, then the ith goal will not be satisfied. However, di+ and d i- allow us to meet or violate the ith goal at will. A good compromise solution aims at minimizing the amount by which each goal is violated. Goal Programming Algorithms There are two algorithms for solving goal programming problems. These algorithms convert the multiple goals into a single objective function. The methods are: The weights method; The Preemptive method; The Weights Method In the weights method, the single objective function is the weighted sum of the functions representing the goals of the problem. The weights goal programming model is of the form;
n

The Pre-Emptive Method In this method, the decision maker must rank the goals of the problem in order of importance. The model is then optimized using one goal at a time such that the optimum value of a higher priority goal is never degraded by a lower priority goal. This variant is known as lexicographic goal. The proposed pre-emptive model is given as
n

Minimize Z = pi (d i+ + di-),
i=1

Subject to .
j=1

.
m

. (3)

(aijxj + di+ di-) = gi

(i = 1, 2, . . ., n) (j = 1, 2, . . . , m) di+, di-, xj 0, where pi is the preemptive factor/priority level assigned to each relative goal in rank order (that is p1 > p2 > > pn ). The weights goal programming and the preemptive or lexicographic goal programming can be combined in a model, for example weighted lexicographic goal programming. The weights and rank model according to Kwak et al (1991) is given by
n n

Minimize Z = Pi{wik+di+ + w ik-d i- }

i=1 i=1

Subject to .
m j=1

. (4)

(aijxj + di- di+) = gi

Minimize Z = {(wi+ + wi-)d i},

i=1

Subject to .
m j=1

(i, k = 1, 2, . . . , n) (j = 1, 2, . . . , m) di+, di-, xj 0 di-) = gi where di+ and di- are deviational variables; xj = decision variables; aij = decision variable coefficients; wi+ and wi- are non-negative constraints representing relative weights; pi = preemptive factor/priority level assigned to each relevant goal in rank order (that is p1 > p2 > > pn). THE BASIC STEPS IN FORMULATING GOAL PROGRAMMING MODEL The basic steps in formulating a goal programming model are as follows: (i) Determine the decision variables; (ii) Specify goals including goal types (oneway or two-way goal) and their targets; (iii) Determine the pre-emptive priorities; (iv) Determine the relative weights; (v) State the minimization objective functions of the deviation;
100

. (aijxj +

. (2) di+

(i = 1, 2, . . ., n) (j = 1, 2, . . . , m) di+, di-, xj 0, where wi+ and wi- are non-negative constraints and can be real numbers representing the relative weights assigned within a priority level to the deviational variables. The parameter wi+ represents positive weights that reflect the decision makers preference regarding the relative importance of each goal; while wi- is the negative weights of the decision makers preference. The determinant of the specific values of these weights is subjective.

Research Journal in Engineering and Applied Sciences (ISSN: 2276-8467) 2(2):95-105

Goal Programming: - An Application To Budgetary Allocation Of An Institution Of Higher Learning

(vi)

(vii)

State other given requirements, example, technological constraints, nonnegativity (linear goal programming); Finally, make sure that the model can exactly specify the decision makers preferences.

The simplex method (BigM) by Tora package was used to analyze the weighted goal programming formulation. PRESENTATION AND ANALYSIS OF DATA This chapter presents and analyzes the data obtained from the Imo State Ministry of Finance and Imo State University, Owerri, as indicated above. The five conflicting goals in the budget estimates of the institution over the period of three years (2006 2008), were considered. Summary Of The Budget Estimates Over The Three Years (2006 2008) Table 1 gives the budget estimates summary of the institution over the period from 2006 2008, showing the personnel cost, overhead cost, capital expenditure and revenue.

SOURCES OF DATA COLLECTION FOR ANALYSIS The data used in this research are of the secondary type as it exists in the published budgets and unpublished budget folder. The data for this study were collected from the Imo State Ministry of Finance, State Secretariat, Owerri and Bursary Department of Imo State University, Owerri. DATA ANALYSIS TECHNIQUE In this study, the goal formulation and weights goal programming methods were used.

Table 1 Outline of the budget estimates for the three years

ITEM (GOAL) Personnel cost Overhead Cost Capital Expenditure Revenue (Internally Generated) Total 2006 1,189,825,252 313,658,446 863,000,000 316,732,540 2,683,216,238 Allocation in Naira/Year 2007 1,570,289,718 433,304,000 1,019,894,886 529,043,360 3,552,531,964 2008 1,669,380,200 590,241,950 803,306,000 728,722,210 3,791,650,360 TOTAL 4,429,495,170 1,337,204,396 2,686,200,886 1,574,498,110 10,027,398,562

Coded Budget Estimates over the Period of Three Years (2006 2008) Table 2 gives the coded budget estimates of the personnel cost, overhead cost, capital expenditure and revenue. The reason for coding this budget estimates is to enable one work with small figures in the analysis. Table 2 Coded budget estimate for years 2006 2008
ITEM (GOAL) Personnel cost Overhead Cost Capital Expenditure Revenue (Internally Generated) Total Allocation in Billion 2006 1.19 0.31 0.86 0.32 2.68 Naira/Year 2007 1.57 0.43 1.02 0.53 3.55

Assignment of Weights to the Goals The objective function coefficient for the variables associated with the goal i is called the weight for the goal i. The most important goal has the largest weight and so on. Let w i be the weight for goal i, that could range from 2, 4, 6, the most important goal has the highest weight and so on. Coded Budget Estimates And The Assigned Weights To The Goals The table below gives the coded budget estimate and the assigned weights to the goals.

Table 3 Coded budget estimates with weights Allocation in Billion Naira/Year ITEM (GOAL) 2006 200 200 TOT 7 8 AL Personnel cost 1.19 1.5 1.6 4.43 7 7 2008 TOTAL Overhead Cost 0.31 0.4 0.6 1.34 1.67 4.43 3 0 0.60 1.34 Capital Expenditure 0.86 1.0 0.8 2.68 0.8 2.68 0.73 1.58 2 Revenue (Internally 0.32 0.5 0.7 1.58 3.8 10.03 Generated) 3 3 Total 2.68 3.5 3.8 10.03 5 ASPIRATION LEVEL (Target Value) of the Goals The goals statements of the budget of the institution were as follows: Goal 1: Raise Personnel Cost (Salary and allowances of staff) by at least N3 billion per annum; Goal 2: Reduce Overhead cost by at most N1.5 billion per annum; Goal 3: Raise capital expenditure by at least N1 billion per annum;

Wi 8 2 6 4 10

101

Research Journal in Engineering and Applied Sciences (ISSN: 2276-8467) 2(2):95-105

Goal Programming: - An Application To Budgetary Allocation Of An Institution Of Higher Learning

Goal 4: Raise revenue (internally generated) by at least N4.0 billion per annum; Goal 5: Reduce the total Budget by at least N7 billion per annum. THE GOAL FORMULATION Let x1 = Amount budgeted in the fiscal year 2006 x2 = Amount budgeted in the fiscal year 2007 x3 = Amount budgeted in the fiscal year 2008 x1, x2, and x3 are the decision variables. The goals can be stated mathematically as follows: 1.91x1 + 1.57x2 + 1.67x3 3 (Personnel cost constraint) 0.31x1 + 0.43x2 + 0.6x3 1.5 (Overhead cost constraint) 0.86x1 + 1.02x2 + 0.8x3 1 (Capital expenditure constraint) 0.32x1 + 0.53x2 + 0.72x3 4.0 (Revenue constraint) 2.68x1 + 3.55x2 + 3.8x3 7 (Budget constraint) x1, x2, x3 0. THE GOAL FORMULATION Table 4
Basic variables Name of variables Minimize Z Constraint 1 Constraint 2 Constraint 3 Constraint 4 Constraint 5 x1 0 1.19 0.31 0.86 0.32 2.68 x2 0 1.57 0.43 1.02 0.53 3.55 x3 0 1.67 0.60 0.80 0.72 3.80 x4 d 1+ 8 -1 0 0 0 0 x5 d 2+ 0 0 -1 0 0 0 x6 d3 + 6 0 0 -1 0 0

Let d i+ = amount by which we numerically exceed the ith goal. di- = amount by which we are numerically less than the ith goal di+ and di- are referred to as deviational variables. Let Z be the weighted sum associated with meeting the annual budget requirements. Using the weighted goal programming model stated in (2), the goal programming formulation can be mathematically stated as follows: Min Z = 8d1++ 2d2- + 6d3+ + 4d4+ + 10d5- (objective function) ... (i) Subject to: 1.19x1 + 1.57x2 +1.67 x3 + d 1- - d 1+ = 3 (ii) 0.31x1 + 0.43x2 + 0.60x3 + d 2- - d 2+ = 1.5 (iii) 0.86x1 + 1.02x2 + 0.8x3 + d3-- d3+ = 1 (iv) 0.32x1 + 0.53x2 + 0.72x3 + d 4-- d4+ = 4 (v) 2.68x1 + 3.55x2 + 3.8x3 + d5-- d5+ = 7 (vi) x1, x2, x3, d1 +, d2+, d3+, d4+, d5+, d1-, d2-, d3-, d4-, di- 0. The Input Data Table 4, gives the input data for the analysis of budgetary allocation in Imo State University, Owerri from 2006 2008 inclusive.

PROGRAMMING

x7 d4 + 4 0 0 0 -1 0

x8 d 5+ 0 0 0 0 0 -1

x9 d 10 1 0 0 0 0

x10 d2 2 0 1 0 0 0

x11 d3 0 0 0 1 0 0

x12 d 40 0 0 0 1 0

x13 d 510 0 0 0 0 1

RHS

= = = = =

3 1.5 1 4 7

Footnote In the above input data, Let x4 = d1+, x5 = d2+, x6 = d3+, x7 = d4 + and x8 = d5+. Let x9 = d1-, x10 = d2-, x11 = d3-, x12 = d4- and x13 = d5-. The Tora software was applied on Table 4 to obtain the table below. Interpretation Of The Solution The application of the simplex method (Big M Method) by Tora package, gives the optimum solution as follows: Z = 4.24, x1 = 0, x2 = 0, x3 = 1.84 d1+ = 0.08, d2+ = 0, d3+ = 0.47, d4+ = 0, d5+ = 0, d1- = 0, d2- = 0.39, d3- = 0, d4- = 2.66 and d5- = 0. Since the value of Z is not equal to zero, the solution satisfies goal 1, goal 3, and goal 5, but fails to satisfy goal 2 which is the Overhead cost and goal 4 which is the Revenue goal. Predominantly, for d2- = 0.39, it means that overhead cost level (target) of 1.5 billion naira has a shortfall of 0.39 billion naira in the Overhead cost; which indicates that the actual overhead cost should be 1.89 billion naira, and for d4= 2.66, it means that the Revenue goal level (target) of 4 billion naira exceeded the Revenue goal by 2.66 billion naira; which indicates that the actual revenue should be 1.34 billion naira.
102

On the other hand, the budget goal of at least 7 billion naira is not violated as d5- = 0. DISCUSSION OF FINDINGS The study examined the problem of conflicting goals in budgeting situation in Imo State University, Owerri. Each of the inequalities in the goal formulation represents a goal that the institution aspires to satisfy. However, compromised solutions among the conflicting goals were found, and the approach to finding a compromise solution is to convert each inequality into flexible goal in which the corresponding constraints may be violated. The simplex method (BigM Method) was used to solve the weighted goal programming model formulated, and the optimal solution obtained by TORA package is Z = 4.24, x3 = 1.84, d1+ = 0.08, d3+ = 0.47, d2- = 0.39, d4- = 2.66, all the remaining variables are zero. Since the optimum is not equal to zero, this indicates that at least one of the goals is not satisfied. Z is the weighted sum associated with meeting the annual budget requirements.

Research Journal in Engineering and Applied Sciences (ISSN: 2276-8467) 2(2):95-105

Goal Programming: - An Application To Budgetary Allocation Of An Institution Of Higher Learning

All but goal 2 and 4 were fully satisfied, which is the overhead cost and the revenue goals respectively. Specifically, d2- = 0.39; shows that Overhead cost level (target) of 1.5 billion naira has a shortfall of 0.39 billion naira and d4- = 2.66, indicates that the revenue goal level (target) of 4 billion exceeded the revenue goal by 2.66 billion. On the contrary, the budget goal of at least 7 billion target is not violated as d5- = 0. The Z value of 4.24 billion indicates that if goal 1, 3 and 5 were satisfied, the institution should come within 4.24 billion naira budget in order to meet goal 2 and 4, which are Overhead cost and Revenue goals respectively. Hence, the minimum budget of the University should be 4.24 billion naira in the next fiscal year 2010 and should be reviewed upward annually. CONCLUSION This study, examined the budgeting system of Imo State University using goal programming model. The results demonstrated that all the goals formulated were met, except the overhead cost and revenue target. The Universitys minimum budget should be 4.24 billion naira to meet goal 2 and 4 which are the overhead cost and the revenue goals. Optimistically, it can be said that the University has not performed below expectation, the institution should continue with their budget allocation formula with increased adaptation to new scientific techniques. RECOMMENDATION Based on the findings of this study, the following recommendations are made: (1) The personnel cost should be raised by at least 3 billion. The overhead cost should be increased to at most 0.39 billion. (2) The capital expenditure should be increased by at least 1 billion. (3) The minimum budget of the University should be 4.24 billion per annum and should be reviewed upward annually. (4) Budgeting (capital and resources allocation) should be based on new technology (preferable goal programming model). (5) The budget should be properly managed and utilized. (6) Timely and active budget monitoring team should monitor the budget of the institution. (7) In all, the minimum budget of 4.24 billion should cover all the University needs. REFERENCES Abdelaziz, B.F and Mejiri, S. (2001). Application of goal programming in multi-objective reservoir operation model in Tunisia. European Journal Of Operational Research 133(2), 352 361.
103

Aouni, B (1996). Lin estimate des expression quandratiques en programmation math ematique: Des bornes plus efficacies, Administration Sciences Association of Canada, Management Science 17(2), 38 46. Aouni, B. and Kettani, O (2001). Goal Programming Model: A glorious history and promising future. European Journal Of Operations Research 133(2), 1 7. Carrizosa, E. and Romero, M.O. (2001). Combining Maxmin and Minmax: A goal programming approach; Operations Research 49(1), 169 174. Cavalier, T. M., and Ignizio, J.P., (1994). Linear Programming, Pretence Hall. Chanchit, C., and Terrell, M. P. (1993). A multiobjective reservoir operation model with stochastic inflows. Computers and Industrial Engineering 24 (2), 303 313. Charnes, A., Cooper, W.W. and Ferguson (1955). Optimal estimation of executive compensation by linear programming, Management Science 1, 138 151. Charnes, A. and Cooper, W.W. (1961). Management Models and Industrial application of Linear Programming, Wiley, New York. Charnes, A., and Cooper, W.W. (1952). Chance constraints and normal deviates. Journal of American Statistics Association 57, 132 148. Chowdary, B.V., and Slomp, J. (2002). Production Planning under Dynamic Product Environment: A Multi-objective Goal Programming Approach. Management and Organization. Pp 112. Contini, B. (1968). A stochastic approach to goal programming. Operations Research 16(3), 576 586. Dade, C. (1981). Revenue Budgeting: A Decremental Application, P.I Jerry Mccaffery, Indiana University, Bloomington. De, P. K, Acharya, D. and Sahu, K.C (1982). A chance-constrained goal programming model for capital budgeting. Journal of the Operational Research Society. 33(7), PP. 635. Diaz-Balteiro, L and Romero, C (2003). Forest Management optimization Models when carbon captured is considered: A Goal Programming Approach. Forest Ecology Management. 174:447 457. Dykstra, D.P (1984). Mathematical Programming for National Resource Management. MCGraw-Hill, New York.

Research Journal in Engineering and Applied Sciences (ISSN: 2276-8467) 2(2):95-105

Goal Programming: - An Application To Budgetary Allocation Of An Institution Of Higher Learning

Easton, F.F and Rossin, D. F, (1996). A stochastic goal programming for employee scheduling. Decision Science. 27(3), 54 568. Field, R.C, Dress, P.E and Fortson, J.C (1980). Complementary Linear and Goal Programming procedures for Timber Harvest Scheduling, Forest Science. 26: 121 133. Freed, N. and Glover, F. (1981). Simple but powerful goal programming models for discriminate problems, European Journal of Operations Research, 7, 44 66. Helm, J. C (1984). A stochastic goal programming for employee scheduling. Decision Science 7(5), 13 18. Hillier, F.S and Lieberman, G.J (2001). Introduction to Operations Research. Seventh Edition; McGrawHill, New York, 7, 331 340. Ignizio, J. P (1976). Goal Programming and Extensions, Lexington books, Lexington, MA. Ignizio, J.P (1978). A review of Goal Programming: A tool for Multi-Objective Analysis. Pennav Lvania State University, University Park, pp 1109. Kalpkic, D., Mornar, V., and Baranovic, M, (1995). Case study based on multi period. Multi-Criteria Production planning Model. International Journal Of Production Economics, 87, 658 669. Keown, A. J., (1978). A chance-constrained goal programming model for bank liquidity management. Decision Sciences, 9(7), 93 106. Keown, A. J., and Martin J. D. (1974). A chance constrained goal programming model for working capital management. The Engineering Economist 22(3), 153 174. Keown, A. J., and Taylor III, B. W., (1980). A chance-constrained integer goal programming model for capital budgeting in the production area. Journal of the Operational research Society, 31(7), 579589. Kim, G. C. and Schniederjams, M. J., (1993). A multiple objective model for a just-in time manufacturing system environment. International Journal of Operations and Production Management 13(12), 49-61. Kwak, N. K., Schnierderjams, M. J. and Warkenstin, K. S. (1991), An application of linear goal programming to the Marketing distribution. European Journal of Operations Research, 52, 334 344.
104

Lam, K. P., and Moy, J. W. (2002). Combination discriminant methods in solving classification problems in two-group discriminant analysis. European Journal of Operational Research, 138, 294 301. Lee, S. M. and Clayton, E. R., (1978). A goal programming model for academic resources allocation. Management Science 18(8), 395 408. Lee, S. M. and Olson, D. L. (1985). Gradient algorithm for chance-constrained nonlinear goal programming. European Journal of Operational Research Society, 22(3), 359 369. Leung M. T. (2001). Using investment portfolio return to combine forecasts; A multi objective approach. European Journal of Operational Research, 134, 84 102. Lyu, J., Gunasekaram, A., Chen, C. Y., and Kao, C. (1995). A goal programming model for the goal blending problem; Computer and Industrial Engineering, Vol. 28, No. 4, 861 868. Martel, J. M., and Aouni, B., (1990). Incorporating the decision makers preferences in the goal programming model. Journal of Operational Research Society, 4(12), 1121 1132. Martel, J. M., and Aouni, B., (1998). Diverse imprecise goal programming formulation. Journal of Global Optimization, (12), 24 34. Martel, A., and Price, W., (1981). Stochastic programming applied to Human resource planning. Journal of the Operational Research Society, 32(3), 187 196. Nagarur, N., Vrat, P., and Duongsuwan, W. (1997). Production Planning and Scheduling for injection molding of pipe fittings; a case study. International Journals of Production Economics, 53, 157 170. Nembuo, C. S., and Murtagh, B. A., (1996). chance-constrained programming approach modeling hydrothermal electricity generation Papua New Guinea, Asia Pacific. Journal Operations Research, 13,105 144. A in in of

Premchandra, I. M., (1993). A goal programming model for the activity crashing in project networks. International Journal of Operations and Production Management, 13(6) 79 85. Rogers, M. and Bruen, M. (1998). Choosing realistic values of indifference, preference and veto threshold for use with environmental criteria within Electra. European Journal of Operational Research, 107, 542 551.

Research Journal in Engineering and Applied Sciences (ISSN: 2276-8467) 2(2):95-105

Goal Programming: - An Application To Budgetary Allocation Of An Institution Of Higher Learning

Romero, C and Rehman, T. (2003) (Second edition): Multiple Criteria Analysis for Agricultural Decisions. Development in Agricultural Economics, 5. Elsevier Science Publishers B.V. Shafer, S. M., and Rogers, D. F. (1991). A goal programming approach to the cell function problem. Journal of Operations Management. 10(1), 28 43. Stancu Minansian, I. M., and Giurgifiu, V. (1985). Stochastic Programming with multi objective functions. D. Reidal publishing Company, Dordrecht. Stam, A. and Kuula, M. (1991). Selecting a flexible Manufacturing system using Multiple criteria analysis. International Journal of production Research, 29(4), 803 820 Steuer, R. E., (1986). Multiple criteria optimization: Theory, Computation, and Application. John Wiley and Sons, New York. Taha, H. A (2003). Operation Research: An Introduction, seventh edition, prentice-Hill delhi, India. 8, 347 360. Tabucanon, M. T and Majumda, S. (1989). Production planning in a ship repair company in Bangladesh, proceedings of international conference on MCDM: Application in industry and service; Asia Institute of Technology, Bangkok, 47 61. Tamiz, M., Jones, D. and Romero, C. (1998). Goal programming for Decision making; An overview of the current state of the art. European Journal of Operational Research, 111, 569 581. Winston, W. L. (1994). Operations Research, Applications and Algorithms. Third edition, Duxbury Press, Belmont, California. 14, 772 782.

105