An investigation into the capital budgeting practices of ELCT Iringa diocese, Iringa, Tanzania.

Abstract

Discounted cash flow (DCF) techniques for capital investment appraisal perform very crucial and important roles that relate to issues ranging from financial to technical, policy and socio-economic environments. Analyses need to be carried out when an organization undertakes capital expenditure on projects and programs. Capital budgets coordinate the development of the organization's long-term capital expenditure projections based on its long-term strategic plans. This dissertation is a result of a descriptive study conducted in the Iringa diocese of the Evangelical Lutheran Church in Tanzania located in Iringa district. The purposes of this study were the following: > To undertake descriptive research to understand the practice of DCF capital· budgeting by key heads of programs and projects of the ELCT Iringa diocese. >To identify key problem areas pertaining to capital budgeting that led to the deterioration of finances in the diocese of Iringa. >To provide recommendations on the alleviation of those identified problems. The study used various forms of data including, the ELCT statistical reports, financial guidelines, a library literature review and a long questionnaire that was distributed to the heads of the particular program/project. The study established the following: > The diocese of Iringa has strategic plans some of which extend to a period of three years. > The heads of programs do not have the necessary skills to pursue DCF Capital budgeting techniques for cash flows estimates falling within the estimated time frame. > The available guidelines issued by the ELCT head office that are currently used do not include the discounting rates and the time value of money when analyzing and evaluating projects and programs. > Since 1997 there has been a decrease in the income that ELCT Iringa diocese is receiving. > There is a need for ELCT Iringa to concentrate more on public relations exercises to attract key donors who could support the running of its programs and projects. In order to reduce the degree of vulnerability and improve her financial viability, it is recommended that ELCT Iringa diocese employ DCF capital budgeting techniques by developing new and better guidelines for capital budgets. Program and project heads also need to be trained in the use of newly developed guidelines. The ELCT Iringa diocese is also advised to improve its handling of finances in order to inspire confidence from its donors.