Introduction

1.1 Ethiopian budgetary practice

In contrast to organized government in Ethiopia that enjoys long history, the budget as an
instrument of economic management and legislative control is a phenomenon of a recent past
not exceeding 70 years.

The first constitution of Ethiopia, which was promulgated in 1931provided that the receipts of
the government treasury should only be expended in conformity with the annual budget, fixing
the sum to be at the disposal of each ministry. This constitution further stipulated that the
annual budget should be based on the proposal of the Ministry of Finance and discussed in the
chamber of Deputies and in the senate, whose resolutions should be submitted for approval by
the emperor.

But this constitution provision had been put in to effect only after 13 years when the first
budget was actually published in the year 1944, followed by the succeeding year budget in
1945. This exercise was, however, interrupted for another eight years until 1953 when a form
of budget was published as a notice of the Ministry of Finance. The budget continued to be
issued in this manner until 1955.

The revised 1955 constitution of Ethiopia gave an entirely new impetus to budgeting which laid
the foundation of modern public sector budgetary system. The Revised constitution provided
that “ non-of the public revenue shall be expended except as authorized by Law.” The following
budgetary system and guidelines were also drawn according to which:

1. Each year the Council of Ministers presented with the approval of the emperor to the
parliament a draft law for the approval of the budget of the following year which budget was
required to accompany the said draft law

2. Each of the chambers of parliament was required to examine the budget in detail and to
vote on it item by item. However, the parliament was not allowed to fix allowances for
unforeseen expenses.

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3. If the draft law of the budget was not approved before the beginning of the fiscal year,
the budget of the previous year continued in force until anew budget law was proclaimed.

4. It was stipulated that a supplementary budget could be submitted during the course of
the fiscal year. The procedure for the approval of a supplementary budget was kept identical
that of the annual budget.

In practice the first three to four years after the promulgation of the revised constitution of
1955 considerable delay was seen in the budgetary process which entailed the late publication
of the annual budget which in turn rendered the necessary budgetary control continued to be
the ineffective for sometime. But after 1961 the procedures were streamlined, the budgets
were properly enacted and published in accordance with the requirement of the law of the
land. Quite apart from its timeliness a lot of improvements were made in the budgetary system
until the advent of 1974 revolution. Some of these improvements consisted of:

Building appropriate budgetary structure by providing heads and subheads for the
government departments and agencies

Introduction of extensive classification by object

Introduction of a firm budgetary procedures for the processing, enacting, and execution of
the annual budget

Introduction of formats and procedures for capital budgeting

Consolidation and revision of the accounting regulations.

In its presentation, the budget consisted of one consolidated central government budget which
used to be sub divided in to the ordinary revenue and expenditure budget as well as special
revenue and capital expenditure budget. The budget covered one fiscal year running from July
the 8th of the current fiscal year to July 7th of the following fiscal year. The budget used to be
presented to the parliament in four parts:

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1. The draft of the budget proclamation

2. Summary of the budgetary revenue and expenditures

3. The schedule of expenditures, for each budgetary head and subhead for each item
(group of expenditure)

4. Details to the schedule of expenditures

The budget approved by the parliament and the head of the state is published in the official
Gazette. In Ethiopia, there has been no codified budgetary law. The annual budget is based on:

 The relevant provisions of the supreme law of the land

 The proclamation defining powers and duties of the ministers

 Annual budget proclamations and supplementary budget proclamation

The consolidated budget of the central government presented ordinary expenditure budget
containing expenditures allocated to each budgetary head essentially government ministries
and agencies. The capital expenditure budget presents expenditures for specific projects,
grouped together under social development, economic development and public building. The
ordinary revenue budget showed the revenue from normal sources of recurrent domestic
revenue and revenue from external grants to be used for covering ordinary expenditures. The
special revenue consisted of foreign and domestic loans and receipts of capital nature.

The presentation of the budget proposal as an integrated central government budget had
remained as the exclusives responsibility of the Ministry of Finance and the planning organ of
the country since the introduction of the legislated budgeting system in the country. The
Ministry of Finance held the responsibility for the preparation of the recurrent budget and that
of the capital budget had been given to the planning organ of the government.

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 1.2The types of budget prepared by the hawassa city administration and
the different steps in the budget cycle.
The public body prepare two kind of budget :

I. recurrent budget and

II. capital budget

The recurrent budget prepare by the public body for the purpose of paying the employees
for their monthly salary and for requirements of the working capital .
Where as the capital budget especially budgeted for the small and huge projects or for the
purchase of different kinds of fixed asset for the public body .

The budgetary cycle of the public body described as in the following ways
First and foremost the budget is allocated from the fedral government to the southern
nation and nationality people region then after from the regional treasury to the hawassa
city administration after that it will send to the finance head of the city administration their
in the financial administration the task of allocation of the budget for different sectors
performed.

Once this allocation task is completed it will sent to the cabine , and their the cabine will
make discussion and soon after the discussion their will be budget approval . finally
notification or letter is written to the public body to use it allocated budget after that it will
sent to the software called IBEX . this in brief implies the budgetary cycle stage of the
public body called hawassa city administration .

1. The basis of accounting the public body apply

As usual like any other public body it uses the modified cash basis of accounting

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1.3 The different types of transactions and their recording (minimum 5 types of
transactions).

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