BUDGET PREPARATION ALLOCATION AND UTILIZATION

( A CASE STUDY ON SILTE ZONE FINANCE

ORGANIZATION )

A RESEARCH PAPER SUBMITTED TO IN PARTIAL

FULFILLMENT OF THE REQUIREMENT FOR BA DEGREE
IN ACCOUNTING.

PREPARED BY : ABDULREZAKE YASSIN

ADVISOR : ATO ESHETU YADECHA

ACCOUNTING DEPARTMENT
BUSINESS AND ECONOMICS COLLEGE
JIMMA UNIVERSITY
May, 2012
Jimma, Ethiopia
Abstract

The general objective of this study is express or assessing budget preparation, allocation
and utilization on the case of silte zone finance department and makes suggestions so as
to its finance. In preparing these research both primary and secondary information was
used. Secondary information has been obtained from organization document, books and
government published news and so on. The primary source of data line, interview and
observation were conducted.
On the bases of analysis and interpretation, the findings with respect to the objective of
the study was reached by using result of analysis and interpretation will make the
conclusion for budget preparation, allocation and utilization in the organization.

The survey of finding and results from these study shows that silte zone finance and
economic development face serious budget problems should be solved to attain the
proposed objectives of the organization to take remedial action so as to solve the
organizations major budget related problems, some of the possible corrective measures
are recommended as follows.
The organization should adopt sound budget controlling mechanism in order to avoid
over or under utilization of budget.
The organization should put the right person at the right position with the right time.
It is better to the organization to use projection.

I
Acknowledgment

First of all I would like to express my thanks to almighty God for nothing I have ever
done without his gracious help. Secondly, I would like to extend my gratitude to my
technical advisor Eshetu Yadecha for his regular follow up instructive ideas and
comments.

Finally, I would like to thank Yordanos Adamassu for her patient and skill fully typing
this paper.

II
Table of content

Contents
Abstract................................................................................................................................I
Acknowledgment................................................................................................................II
Table of content.................................................................................................................III
List of tables........................................................................................................................V
Chapter one: Introduction....................................................................................................1
1.1. Back ground of study.................................................................................1
1.2. Background of the organization................................................................................2
1.3. Statement of the problem...............................................................................2
1.4. objectives of the study....................................................................................4
1.5. Significance of the study................................................................................5
1.6. Scope and limitation of the study................................................................5
1.7. Limitation of the study....................................................................................5
1.8. Organization of the paper...............................................................................6
1.8. Research Design and methodology.............................................................6
1.10Sampling Design................................................................................................7
1.11.Data analysis............................................................................................................7
Chapter Two :Literature review...........................................................................................8
2.1 budget and budgeting concept.......................................................................8
Definition of budget and budgeting.....................................................................8
2.2 historical development of modern government budget..........................8
2.3 budget and budgeting cycle..........................................................................10
2.4 advantages of budget......................................................................................10
2.5 Types of budget.................................................................................................11
2.5.1 Capital Vs current budget.................................................................................11
Capital budget...........................................................................................................11
Current budget.........................................................................................................11
2.5.2. fixed Vs flexible budget..............................................................................11
2.6. budget planning and preparation at the regional level......................12
2.6.1. Budget allocation and utilization...........................................................12
2.7. Role of Budget........................................................................................................13
2.8.Budget approach......................................................................................................13
The object of expenditure approach..............................................................................14
Performance approach...................................................................................................14
Chapter Three : data analysis and presentation.................................................................16
3.1. Characteristics of respondents................................................................................16
3.2. Result of interview and observation.......................................................................23
Chapter four.......................................................................................................................28
Summary, conclusion and Recommendation....................................................................28
4.1 Summary and conclusion.........................................................................................28
4.2. Recommendation................................................................................................29

III
Reference...........................................................................................................................31
APPENDIX........................................................................................................................32

IV
 List of tables

Table 3.1. Description of respondents respect to their age and educational level.............16
Table 3. 2. Assessment of take part of employees in budgeting planning and controlling
process...............................................................................................................................18
Table 3.3. Respondents response budget deficit occur with in the organization...............19
Table 3.4. Respondent response to consider the past performance for to days budget
preparation.........................................................................................................................19
Table 3. 5. Assessment of budget revision in order to update for any special case..........20
Table 3. 6. The response of sample respondents on if they think that there exists proper
implementation of budgetary system developed by MOFED...........................................20
Table 3. 7. Respondents response for periodic training given by the organization
regarding budget planning utilizing...................................................................................20
Table 3.8. Assessment of fair budget allocation among woradas......................................21
Table 3.9. Respondents opinions regarding to the existing budget problem....................21
Table 3. 10. problem related to budget request.................................................................22
Table 3.11. Variance analysis on adjusted budget and current year expenditure of Bureau
of Finance and Economic Development report (2001-2003 in birr).................................25

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Chapter one: Introduction

1.1. Back ground of study

Budget is a quantity of future plan of action and aid to the coordination
and implementation of plan. It is systematic and formalized approach for
stating and communicating the firm’s expectation. A budgeting system
builds on historical or actual performance. Budget is the most widely
used method of its unique feature in controlling financial resources.
Because of its unique feature in controlling financial resources,
preparation of en annual or other wise budget is amendatory in most of
the entities. Also it is a financial or quantitative statement, prepare
containing the planning and controlling procedures, policies and
regulation to be pursued during the period.
Budget identities source of income and assist in planning expenditure
most organizations and many individual find careful planning is an
essential activity in achieving goal. Most people, business and
government have limited fund to be spend , and so they must decide
which expenses most important to achieve the organization prestated
objectives. Budgeting means the act of preparing budget. So budget
preparation use not only planning and also controlling and utilizing the
financial resources. Planning always involves specifying the type and
quality of service that will be provided to constituents, estimating service
cost and determining how to for the service. In general budgets are
ensuring allocation, efficiency, motivation, enhance controlling ,
communication and coordination .
Budget can be applied for every economic resource like money material
and human resource. The budget division allocated the budget amount
depending up on the approved budget of the work units . all work units
have a total budget of the work unit. All work unit have atonal budget

1
ceilings up to which they can prepare their annual operating budget not
compared last year to the previous year.

1.2. Background of the organization

Silte zone is located in the southern part of Ethiopia. The area has estimated surface area
of 2537. 5 sqkm with the population of 84059 and it is now estimated to be 1,000,000 .
the population is more of youngard and compositions regarding ethnicity it is almost Silte
and beyond center of silte zone lives in real area. The administration center of Silte zone
is Worabe, which located 175 km from Addis Ababa to the south. The great majority of
the Silte population is Muslim. There is aneld for addressing poverty human
development, rural development food security, capacity building greater
commercialization of agriculture and industrial development
Silte zone finance and economic development main coordination department established
in 1996 e.C the organization has three departments such as budget and finance
department, Economic and development department and audit control department.
The objective of this public bases are:
 Controlling of this public expenditure.
 collecting the government revenue from different source.
 Preparing annual budget loan.
 Managing and controlling government fund.
 Activating zonal economy and others.

1.3. Statement of the problem

Budget is a quantitative expression for set of time period and a proposed

future plan of action by management. Budget is also comprehensive
activity that requires details planning, analysis and it is entire process of
budget controlling, reporting and allocation of available financial
resource. The accounting system that provides assistance to the
administration in carrying out the plan . In any organization who fails to

2
prepare its budget systematically is expose to uneconomic and
misappropriation in allocating and utilizing its resource.
Based on the above clarification the researcher raise the following basic
questions that should be answered in this course of study.

1, How to asses budget utilization in the organization?

2, What are the problems of budget allocation process?
3, What mechanisms dose the organization following when the approved
budget amount is not sufficient ?
4.How the proper implementation of budget is done by finance bureaus ?

3
1.4. objectives of the study
The general objectives of this study is to investigate how the finance
organization prepare, allocate and utilize the budget and put control
mechanisms of the basis of manual, police, procedures set by the
organizations.

Specific object
The specific objective of the study are
 To evaluate the strength and weakness of the finance
department regarding to budget preparation , allocation and
utilization.
 To asses a problem that faces the department in planning
and utilizing the budget.
 To identify the approaches to budget used by the
department.
 To evaluate the budgetary estimation system.
 Finally, to suggest and recommend the organization about
budget planning and utilizing .

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1.5. Significance of the study
The significance of the study are the following:
 To create awareness to the organization about budget utilization
and controlling
 Help to know the basic ideas and process while preparing
successful proposal.
 Help to increase the research’s experience and ability.
 Helps the department to know what looks like its budgeting system
after this study has conducted.
 Give away for other researcher who wants to make further
investigation in the area of budget practice and to conduct detailed
research on issue.

1.6. Scope and limitation of the study

The main concern of this study is to see the importance of budget
preparation, allocation and utilization in silte zone finance department.
Here, the focus area of this research is how the department plan,
establish and evaluate the budget.
Even though, many problems may be found in the area, this study focus
on the problem related to budget preparation, allocation and utilization
section.

1.7. Limitation of the study

The researcher withfaced certain problems at the time of conducting the
study . among them:
 At the time of data collection some design respondents were not
present that elongate data collection period more than expected.
 There was reluctance on the part of some numbers of the
respondents to give genuine information when asked.

5
1.8. Organization of the paper
This paper include, four chapters . The first chapters present the
introduction part reflecting the background, the statement of the
problem, objective of the study, significance of the study, research
methodology, scope and limitation of the study. The second chapter
deals with literature review. The third chapter deals with data analysis
and presentation and the fourth chapter consists of time summary,
conclusion and recommendation.

1.8. Research Design and methodology

Study area
This study was conducted on budget preparation allocation and utilization in silte zone
worabe town Bureau of finance and economic development which is found in southern
nation nationality and people of Ethiopia at a distance of 175 km away from the center
Addis Ababa to south ward.

1.9Data gathering tools

To collect the necessary data the researcher has been used both primary and secondary
source of data. The primary data include questionnaire, direct observation and interview.
The researcher has been used primary source of data collection method through
questionnaire and by conducting interview. A questionnaire processing a number of
questions with close ended types of question that are relevant and exhaustive as to the
subject of the study has been designed in such ways that the respondent fill easily. On the
other hand to get detail information about he factors affecting budgetary process the
researcher conducted open ended questionnaires
Finally the researcher has been used secondary source of data collection method which
are obtained through review and selected materials such by reviewing the organization
record, procedure and utilization of budget figures of different fiancé and administrative
department of the organization

6
1.10Sampling Design
The sample selection carried out by a researcher so that it is reliable as to the
representation of the total population who are believed to be worker of the organization.
The eligible respondents were budget experts, managers, accounts economic and other
that have some responsibility in the organization. Hence the reserve sample unit was
contain a sample unit was contain a sample size of 35% from 45 total personnel in the
organization with in the organization an effort was made to interview the individual who
is most familiar with the budget preparation and individuals who concern the budget
section.
The sampling technique which in the study is judgmental sampling in selecting the
element to be interviewed because of element difference in educational level, experience
and responsibility. The judgmental consider things like representatives, adequacy and
homogeneity of the sample.

1.11.Data analysis
The researcher used descriptive data analysis method to present the outcomes of the
result. To make all the data collected and stored meaningful and consumable, appropriate
analysis was made using tabular and percentage form of presentation accompanied by
relevant explanation.

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 Chapter Two :Literature review

2.1 budget and budgeting concept

Definition of budget and budgeting

Different scholars defined budget and budgeting in different manners.
However , most of them have come up with similar connotation of budget
and budgeting some of selected are presented below.
Budget is the process, of preparation of budget which determines the
target for budget and it includes preparation of plans, implementation
and evaluation.
A budget is an itemized estimate of the operating result of an enterprise
for a future time period. The form of a budget varies from organization to
organization, but it is eventually summarized in to the form of the
financial statement. The major difference between the budget and
financial statement is the data used to develop each. Financial statement
are based on actual, result of past operation , whereas budgets are based
on planned operation of a future time period. For this reason, budgets
may be referred to as proform statements, (OWEN CHERRINGTION) page
140

2.2 historical development of modern government budget

Historically, the practice of budgeting generally originated in the central,
government of great Britain at the year of 121. However an entirely new
approach to government budget was initiated during the year 1930’s
economic depression in the advanced capitalist countries. During the
period , new possibilities of using financial measures to require were
recognized (Hiness, II and Edward K.J 1954)

8
The historical development of modern budgeting suggests two significant
generalization concerning the distribution of budgetary responsibility.
The budget system developed as an instrument for democratic control
over the executive. The power of the purse come to raised in the
legislature in order arbitrary tax payments in his subject. The budget is
an expression of ultimate legislative authority.
The patterns of responsibility which characterizes the budgetary process
may be examined from a number of stand points
 As a legal institution, the budget is on expression of the
constitution and statutes of government
 Viewed interms of organization.
 As ammater of procedure , the budget s the product of a time
sequence of decisions made in on organization as a context. (Jesse
Burkheed 2001).

9
2.3 budget and budgeting cycle
A budget is a quantitative expression of proposed plan of action by
management for specified period and aid to coordinating what needs to
be done to implement that plan. A budget can concern both financial and
non financial aspect of the plan and serves as blueprint for the company
to follow in an upcoming period. A budget that covers financial aspect
quantifies, management’s expectation regarding in come, cash flows, and
financial position . Just as financial statement be prepared for future
period
Well managed companies usually cycle through the following
budgeting steps:
1. Planning the performance of the company as a whole, as well as
planning the performance of its subunit.
2. Provide a frame reference, a set of a specific expectation against which
actual result can be completed.
3. Investigating variation from plans. If necessary, corrective actions to
flows investigation.
4. Planning again, in light of feed back and changed condition
(HORNGREN ) pp175.

2.4 advantages of budget

 Compares strategic planning and implementation of plans.
 Provides success the companies goal of objectives.
 Motivate managers and employees.
 Provide a frame work for judging performance.
 Promotes co-ordination and communication among sub units with
in the company (HORNGREN) page 177.

10
2.5 Types of budget

2.5.1 Capital Vs current budget

Sound governmental fiscal management requires continual planning for
several period in the future. Most governments are involved in programs
to provide certain good or services continuously, in acquisition of
building can or other major items of capital, out lay that must be
scheduled and financed long term debt service commitments. Although
some prepares comprehensive multi year plans, which include all of
these more common practice is for such plans to include only the capital
outlay plans for the organization.

Capital budget
A plan of proposed capital outlays and means of financing them for the
current fiscal period. It is usually apart of the current budget.

Current budget
The annual budget prepared for and effective during the present fyical
year or in the case of some state government (lynn and freeman 1983:
pp55-56)

2.5.2. fixed Vs flexible budget

Fixed budget are those in which preparation are for a specific fixed dollar
amount and may not be exceed because of changes in demand for
governmental goods or services. On the other hand , expenditure
authorized by flexible budget are fixed per unit of good or services but
are variable in total , according to demand for either production or
delivery of the goods or services.

11
2.6. budget planning and preparation at the regional
level
One component of the federal budget is a grant from the federal
government to the state governments. The allocation of grant is
determining by the federation council, which bases their decision on a
formula that includes variables such as the population in each state and
the capacity of each state to generate their own revenue. The state with
less capacity to generate their own revenue are entitled to get a larger
allocation of this money.
The state government follows similar budget planning and preparation
procedures to the federal government regional finance bureaus prepare
ceiling for expenditure by the. Regional bureaus for each sector, which
include allocations for capital and recurrent expenditure. This is done
after the grant for each state from. The federal government is announced.
The finance bureaus at the zonal and woreda levels also follow this
process at their levels of the administration. The regional finance
bureaus their submit their budget proposals to the regional councils for
approval. Once the budget proposal have been approved , they are
published in the regional Negarit Gazeta (ministr of finance,
proclamation No. 57/1996.

2.6.1. Budget allocation and utilization

Budget utilization is an important part of all business and not -profit-
organization financial plans. Budgets are typically set annually and
involve allocating, anticipated income, and resource between different
departments and business interest. The amount of funding allocated to
each area impasses restriction on the scope of department’s
development.
Budget are normally set on the bases of the previous years expenditure,
plus or minus any change in spending , such as for example silte zone

12
finance bureaus, each department is given a set of amount of money to
spend over the course of the year . the department head normally takes
responsibility for allocating the funding to his staff. A budget aims all
expenditures including , state salary, cost of buying resources as well as
miscellaneous expanse for any un for seen needs.

2.7. Role of Budget

Budget plays a number of vital rules in economic measurement of public sector.
According to UNESCO (1963). The role of budget is grouped in to three categories. This
include distribution of resources, allocation of resource and control activities.
 distribution of resource: though national budget, one can distribute the scarce resource
to different to different public sectors and produces goods and services. The budgeting
activities should play a major role in planning and programming.
Allocation of resources; As resources are limited human wants are unlimited at times the
government should identify the most relevant activities to be done first and allocate the
necessary resources.
Controlling activity : government taxation and spending influences the nations general
level of economic activity that is, when the tax allocation is less than or equal to or
greater than the spending of government activities it will have it’s own impact on
economy. As the case may be budget is a mechanism of controlling and establishing the
economy. Further, through beget records, the controlling authority can variety the legality
and correct implementation of public resources.

2.8.Budget approach
The several general approaches to governmental budgeting have marked difference in
their emphasis on planning, control and evaluation. At this point it may be useful to point
at that the principal groups that excise control are executive branch official and the
legislator the most common approach to operating expend items, budgeting may be
characterized as follows.

13
The object of expenditure approach
It is often referred to as the transitional approach and expenditure control orientation. It
becomes popular as the basis for legislative control over the executive branch. This
method involves subordinator ,agencies, submitted budge request to the chief the chief
executive in terms to be made that is the number of people to be hired in each specified
position and salary level and the specify goods and services to be purchased during the up
coming period. Request for the organization to the legislative in the some object of the
expenditure terms and frequently thorough not necessarily the request along object
expenditure input lines performance of program, data may be included in the budget
documents but they are used only to supplement of support the object of expenditure
request.
This method facilitates accounting control in the budget execution process and that
comparable data may be accumulated for a series of years in order to facilitate trend
comparison. They content that most program are of an on going nature, and most
expenditures are relatively in available decision must in the real world on change
programs and affection can most reading be giving to change proposed compare with
prior year data and the object of expenditure approach does not preclude supplementing
object of expenditure (Lynn and Freeman, 1983, pp60-63).

Performance approach
The performance approach originates near to turn of the century and came in to popular
usage in the fifties. This approach embodies shifting of in phases from object of
expenditure to measurable performance of activities and work program. The primary
focuses in an evaluation of the efficiency with which existing activities are being carried
out its primary tools are cost accounting and work measurement. The total budget for an
agency would be the sum of the products of its unit cost standards multiplied by the sum
of the products of its unit cost standards multiplied by the expected unit of activity in the
un coming period. The enacted budget is viewed some what as a performance contract
between the legsilave branch and the chief executive. The most important contribution of

14
this approach it its emphasis on the inclusion on the need to measure out put as well as
input. The performance budget emphasizes the activities for which funds are requested.
The performance approach provides the chief executive with and additional revenue of
control over his subordinates, rather than being restricted merely to how much has his
subordinates spend, he may evaluate the performance of activities in terms of dollar and
activity unit standards. (Lynn and Freeman 1983).
The program and planning – programming budget approach (PPB).
The national council on governmental accounting (NCGA) defined a program budget
where in expenditure are based primarily on program of work and secondarily on
character and object a transitional type of budget between the traditional character and
object class budget. On the other hand program budget in refers to a planning oriented
approach which emphasizes up on evaluation or control performance measurement is not
prefer quiste to program budgeting or budget it may be a useful act.
The major distinctive characters tics of PPB are
1. Future year implication are explicitly identified
2. All pertinent costs are considered.
3. It focuses on identifying the fundamental objective of the government and the
relating all activities to these regardless of organizational placement).
4. Systematic analysis of alternatives is performed .
Among the benefits to state and locality attributed to the PPB approach are:
- Plans and programs are reviewed continuously
- Inter government planning is improved.
- Inter agency coordinating of program is strength .

15
Chapter Three : data analysis and presentation
In this chapter data collected through questionnaire distributed to respondents and
interview made with some authorized personnel of the organization and personal
observation were analyzed and discussed. At the same time information obtained from
secondary sources such as reports and related forms action have been analyzed by using
different tools like simple tabulation percentage and simple statement. The researcher
distributes 16 questionnaire out of these 12 questionnaires was returned and the rest of
respondents did not return the questionnaire.

3.1. Characteristics of respondents

To start the basic part of the study it is appropriate to know the characteristics such as
educational background of respondents and their work position. Because, it enable to
know the experience and educational level of respondents.

Table 3.1. Description of respondents respect to their age and educational level

No Item Respondents
No %
1 Age
(25-35) 4 33.33
36-45 5 41.61
Above 45 3 25
Total 12 100
2 Educational level
Master
Degree 7 58
Diploma 5 42
12 grade complete - -
8 grade complete - -
Total 12 100
Item 1 of table 3.1 describes the age composition of the respondents with a percentage of
33.33% were found between the age of 25-35 , 41.67% were between 36-45, and 25%

16
were above 45. From this the researcher found out that most of the respondents are
between 36-45.
From the above table out of the total of 12 respondents 5(42%) of respondents are
diploma holders and about 7(58%) have degree. There is no master, no 12 grade complete
and 8 grade complete. This implies that the workers of the organization educational level
is more of degree and budget related activities are largely performed by them.

17
Table 3. 2. Assessment of take part of employees in budgeting planning and controlling process.

No Items Respondents
№ %
1 Do you participate in budget
planning and utilizing?
Yes 9 75
No 3 25
2 If your response for question № 1
above is yes in which types?
Administrative 4 33
Project/ capital 6 50
Planning and utilizing 2 17
Total 12 100
3 If your answer for question 1 above
No what is your reason?
It is not your responsibility 5 40
Only special workers participate 7 60
Because of random selection 0 0
Total 12 100
Table 3.2. above clearly indicated that 9(75%) of respondents replied that they have
participated in budget planning, controlling and utilization of the organization. On the
other hand 3(25%) of respondents indicated that do not participate in budget activities.
In the same table (3.2) 4(33%) of respondents responded that they are participating in the
preparation of budget for administration function, 6(50%) of respondent replied that they
prepare capital budget under taken in the organization and 2(17%) of respondents told
that they have participated in the preparation of general budget and controlling function.
Administration budget refers to the functional classification of budget covers expenditure
for the service like executives legislation, judicial function and physical affairs and public
orders. Capital budget are budget that related to different activities that have a specified
objectives for the achievement of certain goals.
For question No 3 in the same table above employees that do not take part in budget
planning, utilizing and allocating because 5(40%) of the respondents reveled that it is not
their responsibility and 7(60%) of the respondents said that budgeting activity was given

18
fro only special workers. From this point the researcher can conclude that some
respondents are assigned for other responsibility .
Table 3.3. Respondents response to budget deficit occur with in the organization.

Types of response № of respondent Percentage

Yes 4 33
No 8 67
Total 12 100
From the above table out of the total of 12 respondents about 4(33%) of respondents
replied budget deficit occur with in the organization. From this data the researcher can
understand the budget deficit occur with in the organization is medium.
Similarly out of the total 12 respondents about 6(67%) of the respondents response
budget deficit is not occur with in the organization.

Table 3.4. Respondent response to consider the past performance for to days budget preparation.

Types of response No of respondent Percentage

Yes 8 67
No 4 33
Total 12 100
Table 3.4. above clearly indicated that 8(67%) of respondents replied that the
organizations consider the past performance for today budget preparation. On the other
hand 4(33%) of respondents indicate that do not consider the past performance for days
budget preparation.

Table 3. 5. Assessment of budget revision in order to update for any special case.

Types of response No of respondent Percentage

Yes 9 75
No 3 25
Total 12 100
As shown clearly in the above table 9(57%) of the respondents responded that the
organization revise its budget in order to update for any special case. On the other hand
25% of the responded replied that the organization did not consider budget revision in
order to update for any special case.

19
Table 3. 6. The response of sample respondents on if they think that there exists
proper implementation of budgetary system developed by MOFED.

Types of response No of respondent Percentage

Yes 9 57
No 3 25
Total 12 100
According to table 3.6 item 1 9(57%) of the respondents response shows that
there is proper implementation of budgetary system that developed by MOFED in the
organization and about 3(25%) of respondent replied show that the organization is not
implement the budgetary system that developed by MOFED.

Table 3. 7. Respondents response for periodic training given by the organization regarding budget
planning utilizing.

Types of response No of respondent Percentage

Yes 8 67
No 4 33
Total 12 100
As stated in the above table, about 8(67%) of the respondents responsed as they have
periodic training given by the organization regarding to budget planning and utilizing. On
the other hand about 4(33%) of the respondents responded as they have not periodic
training given by the organization regarding budget planning and utilizing. From this the
researcher understood that most of the respondents have peroding training that given by
the organization regarding to budget planning and utilizing.

Table 3.8. Assessment of fair budget allocation among woradas

Types of response No of respondent Percentage

Yes 10 83
No 2 17
Total 12 100
Table 3.8 above clearly indicated that 10 *(83%) of respondents replied that there is fair
budget allocation among worda. On the other hand 2(17%) of respondent responded that
there is no fair budget allocation among woreda.

20
 Table 3.9. Respondents opinions regarding to the existing budget problem

Problem related to budget system

№ Problem 1 Strongl Agree Disagree Strongly Cant Total

y agree disagree determi
ne
№ % № % № % № % № % № %
1 Unsuitable budget 3 25 9 75 - -- - - - - 12 100
system
2 Complexity of the orgn. 4 33 8 67 - - - - - - 12 100
3 Lack of proper 5 42 7 58 - - - - 12 100
monitoring and
controlled by MOFED
4 Improper recording or 5 47 7 58 - - - - 12 100
budget entries

From the above table 3.9 results that 75% of the sample believe that or agree on the
unsuitable budget system of the organization, 67% of which agree on the complexity of
the organizations operation regarding the problem related to budget system. Accordingly,
58% of respondents agreed that they disagreed on the variable which dealing lack of
proper monitoring and control of the approved budget by MOFED. The survey finding in
the above table that 67% of the respondents attached proper recording of budget entries
since they disagree with the question, 50% of the sample respondents disagreed to the
proposed question which describe lack of accordance of budget break down with the
rules of MOFED.

Table 3. 10. problem related to budget request

№ Problem 1 Strongl Agree Disagree Strongly Cant Total

y agree disagree determ
ine
№ % № % № % № % № % № %
1 In appropriate budget 1 8 5 42 4 33 2 17 - - 12 100
request

21
2 Accepting budget - - 9 75 3 25 - - - - 12 100
request without
examining their
relevance, timing and
fairness
3 No disclosing the 3 25 7 78 2 17 - - 12 100
approved budget among
department
4 Most spending 4 13 6 50 2 17 - - 12 100
according budget title
5 In appropriate budget - - 2 17 5 42 4 33 1 8 12 100
transfer

The survey analysis in table 3.10. item 1 portrays that 42% of the sample respondents
agreed to the proposed question revealing in appropriate budget request by the
organization, 33% disagrees while 8% of the sample respondents strongly agree. This
shows in appropriate budget request is the valid and existing problem of the organization.
In the same table (3.10) item 2 reveals that 75% of the respondents agreed on accepting
budget request without examining their relevant, timing and fairness results. In table 3.10.
item 3 show s58% of respondents disagree on the question that asserts there is no disclose
of approved budget among departments. According to this survey 33% of the sample
respondent agree that silte Zone finance organization is not spending it’s budget
according to their title, item 5 reveals that 42% of the respondents replied that there is
inappropriate budget transfer. This implies that Silte zone finance and Economic
development faces the problem related budget request.

3.2. Result of interview and observation

The interview was conducted with different authorized workers of the organization like
managers of the organization economic development head, and planner of the Bureau
and, the observation was made in different activities. Regarding the budget plan policy
review preparing of budget and other source, procedure and controlling system.

22
Regarding the budget cycle according to the response obtained from the budget head the
budget that is own cycle.
Budget call : It is responsibility of Bureau of finance and economic development these
cycle involves strategy, plan, performance, physical, financial and development program
for the zone. This all are the zonal sector and that leads to development direction based
on per-ceiling amount of budget.
Per – ceiling means forecasting or producing the amount of budget require for future. The
actual calling is the exact amount at hand when budget is allocated to activities. And the
difference between the perceiving and actual was adjusted after the zone and woreda
budget were computed it submit to Bureau of finance and economic development by their
sector has help the sector for:
- Plan evaluation of physical and financial performance of the sector.
- Plan for coming year.
Evaluation review : review regarding the evaluation and review it depend on the type of
the project which means long-term project and long term internal review for evaluation
while short term project require short term internal review for evaluation. At sectoral
level the performance is on the monthly basis and at regional level with combined on the
quarterly basis. But at regional level with house of people representative on semi annual
basis from August to February.

23
Table 3.11. Variance analysis on adjusted budget and current year expenditure of Bureau of Finance and Economic
Development report (2001-2003 in birr).
2001 2002 2003
Code Description Adjusted Current Variance Adjusted Current Variance Adjusted Current Variance
budget year budget year budget year
expenditure expenditure expenditure
100 Administrativ 25672217 22672217.8 30000000 41383660 29131050.3 12252610 61889980 32803210 2908677020
e and general
service
200 Economic 22830650 22440650.1 390.000 25718330 12720470.1 12997860 40560560 15993690 24566870
300 Social service 16819500 16251500 568000 86626010 135007320 73118690 123812580 15555770 108256810
400 Political 632410 5553510 78900 2167490 - - 2520370 - -
service
500 Other service 6016430 4816430 1200,000 3897000 5708060 1811060 4988980 5429520 440540
Source: Total budget Vs expenditure by budgetary institution of silte Zone bureau of finance and economic development

25
As clearly described in table above 311 the performance responses of the budgetary
institution of the organization for fiscal year from (2001 -2003) was written in the
organizational document in detail description forms. However for our purpose have taken
the geneal expenditure area. The first point to notice some item of the adjusted have
variance. Some have brackets around them and other do have some of the budget which
have bracket one budget estimated or budget adjusted is less than the current year
expenditure of the year or actual performance of the year.
The organizations budget adjusted in the year are classified as administrative and general
service, economic service, social service, political service and other service. So the
budget adjusted for the bureau in 2001 for administrative and general service birr
25672217, economic service birr 22830650, social service birr 16819500, political
service birr 632410 ,and birr 6016430 for other services.
However the variance of adjusted budget and the current year expenditure or the actual
expenditure of the current years are birr 22672217 in administrative and general service,
birr 22440650.1 in economic service, birr 16251500 in social service, birr 553510 In
political service and birr 4816430 in other service.

From the above table 3.11 we can see that for the year 2002 the budget adjusted for
administration and general service was birr 41383660 and the actual current year
expenditure were birr 29131050.3 and the rest birr 12252610 was the variance for the
year. The adjusted budget for economic service for the same year was The birr 25718330
from this the current year budget used was birr 12720470 and about 12997860 was the
variance of the year.
For the same year the adjusted budget for social service was birr 86626010, from this the
current year budget used was birr 13507320 and birr 73118690 was the variance for the
year. In the year 2002 the adjusted budget for political service was birr 2167490. Among
this the current year budget used birr zero. For the same fiscal year the adjusted budget
for other services was birr 3897000; from this amount about birr 5708060 was actually
expended and birr 5708060 was not used.
Generally one can understand from the above manual report; the organization silte zone
finance and economic development) faces the problems of over under utilization of
budget for different public service they were performed in particular year. Even if there
were no 100% efficient of the budget. The result indicated that the organization to
reaction to its weakness and identify the course of the problem of over under utilization
of budget and give appropriate solution to the problem to minimize the variance for the
activity they performed for the current year.
Chapter four

Summary, conclusion and Recommendation

4.1 Summary and conclusion

This research is concern on assessing and investigating the over all budget preparation,
utilization and allocating performance of Silte zone finance organization. To get answer
for the question, data gathered through primary service, secondary source, and interview.
The data were collected form respondents and information obtained from secondary
source of the general manager bureau. The collected data were analyzed and discussed by
using percentage and descriptive statements.
Depending on the data analyzed before, the researcher has concluded the following main
points.
 To summarize the employee educational level more than half of the worker were
degree holders, but no one who have MBA. Form this we can understand that
organization have lack of well qualified professional workers.
 The organization does not allocate the budget on time to each sector due to manpower
problem and procedures and policies the organization that follow.
 Some people hold position without any experience and qualification in the
organization
 There are some workers in the organization who are negligent to ward the budget
allocation.
 The organization has loading responsibility of employees and shortage of employees
who perform activities different sector under the organization may not report their
report and evidence on time.
 The organization quarterly budget report is not correct because there were under and
over utilization of budget. The causes for this under and over utilization lack of
skilled manpower, lack of proper control and lack of job training for workers.
 4.2. Recommendation
As mentioned earlier there are problems which hinder the smooth flow of budgeting
process and related activities. The researcher gives recommendation as a solution that
assumed to avoid or reduce identified problems. These are as follows:

 For the problem of the shortage of budget amount effectively and ask higher
government body for additional budget by identifying the budget items and codes
which high impact due to budget shortage for the organization goal.
 Budget revision is very important either systematic, quarterly updating of budget
administration is the procedure for revising a budget after it has been approved
clearly, if it can be revised till the budget there would be no point reviewing and
approving in the first instance.
 It is better to the organization to use projection. Actually a budget differs in
several aspects from forecast or projection. A projection is not prediction but one
estimation of what will happen if various conditions and situations should exist.
 Even though there is a budget to train workers, it is under practical. Therefore, it
is better to use the budget to the right position.
 Some people hold position with out any experience and qualification in the
organization there fore, it is necessary to put the right person at the right position
with the right time.
 The organization should hire well experienced workers in order to achieve the
organization goals and objective to have effective and efficient utilization of
budget.
 The organization should provide the opportunity to professional employees to
participate in budget planning process and assign authority and responsibility for
good preparation of budget plan and utilization.
 The organization should adopt sound budget controlling mechanism in order to
avoid the problem of under or over utilization of budget this could be done by
using accounting system ( i. e record the fund available and expense incurred, and
transferred the amount form subsidiary ledger to general ledger account balances.
 The organizations budget amount is not sufficient so to sufficient this amount use
mechanism fund budgetary activity.
 The finance department should use appropriate allocation of budget and control
its implementation by adopting good coordination system with department
manager.
Reference

Charles. T. Hongren; cost accounting, 10th edition, New Delhi (1999).

Donald Axerod ; government budgeting (1989)
Edwad B. Deakins andet al (1991), cost accounting 3rd edition (1991)
Hangreen and etal (1997), cost accounting ,9th edition practice Hill of India, new Delhi.
Herman son, (1989), Principles’ accounting.
Lain, Malland (1997), budgeting for non financial managers.
Jones, Regional(19+1), budgeting: Key to planning and control.
Lynn. (1983) ,fund Accounting theory and practice.
Own cherrington; cost Accounting ; managerial approach, 2nd edition(1980).
Robert G. finng (1993) , powerful Budgeting for Better planning and management.
UNESCO (1983), the role of budgeting and education planning paries.
 APPENDIX
JIMMA UNIVERSITY COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING

Instruction
This questionnaires is formulated to identify the overall activity of budget
system in the above cited zone, and this study is for academic purpose.
General direction
Indicate your answer to the question by putting a check mark in the box
and writ your answers on the space provided for open ended questions.
1. Educational level.
1.1 masters 
1.2. Degree 
1.3 Diploma 
1.4.12 grade complete 
1.5. 8 grade completed 
2. Age composition
2.1. 25-35 
2.2. 2.2 36-45 
2.3. 2.3 Above 45 
3. What are the basic source while budget preparation in the
organization ( Internet and external sources?

4. Do you consider the past performance for to days budget

preparation? 4.1. Yes  4.2. No 
5. What looks like the coordination and communication at different
offices to budget preparation?
 6. Do you have a budget revision in order to update for any special
case? 6.1. Yes  6.2. No 
7. Is there budget deficit occurred in the organization?
7.1. Yes 7.2. No 
8. Do you think that there is fair budget allocation among worada’s ?
10.1 yes 10.2. No
9. Do you think your organization properly implements the budget
system developed by MOFED? 9.1 Yes 9.2. No
10. Is there periodic training for employees given by the organization
regarding to budget planning and utilizing
10.1. yes 10.2. No
11. Do you participate in budget planning and utilizing ?
Yes  No 
12. If your response for question № 11 above is yes in which type?
Administrative 
Project /capital 
Planning and utilizing 
13. If your answer for question 13 above is no what is your reason?
It is not your responsibility
Only special workers participate 
Because of random selection 
14. What is your opinion regarding problems related to budget request.
Ite Problem Strongl Agree Disagree Strongly Can’t
m y agree d d disagreed determine
1 Accepting budget request - - - - -
without relevance, timing
and fairness
2 In appropriate budget
request
3 No disclosing the
approved budget among
 department
4 Not spending according
budget title
5 In appropriate budget
transfer

15. The organization faces budget administration and allocation

problem because of

Ite Problem Strongl Agree Disagree Strongly Can’t

m y agree d d disagreed determine
1 Unsuitable budget - - - - -
system
2 Complexity of the
organization operation
3 Lack of proper
monitoring and
controlled by MOFED
4 Improper recording or
budget entries