RIFT VALLEY UNIVERSITY

DEPARTMENT OF ACCOUNTING AND FINANCE

BUDGET PREPARATION AND IMPLEMENTATION IN CASE OF DIRE

DAWA CITY ADMINSTRATION MUNICIPALITY BUREAU

A RESERCH PROPOSAL SUBMMITED TO ACCOUNTING AND FINANCE, RIFT

VALLEY UNIVERSITY IN PARTIAL FULFILLMENT OF REQUIREMENT FOR THE BA
DEGREE INACCOUNTING AND FINANACE

BY: MALIKA ALIYI ABDELLA

ADVISOR: SEDIK M.

DIRE DAWA, ETHIOPIA

DECEMBER, 2021
 Abstract

A budget is the process of preparing, compiling and monitoring financial budgets. The general
objective of this study is to assess budget preparation and implementation on the case of Dire
Dawa city administration municipality bureau and makes suggestions. In preparing these
research both primary and secondary information will be used. inter and question

Secondary information will be been obtained from organization document and reports. The
primary source of data line, interview and questionnaire will be conducted. On the bases of
analysis and interpretation, the findings with respect to the objective of the study will be reached
by using descriptive research analysis and will be presented in table frequency and percentage
interpretation and then finally the conclusion and recommendation will be made for budget
preparation and implementation in the organization.

i
Table of Contents
Abstract.......................................................................................................................................................i
CHAPTER ONE........................................................................................................................................1
1. INTRODUCTION.............................................................................................................................1
1.1. Background of the study...........................................................................................................1
1.2. Statement of the Problem..........................................................................................................3
1.3. Research Questions....................................................................................................................4
1.4. Objectives of the Study..............................................................................................................4
1.4.1. General objectives..............................................................................................................4
1.4.2. Specific objectives..............................................................................................................4
1.5. Significance of the study............................................................................................................5
1.6. Scope/ Delimitations and Limitation of the study....................................................................5
1.6.1. Scope of the Study..............................................................................................................5
1.6.2. Limitations of the Study..........................................................................................................5
1.7. Organization of the Paper.........................................................................................................5
CHAPTER TWO.......................................................................................................................................6
2. LITERATURE REVIEW..................................................................................................................6
2.1. Theoretical review of literature................................................................................................6
2.1.1. Origin of the budget...............................................................................................................6
2.1.2. Definition of Budget and Budgeting.....................................................................................6
2.1.3. The objective and role of budgeting.....................................................................................7
2.1.4. Budgeting procedures............................................................................................................8
2.1.5. Relationship Between planning and budgeting....................................................................8
2.1.6. Performance measurement...................................................................................................9
2.1.6.1. Performance evolution concepts...................................................................................9
2.1.6.2. Performance reports and communication..................................................................10
2.1.6.3. Using performance measurement to implement corporate strategy........................10
2.1.7. Budget Classification...........................................................................................................11
2.1.8. Types of Budget....................................................................................................................11
2.1.8.1. Program Budgeting......................................................................................................12
2.1.8.2. Zero Base Budgeting....................................................................................................12

ii
 2.1.8.3. Activity Based Budgeting............................................................................................13
2.1.8.4. Incremental Budgeting................................................................................................13
2.1.8.5. Master Budget..............................................................................................................13
2.1.8.6. Variable Budget...........................................................................................................14
2.1.8.7. Fixed Values flexible Budget.......................................................................................14
2.1.9. Government Budget.............................................................................................................14
2.1.10. International control systems..............................................................................................14
2.2.1. Empirical review of literature.........................................................................................15
3.1. Research Design.......................................................................................................................17
3.2. Research Approach.................................................................................................................17
3.3. Data Type and Data Source....................................................................................................17
3.4. Population and Sample size.....................................................................................................18
3.4.1. Sample Size.......................................................................................................................18
3.4.2. Sampling Technique..........................................................................................................18
3.5. Methods of Data Analysis........................................................................................................18
REFERENCE..........................................................................................................................................19

iii
iv
 CHAPTER ONE

1. INTRODUCTION

The study is performed on the assessment of budget preparation and implementation in Dire
Dawa city administration municipality bureau. This chapter tried to cover the background,
statement of the problem, objective of the study, research questions, significance, scope and
limitation of the study and organization of the study.

1.1. Background of the study

A budget is the process of preparing, compiling and monitoring financial budgets. It is a key
management tool for planning and controlling a department within an organization”. (Brook son
2000:6).According to a research done by (Elias H/meskel, 2018) budget is a document or
financial plan of any organization it can be government, nongovernment or private institutions.
In all of the above type institutions, budget is used for allocating scarce resources among the
different priorities of programs or activities. It consists of both revenue and expenditure. There
are different ways of budget management practiced by the different types of organizations.
Budget is central to realizing the national objectives, goals and programs linked to the role of
government or public institutions in financial matters.

According to a research done by (AbdulrezakeYassin, 2012)Budget is 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 otherwise 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 identifies source of income and
assist in planning expenditure most organizations and many individual find careful planning is an
essential activity in achieving goal. 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

1
constituents, estimating service cost and determining how to form the service. In general budgets
deals with ensuring allocation, efficiency, motivation, enhance controlling, communication and
coordination.

According to (Tsegie Semachew, 2019) budget is a quantitative expression of plan of action and
aid to coordination and implementation. It is a financial plan that indicates a proposed
expenditure for the year and the means of financing them, since budget is a financial plan of any
activities. It serves as evaluating performance, coordinating activities, implementing plan and
communicating, motivating and authorizing action in governmental and nonprofit organizations.
Budget appropriates serve as authoring and ceiling for management action. Budget is also a tool
that aids managers in both their planning and control function. However the manager also uses
them to evaluable what happened in the past. (Horngren 2006)

According to a research done by (Yusuf Ahmed, 2015) a good budgeting process incorporates a
long term perspective, establishes linkages to organizational goals, focuses budget decision on
results and outcomes and promotes effective communication with stakeholders. According to
Drury.C (2011), ‘budgeting process creates an opportunity for subordinates to become involved
in planning and performance measurement, process that is traditionally perceived to the role of
top management. Usually the senior and experienced staffs of the organization are involved in
developing the budget’. They should be in a position to take responsibility for all the financial
aspect of a project. In monitoring the budget during the period, managers compare budgets with
actual results to identify favorable and unfavorable variances in order to take corrective actions.
This helps managers to gain insight why the actual results differ from the planned performance
and assist them in their planning and control decisions in the implementation of projects to
deliver outputs and successful achievement of objectives.

2
1.2. Statement of the Problem

Regarding to budget so many studies have been conducted in Ethiopia, For example,
Abdulrezake (2012) studies budget preparation, allocation and utilization on silte zone finance
organization and suggested that 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 are
lack of proper control and lack of job training for workers. Tsige(2019) studies on factors that
affect the preparation and utilization of budget in ministry of finance. Abera (2014) has
conducted study on budget preparation and utilization of educational finance in public secondary
schools of Shashemene town, Oromia region. Ketema (2015) examined assessment of budget
preparation and utilization in Addis Ababa city administration health bureau. Gebeyehu (2013)
studies on assessment of budget preparation, utilization and budget performance in Addis Ababa
mass media agency.

Getu Tola, (2012) studies 0n budget preparation and implementation and concluded that the
responsibility to prepare budget is rested on finance department, thus this section/department
prepares budgets following the procedures and more specifically by assessing the needs for all
sector in the organization at general level. But now there is change of system in the preparation
of budget. The responsibility of preparing budget rests on each department (7 departments) in the
organization. And skilled employees will be selected from each department to prepare the
organization budget. So this change of system will provide new information about budgeting
process.

The researches mentioned above concerns with only on the preparation and implementation
process, they don’t deal with checking the transparency and accountability of the budgeting
process. This study deals with checking the transparency and the accountability on budget
preparation and implementation process of the municipality bureau.

As the researcher’s best knowledge there is only one research done in Dire Dawa city
administration municipality bureau that reports the preparation and implementation of budget, so
conducting this research will be helps with providing available secondary data. And there is also
a time gap, the last research done in Dire Dawa city administration municipality bureau is
conducted by Getu Tola, (2012) on budget preparation and implementation so the researcher will

3
be bring out currently used system or updated information about the preparation and
implementation of budget in the municipality bureau.

1.3. Research Questions

1. What are the challenges in the preparation and implementation of budget?
2. Does the organization effectively implement its budget?
3. What are the strengths and weakness of the organization regarding to budget preparation and
implementation?
4. Is there a variance that results from the budgeted amount and actual performance of the
organization?
5. Is the organization accountable and transparent regarding to budget preparation and
implementation?

1.4. Objectives of the Study

1.4.1. General objectives

The general objective of the study is to assess the preparation and implementation of budget in
case of Dire Dawa city administration municipality bureau.

1.4.2. Specific objectives

1. To identify the challenges faced in the preparation and implementation of budget.
2. To see whether the organization effectively implement its budget or not
3. To evaluate the strength and weakness of the organization regarding to budget preparation
and implementation.
4. To look in to the variance that result from the budgeted amount and actual performance of
the organization.
5. To check the accountability and transparency of the organization regarding to budget
preparation and implementation.

4
1.5. Significance of the study

The study provides reliable information which helps the managers and stockholders of the
organization in decision making process. The organization can use the findings of the study to
know its weakness and strength and also helps for the next year budget preparation and
implementation process. It helps to take corrective action by the manager. The next beneficiaries
are the society, which is the final consumer from fair distribution of the resources. Benefiting the
society leads to our city development and for our country. The result of this study is important
for the researcher to be familiar with the basic concepts of research and also increases the
experience and knowledge of the researcher. The findings of this study will be used as a
reference for other researchers in order to make a further research. And also solves the problem
of lack of sufficient secondary data.

1.6. Scope/ Delimitations and Limitation of the study

1.6.1. Scope of the Study

The main concern of this study is to see the preparation and the implementation of budget in Dire
Dawa city administration municipality bureau. Even though, many problems may be found in the
area, this study focus on the problem related to budget preparation and implementation in study
area.

1.6.2. Limitations of the Study

Some limitations that the researcher faced are the following:
Limited access, it was not easy to get all relevant data from respective offices and no sufficient
study has been done regarding on this research especially in the case area.

1.7. Organization of the Paper

The major section of this research has been organized as follows. The first chapter consists of the
introduction parts that include background, statement of the problem, research question, and
objectives of the study significance of the study, scope of the study, limitation of the study and
also organization of the paper. The second chapter consists of review of the theoretical and
empirical related literatures on the definition of budget preparation and implementation. The
third chapter describes the methodology of the study. The fourth chapter will be consists of all

5
the results and discussions. Finally, in the fifth chapter conclusion and recommendation in the
study area will be discussed.

CHAPTER TWO

2. LITERATURE REVIEW

2.1. Theoretical review of literature

2.1.1. Origin of the budget

The word budget is originated from “The old French baguette, meaning a small bag or pouch”
This term was first used in England to describe the summons leather bag in which the chancellor
carried to the parliament, the statement which was contained in the bag. The practice of budgets
was also originated in 1217 in England as means of asserting parliamentary control over the
crown. During this time parliament was aware of the fact that the financial control should be
under its own hands or control but not under the crown. Hence forth parliament secured the
power of controlling the financial matters of the country. (Alan pizzey 1973: pp: 112)

2.1.2. Definition of Budget and Budgeting

There is no consensus on the definition the term Budget. (Alan Pizzey 1973: pp:179) defines it as
‘a plan quantified in monetary terms, prepared and approved prior to a defined period of time
showing the planned income to the generated and expenditure to be incurred during the period
and the capital to be employed to attain a given objective’. It is detailed plan expressed in
quantities terms that specifies how resources will be acquired and used during a specified period
of time. (Rounald W. Hilton 1979: pp: 366)
(Alan pizza, page: 180) Writes:
‘Budgeting is a coordinating process since all the disparate department and cost centers which
make up the business are filled in to one plan’. It is also an imperative process. Since by a series
of small steps comprising a process of a continual review and revision, the original estimates
become firm plans’.
Budget is an expression of a firms plan conversing all phases of operations in financial form for
a definite period of time in future. Budget spells out the policies, plans, goals and objectives laid
down in advance by top management for the organization and for each sub- division of the same.

6
It predicts income for a given period as well as estimates costs and expenses, with the objective.
It forces management to give early consideration to what they plan to do in the future period.

Budgeting involves as a great range of interests and concerns. It is difficult to conceive any
public policy that can be carried out without money, and hence without becoming subject to
budgetary process. All countries, whether developed or developing would be engaged budgeting
and operate on a budget recognizes its invaluable aid in planning and form waiting economic
policy as well as check on its execution. Budget is used not only by government but also used by
private firms, business and various organizations, because it enables them to achieve their goals.
Nevertheless, budget had not been developed uniformity among countries and the approaches to
budgetary procedures are not the same in all countries.

2.1.3. The objective and role of budgeting

Given that limited availability of resources as compared with competing demand, the process of
budget making assumes a critical role in decision making process of government in order to
optimize the use of existing resources. The paper of monetary of finance in Amharic vision of
Ministry of Finance and Economic Development states that the objective of the budget in three
aspects. These are allocation of resource, distribution of resources and stabilization of economy.
The first objective consists of allocating resources between the various function consumption and
investment that between the public and private sector. The distributional sector (objective)
necessitates the consideration of public expenditure and the income groups that are anticipated to
be served. It is the policy maker or government that decides who will be benefited how much
from the available resources among the society. This may by achieved by expenditure policies
such as, subsidies, pension or social welfare schemes as much as taxation on income and capital
Concerning the stabilizing role of budget, HL Bhatia (1980:pp246) states that "budget plays very
important role in the flow of funds in the economy. It also has important affection in the
economy not only through the flow of funds but also through various fiscal policies and
measures. "As a result, budget can be used to control the danger of inflation by adjusting the
amount of governmental taxation and expenditure. Finally, budget plays an important role as a
tool of accountability, a means of management and instrument of plan of implementation.

7
2.1.4. Budgeting procedures

There are several approaches of budgeting of which the following three are among the common
ones to be mentioned. The first one is incremental budgeting approach. Here, the existing budget
is taken as starting point (or base) for developing the next budget .This may be the easier but not
necessarily the best. The second approach is Zero based approach (budgeting). This approach
puts much less emphasis on the past budget and focuses on what must be done to achieve
specific objectives. Zero based budgeting starts as new each year and therefore it is a more time
consuming process.

The third one is program budgeting / master budgeting program. It is plan oriented and consists
of three stages that include developing alternative for the future, analyzing what the outcome of
the alternative program might be, and relating the programs and policies on the future costs and
benefits, and lastly the actual performance of the chosen program must evaluated.

Therefore, master budgeting is a means that government expenditures are managed through the
comparative attempt of the program proposals of all government agencies. David N. Hyman
(1969: pp190) clarifies the benefit of master budgeting as it possesses potential to permit budget
managers to compromise issues that are not immediately unaware when the agency budgets are
viewed in isolation.

2.1.5. Relationship Between planning and budgeting

Planning signifies the strategies elements for selecting flows of action by a logical consideration
of resources to achieve policy objectives. It establishes program, set goals, objectives and makes
fundamental policy decisions for the economy. Mosher, Frederick (1954: 489) puts plans as
conceiving of goals and the development of alternative courses of future action to achieve the
goals. For him planning also involves the reduction of these alternatives from a very are number
to a smaller one and finally to an approval course of action.

‘Budgeting analysis in detail, the many functions of activities that the economy must perform the
implementation of each program, analysis the alternative within each activity to achieve the end
product and identifies the achievements of the established goals and the associated costs’(Slalim

8
Hamid, 1998). Since budgeting is a crucial instrument for plan accomplishment, they should be
harmonized for proper plan implementation.

To harmonize the budget with the plan, there must be a plan in existence, there should be on
annual plan with which budget could be harmonized, and there must exist at least a set of short
term targets and goals towards the attainment of which the budgetary decisions could be
oriented.

According to preme Hand (1989: pp 188) budgeting without planning could to be a plan of
action and plans without realistic detection of budgetary restraints have little chance of
implementation. Therefore budget and plans are concerned with policy analysis and allocation of
resources. The difference is that, in planning the economic aspects dominate, whereas, in
budgeting more attention is paid for financial aspects.

2.1.6. Performance measurement

2.1.6.1. Performance evolution concepts

Performance reporting for internal management is an important part of a comprehensive profit

planning and control system. To indicate the extensive reporting requirements a business
requires and to focus on performance reporting. The following are an overview of financial
reports.

The first one is special external reports. Here, reports are submitted to government agencies such
as regulatory commissions, creditors, investigative agencies and other external groups. These
reports are extensive and comprise a considerable portion of the overall reporting. The next one
is reports to owners. It refers to the traditional annual report to the owners (to stock holders in the
case of a business) and other special reports got ready fro the owners. These reports based on
generally accepted accounting principles.

The last category, the internal reports are those secret reports are prepared in the corporation for
internal use only. They do not have to meet the needs of external groups, nor the test of
“Generally accepted accounting principle”. This category of reports is subdivided in to three
different sub qualifications. These are statistical report, special report and performance reports.

9
All companies regardless of their size; have reporting requirements for all the categories listed
above. In small companies, most the basic reporting needs may be accomplished by using a
single general propose report; we are concerned specifically with performance reports. This
particular phase or reporting is an internal part of a comprehensive budget program.
(GinnaWelsch and etal 1997)

2.1.6.2. Performance reports and communication

Performance reporting is a crucial phase of the regulatory process. The control process can be
recapped as:

1. Approved plan (Tactical and strategic)

2. Feed forward (Planned objective and goals communicated)
3. Current controls (supervision, inspection, performance reports)
4. Feedback (Communication of different between actual performance causes identified)
5. Correction action (designed to reduce any unfavorable differences in routine results.
(David. N. Hyuman 1996: pp 69).
In most business, management depends to a great extent upon information contained in reports
that serve as an important means of accounting information.

Communication involves that a person receiving the information understands the nature and
meaning of material in the report accordingly, clear communication leads to effective
management action and decisions that are likely to base on the facts. Reports to communicate
effectively to all levels of management stimulate action and influence decisions (Ginna, Welsch
1976). However, some times reports were not understood, recipients lacked time required to
grasp the meaning, or the content of reports was not relevant to problems facing the persons who
received them. (NAA Bulletin, Accounting practice report, No. 9, sec 3).

2.1.6.3. Using performance measurement to implement corporate strategy

Well-developed, coherent strategies merit well developed, coherent performance measurement

system. There are integrated sets of performance indicators that links strategic objective to
functional tasks by focusing attention on the critical out puts required by the strategy.

10
Traditionally, firms have oriented themselves around either a low cost or differentiation strategy.
Firms that focus on cost usually focus on mass production technologies, attempting to stamp out
variance and to attain efficiency through constancy. On the other hand Firms following
differentiation strategies, tend to concentrate on developing flexibility, promoting rapid
adaptation to changing customer’s needs. Nationally, they will experience tension when cost and
differentiation priorities conflict

All companies ought to be aware of the performance levels of their rivals both in absolute and
incremental terms. Bench marketing systems that compare internal performance with industry
best practice can provide not only important information for strategic planning but also a valid
insight for change. (Michaelvitale and Salah C. Mavernae)

2.1.7. Budget Classification

Budget categorization refers to the systematic ways of organizing budgetary data of both
revenues and expenditures. It offers the form and structure of the budgetary information that help
analysis and inference. Budget classification is one of the essential points to be beard in mind for
the budget to attain its goals more efficiently and effectively. Three general importance’s’ can be
gained if proper budget classification is intended. These include:

1. Budget classification play’s a significant role to maintain accountability and fix

responsibility to specific organization and even persons in a unit it the account define
responsibility accurately and precisely.
2. It offers a means of evaluating performance by alleviating comparison between actual result
and the level of funding found in the budget.
3. It provides means of controlling resources because authorized spending limits are established
in the budget. (DonaldAxelrod, 1989).
2.1.8. Types of Budget
Budget as a process and a system has different features and applications. Even through many of
them have common feature, they also manifest significant differences. Since budget express
plan and an organization may have a large verity of plans: there are many type of budget. The
classification of budget based on their nature, coverage of function, characteristics of activity,
period and flexibility.

11
 2.1.8.1. Program Budgeting
Program budgeting does not have a standardized definition because of its encompassing nature.
Its many aspects include concepts, systems and process, technique and format, and in some cases
almost a management philosophy. Essentially, it is a management decision making system that
tries together strategic and long range planning with conventional budgeting and supporting
analysis so that an organization can most effectively assign resources to achieve both its short
and long range objectives. It utilizes a planning and budgeting process in an output oriented
program format, which is oriented to its objective to facilitate developing and evaluating
alternative. This process ultimately leads to an allocation of resources over a planning period.
This is then a basic for constructing a resources (man power), materials, facilities (including
equipment), and capital, which operate together to achieve a set of common objectives with in a
planning period. (Anthony Robert 2004: PP 366)

2.1.8.2. Zero Base Budgeting

This type of budgeting is similar to planning programming and budgeting. The most basic
concept behind zero base budgeting is that all programs and expenditure are evaluated every
year. Another zero base budgeting is that the responsibility, to present and defend program. The
principal’s advantage of zero base budgeting is that each type of cost incurred in every budget
period will be justified.

Its advantage falls in to the hands of mangers of respective institutions. More over according to
the method of zero base budgeting “decision packages have to be developed. They key to be zero
base budgeting lies in the identification and evaluation of alternative. This is favorable by
ranking of decision package, the most crucial stage in the application of this method. Despite the
obvious advantage of zero bases budgeting, it has disadvantages.
- Given enough time and man power, there would not be controversy on the application of
zero base budgeting.
- However, if such problems exist, reviewing all programs every year would be bulky and
sometimes important.
- Another more serious problem is the ranking of problems.
- If there is in to way to continue with that inefficiency
- Activity in the future. (Anthony Robert 2004: PP 300)

12
 2.1.8.3. Activity Based Budgeting
It focuses on the cost of activities necessary to produce and sell product and services. It separate
indirect cost in to separate homogeneous activity cost pool. Management uses the cause and
effect criterion, to identify the cost driver for each of these indirect cost pools comes up with the
following merits of activity based budgeting.
1. Ability to set more realistic budgets,
2. better identification of research needs,
3. Clear or linking of costs with staff responsibility and
4. Linking of cost to output.

Conversely, it is tiresome and time consuming to determine the demand for each individual
activity based on output budgeted, production, new product development (Anthony Robert 2004:
PP 309)

2.1.8.4. Incremental Budgeting

In this case the previous budget is considered as a base. The former budget figures can be
increased or reduced based on situations, particularly on the volume of activity of the
organization planned to be performed. These types of budgeting simplify the preparation of the
budget because it needs adjustment of data from the budget that had already been prepared.
However, incremental budgeting is not without drawbacks, particularly because the past period
budget may include in efficiency. (Anthony Robert 2004: pp 321)

2.1.8.5. Master Budget

It is a budget that summarizes the financial estimates of the entire organization’s individual’s
budget. It helps the achievement of long range plans year by year steps)

The guidance is more specific for the coming year than it is for more distant year. The plan for
the coming years is called master budget. The master budget is also known as the static budget,
the budget plan or the planning budget. The master budget indicates the sales level, production
and cost level. Here, income and cash flows that are anticipated for coming year. However, it has
its Owen limitations that arise from its comprehensiveness which may result in wrong
formulation of the budget. (IAIN, Maritaland, 1997: pp 119)

13
 2.1.8.6. Variable Budget
The primary purpose of this type of budgeting is to accelerate control. (Glevene, Weish
1978:218) identifies three specific benefits of variable budgeting.

- To help development of departmental expense budget for insertion in the profit plans.
- To give examples, goals for the managers of responsibility center during the period
covered by profit pan and
- To offer adjusted budget allowances for comparison intention in the monthly report.

2.1.8.7. Fixed Values flexible Budget

Fixed budget is a budget for a specific or fixed total amount that many not be exceeded due to
changes in the demand for goods and services. Being prepared for a particular planned action, it
is suitable for activities whose resources utilization does not materially vary in due course. It is
most appropriate when changes in the amount of goods and services obtainable directly affect
availability of resources and expenditure needs. (IAIN, Maritaland, 1997: pp: 301)

2.1.9. Government Budget

In governmental entities, budget services as a tools of managing resources to attain programmed
objectives. It serves as instrument for the legislative body to ensure whether actual expenditures
are corresponding to budgeted amounts and that the objective and levels of activity envisaged in
the budget are attained or not. As well, to obtain a share in government resources allocation,
preparing and submitting budget proposal is expected from each government entity. Moreover,
governmental budgets are legally binding upon the executive body and once fixed by law, they
are usually unalterable without much effort.

2.1.10. International control systems

The council of minister’s finical regulation No. 17/1997 defines internal control systems as:
“The plan of organizational and all the coordinated methods and measures adopted by
management to safeguarded assets ensure the lines, accuracy and reliability of accounting data,
promote operational efficiency and maintain adherence to regulation and directives.”

The two main constituents of internal control system are the administrative and the financial
Accounting control .The administrative control comprises the procedures and records that are

14
concerned with decision making process leading to management’s authorization of events. on the
other hand, the financial control consists of the plan of an entity, producers; and records that deal
with protection of assets and the consistency of financial records ascertains logical plan of an
entity, new designed and accounting configuration, an internal audit function, and quality and
training of personnel’s as among the indispensable factor to reinforce internal control
arrangement.

Strong system of internal control is very essential in achieving certain goals of an organization.
Internal control includes all the procedures and actions taken by an organization in order to
manage the expiating assets, ensure conformity with organizations policy and governmental
rules, evaluate operating efficiency and ensure precise and reliable operating data and accounting
records.

2.2.1. Empirical review of literature

The empirical study concerns on previous academic studies on the assessment of budget
preparation and implementation practice. In this study there are some researches stated which are
done by different researchers as follows.Ketema Muluneh, (2015) studied budget Preparation
and Utilization Case of Addis Ababa City Administration Health Bureau and stated that with
regard to budget planning and utilization, the annual report of Addis Ababa City Administration
Health Bureau shows the existence of inefficiencies in budget preparation and utilization. Some
of the deficiencies identified in the report are: there is no strong follow up and control by
successive leaders on the budget preparation as well as utilization at each respective budget
users; each budget users unable to report comparisons of utilized and unutilized budget including
the reason why it is not consumed.

Birhanu (2011) studies evaluation of budget management practice of Ethiopia in comparison

with two east African countries(Kenya and Uganda) focusing on budget management practice
and transparency by using qualitative research approach and revealed that the level of
transparency with regard to full disclosure of all relevant budget information is very poor in
Ethiopia, Kenya and Uganda.

15
Abera (2014) has conducted study on budget preparation and utilization of educational finance in
public secondary schools of shashemene town, Oromia region by employing descriptive survey
and the study was revealed that; the level of transparency and accountability in budget process
and effectiveness and efficiency in utilization of budget is more or less positively related.

Ketema (2015) examined assessment of budget preparation and utilization in Addis Ababa city
administration health bureau and revealed that there is no accountability in budget and no market
oriented cost estimation because of lack of adequate and experienced expert in the budget
department.

Doreen, D. (2014) determined the effectiveness of Budgeting process in achieving organizational

goals in case of Tanzanian Electrical Mechanical and Electronics service Agency using a case
study research design strategy with the objective of investigating how Budgeting process helps
organization in achieving its goals. It was concluded that the role of Budgeting process that make
an organization attains its goals should be effective by having active support for Budgeting
process from the top management.

16
 CHAPTER THREE

3. RESEARCH METHODOLOGY

3.1. Research Design

For this study, the researcher will be employed descriptive type of research design. Because the
researcher has no control over the variable can only report what has happened or what is
happening, and Descriptive study has been used because this type of research is commonly
conducted to collect detail description of existing phenomena with the intent of employing data
to justify current conditions and to draw conclusions from the fact discovered.

3.2. Research Approach

Research approaches are mechanisms of attaining research objectives. The approaches are
adopted to achieve the best possible of the research objectives. Research approaches will be
adopted based on the feasibility of the selected approaches. The common research approaches
are quantitative, qualitative and mixed research approaches. Quantitative approach uses surveys
of cross-sectional or longitudinal using self-administered semi structured questionnaires or
structured interviews for data collection, with the intent of generalizing from a sample to a
population (Babbie, 1990). A qualitative research approach will be used strategies inquiry
including narratives, ethnographies, case studies, observations, interviews, and the results are
communicated subjectively through descriptions using words rather than numbers (Creswell,
2003). Moreover Qualitative researchers tend to use open-ended questions so that Participants
can express their views. Under this method contact with the field of research is based on
interviews, observations, or analysis of documents and other artifacts.

3.3. Data Type and Data Source

This study will use primary and secondary data sources. Primary data source is the main source
of information for the accomplishment of the study, under this data source the necessary
information for the study will be gathered using questionnaire and interview. Interview contains
unstructured questions which are intended to address objectives of the study. Moreover, the

17
questionnaire will include questions that can help to assess the preparation and implementation
of budget. The secondary data will be collected from documents of the organization & reports.

3.4. Population and Sample size

3.4.1. Sample Size

In Dire Dawa city administration municipality bureau there are 450 employees divided in to 7
departments under the organization structure. And from total population the researcher selected
11 employees who are related to the budget and 3 management bodies related to the budget.

3.4.2. Sampling Technique

The sampling technique that has been used for this study is nonprobability sampling techniques
which means judgmental sampling method. This techniques of sampling is selected, because of
the researcher took respondents from the total population whose profession is the most probably
related with budgeting. When the researcher compares the selected sampling method with others,
the researcher believed this sample fit with the topic of the researcher. The researcher chooses
this sampling method because it is used in the case where the specialist of the respondent is
capable of bringing near to accurate result.

3.5. Methods of Data Analysis

According to the researcher, the appropriate method of analysis for the study is descriptive
method. Categorization or separations of data set is also a form of analysis to make the data
easily manageable. Organizing the data has provided descriptive information that answers
questions in the problem defined. The researcher attempted to describe consistency in the
analysis of data. The research employs quantitative data analysis, such as percentage and simple
tables.

18
 REFERENCE

Abdulrezake Yassin, (2012) Budget preparation, allocation and utilization in case of Silte zone
finance organization

Abera, (2014) assessment on budget preparation and utilization on public secondary school in
shashemene town

Alan Pizzey, Cost and Management Accounting 3rd edition

Amicucci, D.J. 1965. Budget variance trend reports. N.A.A. Bulletin (July): 9-14

Atkinson, P., &Hammersley, M.(1994) Ethnography and participant observation. In N.K. Denzin
& Y.S. Lincoln (EDS) , Hand book of qualitative research.

Babbie, E.R.(1990) survey research methods 2nd edition

Charles T. Horngren,G, Srikant M. &Datar. (1997) Cost Accounting: A Managerial Emphasis,

Volume 1. Prentice Hall, 1997

Creswell, J.W. (2003) Research Design: Qualitative, Quantitative & Mixed Method Approaches.
2nd Edition, Sage Publications,Inc.

David N Hyman public finance: A contemporary application of theory to policy 11th edition

Donald Axelrod, 1989 budgeting for modern government 2nd edition

Doreen .D (2014) effectiveness of budgeting process in achieving organizational goal in case of

Tanzanian Electrical, mechanical and electronics service agency

Elalu (2012) budgeting and its impact on the performance of commercial bank a case study on
shashemene branch

Elias H/meskel, (2018), Assessment on budget implementation and controlling in Case of Addis
Ababa City Administration Finance and Economic Development Bureau

Fredrick C. Masher, Program Budgeting: Theory and practice(Chicago:1954)

Gebeyehu (2013) budget preparation, utilization and budget performance in Addis Abeba mass
media agency

19
Getu tola (2012) budget preparation and implementation in Dire Dawa city

Ketema (2015) budget preparation and utilization in Addis Abeba city administration health
bureau

Robert N. ANTHONY (2004) Management control systems 11th edition

Ronald W.Hilton Managerial Accounting 4th edition

Tsegie Semachew,( 2019) Factors That Affect the Budget Preparation and Utilization in Ministry
of Finance

Yusuf Ahmed, ( 2015) budgeting and budget monitoring practice in NGOs operating in Ethiopia)

20