QUEENS’COLLAGE

ACCESSES ISSUE RELATED TO THE BUDGET PRIPARATION AND UTTILIZATION

IN KERA KORE SUB –CITY WAREDA 02 ADMINSTRATION

RESEARCH PROPOSAL SUBMITTED TO DEPARTMENT OF BUSINESS AND

ECONOMICS

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE DEGREE IN

ACCOUNTING AND FINANCE

By ID NO
1, MESERET BOSHA 0115/14

3, NIGISTE BARKE 0086/14

4, FASIKA BEGNA 0098/14

5, TIGEREDA DEMISSE 0127/14

6, KIBRNESH FIKRE 0087/14

JUNE 20223

ADDIS ABEBA.ETHIOPIA
ABSTRACT
The study aimed at assessing budget preparation and utilization in Finance and Economic
Development in kara kore Sub city wareda 02 administration. Specifically the study focused on
identifying the existing condition of budget preparation, budget utilization & controlling and
performing of internal audit, through field survey to ensure the research primary and secondary
are used to collect data. Data were presented into tables and charts for easy analysis and
discussion of findings, the study findings indicated that budget preparation problems leads to
budget utilization problem and it end up with providing feedback for the necessary corrective
measures the study concluded that in order to enhance the performance of the Finance and
Economic Development in kara kore Sub city wareda 02 there must be properly integrated
budget and plan and also properly implement and controlling the budget through encouraging the
internal controls and audit performance of the approved budget.
Acknowledgement
Above all, we would like to thank and praise almighty GOD for his keeping our healthy; give us
strength and endurance from beginning of this degree program to the finalization of this research
paper. We would like to express our Teacher Zeryhun /--/ for his Understanding,
encouragement and patience, professional and constructive comments from the beginning to the
completion of this research paper. And we would also like to extend officials of the office of kara
kore sub city 02 administration they have provided us the relevant data for our study. Special
thanks go to all our parents who have been the inspiration and motivational force throughout my
entire academic life. Our Special note of appreciation also extended to all our beloved friends for
their constructive comments, love, prayer, moral and encouragement for the finalization of this
paper.
Table of Contents page
Queens’ college………………………………………………...……………….

DECLARATION..........................................................................................................................................3

ABSTRACT................................................................................................................................................4

Acknowledgement.......................................................................................................................................5

Chapter1. INTRODUCTION....................................................................................................................10

1.0. BACKGROUND OF THE STUDY...............................................................................................10

1.1. Statement of the Problem.................................................................................................................12

1.2. Objective of the study...................................................................................................................13

1.2.1.General objective....................................................................................................................13

1.2.2.Specific Objective...................................................................................................................13

1; 3Basic Research question................................................................................................................13

1.4. Scope of the study.........................................................................................................................14

1.5. Significance of the study...............................................................................................................14

1:6 Limitation of the study..................................................................................................................14

Chapter2. Literature review.......................................................................................................................15

2.0.Introduction.....................................................................................................................................15

2.1. Concepts of Budget.......................................................................................................................15

2:2 Types of Budgeting........................................................................................................................15

2:2:1 Departmental and ministerial budgets..................................................................................15

2:2:2 Union and state budgets.........................................................................................................16

2:2:3 Revenue and capital budgets.................................................................................................16

2:2:4 Plan and non – plan budgets..................................................................................................16

2:2:5 Administering and cash budgets...........................................................................................16

2:2:6 Main budget and supplementary budget..............................................................................16

2:2:7 Legislatives and executive budget..........................................................................................17

2;2;8 Flexible....................................................................................................................................17
 2;2;9 Purchase budget.....................................................................................................................17

2;2;10 Sales budget..........................................................................................................................17

2;2;11 Master budget.......................................................................................................................17

2.3 System of budgeting......................................................................................................................18

2.3.1 Zero based budgeting.............................................................................................................18

2:3:2 Incremental budgeting...........................................................................................................18

2:3:3 Fixed budgeting......................................................................................................................18

2:3:4 Performance budgeting..........................................................................................................18

2.4. The objective of budgeting.......................................................................................................19

2.5. Functions of budgets.....................................................................................................................19

2.5.1. Planning..................................................................................................................................20

2.5.2. Control...................................................................................................................................20

2.5.3. Communication.....................................................................................................................20

2.5.4. Coordination..........................................................................................................................21

2.6. Budget preparation......................................................................................................................21

2.7. Budget utilization.........................................................................................................................22

2.8. Concepts of under and over utilization of Budget......................................................................23

2.9. Internal control.............................................................................................................................23

2.10. Managing and Monitoring Budget Utilization.........................................................................24

2.11. Budget Process Overview.............................................................................................................24

2.12.Finance and Economic Development office Budget Process.........................................................29

2.12.1. Preparation.............................................................................................................................29

2.12.2. Utilization..............................................................................................................................29

2.13. Empirical literature.......................................................................................................................29

2.13.1. Research Gap.........................................................................................................................32

Chapter3..Research Methodology ---------------------------------------------------------------------------------

3.1.Chapter Objectives-------------------------------------------------------------------------------------------29

3.2. Research design..............................................................................................................................34

 3.3. Research Approach.........................................................................................................................35

3.4. Research techniques...........................................................................................................................35

3.5. Sample Designed............................................................................................................................36

3.5.2. Sampling Frame.......................................................................................................................36

3.5.3. Sampling unit...........................................................................................................................36

3.5.4. Sample Size and Sample Techniques....................................................................................36

3.6. Types of Data Collection Methods:................................................................................................37

3.6.1. Primary data source.................................................................................................................37

3.6.2. Secondary data source.............................................................................................................37

3.7. Data analyses and interpretation.....................................................................................................37

3.9. Data presentation............................................................................................................................37

3.10. Limitation.....................................................................................................................................37

3.11. Selecting the Methodology

List of table

1. Gender Composition of Respondent----------------------------------------------34

2. Education Level of Respondent----------------------------------------------------35
3. work Experience----------------------------------------------------------------------36
4. response rate on budget preparation-----------------------------------------------37
5. Budget Utilization in Finance and Economic Development--------------------39
6. Budget control in Finance and Economic Development------------------------40

LIST OF ABBREVIATIONS
IDA International Development Association
IFC International Finance Corporation
MTEF Middle Term Expenditure Frame work
MoFED Ministry of finance and Economic development
SDPRP Sustainable Development and Poverty Reduction Program
UNDP United Nation Development Program
GTP Growth and Transformation Plan
 1. INTRODUCTION
1.0. BACKGROUNDOF THE STUDY
Budget is a quantitative plan of action prepared in advance of a defined of time. It is also a
financial plan for a forthcoming accounting period. Budget is used as a tool for deciding which
activities as been chosen for a future time period. The Financial plan for how an organization we
receive and spend money for a set time period. It is an estimation of revenue and expenses over a
specified future period of time. The chartered institute of the management accountant CIMA of
England defined Budgets a plan qualified some monitory items prepared and approved prior to a
defined period of time usually showing a planned income to be generated and expenditure to be
incurred during that period and the capital to be employed o attained a given objective and his
definitions of covers Budgeting activities largely in the private sector enterprises Jain and
Narranq 2002.there is a general consensus in developing countries that economic development is
an urgent priority.Butthe task to bring about this development has remained an elusive and
difficult one. This is so partly due to inadequate financial resources and low level of investment
in our country. The financial resources are in scarce supply to meet ever increasing social needs
and population growth. The availably of financial resources is constrained by difficulty of
generating he required level of saving our of low level of per capital income and economic
growth. Therefore in view of limit resources and increasing demands, there is a need o improve
resources allocation through proper economic policy and expenditure planning (Jain and Narranq
2002)

Budgeting refers to the process used by the companies in which the detailed projection of
revenues and the expenses of the company for the future specific period of time are made
considering the different internal as well as external factors prevailing at that time.
The budget is the plan which intends to figure out expected operations revenue and expenses of
an organization for a future time period. In other words for business, entity budgeting is the
process of preparing a detailed statement of financial results that are projected for a certain
period of time. It is to estimate the future while taking the management inputs considering
internal and external factors of the organization.

In every organization, the finance department plays a key role in the preparation of the budget in
consultation with higher management. It is a document, which is referred for the health check of
the organization during the budgeted period.
The budget is prepared to carry out various functions like planning activities, developing
projects, testing and implementing programs, etc. There are various such functions for which an
entity prepares it. This can increase the chances of making profits within the given environment
and help the decision-making process of management. source yvanavich Agust. 2019

However, the approaches can be divided into two major points as below

Top-Down Approach of Budgeting; In the top-down approach, the top management prepares the
budget according to the objective of the organization and passes it on to the managers for
implementations. The suggestion and inputs may have taken from the managers before it’s
preparation but consideration to their suggestions for such preparation is solely on management’s
desecration.

Top-down budgeting begins with the estimation of costs at a higher level. The entire budget is
divided into first-level tasks, and then below level task and then below level task.

Management from previous trends and experiences estimates the cost and revenue while keeping
internal as well as external influences in mind such as an increase/decrease in salary cost, the
economic condition of the country, etc. Past experience and current market conditions are key
elements for the budget preparation. Management is expected to be in knowledge of current
affairs of the market as well as past history of the organization. Management may take inputs
from the managers at the initial preparation. This will help the management to acknowledge the
feelings of the lower staff and expectations at the organization level. Management shall consider
margin pressure, macroeconomic factors such as a change in tax legislation, as well as internal
factors such as resource allocation. Management may also take a look over the peers and their
budgets and profitability to compare the same with the organization. This will help to set targets
for the organization and increase the margin or profitability and outperform in the market. The
comparison with the peers may be at turnover level, cost level or overall profitability level. This
exercise helps management to find out the reasons for the gap between the organizations.
Management posts their finalization of the budget may again put it for the manager’s inputs.
Management may consider the inputs provided by the managers and finalize the same source
CFI’s budge and forecasting course (Horngren,Sundem& Stratton, 2002)and As Schiavo-Campo
(2007
Bottom-up Approach of Budgeting

In bottom-up approach, the managers shall prepare the department wise/business unit wise
budget according to the information and past experiences and present the same to the
management for their inputs and approval. The bottom-up approach begins by identifying the
different operations and tasks performed by the organization. Each unit of the organization shall
disclose the resources and funds required by them in their individual budgets. The finance
department then consolidates the funding requirement of the entire organization and the HR
department shall consolidate the resources required. The combined budget shall be put up to the
management for the approval. Managers from their past experiences and their involvement in the
day to day business shall prepare a budget for the forthcoming period. They have been asked by
the management for setting their own targets with regard to revenue as well as cost. Managers
are expected to take into account market conditions and margin pressures and help it to make
more realistic. Managers are expected to go beyond the internal environment and consider the
external influencers as well. Managers then put the budget to the management for their review
and approval. It shall have an explanation for each and every item and if there is a major
variance from the previous period budget, that should be highlighted to the management with the
explanation. Post their review and query resolution, it shall be finalized and implemented in
every business unit.(Horngren,Sundem& Stratton, 2002)and As Schiavo-Campo (2007

1.1. Statement of the Problem

In developing countries, it has become increasingly complex to manage public expenditure
allocation because the roles of the government have been expanded and financial resources are in
scarce supply to meet this ever-increasing social needs and population growth. Due to inadequate
financial resources as opposed to an increasing demand for public service, there is a need to
improve resource through proper economic policy and expenditure planning(Getachew 2005).

These processes require a realistic medium term of expenditure planning and annual budget
allocation, which reflect policy objectives and priorities of the city government public sector. It
is a tool for improving public sector expenditure planning and management. Failures to link up
these systems across the all levels of the city have been contributing to poor expenditure
planning and budget management systems. In Middle Term Expenditure frame work sub-city
administration, the integration of annual budgeting with medium term planning is fragmented.
Budget reform and public investment projects have been attempted to reduce the gap between
expenditure planning and annual budget allocation in the sub-city. The expenditure planning
project has attempted to implement efficient resource allocation by placing greater emphasis on
the medium term expenditure planning. Its main focus was on the capital planning process to
develop public investment program.

Every year the sub-cityWareda 02 administration finance and economic development bureau
disseminate Middle Term Expenditure frame work format which contains the needed budget for
the coming two or three years which includes the capital and recurrent budget as well as the
basic salary of the employee of the Wareda 02 sub-city administration. According to the request
the wareda 02 sub-city administration and other bureau and other institution send their budget
request as required. What is the problem regarding this issue is that the budgetary institutions are
not aware of what they have to do and for the coming budget year. In Addis Ababa KeraKore
sub-city werada 02 administration public sectors, one of the institutions which are administered
by the city council is responsible to request the annual budget depending on what is going to do
on both the capital and recurrent budget. The agency prepared the annual budget request every
year according to the budget ceiling which is disseminated by the finance bureau every year.
What is the main problem in requesting the annual budget of the wareda 02 sub-city is that the
concerned business process does not know efficiently what is going on in the wareda 02 sub-city
administration public sectors for the coming budget year; the concerned other business processes
are not interested to inform what will be done for the coming year and the other major problems
arise in relation to the utilization of the allocated budget which is due to the fact that the budget
is not specifically allocated for the specified item

1.2. Objective of the study

1.2.1. General objective
The general objective of this study is to the budget preparation and utilization in wareda 02 sub-
city administration of Finance to provide solutions for the problem.

1.2.2.Specific Objective
o To examine the budget preparation and utilization process.
o To identify the budget preparation and utilization and controlling system

1; 3Basic Research question

o What are the roles of budgeting in local government budget preparation?
o How does this factor influence financial preparation and utilizing in the sub-city wareda 02?
o What are the constitutions of budgeting preparation systems in the sub-city wareda 02?
1.4. Scope of the study
The scope of the study is limited to the analysis of access issue related to the budget preparation,
utilization and performance of the Kera Kore sub-city wareda 02 government sectors. It doesn’t
consider NGO and other institutions those which are administered by the city administration

1.5. Significance of the study

In developing countries, like Ethiopia, the allocation of scarce resources for the provision of
Socio-economic development should be based on systematic synchronization of policies,
Planning and resource and efficient utilization of resources for effective economic development.
But, in practice there are several gaps to link up the needed requirement and the allocated budget.
Objectives are available resources in the office of city government. The need to work on this
missing link is essential in the sector where resources are extremely scarce. From this point, one
can easily conclude that it becomes so important to study allocation of financial resources, In
general, by analyzing some the city government procedures in budget allocation; the study is
helpful to formulate sound Expenditure planning and to improve the deficiencies of resource
allocation and utilization in the Sector.

1:6 Limitation of the study

There was an inadequate finance especially in facilitating data collection, printing of reports
among others. Difficulties in getting adequate information as many of those directly involved
were reluctant in giving the required information. Insufficient information was provided by the
respondents because most of the local councilors
 2. Literature review
2.0. Introduction
This chapter tries to see the analysis of the existing knowledge and other researchers‟ worksfrom
library, different websites, research papers and other documents in order to know theconcept of
budget, budget preparation and utilization empirical literatures are discussed. In this part,
assessment of related theoretical literature from different books written by differentscholars on
the basic concept of the government budget implementation and controlling waspresented to
identify and analysis documents consisting of information associated with theresearch problem
being investigated.

2.1. Concepts of Budget

Horngren Forster and Datan (1997) describe a budget as a quantitative expression for period of
time designed for future plan of action by management. A budget can cover both financial and
non-financial aspect of these plans and act as a blue – print for the company to follow in the
upcoming period. Thus a budget is also an itemized estimate of operating result of an enterprise
for a future time period. According to Adams (2009:184), a budget could be defined as a future
plan of action for the whole organization or a section thereof. Budget can also be defined as a
Financial and/or quantitative statement prepared and approved prior of time to be pursued by the
organization in order to achieve organizational goals and objectives government budget is a
financial plan which describes its intention and policies that it would like to pursue in the coming
period along with their cost implications. Such a plan describes in detail the estimated receipts
and proposed spending under different heads. Indeed, the word ‘budget’ comes from the French
word: baguette which is small leather bag or wallet containing spending money along with the
spending purpose.

2:2 Types of Budgeting

2:2:1 Departmental and ministerial budgets
These were prepared upon the ministry, its departments, its functions and the types of transaction
being performed. These departmental budgets were being consolidated into the budget and the
ministry budget and then all these were being consolidated into the main budget which was
presented to the parliament of the country every year for example the railway budget in India.
2:2:2 Union and state budgets
In the federal country like India, there were main state government and a central government and
both sets of government require money for the fulfillment and their respective needs. This was
because they tap different sources for obtaining revenue

2:2:3 Revenue and capital budgets

This was divided into two, that is revenue budget which includes tax revenue and non taxrevenue
receipt and the capital budget and the expenditure met out of them. The tax revenue include the
receipts from various type and taxes levied by the government whereas the non tax revenue
consists of receipts from property and enterprises, income from general service like public work,
supplier and disposed. Capital budget includes market borrowing, foreign debts, net small
savings, and other unfunded debts, sell of treasury bills, payment for loans from states,
miscellaneous capital receipts on the receipts sides. On the expenditure side the capital
expenditure includes expenditure and buildings and other construction, machinery and
equipments, investment in shares, loans for capital formation to states, local government and
others.

2:2:4 Plan and non – plan budgets

The plan budget shows the budgetary provisions related to the annual plan for the year. The plan
budgets includes the financial provisions of the government related to different sectors like
agriculture and allied sector, industries and mines, transport and communication, power and
social service. It also includes central assistance for state plans, while the non-plan budgets
relates to other activities other than the plan expenditure.

2:2:5 Administering and cash budgets

The Administrative budget shows the revenue and expenditure on actual basis, it excludes those
funds which were owned by the government. On the other hand cash budgets shows revenue and
expenditure on actual payment basis although it includes funds which do not belong to the
government.

2:2:6 Main budget and supplementary budget

The main budget was that which presents budgets for the entire fiscal year. It was an annual
financial statement of estimated receipts and expenditure of the government. Supplementary
budget was presented to the parliament of the country to meet extra expenditure on emergencies
like war, earthquakes, floods and to increases tax and non – tax revenues for the purpose.
However there were no fixed times or period for a supplementary budget or its presented any
time when emergency arises.

2:2:7 Legislatives and executive budget

There are budgets prepared by the various committees appointed by the legislature (parliament)
from among its members and there after passed by the legislatures. An executive budget is the
one that involves estimates for revenue and expenditures which are prepared by the different
ministries and department which are later forwarded to the ministry of finance. All this estimates
are consolidated into the main budget which is presented to the legislature for adoption.

2. 2. 8. Flexible
Flexible budget was the one designed to adjust the cost according to actual level and activity
attained or it’s to adjust the cost levels to suit the level for activity usually attained. These were
general funds, which represents amounts which were expendable at the discretion to the council
in furtherance of the objectives of charity such funds especially helped to finance working capital
or capital investment.

2;2;9 Purchase budget

These include purchases of raw materials and other items required for the production of goods.
In the case of local government they purchase items like office equipment’s and vehicles

2;2;10 Sales budget

(Kamukama Nikon 2008). The sales budget indicates the amount and sales in units and value the
company intended to sales in the fourth coming period and this must be prepared before any
other budget was prepared and this budget forms the foundation of all other budgets. In the
caseof local government it may look at the construction for health centers and roads.

2;2;11 Master budget

(Jian and Narany 2002) definition of the master budget given by Chattered Institute of
Management Accountant (CIMA) of England as the summary budget incorporating its
components functional budget and which was fully approved adopted and employed. This
summarizes the entire department budget
2.3 System of budgeting
2.3.1 Zero based budgeting
Peter Rhyr has defined zero based budgeting as a “planning to justify the entire budget request in
details from scratch (hence zero based) each manager states why he should spend any money at
all”. This approach requires that all activities be identified as decision packages, which will be
evaluated by a system of systematic analysis ranked in order of importance. It was also defined
on a “system whereby each budget item regardless of whether its new or existing must be
justified in its entirely each time a new budget was prepared and quoted by (M.N. Arora 1999).

2:3:2 Incremental budgeting

This type of budgeting provides that the current level of operating activity and budgeted
allowance for existing activities were the standing point for the preparation of an annual budget.
The base was then adjusted for changes expected to occur during the period. It was called
incremental budgeting because it was concerned with increments in operations and expenditure
that will occur during the budget period. The short coming with this type of budgeting was that it
perpetually incorporates past inefficiencies.

2:3:3 Fixed budgeting

The institute of cost and management accountants (UK) defines a fixed budget as the budget
which was designed to remain unchanged irrespective of the level of activity actually attained. It
was based on the single level of activity. A fixed budget performance report compares data from
actual operations with the single level of activity, in the budget. Fixed budgets do not change
when the production level change. This was in Jawahur Lal (2002).

2:3:4 Performance budgeting

(Jain and Narranq 2002) performance budgeting had its origin in USA after the Second World
War. It tries to rectify some of the short comings in the traditional budgets. In the traditional
budget amounts were earmark for the object of expenditure such as salaries, travels, office
expenses, grant and aid. In such a system of budgeting the money concept was given more
prominence that was estimating or projecting rupee values for the various accounting heads or
classification or revenue and cost. Performance oriented budgets were established in such a
manner that each item of expenditure relates to a specific responsibility centre was closely linked
to performance of that centre. The basic issue involved in the fixation of performance budget was
that of developing work programs and performance expectation by assigning responsibilities
necessary for the attainment of goals and objectives of the enterprise, it involves establishing
each centre a program of target performance in physical units, forecasting the amount of
expenditure required to meet the physical plan laid down and evaluation of performance
revenues, donor funds etc.

2.4. The objective 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 (MoFED) 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 achieve by expenditure
policies such as, subsidies, pension or social welfare schemes as much as taxation on income and
capital. Budgeting may be the most important responsibility of government legislator or
manager. Citizens expect, government leaders to prioritize community program and services
goals, authorize the expenditure of resources of meet those goals, comply with law over spending
appropriations improve the quality of services in the meatier and demonstrate for public funds in
the long term. A good budget should, at a minimum, have majority, ‘Buy in’ by all affected
parties. Integrating the budget in to the accounting system allows management to oversee

Individual unit performance and react quickly to variances between actual results and budgets
plans. The legalistic view is that a budget is a plan of financial operation embodying an estimate
of proposed expenditures for a given period of time and the proposed means of financing them.
Budgets may be regarded as devices to aid management in operating an organization more
effectively. Governments build budget to demonstrate compliance with laws and to communicate
performance effectiveness. (Wilson 2010).

2.5. Functions of budgets

A budget serves several useful functions in organizations. The main functions that budget plays
in companies include planning, communication, control and coordination. These are not the only
functions of budget; however, for the purpose of this research we will only focus on these four
functions. Each function is separately discussed below.

2.5.1. Planning
Budget plays a crucial role in planning the activities of an organization (Hansen, Mowen& Guan,
2007). It provides detail information regarding what management wish to achieve and how.
Therefore, it serves as a plan of action for a company and allows management to identify and
determine in advance the amounts and time required to achieve its desired goals. Churchill
(1984) stressed that budget, from a planning point of view, harmonizes the company’s strategy
with its organizational structure, its management and personnel, and the tasks that have to be
done to implement the strategy. If the budget is well prepared and implemented, it will translate
the company’s strategic plans into period-oriented operational goals.

2.5.2. Control
During the preparation process and at the beginning of the year, the budget is a planning tool. At
the end of the period, it is a control tool (Shim & Siegel, 2008). In this sense, budget is
considered as a type of “yardstick” against which the actual performance is evaluated. The
objective of budget as a control system is to minimize the difference between actual and desired
conditions (Hanson, 1966). The controlling function of budgets is performed by 21 comparing
actual revenue and costs with budgeted ones to identify occurred variances and determine
necessary corrective actions (Anthony &Govindarajan, 2007). Variances are analyzed with the
purpose to identify the causes and parties responsible, thereafter the responsive actions are taken
to correct them if needed.

2.5.3. Communication
Budget serves as a management control tool that promotes the communication of plans and
targets in an organization (Upchurch, 2002). The plans and targets are communicated among
subunits and between managers and subordinates within the company. A good budget process
communicates not only from a top-down but also from a bottom-up perspective (Horngren,
Sundem& Stratton, 2002). Further, the plans of management cannot be successfully implemented
unless the organization understands these plans, and budget is a useful device for communicating

Information regarding the plans. According to Drury(2008. When top management defined the
goals of the organization, these are communicated to other employees through the budget, and
the employees and lower-level managers in turn communicate to the top-level management how
they plan to achieve the goals and objectives (Horngren et al., 2002).

2.5.4. Coordination
Budgets also serve a coordination role. Since the budgets consist of many subsidiary budgets for
different functions of the company on different levels, some inconsistencies may appear when
assembling the pieces into an overall budget. During the budget preparation, these
incompatibilities are discovered and resolved (Anthony &Govindarajan, 2007). Thereby, budgets
help coordinate the activities in the entire organization with the purpose of assuring that the
resources are not under- or overused. At a higher level, budgeting coordinate operational plans
with investments plans and finance (Arwidi& Samuelson, 1993). Moreover, budgets can serve a
coordinating function after the budget period has actually started. If a unit does not meet its
budget due to changed conditions, then the knowledge gained during the budget preparation
about interrelations between different activities can be beneficent in developing revised plans
and reallocation of resources (Barrett & Fraser, 1977).

2.6. Budget preparation

Maitland (2001) mentions that the process of preparing and agreeing on a budget is a means of
translating the overall objectives of the organization into detailed, feasible plan of action. Public
budget preparation is one of the tedious tasks that any country should look upon. The preparation
process for the annual budget involves a great deal of energy, time, and expense. Hence, it is
important that a country must be able to follow accurately all the methods of preparing an annual
budget. In budgeting, the focus is not only to prepare the budget, but more importantly to have a
follow-up operation for budgeting and to act according to known data. Falk (1994) states that
budgets are financial expressions of a country’s plan for a period of time. It tells where and how
the organization will spend money and where the money will come from to pay these expenses.
He adds that budgets set limits. Besides setting limits, Andrews and Hill (2003) say that budgets
also provides the assurance that the most important needs of a country are met first and less
important needs are deferred until there are sufficient funds in which to pay for them. Even
though budget preparation is not the sole thing that needs consideration in budgeting, the basis of
it is still needed in order to have at least close estimation. Budget preparation helps management
focus on the next month or the entire coming year .Budget preparation is also an excellent
vehicle with which to work with all supervised personnel by requesting their managers and their
staffs. At the end of a period the budget helps managers evaluate performance, locate
problematic areas, bottlenecks and provide solutions to these problems (David, 1988). As per
Shah (2007) preparation of the budget usually takes many months and involves all public
institutions: the Ministry of Finance manages the process; the Cabinet/President sets or approves
the policy priorities, line ministries plan and advocate for their resource needs and the legislature
reviews and approves the final plan. Preparation is at the heart of the political process: it is the
decision on how to allocate the state’s limited resources to competing demands. Preparing a
budget proposal that suggests a set of recommended policies and stays within whatever financial
limits are considered politically realistic has been a prominent issue in public budgeting Bunch
and Straussman (1993). One approach is to set specific dollar ceilings on budget requests. This
approach has the distinct advantage of making agencies prepare requests that include only
financially feasible options Lee (1992). This method is often called fixed- ceiling budgeting.
Budget ceilings instruct agencies to request next year's budgets based on certain assumptions,
such as their set of priorities regarding rankings. According to Schiavo-Campo and Tommasi
(1999) and Allen and Tommasi (2001), the main starting points for the preparation of the annual
budget should be a clear definition of fiscal targets and strategic framework consisting of a
comprehensive set of objectives and priorities. As Schiavo-Campo (2007) stated a successful
budget preparation process combines top-down direction and bottom-up planning. The overall
budget envelope and sector/ministry spending ceilings are usually set by the Ministry of Finance
and the Cabinet/executive in accordance with policy objectives. These are then communicated to
the line ministries, which are responsible for preparing their respective sector budgets. Through
an iterative process of review, debate and bargaining, a consolidated budget is hammered out. A
budget proposal is then presented to the legislature, where it is debated and negotiated with the
executive and eventually passed into law.

2.7. Budget utilization

Once a budget has been approved by the legislature, the government embarks on the challenging
task of spending funds. Utilizing public funds effectively to meet stated policy objectives while
ensuring value for money is often just as challenging than planning how to spend it. Several
reviews of Public Financial Management performance in developing countries show that
countries score significantly better on budget preparation than on budget utilizing. According to
Schiavo-Campo and Tommasi (1999) budget utilization is the phase where resources are used to
implement policies incorporated in the budget. As they argued, it is possible to utilize badly
awell-prepared budget; it is not possible to utilize well a badly prepared budget. As per Allen and
Tommasi (2001), successful budget utilization depends on numerous factors, such as the ability
to deal with changes in the macroeconomic environment, and the implementation capacities of
the agencies concerned. Besides to this, the budget system should assure effective expenditure
control. In addition to a realistic budget to begin with, a good budget utilization system should
have complete budgetary/appropriation accounting system.

2.8. Concepts of under and over utilization of Budget

Allen and Tommasi (2001) stated that over utilizations are sometimes caused by non-compliance
of budget managers with the spending limits defined in the budget, when committing
expenditures. Since cash allocated to spending units for appropriated expenditures is generally
controlled, these overruns generate spending arrears. Overruns are often the result of off-budget
spending mechanisms (payment from special accounts, etc.). In some countries, payments made
through exceptional procedures are not controlled against the appropriations and are therefore an
important cause of overruns; lack of compliance can be addressed through strengthening the
audit system, and reporting system, and ensuring the effectiveness of the basic budget execution
controls. Moreover, overruns can be caused by deficiencies in budget preparation. Sound budget
preparation processes and adequate institutional arrangements are a prerequisite for avoiding
overruns. On the other hand, Allen and that Tommasi (2001) expressed in a number of countries,
the official budget is under spent, particularly its non-wages expenditure items. This does not
necessarily mean that there is good fiscal discipline in these countries. In some countries with
poor governance, under spending of the official budget may coexist with large amounts of off-
budget spending. On the whole, in most cases, underutilization as well as over utilization is
related to insufficiencies in budget preparation and program preparation. An overestimated
budget and unrealistic projections of revenues may lead to budget revisions during budget
utilization and to a practice known as “repetitive budgeting”. Peters (1998) identified the
following weaknesses in resource allocation and use: poor planning; no links between policy
making, poor planning and budgeting; poor expenditure control; inadequate funding of
operations and maintenance; little relationship between budget as formulated and budget as
utilized; inadequate accounting systems; unreliability in the flow of budgeted funds to agencies
and to lower levels of government; and poor cash management.

2.9. Internal control

As explained by Rebecca, Natasha & Imran (2011) internal control systems are the policies and
procedures put in place by the management of a government agency in order to ensure theagency
achieves its objectives and complies with external laws and regulations. Such policies and
procedures tend to cover financial accounting and reporting, performance monitoring, asset
management and procurement. Large agencies will have an internal audit unit comprising
internal auditors that independently review and report on the implementation of management
policies to the head of the agency.

2.10. Managing and Monitoring Budget Utilization

As indicated by Tommasi (2007) there should be distribution of responsibilities for budget
utilization, budget appropriation management rules and budget revisions, various special issues
related to budget utilization, and the monitoring of budget execution. At the same time budget
execution covers both activities related to the implementation of policies and tasks related to the
administration of the budget. Both the central agencies (the ministry of finance, the ministry of
planning in a dual budgeting system, and the prime minister’s office) and the spending agencies
are involved in these tasks. The distribution of responsibilities in budget management should be
organized according to the agencies’ respective areas of responsibility and accountability.

2.11. Budget Process Overview in the case of Ethiopia

As part of the on-going civil service reform programs, the government has introduced Program
Budgeting system at the federal level. Prior to the adoption of the Program Budgeting initiative,
the country was followed the Line-item budgeting system. From 2006/07 to 2009/10 pilot Public
bodies were selected to implement program-based budgeting: and in 2010/11 fiscal year all
federal level public bodies switched to program budgeting for shadow program budgeting: and
in2011/12 fiscal year, the program budgeting system was further strengthened and total
implemented at federal level. The main objective of program budgeting system is to allocate
resources for output or results, it also show the relationship between plans and budgets, and
coordinates both capital and recurrent budgets. The Line-item budget system on the other hand,
focuses only on inputs. Preparation of budget at Federal level is based on the three stages in the
Planning Cycle:

The macro-economic and fiscal framework;

Notification of the three-year subsidy estimates; and the
Preparation of the annual fiscal plan.

These three planning documents must be consistent with higher-level national planning
strategies; the latest being the Growth and Transformation Plan (GTP) and sartorial planning
strategies.
Stage.1The Macro-economic and fiscal framework (MEFF). MoFD is responsible for the
preparation and maintenance of a rolling three year Macro Economic and Fiscal Framework, and
to have it presented to the Council of Ministers for their approval.

MEFF is a three-year forecast of the following:

 Economic growth and GDP

 Government revenues and expenditures, and of sources of financing
 The allocation between federal government expenditures and the total subsidies to
regions and administrative councils

4. The allocation between capital and recurrent expenditures for the federal government.

Stage 2. Notification of the three-year subsidy estimates.

Using the approved subsidy formula and based on the approved MEFF, MoF will prepare a
rolling three year estimate of subsidies to each regional government and administrative council,
and notify them of these estimates by November 25 each year.

Stage 3.Preparation of the annual fiscal year plan.

The final stage of the planning cycle is the preparation of the Annual Fiscal Plan by MoFD. The
Annual Fiscal Plan is a detailed estimate of the revenue, expenditure (including subsidies) and
financing requirements for the coming fiscal year. The Annual Fiscal Plan provides a more
detailed and accurate set of estimates than are available from the first year of the MEFF. By
definition, the MEFF is a high level macro set of estimates, and the MEFF is prepared early in
the planning cycle (i.e. October). The Annual Fiscal Plan on the other hand is built from the
bottom up (i.e. from each public body), and is prepared using more recent data on revenue and
expenditure trends and forecasts (i.e. in January). With these three important planning documents
available, work can start on the preparation of the annual budget itself. Preparation of budget has
eight stages in the program budget cycle. This are:-

1. Pre-preparation of budget by public bodies each public body needs to take the initiative to
start budget preparations before they receive the budget call letter from MoFD with their
budget
 2. Ceilings. There is much preliminary budget preparation work they can carry out prior to
receiving the official budget call letter. This preliminary work is dominated by the policy
and planning aspects of budgeting; that which differentiates PB from line item budgeting!
This preliminary work can be summarized as follows, for federal, organizations.
• Individual organization’s ARISIP (a) last year’s performance
• Preliminary budgeting based on last year’s allocation

2. Notification of Annual subsidy to Regions

Using the approved subsidy formula, MoFD prepares the budget for the subsidies to regional
governments and administrative councils. MoFD will notify each regional government and
administrative council of their annual subsidy by February 8.

3. Issuing the Budget Call

The Budget Call is a letter from MoFD sent to all public bodies which provides them with the
following:

 Their ceiling for program expenditure for the coming fiscal year;
 The deadline for submitting their budget request;
 A review of the policies that affect the expenditure of public bodies;
 General guidelines for the preparation of the program budget submission; and
 Detailed instructions and formats for preparing the request for the program budgets.

In deciding the allocations for capital outputs in programs, MoFD will consider the progress on
implementation of existing projects, whether any new projects have been approved by
Government, and the capacity of public bodies to implement the projects in their work plans. In
deciding the allocations for recurrent outputs in programs to public bodies, MoFD will review
the effectiveness of programs in each public body, whether any new programs have been
approved by Government and whether there have been any changes to structures of ministries or
departments. The Budget Call informs public bodies not only what their ceilings are and how and
when to prepare their budget requests but also, the formats for submitting these requests. MOFD
will issue the Budget Call letter to all public bodies by February 8 of each year.
4. Budget Request

The ‘budget request’ stage of the budget cycle begins when public bodies receive the Budget
Call. The central task for public bodies during the request stage is to fit their request within the
budget ceiling issued in the Budget Call. Public bodies’ request is based on written text

(ARISIP) and supporting tables. To fit the request, two tasks have to be completed by public
bodies:

 Adjust their PBs to the budget ceiling notified; and

 Complete the necessary forms for submitting their PB requests to MoFD.

5. Budget Hearings

Having received the budget requests from public bodies, and before preparing a draft
recommended budget, MoFD will conduct ‘budget hearings’. These hearings are designed to
respond to any issues raised during MoFDs initial review of any public body’s PB. Officials
from each public body will be questioned about their budget requests, and sometimes invited to
submit additional supporting information. The information obtained from these budget hearings
enables MoFD to proceed to the preparation of a draft recommended budget.

6. Preparation of the draft recommended budget

The draft recommended budget is the consolidated budget that MoFD prepares and submits to
the Council of Ministers. In turn, the Council reviews it and recommends it to the Council
Peoples’ Representatives. MoFD prepares the draft recommended budget based on the budget
requests it has received from all of the public bodies, and from up to date information on
resources that will be available to fund expenditures. During this stage, the budget requests from
public bodies are reviewed, adjusted and consolidated into a single budget for capital and
recurrent expenditure; the new consolidated PB format. The draft recommended PB budget will
be finalized by MoFD and printed from the (revised) computerized budget system. MoFD is
required to submit its draft recommended budget to the Council of Ministers by May 23.

7. Recommended budget reviewed by council of ministers

The Council of Ministers receives the draft recommended budget from MoFD, and carries out its
own review of that draft recommended budget. The Council of Ministers will carry out its review
from the 3 rd week of May to the first week of June (15 days). The Council of Ministers may ask
MoFD to make adjustments or revisions to the draft recommended budget before the Council
‘recommends’ it to the House of Peoples’ Representatives. MoFD will make these changes using
the computerized budget system, and then provide the Council of Ministers with th
recommended budget. The recommended budget must be submitted by the Council of Ministers
to the House of Peoples’ Representatives no later than June 7. The recommended budget is now
ready for review, approval and appropriation by the House of Peoples’ Representatives.

8. Legislative approval and appropriation of the budget

The recommended budget will be presented in a Budget Speech by the Minister of Finance, to
the House of Peoples’ Representatives (HPR), on a designated date. After consideration, HPR
will send the budget document to the Permanent Budget Committee (PBC) for further scrutiny.
PBC, in the presence of MoFD officials, will then invite selected stakeholders to finalize
consultation on the annual budget. Once approved by the House of Peoples’ Representatives, the
‘recommended budget’ becomes the ‘approved budget’. However, the expenditures proposed in
the approved budget cannot be implemented until an appropriation law is also proclaimed by the
House of Peoples’ Representatives. It is important to distinguish between the approved budget
and the annual appropriations. The budget that is approved by the House of Peoples’
Representatives is a detailed budget. However, the appropriations are at a more aggregate or
global level. An appropriation is a legal mandate to spend money out of the consolidated fund.
The House of Peoples’ Representatives is required to vote on the annual appropriations for the
approved budget no later than July 7. The appropriation Proclamation will specify the following;
first, for government as a whole:

Total revenue source; both domestic and external;

Total federal recurrent expenditure;

Total federal capital expenditure;
Total of all subsidies to regional governments and administrative councils; and
The total subsidy for each regional government and administrative councils.

Then, for each public body (based on PB form 1b):

 Total budget for each public body;

 Total budget for each program;
 Total budget for each output; and
  Source of funding for each output.

The approved budget includes the appropriation Proclamation, as well as more detailed
schedules of the budgeted allocations to and within each public body, and of forecast revenue
collections by each public body. The approved budget and the annual appropriations can now be
referred to as the Proclaimed Budget, and is published in the NegaritGazeta – ready for
implementation. Copies are distributed to all public bodies and made available of the MoF
website.

2.12. Finance and Economic Development office Budget Process

2.12.1. Preparation
The Finance and Economic Development office budget plans are based on the organization
mandates and responsibilities that are given by the federal government of Ethiopia. There are
twenty four directorates in the ministry that works with their own responsibility for the general
objective the ministry. Even if the ministry is the responsible body for all budgetary public
bodies budget preparation and utilization it also follow the instructions by the ministry itself how
to prepare and utilize its budget. The strategic planning & management directorate prepare the
organization budget based on the needs of those 8department and 1projectdepartment projects.

The planning department prepares the Finance and Economic Development office budget using
the program budget concept and the celling given by the Finance and Economic Development
office for all budgetary public bodies.

2.12.2. Utilization
The 8department and 1 project department are the major users that hold the direction of the
Finance and Economic Development office in terms of activities and programs based on the
strategy that needs to achieve within five years. These activities and programs are implemented
through the whole budget users.

2.13. Empirical literature

The empirical study concerns on previous academic studies on the assessment of budget
preparation and utilization practice. In this study there are some researches stated which are done
by different researchers as follows. 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. Ida
HaryantiBintiMohd Noor (2012) studied budgetary participation by focusing on how it affects
performance and commitment in order to determine the relationship between budgetary
participation and managerial performance with organizational commitment as the intervening
variable in a Malaysian public sector organization using a pilot study. The study found that the
budgetary participation process implemented does have significant positive effects on managerial
performance. Moreover, the intervening variable of organizational commitment has a significant
role in mediating the relationship between budgetary participation and managerial performance
and organizational commitment leads to improved managerial performance since more
committed employees are more motivated and dedicated. Ida HariantiBintimohd (2012) studied
how budgetary participation affects organizational performance with organizational commitment
as the intervening variable and the study identified that budgetary participation has a significant
effect on managerial performance by enhancing organizational commitment. Elizabeth (2010)
determined challenges of Budget implementation in public institutions bytaking University of
Nairobi as a case study to analyze whether budget implementation in public institution in Kenya
served the multiple roles of planning, controlling, communication and decision making using
descriptive research study design. The study established the challenges encountered in budget
implementation. The challenges as found out included insufficient funds, institutional weakness,
the method usedto allocate budget was unsatisfactory and budget included unattainable targets.
The study further found out that the institutions used the budget to serves the multiple roles of
planning, controlling, coordination and communication. The study established that participation
in budget preparation is another important issue because it reflects degree of consensus and
ownership from the persons involved. The study concluded that University of Nairobi faces
various challenges in budget implementation especially reduced revenue leading to shortage of
available resource for its operation. Nicoleta (2010) conducted a study on public Budgeting on
Republic of Moldova as a case studyby reviewing both theoretical and practical analysis done by
World Bank with the objectives of illustrating if public Budget is efficient or not and impact of
applications of practice. The study found that the general trend concerning the Budget method
and procedures is directed to the achievement of results, performance indicators and performance
information. According to Getachew (2006) conducted a study on the analysis of medium term
expenditure planning and budget allocation in Ethiopia stated that, even though there have been
several attempts to address the weakness of the Ethiopian budgetary system and try to resolve
conflict between annual budget perspectives with medium term planning horizons, successful
modern budgeting system remains a continuous problem of the country. In addition, Getachew
(2006) explained that, the main problems of the Ethiopian budget process systems were:

o Lack of proper medium term perspective;

o Lack of properly integration of capital and recurrent budget;
o The head of public bodies did not give much attention for preparation of budget;
o Budget doesn’t give incentives for efficiency;
o During budget utilization performance measures is not applied;
o The relationship between budget and macro-economic policy framework is insufficient;
o Preparation of budget based on unreliable data and estimation;
o The budget system was ineffective to ensure financial accountability; and
o Involvement of stakeholder and Political commitment in the budget process are limited.

In line with this Abdu (2009) conducted a study on the assessment of budget process in
koboworeda. The main aim of the research was to enhance understanding on the government
budget preparation, budget approval, budget implementation and budget control. The study
concludes that there is a problem in preparation of medium term expenditure planning and
Priority setting was not according to the national and regional objectives. The legislature did not
make any serious deliberation and has no influence in the priority setting of the budget. With
regard to the budget implementation, even though the public sectors preparing the action plan for
purchasing of goods and services it is not practical operational. Finally the researcher identifies
that there was no well qualified and professional auditor. Most of the time sectors were not
audited on time. The audit standards like professional skills, and independence were not properly
functioning. Turyakina (2004) pointed that, budgets play a highly important role in performance
evaluation. Attaining corporate objectives is per amount to success. Performance of any
organization is often evaluated by measuring success in meeting the budget objectives. When
budget is successfully implemented and executed will enable realization of company objectives
and once this has been done the organization is said to have achieved at performance level. Thus,
efficient budget management is important for smooth performance of any organization. In a
study, Douglas (1994) used a case study approach and found that budgeting places high
importance on budget-actual- comparison for performance evaluation purpose; both at corporate
and subordinate levels. Budgeting and budgetary control mainly forms and give an organization
the structural support to achieve its goals and objectives and maximizing performance through
effective resource allocation. According to Joshi et al. (2003), examines budgetary planning,
control and performance evaluation in developing countries. A questionnaire survey of 54
medium and large sized firms including both listed and non-listed firms was conducted. His
findings revealed that most of the firms prepare long-range plans and operating budgets, and use
budget variance to measure performance for timely recognition of problems and to improve the
next period’s budget

2.13.1. Research Gap

Different Researchers were discussed about budget preparation, implementation and control in
different sectors. Previous studies show that there is a direct relationship between budgetary
participation and performance. The objectives of the article were reviewing public expenditure
management and controlling of financial resources as it is crucial because society’s needs and
demands are unlimited whereas resources are limited in nature. Therefore, Determinants of
budget control in public organizations showed that there is a problem of linking the work plan
with expenditure budget preparation. It is also revealed that purchasing of goods and services is
not based on the annual action plan by sectors. In other word, this indicated that there is a
problem of budget preparation and execution. On the other hand, In relation to budget approval,
the result indicated that Legislature has effective systems of check and balance on public
expenditure. The test was also undertaken to check auditor’s satisfaction in relation to the
support they get from management to conduct their task. The test result indicated that auditors
have a problem of motivation with the financial and material support to carry out audit work to
achieve their objectives for the accomplishment of organizational goals.Esayas (2014) study on
assessment of budget implementation and control by using qualitative type of research approach
at case of kara kore Sub-city Wareda 02 finance and economic development bureau by using
judgmental probability sampling and the author select 21 samples from total of 42 personnel
found in the sub-city. The main objectives of the study was to be asses the comprehensive factor
that affect budgetary implementation and control system to find potential solution to the problem
at sub-city Wareda 02 administration. The results of the studies shows that Even if the sub-city
of Wareda 02 implements its budget effectively, variance were occurred, when compared actual
results with budgeted estimation the reason for the occurrence of variance was the sub-city is not
perform it activities. Performance report can be effective, especially if it is presented
continuously. However, the sub-city constantly presented the performance report. poor database
for planning and budgeting, lack of incentives and lack of experienced personnel in the various
departments are some of the problems the sub-city encounters in budget preparation and control,
operational difficulty, low morale and delays are other problems the sub-city encounters in the
budget implementation. There is active participation of all the departments in the budget
preparation and implementation as every department submits their inputs into the annual budget
proposals. Ketema (2015) conducted studies on assessment of budget preparation and utilization
in the case of Addis Ababa City Administration Health Bureau by taking five out of seventeen
budget holders was taken and ten key informants were selected from each budget holders with a
total of 50 respondents. The results of qualitative analyses demonstrate that there was no
accountability in budget utilization; there are no market oriented cost estimation practices. Lack
of adequate and experienced budget experts is other issue that contributes to worsen the
problems and also there is no evidence based evaluation mechanisms in the budget utilization at
each level of the Health Bureau. Even if the researches show that there are budget management
problems in different sectors in Ethiopia most of the studies concern on the implementation and
control. Based on this research gap this research assesses and discuss the budget preparation and
utilization mainly on the planning and budget
 3. RESEARCH METHODOLOGY
3.1.Chapter Objectives
The aim of this chapter is to explain the research methodology and design that was used to carry
out this research. The chapter starts with the discussion on research, philosophical perspective
and paradigms of research followed by a discussion on research approach and strategy.
Subsequently the argument was made about the select of an appropriate methodology for this res
earch. The next section of the chapter describes the researchdsign for the research. This is follow
ed by the discussion on the data collection and analysis techniques. Later the data analysis techni
que of content analysis is illustrated along with the example of data analysis. Finally data
analyses method was indicated to accomplish the objectives of thesis the researcher was used the
following methodologies .the complete literature reviews have been conducted regarding the
concept Budget preparation and utilization. Budget planning, Budget knowledge area, utilization
of Budget and Budget management activities input factors are the important following literature
reviews order to assess the issue role of stakeholder project management in project performance
data collection has been carried out both primary and secondary data were collected using well
structure questionnaires. Budget report document analyses and review of pervious research
works also included. The researcher has designed the survey questionnaires for assessing the
management process the input factors that effects of the management process, the relation b/n the
Budget process and Budget management successes factors of the selected Budget in Public
Service in kera kore 02 Administration
3.2. Research design
A Research design is the arrangement of conditions for collection and analyses of data in a
manner that aims to combine relevant to the research purpose with economy in procedure.
Among the different alternative research design, this research and descriptive research method,
this tried to describe the assessment of problem of management performance in public Service
ofkera kore 02 Administration cities. In addition descriptive research design method in
advantageous to partier to collect details of data from many respondents, it describes what the
reality or what actually exist within a situation such as current practices progress and situations
of different aspects of the study. Again this descriptive research method allows description of
both qualitative and quantitative data that enables to collect information from informal and
officials and the researcher uses the questioners and interviews Researcher design is a
compressive plan for data collection in an empirical research aimed at answering specific
research questions or hypothesis and must specify a least 3processes. 1.Data collection
2.instrument development process 3.the sample process (annoland 2012)

3.3. Research Approach

The objectives of the research are to assess issue related to the budget preparation and utilization
in kera kore sub–city wareda 02 administrations. However, it has disadvantage like many
question, shallow in depth expensive interims of time and money. But the research solved all this
problems by using the appropriate questions, time schedule and family relationship respondents

3.4. Research techniques

A survey method is adopted for collecting evidence from experts the survey was selected from
the fact that the Survey method used to collect the original data from the study participants that
helps the attainments of the study objectives. Thus, substantial information was from the
respondents using survey methods which contain both closed ended and open ended questions.
Questionnaires were administration on individual experts and contractors. This was in the form
of personal interviews (structural interview in which the environment are asking questions and
recording answers from the economic status. The open ended questions are intended to answers
that refer the experts and contractors opinions the public Service on kera kore 02 Administration.
The Survey was conducted with the assistance of data collectors at any given time.

Sampling
Sekaran(2003) perceive that in research investigations it is almost impossible to gather data from
the entire population therefore samples rather than entire population is used. They further states
that study of samples rather than the entire population is also sometimes likely to produce more
reliable results. There are two main types of sampling: probability and non-probability sampling.
In probability sampling, the elements in the population have some known chance of probability
of being selected as sample subjects (ibid). The social science often examine research situations
in which one cannot select the kinds of probability samples used in large-scale surveys and
which conform to the restricted needs of a probability sampling. In these situations, investigators
rely on non-probability sampling (Berg,2007)In nonprobability sampling, the investigator does
not base his or her sample selection on probability theory. Rather, efforts are undertaken (1) to
create a kind of quasi-random sample and (2) to have a clear idea about what larger group or
groups the sample may reflect (ibid).
3.5. Sample Designed
3.5.1. Population is the universe of events from which the sample is drawn .In order to strike the
intended objective the concerned governments office and Public Service like Wareda 02
administration City Finance and Economic Development and cooperative, education office,
Building Construction office and so as the main target to concern.

3.5.2. Sampling Frame

The sample frame on this study was list of employees of Kera kore wareda 02 Administration of
Public Service sample government sector on the access issue related to the budget preparation
and utilization in kera kore sub –city wareda 02 administrations.

3.5.3. Sampling unit

For this specific study the sampling units were employees working in Public Service of the
Finance and Economic Development and cooperative Administration and which selected
government office, experts, stakeholder body and concerned contractors.

3.5.4. Sample Size and Sample Techniques

The entire of population Kera kore wareda 02 Administration of which are estimated 148,100
while The researcher took the total size of the sample population in the study
from wareda 02 Administration Office will be60(100%) The researcher will be employing
stratified sampling techniques. After the researcher will be dividing in different population of
6(25%) leaders, 18(75%) office workers respondents and here mining them youth and sport
6( ),and office workers respondents for lottery method while 6(25%) leaders, 18(75%) office
workers and he remaining 6 ( ) again will be using random method to interview. These two
methods will be capable to collect the necessary data due to the size of the population and
accessibility. . 3.5.5. Sources of Data
in order to in order to know the concept of budget, budget preparation and utilization in Wareda
02 Administration in based on how use in different infrastructure work and the study can be
collected from primary or secondary sources. Primary data refer to information obtained
firsthand by the researcher on the topic of interest for the purpose of the study. Some examples
of this kind of data are individual, focus groups, panels etc (Sekaran, 2003). Secondary data refer
to information gathered from sources already existing. Some examples of this
kind of data are company records, government publications, industry analyses etc (ibid).
3.6. Types of Data Collection Methods:
3.6.1. Primary data source
Primary data entirely depends on questionnaires data that generates through these means can be
coded and analyses. The strength of primary data lies in its nature that takes the researcher to the
same source in order to gather empirical data. It provides the research to have firsthand
information and observation of the issues and area of study some of the weakness can be cost of
data collection and time. So as to increase the clarity and accuracy of the data, further in depth
interviews questioners were distributed to administration and other officials.

3.6.2. Secondary data source

Secondary data source entirely comes from a range of documents and activities that does not
involve any field work. The secondary source was used in the study to collect data through
document review and the experiments.

3.7. Data analyses and interpretation

Descriptive statistical method of data analyses was used to analyses the information gathered
both primary and secondary source .Data processing begins with analyses and editing, coding
and tabulation process that was done prior analyses. The statistical employed to summarize the
data for the purpose of analysis.

3.9. Data presentation

The information that was obtained from reports statistical are incorporated in the analyses and
presented through narrative descriptions. Both primary and secondary source of data were
analyses and presented using statistical tools like tables, charts and figures to facilitate the
presentation of the result.

3.10. Limitation
Descriptive survey method was employed for this research and it has disadvantage like many
questions shallow in depth, expensive in terms of time and money. But the researcher solved all
this problems by using the appraise questions, time schedule and friendly relationship with
respondents While conducting field survey, some technical. Thus for the sale of reliability and
validity of the data as to treat all the respondents for key terminology before they start
responding to questionnaires
3.11. Selecting the Methodology for this research
In this section the aim of the researcher is to identify the appropriate methodology for
the research. Fellows and Liu (2003) argues that with various approaches of inquiry,
research students are often at a loss for understanding what methodologies exist and how
one makes an informed choice of an option for research. They further states that choice
is affected by consideration of the scope and depth of the problem. The objective of this research
is to investigate the budget management practices in Wareda 02 public sector organizations.
Therefore this research can be categorized as an exploratory study. Sekaran (2003) argues that an
exploratory study is undertaken when not much is known about the situation at hand, or no
information is available on how similar problems or research issues have been solved in the past.
Creswell (2009) links this with qualitative research and states that qualitative research is
exploratory and is useful when the researcher does not know the important variables to examine.
This type of approach may be needed because the topic is new, the topic has never been
addressed with a certain sample or group of people, and existing theories do not apply with the
particular sample or group under study (Morse, 1991).Qualitative researchers study things in
their natural settings, attempting to make sense of or interpret phenomenon in terms of the
meaning people bring them (Creswell, 1998). This interpretation of the phenomenon places this
research in the social constructivist paradigm.
 Annex 1.Survey tool:
TITLE OF THE THESIS; accesses issue related to the budget preparation and
utilization in kera kore sub –city wareda 02 administration

The purpose of this questionnaire is used to collect information on budget preparation and
utilization process of your Wareda 02 Finance and Economic Cooperative Development office
and to suggest some recommendations based on the findings.

Give your answer by making (×).

First all thank you so much for your time and cooperation giving my questions.

PART I- General Information

1. Gender: -------------------

2. Age: -------------------

3. Educational background Status---------------------------------------------------------------

4. Your work experience in office-----------------------------------------------------------

5.Your current position (job title) in office------------------------------------------

6. How money years of budget preparation privacies time----------------------------------

Part II-QUESTIONS ON BUDGET PREPARATION; using a rating of 1 to 5 please indicate your view of
the following statement on the budget preparation.

Where;- 5= Strongly Agree; 4= Agree; 3 = Moderate; 2= Disagree; 1=Strongly Disagree 1 2 3 4 5

No. Question Items 1 2 3 4 5

1 Your sector has enough number of budget and plan officers who prepare plan and
budget effectively?

2 Have adequate knowledge and skill to prepare plan and Budget?

3 Your sectors budget plan is prepared based on reliable data and estimates?

4 sector Prepare its Plan based on the strategic plan of the organization?

You
5 All employs of the sector participate on budget preparation of your department?
 6 Ther Is your office tendency of submitting budget request without plan?

7 In your office revises its plan frequently in relation to budget?

Part III -QUESTIONS ON BUDGET UTLIZATION

no Question items 5 4 3 2 1

1 Your department is criticized for accumulation of unutilized budget?

2 There is a tradition of overspending of budget in your office?

3 Your department presents timely, explanatory and complete budget

utilization report?

4 Budget utilization reports are consistent with plans?

5 There is frequent budget transfer request in your department?

6 Your office is frequent additional budget request in your department?

Using a rating of 1 to 5 please indicate your view of the following statement on the budget preparation.
Where 5= Strongly Agree; 4= Agree; 3 = Moderate; 2= Disagree; 1=Strongly Disagree 1 2 3 4 5 your
Sector use its budget based on your plan?

PART IV-Questions on Budget Control 1 2 3 4 5 your organization has budgetary control system?

no Question items 5 4 3 2 1

1 Internal auditors of your organization independently conduct their duties

and responsibilities?
2 There is strong monitoring and evaluating team in your organization.
The budget contains performance indicators to assess the progress
towards meeting the policy goals?
3 Internal auditors conduct financial auditing to ensure that funds are
utilized for the intended purpose?

4 Internal auditors conduct performance auditing to evaluate efficiency

and effectiveness of budget utilization?

5 Your organization has mechanism to implement the audit comments?

PART V. Answer the following question based on the given information.

 1. What are the weakness observed on the budget preparation and utilization of your Wareda
02 Finance and Economic cooperative Development Office?
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………

2. What are the major challenges in your Wareda 02 budget preparation and utilization of the
office?
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………

3. If there are problems in budget preparation and utilization in the office, what are the solutions you
recommend?
…………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………

4. If you have any additional suggestion or comment?

……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………

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Table 7:- Some of the codes which the city administration uses for budget allocation are listed

Code Clarification

6111 Salary of permanent employee

6116 Different kinds of payments of the employee

6121 Per dime

6131 Pension contribution

6211 For the purchase of uniforms

6212 Office supplies

6213 Printing materials expenditure

6217 For fuel consumption

6218 For various office supplies

6219 For different materials

6232 Transport

6254 For insurance payment

6257 For electric consumption

6258 For telecommunication consumption

6313 For the purchase of permanent office supplies

Source: - Addis Ababa Finance bureau