Ambo University: College of Business and Economics
Ambo University: College of Business and Economics
January 2015
Ambo, Ethiopia
ACKNOWLEDGEMENT
First of all our deepest thanks goes to almighty of God for let us to stay in life to this day
and enables is to complete our academic life. We also would like to say thanks to our
advisor Sori Tefera for his enthinusitic support from the interpretation until the final
discussion of this paper with frequent follow up with receiving in detail, main body of
the paper forwarding constrictive suggestion.
We are greatly thanks for our family they had been assisted our schooling life and to give
advice how can we goes with our planning activity to finish our academic schooling in
this University.
Finally we would likes to acknowledge all individuals and institutions that have helped
us materially and morally during the preparation of this paper.
ABSTRACT
The objective of the study is to assess the problems that affect the budget preparation
process and performance evaluation of the organization.
To collect the data the researcher use both primary and secondary data. The primary data
is collected from questionnaires and interview. And secondary data collected from
reference books, internets, published articles and also budget manual of the organization.
The data analysis would be carried out based on tabulation and percentage method and
interpreted accordingly.
Finally summary, conclusion and recommendation on relative sources usage are forward
to combat the possible solution.
CHAPTER ONE
INTRODUCTION
1.1. Background of the study
Everyone has heard that planning for success will help you attain it. When you plan you
need how you get it help reach your ultimate goal. An operational budget focuses on the
income statement and helps you plan your expenditures properly in order to not end up
with a significant surplus or deficit at year ended. (Bruns and John 2011)
Budget is quantitative expression of plan for a defined period of time. It is organization
plan stated in monetary terms. A budget is comprehensive, formal plan that estimates the
probable expenditure and income for an organization over specific period. Budgeting
describes the overall process and preparing and using a budget. Budget is an ongoing
process it does not occur in a vacuum or for limited period ongoing monitoring data
gathering analysis revision of alternatives are needed. Budgets are required before
organization can apply for funds from most funding sources. Effective budget depend on
having clearly defined strategies for the budget process (Murry and et al 2007).
During budget preparation the organization must to follow strict rule. It is preference
way to prepare effective budget there must be a rule that lead the most favourable
outcome. (Alesina and Peroti 2007)
Budget helps to aid the planning of actual operations by forcing managers to consider
how the conditions might change and what step should be taken now and by encouraging
managers to consider problems before they arise. (Brownell 1982)
Most of the time budget deficit should be controlled by finance organizations and by
periodical performance of the organizations. But taking this case into account there is a ga
created within the organizational system which affects the goal of the organization.
The budget at right place support the organization objective customer service, return of
investment, promoting high profit and others objectives. Organization performance is
different from one organization to other organization, but all need adequate budgetary
performance management. (Chandra 1998)
Many organizations prepare budgets that they use as method of comparison when
evaluating their actual results over the next year.
This study will focus on the assessment of budget preparation process and performance
evaluation of Ambo University. And we will assess the problem occur during the budget
preparation stage and performance evaluation.
Most of the time organizations face many problems at the time of budget preparation
Some of these problems are: -If the budget is not prepared at the right time, lack of follow
the steps to prepare budget, if essential only one or two persons are participate at the time
of budget preparation, if the manager of organization is carless in budget preparation.
(Larry and et al 1995).
+Properly managed budgetary performance is good to the organization development. But
absence of this the organization would be not fulfil their goal and objectives.
So the study will assess those problems that occur during the time of budget preparation
process and performance evaluation of Ambo University.
Properly prepared and managed budget support the organizational objectives, customer
service, return on investment, promoting high profit and others objectives.
Generally now a day every organization is preparing budget and at the end of the year
evaluate it with actual result, it should be available management tool, express plan for the
future year and it states how available resources would be employed and what additional
resource would be needed. (Larry and et al 1995)
Budget is the formal expression of the plan and objectives of management to the
organization which covers all phase of operation for specific period of time.(Murry and et
al 2007)
Different research scholars give many suggestions in budget preparation process and
performance evaluation of any organization and we try to discuss some of the suggestions
given by these scholars.
According to research conducted by Josh and et al in USA 2003 they examine budget
planning implementation and performance evaluation practices by utilizing questioners
survey of 54 medium and large size companies located in Bahrain. Use of budget is
planning to manager’s ability for timely recognition of problem and to improve the next
period’s budget. Finding is that the need for research on attitudes held by the budgeters
towards, the use of budget variance in the context of advanced management accounting
techniques.
According to the research conducted by Murry and et al in France in 2007 they state that
the budget is an ongoing process it does not occur in vacuum or for limited period on
going monitoring and data gathering analysis revision of projection and assumption and
consideration of alternatives are need. Examine the non profit organizations that found in
the country practice utilized a questioner survey of 32 non profit organization in France.
Over the time careful attention to the budgeting process will lead to gather financial
stability operational effectiveness and efficiency. Effective budget depend on having
clearly defined strategies for the budget process. The finding is that if the organization do
not prepare budget periodically they didn’t reach the specific goals it has set, difficult to
adjust plans activities and spending as need
According to research conducted by Larry and et al USA in 1995) they state that to be
effective the organization must have a quantitative understanding of both the
requirements of future mission and limitation of current rovers. To understand this issue
there must be performance evaluation. The finding is that if the organizations have not
performance evaluation they can’t understand their organization in what position and
what happen in the future. They examine mars analogue terrains in this arena by
randomly distributing rocks according to an exponential model of mars rock size
frequency created from Viking lender imagery. To date, they have recorded detailed logs
from over 85 navigation trials in this test bed.
From the above literature we can conclude that budget is important for every
organization. And also we understand that if budget is not prepare properly and evaluated
the objective of the organization is misstated.
This study will examine the budget preparation process and performance evaluation and
the problems that arise during budget preparation process and performance evaluations in
Ambo University.
1.3. Research questions
In this study the following questions are discussed
1. What are the main problems that arise at the stage of budget preparation process
and performance evaluation?
2. If there is a problem what is the cause of the problem?
3. What are the factors that affect the budgetary performance of the organization?
4. Is the budget is participatory or not?
1.4. Objective of the study
1.4.1. General objective
The general objective of this study will be assessment of budget preparation process and
performance evaluation case study in Ambo University.
1.4.2. Specific objective
To assess the problems that arises at stage of budget preparation process and
performance evaluation in Ambo University
If there is a problem, to identify the cause of the problem.
To assess the factors that affect budgetary performance
To identify whether the budget participation process is participatory or not.
1.5. Significance of the study
The aim of this study will be to investigate the assessment of budget preparation process
and performance evaluation in Ambo University. It helps to identify ways and means by
which the organization budget and its performance is improved to the best level
expectation in addition it play a great role to avoid the problem that arise at the time of
budget preparation performance evaluation of the organization.
It also help for future researcher as evidence or as a data when the conduct their research.
This paper includes five chapters. The first chapter present the introduction part which
reflecting the background, statement of problem, objective of the study, significance of
the study, limitation of the study and organization of the paper. The second chapter deals
with literature review. The third chapter deal with research design and methodology of
the study. The fourth chapter deal with data analysis and interpretation. The fifth chapter
consist of summary, conclusion & recommendation.
When we conduct this research there are some limitations that we observes are
LITERATURE REVE
2.1 Background of the organization
Ambo University is one of the for most higher learning institution with significant
contribution in the country’s overall development by building the capacity of
development agents through short, medium, and long term training in various fields since
its establishment in1939
It was established in1939 as a junior high school offering diploma programs to mid-level
professionals who could help in technology transfer for farmers. The university since its
establishment had passed through several levels of development. In the course of
developmental process it had enrolled students from various backgrounds and students
graduated with up to master’s level professionals.
Ambo University is one of the fastest growing Ethiopian currently expanding to four
campuses. In addition to the main campus, it has two functional campuses, weliso
Business and economics and Awaro Technology campuses and Guder campus which is
under construction After passing through various developmental stages it has recently
became independent with a status of university organized in to five colleges and three
institutions and two schools with 38 academic departments. The primary objectives of the
university are to promote and advance academic and research in all aspects of sciences to
contribute to sustainable development of the country.
Budget is an estimation of revenue and expense over specific future period of time. A
budget may be made for a person, family, group of people, business, government,
country, multinational organization or just about anything else that makes and spends
money. A budget is macroeconomic concept that shows the trade-off made when one
good is exchanged for another.
At least two or three months before the binging of your fiscal year you will want to start
thinking about the budget for the coming year.
The budget ordinary corresponds to your fiscal year, which should be selected to reflect
your organization operating cycle. For example a theatre company might have a fiscal
year beginning September 1 st to correspond to the beginning of its performance schedule.
A nonprofits’ relying on government funding might choose a fiscal year ending June 30 th
so that the budget corresponds to the major funding cycle. (Brown and Haward 1995)
Annual budget for an organization is prepared for the year and is a comprehensive plan, a
coordinated set of detailed financial statement of operating plans and schedule. It is the
organization‘s formal plan of action for the budget prepared.
Annual budget is the best document for understanding microeconomic of the organization
for the forth coming budgeted period.
In the budgeting process the annual budget provides a single map explaining how the
organization intent to earn profit and positive cash flow for the coming period.
The first step in making of the annual budget is to forecast the revenue target. And the
production target and the revenue target are relating each other. After forecast the revenue
marketing budget is to be made for the year. Based on sale budget production plan are
made. Production plan takes in to consideration starting inventory of the product at the
end of budget year. The last part of annual is the budgeting income statement. It is based
on sales forecast and cost data obtained from production plans. Budgeted income
statement estimate the expected operating income from the budgeted operations.
(Satyendra 2014)
Cash budget is prepared in order to forecast the firm’s future financial need. It is also a
tool for cash planning and control, because the cash budget detail is the expected cash
receipt and disbursement for a designed time period, it helps to avoid the problem of
either having idle cash on hand or suffering a cash shortage temporary or permanent, i.e.
weather short term or long term borrowing need. Cash budget typically consists of the
following four major sections.
2.5.1 The receipt section: - which gives the begging cash balance, cash collection
from customers and others.
2.5.2 The disbursement section: - which should all cash payment made or instade
by purpose.
2.5.3 The cash surplus or deficit section: - which simply shows the difference
between cash receipt and cash disbursement action.
2.5.4 The financial section: - which provide a detaild account of the borrowing
and repayment expected during the budgeted period
Estimate of cash at particular point of time may be made with the help of the
following: -
1. Budgeted balance sheets cash budget: the cash budget may be prepared inline of
capital budget with the help of budgeted balance sheet. This cash budget is
essential for static type.
2. Fund follow type of cash budget: it does not show as to how the expected cash
deficits arising.
3. Cash account type or receipts and payment type of cash budget: fund flow type
analysis is better balance sheet type of approach.
2.6 Basic principle of budgeting
The preparation of an organizations budget is important to its success for three reasons,
first preparing budget forces management to look ahead & plan both long range short
range goals and events. Second, the entire management team must work together to move
and carryout the plans. Third, by comparing the budget with actual results and it is
possible to review performance of all levels of management.
Budgets must be classified and then charged to the different general ledger account the
projected financial statement are the end product of the budgeting process. At this point,
management must decide whether to accept the proposed master budget, as well as the
planned operated results, or ask the budget director to change the plans and do part of the
budget over again.
Having a formal and structured budgeting process is the foundation for good business
management, growth and development. So where do we begin? There are 10 steps to
developing and managing a budget that stated by Patricialotich on March 12, 2014
1. Strategic plan
This ensures that organizational resources are used to support the strategy and
development of the organization. It means budgeting toward the vision.
2. Business goals
Goals need to be developed and there needs to be accountability for achieving goals,
which is the responsibility of the management team, board or business owner.
3. Revenue projection
Revenue projections should be based on historical financial performance, as well as
projection growth income.
4. Fixed cost projections
Projecting fixed cost is simply a matter of looking at the monthly predictable cost that do
not change.
5. Variable cost projections
Variable costs are costs that fluctuate from month to month. These are expense should be
budgeted and controlled.
6. Annual goal expense
Goal related projects should also give budgets.
7. Target profit margin
Every organization whether they are for profit or not for profit should have a target profit
margin.
8. Board approval
The governing board, president, owner, or head of the organization should approve the
budget and keep current with budget performance.
9. Budget review
A budget review commute should meat on a monthly basis to monitor performance
against goal.
10. Dealing with budget variances
Budget variances should be reviewed with the responsible department manager and
questions should be raised as to what caused the variance.
Good budgeting process can help develop and advance an organization while sloppy
budgeting and monitoring of budgets can blindside an organization and affect its long
term financial health and viability.
Budget performance report is compare budget figure with the actual result. They reveal
problem areas and help management correct them, as well as improve estimation method.
Because of the roll of external factor management is not always blamed for shortfalls.
Sayendra 2014)
Finally the budget is effectiveness in attaining the organization’s stated goal and
objectives. Evaluation typically involves an examination of how funds were expended,
the outcomes that resulted from the expenditure of fund, and the degree to which these
outcomes achieved the stated objective. This phase is fundamental in developing the
subsequent year budgetary allocation. In effect budget preparation not only is an annual
exercise to determine the allocation of fund, but also is part of continues cycle of
planning and evaluation to achieve the stated goals and objectives of the organization
(Sayendra 2014)
b. The need for budgetary control
Budgetary control is the process of developing plan for company expected operation and
controlling operation to help carry out those plans. The basic objectives of budgetary
control are the following:
Budgets are required before organization can apply for funds from most funding sources.
Importances of budget preparing are:-Adjust plans activities and spending as need, Spend
money cost effectives Reach the specific goals it has set, Receive clean audit (Murry and
et al 2007)
Budget is the major future of management control system. In general they can:-
Development of an annual budget is only one segment of the ongoing planning process of
businesses for the planning process to be more successful, there must be long range goals,
intermediate objective and short term plan of action.
I. Long range goal: - identify the direction of accompany over 5-10years the goal
are stated in general term but deal with specification in which the company
intended to be successful.
II. Short term plan: - is budget or annual forecast, identify the activity the activity
to be accomplishing during the coming year.
III. Intermediate objective: - identifies the specific stages that will lead to
accomplishing the long term goals, they provide a link between short term plan
and long term objective.
2.12. The structure of budget
Budget is classified broadly in to two categories. These are operational budget and
financial budget.
I. Operational budget: - which reflect the result of operating decision of the
firm.
II. Financial budget: - which reflect the financial decision of the firm.
III. The operating budget consists, sale budget, production budget, ending
inventory budget, cash receipts budget, direct material budget, factory
overhead budget, selling and administrative expense budget.
Today when the management of money is more important than ever for public and
private entities, budgeting plays an enormous role in controlling operations efficiently
and effectively.
Organizations monitor and evaluate actual result against approved budgets to guide
current and future decision- making and hold managers accountable for performance.
Effective monitoring of budget performance required that mangers are provide with
relevant timely and accurate information appropriate to the level of responsibility it also
require the managers to provide clear and consistent feedback in tamely manner about
underlining causes and effects of budget variation as well as planed action to manage
variation for which they are accountable.
Internal reporting process follow the monthly financial close and typically involve the
finance area preparing for releasing detail of actual result against budgeted to the line
management for evaluation and explanation. Result of this process are summarised
and provide to senior management to assist decision making at the organization level,
and the department of the finance and deregulation to enable whole of government
reporting. It is important that result of senior management’s review and analysis of
budget performance are communicated to relevant operational managers.
Reviewing actual result with budget estimate on regular basis monthly for most
organizations using a process that is understood across the organization is critical to
effective monitoring and reporting of budget performance. Careful design of financial
report is the fundamental to effective review and analysis of budget versus actual
result.
The effectiveness of internal financial report is likely to be enhancing when report are
prepared for each level of budget accountability and summarised appropriately for
each level management. When output and organizational accountability is differ
budget to actual financial report should be designed to enable the assessment of
budget accuracy against both accountabilities.
Both practice organization provide managers with detale of actual result against
budgeted within three days of the close of each period. Standardising reporting across
the organization is deal and made easier when managers source actual and budget data
directly from same financial system.
A successful budget
Categorize that fit your personal situation and your spending habits not some
bodies else.
Accurate income projection
Enough categories to give you a meaningful picture of where your money goes
and where your might be able to cut costs, but not so much detailed that
tracking is a chore that you’ll soon tire of.
Inclusion of expenses that don’t occur on a monthly basis, such as auto
maintenance, homeowner’s insurance personal property taxes, service
contracts, etc.
Regular review of categories to determine if you need more or fewer review of
expense, and brainstorming about ways to trim costs in each category.
Cash expenditure tracing and recording. Biggest leak in most budgets cash
disappears quickly and if you spend it on, you’ll have a distorted look at your
spending.
A line item for saving so you treat a contribution to your saving account just as
you would a bill you owe.
Realistic written goals. Budget isn’t about tracking your costs; it’s about
setting financial goals (saving for a down payment on a house, buying a new
car getting out of debt, saving for retirement, putting your kids through
college, travelling, etc.) and finding ways to meet them. Without goals, your
budget is just a pair of handcuffs.
Identification of spending patterns you may not have been aware of when you
weren’t tracking your spending.
Most importantly, international motivation and appositive attitude!
CHAPTER THREE
book, magazines and internet, and by referring the budget manual of the organization.
3.4. Data type
To assess the budget preparation process and performance evaluation of the organization,
the study use some measurement variables, like;
Time of budget preparation and performance evaluation.
Cost of budget preparation and performance evaluation.
Number of people who participate in budget preparation and performance
evaluation.
3.5. Population and sample size
The researcher is focus on the employees of organization those work in finance and
accounting arias. The total population of the study are including 25 employees. To make
the data more reliable the researcher takes all the total population.
3.6. Method Data analysis
To present the data clearly the researcher use different method to present the data like;
table, percentage and descriptive method.
CHAPTER FOUR
Data analysis and interpretation
This part deals with the major finding of the study. For data analysis and interpretation
purpose the relevant information was gathered from questionnaires distributed to the
employees that work in finance and accounting office of the organization and face to face
interview with the budget administrator.
Finally the collected data organizes and arranged in appropriate manner that will be
readable and understandable to the reader by using different analysis and interpretation
techniques like table and percentages.
4.1. The budget preparation process of the organization
In the university there are two major kinds of expenditure. These are capital and current
expenditures. And there are four major programs
- Administrative
- Learning and teaching
- Infrastructure
- And community participation
Under these four programs there are many departments.
Under these programs every sectors send their own expenditures to the manager of the
sectors for example if we take the learning and teaching program, under these program
there are five main collages. Under those collages there are several departments. Let us
take the college of business and economics there are around six departments. Each
department prepare their own budget that means the expenditure they will incur in the
future and submit to the collage dean. And the total collages budgets are collect and
submitted to learning and teaching program manager. And also in the four programs
budgets are collected and the budget are prepare in the university. Finally the total
university budget is send to the federal learning minister and the budget is assigned
accordingly. The total budget of the organization is prepared by 6 people, and they are
elected or assigned by the president. Those people are selected from employees those
work in a finance and accounting area. (Source; from budget manual of the organization)
From the above table the respondents response indicate that 15(75%) of the respondents
are degree holders, 5(25%) of the respondents are diploma holders, and there are no
respondents that hold masters and 12 th complete. In addition to this the respondents
response indicate that most of the employees are males that is 12(60%) of the total
population and the rest 8(40%) of the respondents are female.
Table 4.2 respondents’ response regarding the organization has budget or not
From the above table all respondents’ 20(100%) of the respondents’ response indicate
that the organization has the budget manual. So we can observe that the organization has
the budget manual.
From the above table the respondent response indicate that 14(70%) of the respondents
are not participate during budget preparation. The rest 6(30%) of the respondent are
participate during budget preparation. This indicates more than half of the employees that
work in finance and accounting office are not participate during budget preparation.
From interview the response of the budget administrator indicates that participatory
budget is important instrument for overall organization activity. In many constraints it is
difficult to participates all employees during budget preparation, like overload of work
and miss communication between the persons.
From the above table out of the total (20) respondents’ 3(15%) of the respondents
response indicate that the major problem that occur during budget preparation is lack of
skilled man power. 9(45%) of the respondents response indicate that the major problem
encounter at the time of budget preparation is take long time. 1(5%) of the respondents
response indicate that the major problem occur during budget preparation is lack of
testing. 4(20%) of the respondents’ response indicate that the major problem that occur
during budget preparation is lack of information. The rest 3(15%) of the respondents
response indicate that there is no problems observed at the time of budget preparation
process.
From the interview the budget administrator response indicate that the major problem that
observed during budget preparation process is take long time. And also he put the main
reason for this problem is delay of sectors to respond to budget needs submission with
appropriate documents.
In general the respondents response indicate that the 1 st major problem encountered at the
time of budget preparation process is take long time mean that the budget takes more than
the dead line. The 2 nd problem is lack of information means that to prepare budget there
must be reliable information for example about revenue and expenditure. So there is lack
of reliable information also another problem that occurs during budget preparation
process in the organization. The 3 rd problem is that lack of skilled man power means that
the people those prepare budget are lack of knowledge about the budget and related ideas.
Table 4.6 respondents’ response on the type of budget prepared in the organization
From the above table all of the respondents response 20(100%) indicate that the
organization prepare both current and capital budget.
From interview the budget administrator response indicate that the organization prepare
both capital and recurrent budgets, because the organization incur both current and capital
expenditure. Under recurrent expenditure there are expenditures like salaries for
employees, expenditure incur for students meal, expenditures incur for water and
electricity etc. Under capital expenditure there are expenditure like building of different
rooms like class room and dorms.
Table 4.7 respondents’ response on time of budget preparation
Time of budget preparation No of respondent Percentage (%)
Annually 13 65
Semi annually 0 0
Quarterly 3 15
Monthly 4 20
Total 20 100
(Source; data collected through questionnaires)
From the above table 13(65%) of the respondents’ response indicate that the budget is
prepared in the organization on annual bases. 3(15%) of the respondents response indicate
that the organization prepare its budget on quarterly bases that means four times in a year.
The rest 4(20%) of the respondents response indicate that the organization prepare its
budget on monthly bases. No respondents’ response that indicates the budget is prepared
on semi annual bases.
From interview the administrator response indicates that the budget is mainly prepared
annually. But the implementation reports are prepared on monthly and quarterly bases.
And according to the implementation report the budget may be adjusted or prepared.
Table 4.8 respondents’ response on effective implementation of the budget in the
organization
Table 4.9 respondents’ response on the factor that hides the effective implementation of
the organization budget
From the above table out of all respondents’ 7(35%) of the respondents response indicate
that the major factor that hide the effective implementation of budget in the organization
is lack of coordination between managers and employees. 6(30%) of the respondents
response indicate that the major factor that hide the effective implementation of budget in
the organization is lack of control. 3(15%) of the respondents response indicate that the
major factor that affect the effective implementation of budget in the organization is poor
budget. The rest 4(20%) of the respondents response indicate that there is no factor that
affect the effective implementation of budget in the organization.
From interview the budget administrator response indicate that there are no major factors
that hide the effective implementation of the budget in the organization.
In general according to the data gathered from questionnaires the 1 st factor that hides the
effective implementation of the budget is lack of coordination between managers and
employees. This means the employees and the managers of the organization are not work
closely or there is no good relationship between them. The 2 nd factor is lack of control.
This means the responsible bodies are not control the activities done in the organization.
And also the 3 rd factor is poor budget that means the budget is not consistence with the
organization perspective.
Table 4.10 respondents’ response on the budget performance report preparation
From the above table all (20) respondents response indicate that the organization prepare
budgetary performance report. So we can observe that the organization compare its
budgeted result with actual result.
From the above table 7(35%) of the respondents response indicate that the budgetary
performance evaluation is done at the meddle of the budgeted year. 13(65%) of the
respondents response indicate that the budgeted performance evaluation is done at the end
of the budget year.
From interview the administrator response indicate that the budget is normally evaluated
at the end of the year but if there is un expected result is occur in the organization it may
evaluate at the meddle of the budgeted year.
Table 4.11 respondents’ response on the variance is observed in the organization or not
From the above table all respondents’ (20) of them are response yes. Which means when
the organization evaluates its budget, or when it compares the actual result with budgeted
proposal, the variance is observed.
Table 4.12 respondents’ response on kind of variance that observe in the organization
From the above table 17(85%) of respondents response indicate that there is shortage
which means the actual cost is greater than the budgeted cost or the actual revenue is less
than the budgeted revenue. And the rest 3(15%) of the respondents response indicate that
there is overage variance, which means the opposite of the shortage.
The major cause for variance is
- In appropriate budget allocation
- Lack of resource which satisfy the need of the organization
- Price fluctuation due to inflation
- Due to unexpected expenditures are happen
- In appropriate use of funds
- Federal governments send revenue less than the organization needs
Table 4.13 respondents’ response on the action that the organization takes when
the variance is observed
From the above table 12(60%) of the respondents response indicate that when the
organization observe variance first it identify the problem and take corrective action.
8(40%) of the respondents response indicate that when a variance is observed in the
organization the organization change the budget and try to minimize the gap.
Table 4.14 respondents’ response on the body evaluates the budget of the organization.
From the above table 15(75%) of the respondent response indicate that the responsible
body to evaluate the budget is the budget administrator. The rest 5(25%) of the
respondent response indicate that the budget is evaluate by the president.
The president 4 20
Total 20 100
(Source; data collected from questionnaires)
From the above table 16(80%) of the respondent response indicate that the responsible
body to allocate budget is the budget administrator and the rest 4(20%) of the respondent
response indicate that the budget is allocated by the president of the organization.
From interview with the budget administrator response indicate that the budget is
controlled and evaluated by the budget admistrator. If necessary the president of the
university is involve in these activities. The allocation of budget is done by the university
president and the budget administrator. But most the time the responsible body for
allocation of the budget is the budget administrator.
CHAPTER FIVE
SUMMERY OF FINDING, CONCULUTION AND RECOMMENDATION
5.1. Summary of findings and conclusion
Budget is essential for all organization and it is difficult to operate for any entities
without budget. They can’t meet their objective without budget. If the budget is
wrong the organizations objective is became false. Hence it is necessary to carry
out study in the area of budget to promote good assessment method which could
be vital in improving the performance of budget in an organization (Ambo
University)
The organization is governmental organization so the budget preparation process
is the same like the process of federal governments.
Only 6 peoples are participate in the budget preparation process, but every sector
prepare their own budget so indirectly all employees are participate in the
organization budget preparation process.
The organization uses both capital and recurrent budget
The budget of the organization prepared on annual basis.
The organization takes long time when it prepares its budget. When the budget
are not prepare at right time it delays the implementation period. The programs are
not done at the right time.
The organization evaluates its budget most the time at the end of the year. This
causes the variance are not detect immediately and the variance became large.
Since budget is the financial plan of the organization for the period of year and it
enable to predicting financial result and contents of the financial statement over
the year. There for effective implementation of budget should enable to achieve
the desire objectives and goals of the organization.
Most of the respondents which is 14(70%) of the response indicate that the
organization effectively implement its budget. Where the rest of respondents’
responses indicating that the organization does not implement its budget. From
this it can conclude that the organization implement its budget effectively.
Even if the organization effectively implements its budget variance is observed
when compared the actual result with budgeted estimates and the reason for
occurrence was in appropriate budget allocation, price fluctuation and
inappropriate uses of funds.
5.2. Recommendation
Based on the data findings and conclusions made following recommendations are
forwarded.
The organization take long period to prepare the budget. This is because of
sectors delaying in submission their documents, so take strict measurement to
the sectors to submit their documents. And set fixed time interval and control
those sectors don’t submit their document within the dead line.
Even if the organization implements its budget effectively there are some
problems that hide the implementation process. The main problems are lack of
coordination between the managers and the employees and lack of control. So
the organization has to work hard in increasing the coordination. By
identifying the problems between the employees and managers, and it can
solve this problem. And also take control the managers of the organization.
Use active coordination system; which helps the organization from the top
manager to lower employees should be coordinate and communicate properly.
Most of the time the budget is evaluate at the end of the year because of this
the budget variance is very high. So if the organization evaluate its budget at
the-meddle of the budgeted year, the variance are detected emidiatly and
corrective action is taken at the right time.
The variances are observed because of inappropriate allocation of budget and
inappropriate use of funds.
The budget allocation, evaluation and controlling activities are done by the
budget administrator of the organization. This implies that there is no
segregation of duties. If related jobs are done by the same person and body
there may be miss appropriation of funds may be occur. There for the
organization segregate the duties to different bodies may minimize the problem
of inappropriate budget allocation and lack of control under budget
implementation.
AMBO UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
Dear respondent; We are under graduate students of the ambo university and currently
take research on the budget preparation process and performance evaluation taking Ambo
University as a case study. Please recall that you are selected as possible participant
because you are the employee of the organization work in the finance and accounting
office. Your participation in this study is completely voluntary.
Here you will find some question regarding the budget of the organization. We would
generally appreciate it if you would please spend approximately 5-10 minutes of your
time necessarily to respond to these questions and return to us.
The quality of this research is based on the accuracy of the information you provide. We
will assure you, the information you will provide us is going to be reported and
communicated in aggregate data only with no personal identifiable data. Any information
obtained in connection with this study will remain strictly confidential, and for academic
purpose.
Thank you in advance for your assistance with this research project.
I. Personal profile
I.1. Sex male Female
I.2. Education level
Degree Masters
Diploma 12 th complete
Others
II. General question
1. Does the organization prepare budget?
a. Yes b. No
2. Does the organization have budget manual?
a. yes
b. Doing research
c. Estimate expenditure and revenue
d. Writing the budget
e. other
3. At what time the budget is prepared in the organization?
a. Annually
b. Semi annually
c. Quarterly
d. monthly
e. other
4. Does the organization effectively implement its budget?
a. Yes b. No
5. Who is responsible for allocation of budget?
a. The organization manager
b. The finance department
c. Other
6. Is budget deficit occurring in the organization?
a. Always
b. Usually
c. Sometimes
d. Reilly
e. Never
7. If there is budget deficit occur in the organization do you know why? If you know
answer
a. Lack of proper using funds
b. Lack of adequate budget preparation
c. Corruption
d. Others
8. Do you think the organization used its capacity to reduce budget deficit?
a. Yes b. No
9. If yes in what way
a. By rising its revenue
b. By reducing its expenditure
c. By preparing supporting budget
d. other
10. Who control the budget of the organization?
a. The manager
b. The budget administrator
c. The employees
d. other