JIMMA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE PROGRAM

BUDGET PREPARATION, ALLOCATION AND UTILIZATION

(A CASE OF JIMMA FINANCE ORGANIZATION)

PREPARED BY: - ANDAMLAK KIFLE

ID. NOUMBER: -ET0002/12

ADVISOR: - Ms. MEDHANIT GETINET (MSC)

JUNE, 2022

JIMMA, ETHIOPIA
Acknowledgment
First of all I would like to express my thanks to almighty God for nothing I have
ever done without his gracious help. Secondly, I would like to extend my
gratitude to my technical advisor Ms. Medhanit Getinet for her regular follow up
instructive ideas and comments.
Also, I would like to thanks Mr. Mohammed A. for his patient and knowledge fully
teaching of research methods in accounting and finance.
Finally I would like to acknowledge all individual and institutions that have
helped me materially and morally during the preparation of this paper.
Abstract
A budget is an estimation of revenue and expenses over a specified future period
of time and is usually compiled and re-evaluated on a periodic basis. The general
objective of this study is express or assessing budget preparation, allocation and
utilization on the case of Jimma zone finance department and makes suggestions
so as to its finance. In preparing these research both primary and secondary
information was used. Secondary information has been obtained from organization
annual budget report documents. The primary source of data line, interview and
observation were conducted. On the bases of analysis and interpretation, the
findings with respect to the objective of the study was reached by using result of
analysis and interpretation will make the conclusion for budget preparation,
allocation and utilization in the organization. The survey of finding and results from
these study shows that Jimma zone finance and economic development face
serious budget problems was solved to attain the proposed objectives of the
organization to take remedial action so as to solve the organizations major budget
related problems like inappropriate budget allocation, Inappropriate budget
transfer, not spending budget according to budget title, Inappropriate budget
request, under utilization of budget, Improper recording or budget entries; Lack of
proper monitoring and controlled by Bureau of Finance and Economic
Development. Some of the possible corrective measures are recommended as
follows. The organization should adopt sound budget controlling mechanism in
order to avoid budget problem related to budget system, under utilization of budget
and budget allocation problems among woreda. It is better to the organization to
use integrated budget system and should spend budget according to budget title.
Key words
Preparation: - The action or process of preparing or being prepared for use or
consideration.
Allocation: - To apportion for a specific purpose or to particular persons or things.
Budgetary: - Relating to or in accordance with an estimate of income and
expenditure.
Utilization: - the action of making practical and effective use of something.
BoFED: - Bureau of Finance and Economic Development
Fiscal: - Relating to government revenue, especially taxes.
PPB: - Planning – programming budget approach.
NCGA: -National council on governmental accounting.
 Table of content
Contents Page
Abstract..................................................................................................1
Acknowledgment....................................................................................III
Table of content.....................................................................................IV
Chapter one: Introduction......................................................................1
1.1. Back ground of study ....................................................................1
1.2. Background of the organization.....................................................3
1.3. Statement of the problem...............................................................3
1.4. Research questions .......................................................................4
1.5. Objectives of the study...................................................................5
1.6. Significance of the study................................................................4
1.7. Scope and limitation of the study...................................................4
1.8. Limitation of the study...................................................................5
1.9. Organization of the paper..............................................................5
Chapter Two :Literature review..............................................................6
2. Budget and budgeting concept............................................................6
2.1. Definition of budget and budgeting................................................6
2.2. Historical development of modern government budget...................6
2.3. Budget and budgeting cycle...........................................................7
2.4. Advantages of budget.....................................................................7
2.5. Types of budget.............................................................................7
2.5.1 Capital Vs current budget.........................................................7
Capital budget.................................................................................7
Current budget................................................................................8
2.5.2. fixed Vs flexible budget.............................................................8
2.6. Budget planning and preparation at the regional level...................8
2.6.1. Budget allocation and utilization..............................................8
2.7. Role of Budget...............................................................................9
2.8.Budget approach............................................................................9
The object of expenditure approach....................................................9
Performance approach......................................................................10
Chapter Three : Research Design and methodology .............................12
Introduction .........................................................................................12
3.1. Research design .........................................................................12
3.2. Study area ..................................................................................12
3.3. Population ..................................................................................12
3.4. Sample size and Sampling Technique ..........................................12
3.4.1. Sampling Techniques .............................................................12
3.5. Data Collection Methods .............................................................13
3.5.1. Primary data ..........................................................................13
Secondary data ..................................................................................14
Data Analysis Method ........................................................................14
Chapter –Four: Data analysis and presentation ...................................15
4.1. Characteristics of respondents ......................................................15
4.2. Data analysis ................................................................................16
4.3. Result of interview and observation ...............................................19
Chapter Five: Summary, conclusion and Recommendation .................21
5.1. Summary & Conclusion ................................................................21
5.2. Recommendations ........................................................................22
Reference ............................................................................................23
Appendix .............................................................................................24
List of tables
Table 4.1. Description of respondents respect to their age and educational level. 13
Table 4. 2. Assessment of take part of employees in budgeting planning and
controlling process.......................................................................................................................14
Table 4. 3. Respondent’s response to budget deficit …………………………………….15
Table 4.4. Respondent response to consider the past performance for today’s
budget preparation......................................................................................................................15
Table 4.5. Assessment of budget revision in order to update for any special
case………………………………………………………………………………………………15
Table 4.6. The response of sample respondents on if they think that there is
proper implementation of budgetary system developed by MOFED...........................16

Table 4.7.The response of sample respondents on if they think that there is fair
budget allocation among woreda…………………………………………………………..16

Table 4.8. Respondent’s response for periodic training given by the organization
regarding budget planning utilizing………………………………………………………..16

Table 4.9. Respondents opinions regarding to the existing budget problem related
to budget system……………………………………………………………………………….17

Table 4.10. Problem related to budget request …………………………………………17

Table 4.11. Variance analysis on adjusted budget and current year expenditure of
Bureau of Finance and Economic Development report (2011-2013 in birr)............19
 Chapter one
1. Introduction
1.1. Back ground of study
Budget is a quantity of future plan of action and aid to the coordination and
implementation of plan. It is systematic and formalized approach for stating
and communicating the firm’s expectation. A budgeting system builds on
historical or actual performance. Budget is the most widely used method of its
unique feature in controlling financial resources. Because of its unique feature
in controlling financial resources, preparation of en annual or otherwise budget
is amendatory in most of the entities. (Aseshemic, 1997) defined a budget as a
financial or quantitative statement of plan to be pursued for achieving given
objective. According to (Brown and Howard, 2002), a budget is a predetermined
statement of management policy during a given period which provides a
standard for comparison with result actually achieved. Buyers and Holmes
(2000) on their part define a budget as a financial and/or quantitative
statement prepared and approved prior to be pursued during that period for
the purpose of attaining a given objective. Also it is a financial or quantitative
statement, prepare containing the planning and controlling procedures,
policies and regulation to be pursued during the period (Aseshemic, 1997).
Budget identities source of income and assist in planning expenditure most
organizations and many individual find careful planning is an essential activity
in achieving goal. Most people, business and government have limited fund to
be spend, and so they must decide which expenses most important to achieve
the organization pre-stated objectives. Budgeting means the act of preparing
budget. So budget preparation use not only planning and also controlling and
utilizing the financial resources (Scott, 2000). Planning always involves
specifying the type and quality of service that will be provided to constituents,
estimating service cost and determining how to for the service. In general
budgets are ensuring allocation, efficiency, motivation; enhance controlling,
communication and coordination. Lambe (2012) writing on Budgeting and
Planning aptly defines budgeting as a comprehensive and coordinated plan
which is packaged by the management of an organization, and expressed in
financial terms for the operations and resources of an enterprise for some
specific period in the future.
Budget can be applied for every economic resource like money material and
human resource. The budget division allocated the budget amount depending
up on the approved budget of the work units. All work units have a total
budget of the work unit. All work units have atonal budget ceilings up to which
they can prepare their annual operating budget not compared last year to the

previous year (Abdulrezake Y., 2012).

1.1 Background of the organization

Jimma Zone is located in the Oromia National Regional State, Southwest
Ethiopia. Jimma town is the capital and administrative center of the Zone and
is located at a distance of 350 km away from the capital of Ethiopia- Addis
Ababa. Jimma is bordered on the south by the Southern Nations, Nationalities
and Peoples Region, on the northwest by Illuababor Zone, on the north by East
Wollega Zone and on the northeast by West Shewa Zone; part of the boundary
with East Shewa Zone is defined by the Gibe River. The highest point in this
zone is Mount Maigudo (2,386 m). The administration center of Jimma zone is
Jimma Towns and cities in Jimma include Agaro, Limmu Inariya and Saqqa.
The town of Jimma was separated from Jimma Zone and is a special zone now.
The Central Statistical Agency (CSA) reported that 26,743 tons of coffees were
produced in this zone in the year ending in 2005, based on inspection records
from the Ethiopian Coffee and Tea authority. This represents 23.2% of the
Region's output and 11.8% of Ethiopia's total output, and makes Jimma one of
the three top producers of these goods, along with the Sidama and Gedeo
Zones. Based on the 2007 Census conducted by the CSA, this Zone has a total
population of 2,486,155, an increase of 26.76% over the 1994 census, of whom
1,250,527 are men and 1,235,628 women; with an area of 15,568.58 square
kilometers, Jimma has a population density of 159.69. While 137,668 or
11.31% are urban inhabitants, a further 858 or 0.03% are pastoralists. A total
of 521,506 households were counted in this Zone, which results in an average
of 4.77 persons to a household, and 500,374 housing units.
(https://en.wikipedia.org/wiki/Jimma_Zone)
The organization has three departments such as budget and finance
department, Economic and development department and audit control
department.
The objective of this public bases are:
 Controlling of this public expenditure.
 Collecting the government revenue from different source.
 Preparing annual budget loan.
 Managing and controlling government fund.
 Activating zonal economy and others.

1.2 Statement of the problem

Literature has supported the claim that budgeting is a means for facilitating
and enabling the process by which resources are acquired, allocated among
subunits and consumed in the achievement of organizational objectives.
Effective implementation of budgets enables a firm to effectively and efficiently
utilize its resources (Horngren, 2003). (Gachithi, 2010) did a research to
investigate the challenges facing budget implementation in Public institutions,
a case study of the University of Nairobi. The researcher found that the
universities budget preparation procedures are not efficient especially because
lower level staff do not take ownership. (Mawathe, 2008) did a research to
investigate the challenges of budget implementation in the Banking Sector
Industry in Kenya. The research found that there were enormous challenges in
budget implementation in the sector. (Muthinji, 2009) also did the research on
budget implementation in public sector, a case study of Commission of Higher
Education. The study found that the budget implementation and controls was
a big challenge within public sector.
(Yemisrach and Mulugeta, 2012) did a research to assess the challenges and
opportunities of implementing program budgeting systems (PBS) in two
selected Federal Ministries in Ethiopia. The finding demonstrated that quite
impressive progresses have been registered in revising the program budget
manual and training modules, significant program budget training, and
piloting of Program budget at federal level and gradual improvements on the
budget submission formats. Equally important, however, there are challenges
that deserve serious attention.
There are different budget users at different level of finance Bureau and each of
the budget users has the responsibility of preparing and utilizing budget. In
budget preparation, allocation and utilization.
There are some problems encountering, in the case of Jimma finance office the
problems can be categorized in different way: On each level of budget users and
On Planning and Budget Department of the finance office.
In many of the budget users, gaps are observed in organizing their plans as per
the strategy of the Finance office; with regard to budget planning and
utilization, the annual report of the finance office shows the existence of week
efficiencies in budget preparation, utilization and allocation. Some of the
deficiencies identified in the report are: there is no strong follow up and control
by successive leaders on the budget preparation, allocation as well as
utilization at each respective budget users; each budget users unable to report
comparisons of utilized and Unutilized budget including the reason why it is
not consumed.
Besides to this, there is recommendation given by bureau of finance and
economic development (BOFED) as if there are unutilized budget by finance
office that can be used for other developmental activities. On the other hand,
Planning and Budget Department of the finance office has a lion’s share Role to
follow-up the implementation of finance office budget whether it is prepared
and Utilized for the intended purpose or not. In this regard, there is no strong
way in budget reporting, supervising and controlling system by the finance
office budget department for each level of budget users and problems would
arise for weak budget preparation and utilization as reported by BOFED. This
problem requires further investigation with scientific approach how the budget
preparation, allocation and utilization proceeded within the Jimma finance
office.
The research will concentrate on the assessment of the preparation, allocation
and utilization of budget in Jimma finance office. Little has been done to
evaluate/determine the cause that probably affects the preparation and
utilization of budget in Jimma finance office. The research thus bridges an
evident research gap as there is no document to the best of researcher
knowledge that reports any study on the probable causes that may hinder the
budget preparation, allocation and utilization of budgeting in the Jimma
finance office.
In many of the budget users, gaps are observed in organizing their plans as per
the strategy of the Finance office.
1.4. Research questions
Based on the above clarification the researcher raises the following basic
questions that should be answered in this course of study.
1. How to asses budget utilization in the organization?
2. What are the problems of budget allocation process?
3. What mechanisms dose the organization following when the approved
budget amount is not sufficient?
4. How the proper implementation of budget is done by finance bureaus?
 1.5. Objectives of the study

The general objectives of this study are to investigate budget preparation,

allocation and utilization in a case of jimma zone finance organization.

Specific object
The specific objectives of the study are
 To evaluate the strength and weakness of the finance department
regarding to budget preparation, allocation and utilization.
 To assess budget problem related to budget system.
 To identify the approaches to budget used by zone & woredas.
 To assess the budgetary Problem related to budget request.
1.6. Significance of the study
The significances of the study are to create awareness to the organization
about budget utilization and controlling; helps to increase the research’s
experience and ability and also the organization to know what looks like its
budgeting system after this study has conducted and give away for other
researcher who wants to make further investigation in the area of budget
practice and to conduct detailed research on issue.

1.7. Scope of the study

The main concern of this study is to see the importance of budget preparation,
allocation and utilization in gurage zone finance department. Here, the focus
area of this research is how the department plans, establish and evaluate the
budget.
Even though, many problems may be found in the area, this study focus on the
problem related to budget preparation, allocation and utilization section.
1.8. Organization of the paper
This paper includes five chapters. The first chapter present the introduction
part which reflecting the background, statement of the problem objective of the
study, significance of the study, scope of the study and organization of the
paper. The second chapter deals with literature review. The third chapter
deals with methodology of the study. The fourth chapter deals with data
analysis and interpretation and the fifth chapter consists of summary,
conclusion & recommendation.
 Chapter Two:

Literature review
2. Budget and budgeting concept

2.1. Definition of budget and budgeting

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

2.2. Historical development of modern government budget

Historically, the practice of budgeting generally originated in the central,

government of Great Britain at the year of 121. However an entirely new
approach to government budget was initiated during the year 1930’s economic
depression in the advanced capitalist countries. During the period, new
possibilities of using financial measures to require were recognized (Hiness, II
and Edward K.J, 1954).
The historical development of modern budgeting suggests two significant
generalizations concerning the distribution of budgetary responsibility.
The budget system developed as an instrument for democratic control over the
executive. The power of the purse come to raised in the legislature in order
arbitrary tax payments in his subject. The budget is an expression of ultimate
legislative authority.
The patterns of responsibility which characterizes the budgetary process may
be examined from a number of stand points.
 As a legal institution, the budget is on expression of the constitution and
statutes of government
 Viewed in terms of organization.
 As amateur of procedure, the budget s the product of a time sequence of
decisions made in on organization as a context. (Jesse Burkheed 2001).
2.3. Budget and budgeting cycle
A budget is a quantitative expression of proposed plan of action by
management for specified period and aid to coordinating what needs to be done
to implement that plan. A budget can concern both financial and non financial
aspect of the plan and serves as blueprint for the company to follow in an
upcoming period. A budget that covers financial aspect quantifies,
management’s expectation regarding income, cash flows, and financial
position. Just as financial statement is prepared for future period.
Well managed companies usually cycle through the following budgeting
steps:
1. Planning the performance of the company as a whole, as well as planning
the performance of its subunit.
2. Provide a frame reference, a set of a specific expectation against which
actual result can be completed.
3. Investigating variation from plans. If necessary, corrective actions to flows
investigation.
4. Planning again, in light of feedback and changed condition
(Horngren.pp175).

2.4. Advantages of budget

 Compares strategic planning and implementation of plans.

 Provides success the company’s goal of objectives.
 Motivate managers and employees.
 Provide a frame work for judging performance.
 Promotes co-ordination and communication among sub units within the
company (HORNGREN) page 177.

2.5. Types of budget

2.5.1 Capital Vs current budget

Sound governmental fiscal management requires continual planning for several

periods in the future. Most governments are involved in programs to provide
certain good or services continuously, in acquisition of building can or other
major items of capital, out lay that must be scheduled and financed long term
debt service commitments. Although some prepares comprehensive multiyear
plans, which include all of these more common practices is for such plans to
include only the capital outlay plans for the organization.

Capital budget

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

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

2.5.2. Fixed Vs flexible budget

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

2.6. Budget planning and preparation at the regional level

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

2.6.1. Budget allocation and utilization

Budget utilization is an important part of all business and not -profit-

organization financial plans. Budgets are typically set annually and involve
allocating, anticipated income, and resource between different departments
and business interest. The amount of funding allocated to each area impasses
restriction on the scope of department’s development.
Budget are normally set on the bases of the previous year’s expenditure, plus
or minus any change in spending , such as for example Jimma zone finance
bureaus, each department is given a set of amount of money to spend over the
course of the year. The department head normally takes responsibility for
allocating the funding to his staff. A budget aims all expenditures including,
state salary, cost of buying resources as well as miscellaneous expanse for any
for seen needs.

2.7. Role of Budget

Budget plays a number of vital roles in economic measurement of public

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

2.8. Budget approach

The several general approaches to governmental budgeting have marked

difference in their emphasis on planning, control and evaluation. At this point
it may be useful to point at that the principal groups that excise control are
executive branch official and the legislator the most common approach to
operating expend items, budgeting may be characterized as follows.
The object of expenditure approach

It is often referred to as the transitional approach and expenditure control

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

Performance approach

The performance approach originates near to turn of the century and came in
to popular usage in the fifties. This approach embodies shifting of in phases
from object of expenditure to measurable performance of activities and work
program. The primary focuses in an evaluation of the efficiency with which
existing activities are being carried out its primary tools are cost accounting
and work measurement. The total budget for an agency would be the sum of
the products of its unit cost standards multiplied by the sum of the products of
its unit cost standards multiplied by the expected unit of activity in the
oncoming period. The enacted budget is viewed somewhat as a performance
contract between the legislate branch and the chief executive. The most
important contribution of this approach it its emphasis on the inclusion on the
need to measure output as well as input. The performance budget emphasizes
the activities for which funds are requested.
The performance approach provides the chief executive with and additional
revenue of control over his subordinates, rather than being restricted merely to
how much has his subordinate spend; he may evaluate the performance of
activities in terms of dollar and activity unit standards. (Lynn and Freeman,
1983).
The program and planning – programming budget approach (PPB).
The national council on governmental accounting (NCGA) defined a program
budget where in expenditure are based primarily on program of work and
secondarily on character and object a transitional type of budget between the
traditional character and object class budget. On the other hand program
budget in refers to a planning oriented approach which emphasizes up on
evaluation or control performance measurement is not prefer quest to program
budgeting or budget it may be a useful act.
The major distinctive characters tics of PPB are.
1. Future year implication are explicitly identified
2. All pertinent costs are considered.
3. It focuses on identifying the fundamental objective of the government
and the relating all activities to these regardless of organizational
placement).
4. Systematic analysis of alternatives is performed.
Among the benefits to state and locality attributed to the PPB approaches
are:
- Plans and programs are reviewed continuously
- Inter government planning is improved.
- Inter agency coordinating of program is strength.
 Chapter Three:

Research Design and methodology

3. Introduction
This chapter presents the procedures that were used in the research, including
study area and design, population and sampling techniques, methods of data
collection and data analysis techniques.
3.1. Research design

This is the procedure that guides the investigator in the process of data
collection, analyzing and interpretation of data. It provides a systematic plan of
procedures for the researcher to follow; a research design is the arrangement of
conditions in collecting and analyzing of data in a manner that aims to
combine reliance to the research purpose with economy in procedure (Kothari,
2006). Therefore, in this study the researcher uses a descriptive method of
research on the budget preparation, utilization and allocation of jimma Zone
finance organization.
3.2. Study area
This study will conduct on budget preparation allocation and utilization in
Jimma zone Jimma town Bureau of finance and economic development which
is located in the Oromia National Regional State, Southwest Ethiopia. Jimma
town is the capital and administrative center of the Zone and is located at a
distance of 350 km away from the capital of Ethiopia- Addis Ababa.

3.3. Population

The population of the study was comprised of 80 employees who are working
within the organization at jimma zone finance organization. Departments was
focus were accounting and finance departments and other sections including
human resource, planning, project, distribution, generation, transmission and
procurement department.

3.4. Sample size and Sampling Technique

The sample size was comprised of representative sample of 40 respondents.

This is obtained from accounting and finance departments and other sections
including human resource, planning, project, distribution, generation,
transmission and procurement department.

3.4.1. Sampling Techniques

The researcher used purposive and simple random sampling techniques.
Simple random sampling was used to select respondents from the population
who questionnaires are administered since it is not possible to study the whole
population. Simple random sampling was considered adequate because
chances of selection were equal at any stage in the sampling process. The
researcher used this method to select number of departments that were
included in the study since all departments of jimma zone finance organization
to have equal chance to be select as representative. Purposive sampling was
used when subjects was selected because of their characteristics they
possessed. This included their characteristics of being in the company to
provide the needed data for analysis.
 3.5. Data Collection Methods

For the researcher to obtain in-depth information, various methods of data

collection is used, they will include;

3.5.1. Primary data

Primary data refers to type of data in which the researcher collects data directly
from the field. It is also referred to as first hand data obtained from the field; it
is usually collected through various methods as observation, questionnaires
and experiment.

The following include primary methods of data collection that will use:

Questionnaires

According to Leedy, (1984), questionnaires are appropriate instruments widely

utilized by researchers to obtain facts about current conditions, practices and
also to make inquiries concerning attitudes and opinions. Furthermore, they
were used due to their ability to collect as much information as possible within
a short time which helped the researcher to save time. Thus, the researcher
used close-ended and open ended questionnaires that were administered to the
respondents.

Questionnaires were used to address the specific objectives specifically, the

budget system, clarification on trend of budget preparation, allocation and
utilization in jimma zone finance organization.

Interview

This is a two systematic communication or face to face communication between

the researcher and the respondent intended to obtain information relevant to
this research study. This enabled the researcher to get in-depth information
from the respondents and it increased flexibility in data collection. Interview
method of data collection was used by interviewing the manager; to obtain in
depth information concerning the budget process of jimma zone finance
organization.

3.5.2 Secondary data

These include data that have been already collected and readily available from
other sources. It covers all published or second-hand information such as
books, documents, journals, statistics, financial reports and the like. These
kinds of data are cheaper and quickly obtainable than primary data. The
researcher was used secondary source of data collection methods; which obtain
through review and select materials such by reviewing organization’s financial
reports (2019 to 2021), corporate budget reports (2019 to 2021 of the
organization.

3.6. Data Analysis Method

After data collection, data analysis was intended to derive descriptive statistics
by classifying, organizing and summarizing the data into tables. Data analysis
was assist with the use of Microsoft Excel for analysis basing on descriptive
analysis. Data was systematically presented according to theme following the
chronology of research objectives that enabled easy interpretation of the
findings.
.
 CHAPTER –FOUR

Data analysis and presentation

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

4.1. Characteristics of respondents

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

Table 4.1. Description of respondents respect to their age and educational level

No Item Respondents

No %

1 Age

(25-35) 13 32.5

36-45 22 55.0

Above 45 5 12.5

Total 40 100

2 Educational level

Master 5 12.5

Degree 25 62.5

Diploma 10 25.0

12 grade complete - -

8 grade complete - -

Total 40 100
Item 1 of table 4.1 describes the age composition of the respondents with a
percentage of 32.5% were found between the age of 25-35, 55% were between
36-45, and 12.5% were above 45. From this the researcher found out that most
of the respondents are between 36-45.

From the above table out of the total of 40 respondents 10(25%) of respondents
are diploma holders and about 25(62.5%) have degree and 5(12.5%) are Master
holder; no grade 12th complete and grade 8th complete. This implies that the
workers of the organization educational level is more of degree and budget
related activities are largely performed by them.

4.2. Data analysis

The data obtained from questioner are analyzed as follows: -

Table 4. 2. Assessment of take part of employees in budgeting planning and

controlling process.

No Items Respondents

№ %

1 Do you participate in budget

planning and utilizing?

Yes 30 75

No 10 25

2 If your response for question

№ 1 above is yes in which
types?

Administrative 5 12.5

Project/ capital 5 12.5

Planning and utilizing 30 75

Total 40 100

3 If your answer for question 1

above No what is your
reason?

It is not your responsibility 2 5

Only special workers 7 17.5

participate

Because of random selection 1 2.5

Total 10 25
Table 4.2. above clearly indicated that 30(75%) of respondents replied that they
have participated in budget planning, controlling and utilization of the
organization. On the other hand 10(25%) of respondents indicated that do not
participate in budget activities.

In the same table (4.2) 5(12.5%) of respondents responded that they are
participating in the preparation of budget for administration function, 5(12.5%)
of respondent replied that they prepare capital budget under taken in the
organization and 30(75%) of respondents told that they have participated in the
Planning and utilizing function.

Administration budget refers to the functional classification of budget covers

expenditure for the service like executives, legislation, judicial function and
physical affairs and public orders. Capital budget are budget that related to
different activities that have a specified objectives for the achievement of
certain goals.

For question No 3 in the same table above employees that do not take part in
budget planning, utilizing and allocating because; 2(5%) of the respondents
reveled that it is not their responsibility and 7(12.5%) of the respondents said
that budgeting activity was given for only special workers and 1(2.5%) random
selection. From this point the researcher can conclude that some respondents
are assigned for other responsibility.

Table 4.3. Respondent’s response to budget deficit occurs within the

organization.

Types of response № of respondents Percentage

Yes 35 87.5

No 5 12.5

Total 40 100

From the above table out of the total of 40 respondents about 35(87.5%) of
respondents replied budget deficit occur within the organization. From this
data the researcher can understand the budget deficit occur within the
organization is higher.

Similarly out of the total 35 respondents about 5(12.5%) of the respondents

response budget deficit is not occur within the organization.

Table 4.3. Respondent response to consider the past performance for today’s
budget preparation.

Types of response No of respondent Percentage

Yes 35 87.5

No 5 12.5

Total 12 100
Table4.4. Above clearly indicated that 35(87.5%) of respondents replied that
the organizations consider the past performance for today budget preparation.
On the other hand 5(12.5%) of respondents indicate that do not consider the
past performance for days budget preparation.

Table 4.4. Assessment of budget revision in order to update for any special
case.

Types of response No of respondent Percentage

Yes 35 87.5

No 5 12.5

Total 12 100

As shown clearly in the above table 35(87.5%) of the respondents responded

that the organization revise its budget in order to update for any special case.
On the other hand 12.5% of the responded replied that the organization did not
consider budget revision in order to update for any special case.

Table 4.5. The response of sample respondents on if they think that there is
proper implementation of budgetary system developed by MOFED.

Types of response No of respondent Percentage

Yes 10 25

No 5 12.5

Partially 25 62.5

Total 40 100

According to table 4.6 Item 25(62.5%) of the respondents response shows that
there is partial implementation of budgetary system that developed by MOFED
in the organization; about 10(25%) of the respondents response shows that
there is proper implementation and about 5(12.5%) of respondent replied show
that the organization is not implement the budgetary system that developed by
MOFED.

Table 4.7.The response of sample respondents on if they think that there is fair
budget allocation among woreda

Types of response No of respondent Percentage

Yes 5 12.5

No 35 87.5

Total 40 100
 According to table 4.7 Item 5(12.5%) of the respondents response shows that
there is fair budget allocation among woreda and about 35(87.5%) of
respondent replied show that there is fair budget allocation among woreda.

:-There is a problem of budget allocation in the organization among woredas.

Table 4.8. Respondent’s response for periodic training given by the organization
regarding budget planning utilizing.

Types of response No of respondent Percentage

Yes 30 75

No 10 25

Total 40 100

As stated in the above table, about 30(75%) of the respondents responses as

they have periodic training given by the organization regarding to budget
planning and utilizing. On the other hand about 4(33%) of the respondents
responded as they have not periodic training given by the organization
regarding budget planning and utilizing. From this the researcher understood
that most of the respondents have periodic training that given by the
organization regarding to budget planning and utilizing.

Table 4.9. Respondents opinions regarding to the existing budget problem

related to budget system

№ Problem 1 Strongly Agree Disagre Strongly Cant Total

agree e disagree deter
mine

№ % № % № % № % № % № %

1 Unsuitable budget 38 95 2 5
system

2 Complexity of the 38 95 2
organization.

3 Lack of proper 37 92.5 3 7.5

monitoring and
controlled by
MOFED

4 Improper recording 5 12.5 35 87.5

or budget entries
From the above table 4.9 results that 95% of the sample disagree on the
unsuitable budget system of the organization and 5% agreed up on, Also 95%
of which disagree & 5% are agree on the complexity of the organizations
operation regarding the problem related to budget system. But, 92.5% of
respondents are agreed & 7.5 are disagree on the variable which dealing lack of
proper monitoring and control of the approved budget by MOFED. And also
that 87.5% of the respondents agreed & 12.5% respondents are disagreeing in
Improper recording of budget entries.

 Since they disagree with the question, 50% of the samples respondents
disagreed to the proposed question which describe lack of accordance of budget
break down with the rules of MOFED and Improper recording of Budget
entries.

Table 4.10. Problem related to budget request

№ Problem 1 Strongly Agree Disagree Strongl Can’t Total

agree y determi
disagre ne
e

№ % № % № % № % № % № %

1 Inappropriate 7 20 32 80 40 100
budget request

2 Accepting 39 97.5 1 40 100

budget request
without
examining
their relevance,
timing and
fairness

3 No disclosing 3 7.5 37 92.5 40 100

the approved
budget among
department

4 Not spending 35 87.5 5 12.5 40 100

according
budget title

5 Inappropriate 5 12.5 35 87.5 40 100

budget
transfer
The survey analysis in table 4.10. Item 1 show that 80% of the sample
respondents agreed & 20% strongly agree to the proposed question revealing
inappropriate budget request by the organization. This shows in appropriate
budget request is the valid and existing problem of the organization.

In the same table (4.10) item 2 reveals that 97.5% of the respondents agreed on
accepting budget request without examining their relevant, timing and fairness
results. And item 3 shows 92% of respondents disagree and 3% only agree on
the question that asserts there is no disclose of approved budget among
departments. According to this survey 87.5% of the sample respondents agree
and 12.5% disagree that jimma Zone finance organization is not spending its
budget according to their title. And item 5 reveals that 100% of the
respondents replied that there is inappropriate budget transfer. This implies
that jimma zone finance and Economic development faces the problem related
budget request.

4.3. Result of interview and observation

The interview was conducted with different authorized workers of the

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

According to the response obtained from the budget head the organization uses
fixed for capital budget and flexible for workflow budget types. More of the
employs participate during work flow budget preparation.

Budget call: It is responsibility of Bureau of finance and economic development

this cycle involves strategy, plan, and performance, physical, financial and
development program for the zone. This all are the zonal sector and that leads
to development direction based on per-ceiling amount of budget.

Per–ceiling: - Means forecasting or producing the amount of budget require for

future. The actual calling is the exact amount at hand when budget is allocated
to activities. And the difference between the perceiving and actual was adjusted
after the zone and woreda budget were computed it submit to Bureau of
finance and economic development by their sector has help the sector for:

- Plan evaluation of physical and financial performance of the sector.

- Plan for coming year.

Evaluation review: -Review regarding the evaluation and review it depend on

the type of the project which means long-term project and long term internal
review for evaluation while short term project require short term internal review
for evaluation. At sector level the performance is on the monthly basis and at
regional level with combined on the quarterly basis. But at regional level with
house of people representative on semiannual basis from August to February.

Table 4.10. Variance analysis on adjusted budget and current year expenditure
of Bureau of Finance and Economic Development report (2011-2013 in birr).
2011 2012 2013

Descrip Adjus Curren Varia Adjust Curren Varian Adjust Curre Varian
tion ted t year nce ed t year ce ed nt ce
budg expen budget expen budget year
et diture diture expen
diture

(Zonal) 7779 71272 6518 94996 88780 62156 11501 10589 91171
Jimma 1172 9761.3 1966. 6112. 9821.6 290.7 33670 62000. 669.34
town 7.46 3 13 41 2 9 .05 71

Woreda 2799 27156 8415 31174 30776 39749 40981 40741 24004
8487 83450. 339.8 26018 76890. 127.6 67344 62841. 502.95
90.00 11 9 .00 40 0 .00 05

TOTAL 3577 34284 1493 40673 39654 10190 52483 51331 11517
7605 13211. 4730 92130 86712. 5418. 01014 24841. 6172.2
17.46 44 6.02 .41 02 39 .05 76 9

Source: Total budget Vs expenditure by budgetary institution of Jimma Zone

bureau of finance and economic development.

As clearly described in table above 4.11 the performance responses of the

budgetary institution of the organization for fiscal year from (2011-2013) was
written in the organizational document.

The organizations budget adjusted in the year are classified as jimma town and
jimma zone woredas; adjusted, the year expenditure and variance budgets. So the
budget adjusted for the bureau in 2011 total budget birr 3,577,760,517.46.
However the variance of adjusted budget and the current year expenditure are birr
149,347,306.02. And we can see that for the year 2012 the total budget adjusted
was birr 4,067,392,130.41 and the actual current year expenditure were birr
3,965,486,712.02 and the rest birr 101,905,418.39 was the variance for the year.
Also in the budget year of 2013 total budget birr 5,248,301,014.05, the year
expenditure is birr 5,133,124,841.76. However the variance of adjusted budget
and the year expenditure are birr 115,176,172.29.

Generally one can understand from the above manual report; the organization
(Jimma zone finance and economic development) faces the problems of under
utilization of budget for different activities they were performed in particular
year. Even if there were no 100% efficiency of budget. The result indicated that
the organization to reaction to its weakness and identify the course of the
problem of under utilization of budget and give appropriate solution to the
problem to minimize the variance for the activity they performed in that year.
 CHAPTER FIVE
Summary, conclusion and Recommendation

5.1 Summary and conclusion

This research is concern on assessing and investigating the overall budget

preparation, utilization and allocating performance of Jimma zone finance
organization. To get answer for the question, data gathered through primary
service, secondary source, and interview. The data were collected form
respondents and information obtained from secondary source of the general
manager bureau. The collected data were analyzed and discussed by using
percentage and descriptive statements.

Depending on the data analyzed before, the researcher has concluded that
there is no fair budget allocation among woreda and this cause budget deficit
in some woreda. And there is budget problem related to budget system. Like: -
Lack of proper monitoring and controlled by MOFED and Improper recording or
budget entries are observed. And also Problem there related to budget request
are obtained by the researcher data analysis output; like inappropriate budget
request and accepting budget request without examining their relevance,
timing and fairness; not spending money according to budget title, this
problems are the results of inaccurate development plane week internal
control. In addition the organization makes inappropriate budget transfer and
do week implementation of budgetary system that developed by MOFED in the
organization. Quarterly budget reports of the organization are under utilization
of budget. The causes for this under utilization are inappropriate budget
allocation and lack of deep preplanned habit (Experience).
 Recommendations
 As mentioned earlier there are problems which hinder the smooth flow of
budgeting process and related activities. The researcher gives
recommendation as a solution that assumed to avoid or reduce identified
problems. These are as follows:
 Institutional budget allocation should be fair and take into account the
woreda and city development plans.
 Use appropriate budget transfer to minimize budget deficit among
departments and woreda.
 There must be full implementation of budgetary system that developed by
MOFED in the organization.
 And ask appropriately to higher government body for additional budget by
identifying the budget items which high impact due to budget shortage for
the organization goal.
 Budget revision is very important either systematic, quarterly updating of
budget administration is the procedure for revising a budget after it has
been approved clearly; if it can be revised till the budget there would be no
point reviewing and approving in the first instance.
 It is better to the organization to use projection. Actually a budget differs in
several aspects from forecast or projection. A projection is not prediction but
one estimation of what will happen if various conditions and situations
should exist.
 Even though there is a budget to train workers, it is under practical.
Therefore, it is better to use the budget to the right position.
 The organization should hire well experienced workers in order to achieve
the organization goals and objective to have effective and efficient utilization
of budget.
 The organization should provide the opportunity to professional employees
to participate in budget planning process and assign authority and
responsibility for good preparation of budget plan and utilization.
 The organization should adopt integrated budget control system or sound
budget controlling mechanism in order to avoid the problem of under or
over utilization of budget this could be done by using accounting system (i.
e record the fund available and expense incurred, and transferred the
amount form subsidiary ledger to general ledger account balances.
 The organizations budget amount is not sufficient so to sufficient this
amount use mechanism fund budgetary activity.
 The finance department should use appropriate allocation of budget and
control its implementation by adopting good coordination system with
department manager.
 Recommendation for future researcher: -I recommend for the researchers
for the future to assess about the organization takes corrective action on
planning, allocating and utilizing budget; and to assess the budgetary
performance for this organization in that time.
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APPENDIX
JIMMA UNIVERSITY COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING
Instruction
This questionnaire is formulated to identify the overall activity of budget
system in the above cited zone, and this study is for academic purpose.
General direction
Indicate your answer to the question by putting a check mark in the box and
writ your answers on the space provided for open ended questions.
1. Educational level.
1.1. masters 
1.2. Degree 
1.3. Diploma 
1.4. 12th grade complete 
1.5. 8 grade completed 
2. Age composition
2.1. 25-35 
2.2. 2.2 36-45 
2.3. 2.3 Above 45 
3. What are the basic source while budget preparation in the organization
(Internet and external sources?

4. Do you consider the past performance for today’s budget preparation?

4.1. Yes  4.2. No 
5. What looks like the coordination and communication at different offices
to budget preparation?

6. Do you have a budget revision in order to update for any special case?
6.1. Yes  6.2. No 
7. Is there budget deficit occurred in the organization?
7.1. Yes 7.2. No 
8. Do you think that there is fair budget allocation among woredas?
8.1 yes 8.2. No
9. Do you think your organization properly implements the budget system
developed by MOFED?
9.1 Yes 9.2. No 9.3. Partially
10. Is there periodic training for employees given by the organization
regarding to budget planning and utilizing
10.1. Yes 10.2. No
 11. Do you participate in budget planning and utilizing?
11.1. Yes  11.2. No 
12. If your response for question № 11 above is “yes” in which type?
Administrative 
Project /capital 
Planning and utilizing 
13. If your answer for question 13 above is “no” what is your reason?
It is not your responsibility
Only special workers participate 
Because of random selection 
14. What is your opinion regarding problems related to budget request?
Ite Problem Strongl Agree Disagree Strongly Can’t
m y agree d d disagreed determine
1 Accepting budget request - - - - -
without relevance, timing
and fairness
2 In appropriate budget
request
3 No disclosing the
approved budget among
department
4 Not spending according
budget title
5 In appropriate budget
transfer

15. The organization faces budget administration and allocation problem

because of

Ite Problem Strongl Agree Disagree Strongly Can’t

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