ASSESSMENT ON BUDGET PREPARATION AND

IMPLEMENTATION
(THE CASE OF EZHA WEREDA FINANCE & ECONOMY
OFFICE)

A Research Paper Submitted to Wolkite University, College of

Business and Economics, Department of Accounting, in Partial
Fulfillment of the Requirements for BA Degree in Accounting

BY: - AYNALEM W/MARIAM

ADVISOR: - DESTA (MSC)

WOLKITE UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING

JANUARY 2018
WOLKITE ETHIOPIA

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ACKNOWLEDGEMENT
I would like to express my sincere gratitude to my advisor Instructor Desta Yohanis for his
valuable guidance throughout this research of which without his direction it would have been
impossible to reach this far.

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ABSTRACT
The establishment of effective budgetary performance is important for every organization in
order to achieve its objectives and future plan of action. This research is conducted to the
assessment of budgetary performance in Gurage Zone Ezha Wereda Finance and Economic
Office. The objective of the study is to assess the budgetary performance and identify any
problems which affect its effective implementation of budget in general. In collecting data the
researcher used both primary and secondary source of data. The primary field survey, 2018 and
through interview. The secondary source of data was collected from d/t sources and also the
four year budget report of the organization. The sample used for this research were simple
random sampling techniques. The data analysis would be carried out based on tabulation and
percentage method and interpreted accordingly.

Table of Contents

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ACKNOWLEDGEMENT...........................................................................................................................1
ABSTRACT................................................................................................................................................2
LIST OF TABLES......................................................................................................................................4
CHAPTER ONE..........................................................................................................................................5
INTRODUCTION.......................................................................................................................................5
1.1. BACKGROUND OF THE STUDY............................................................................................5
1.2. STATEMENT OF THE PROBLEM...........................................................................................6
1.3. OBJECTIVE OF THE STUDY...................................................................................................7
1.3.1. General Objective..............................................................................................................7
1.4.2. Specific Objective.....................................................................................................................7
1.4. SIGNIFICANCE AND SCOPE OF THE STUDY......................................................................7
1.4.1. Significance of the study..........................................................................................................7
1.4.2. Scope of the study....................................................................................................................8
1.5. LIMITATION OF THE STUDY.................................................................................................8
1.6. ORGANIZATION OF THE PAPER...........................................................................................8
CHAPTER TWO.........................................................................................................................................9
LITERATURE REVIEW............................................................................................................................9
CHAPTE THREE......................................................................................................................................17
METHODOLOGY....................................................................................................................................17
1.1 RESEARCH DESIGN...............................................................................................................17
1.2 SOURCE OF DATA.................................................................................................................17
1.3 SAMPLING TECHNIQUES & SAMPLE SIZE.......................................................................17
1.4 METHOD OF DATA ANALYSIS............................................................................................17
CHAPTER FOUR.....................................................................................................................................18
DATA ANALYSIS AND INTERPRETATION.......................................................................................18
CHAPTER FIVE.......................................................................................................................................24
SUMMERY OF FINDING, CONCLUSION AND RECOMMENDATION............................................24
5.1. SUMMARY OF FINDINGS AND CONCLUSION......................................................................24
5.2. RECOMMENDATION..................................................................................................................25
REFERENCE............................................................................................................................................26
APPENDIX 1............................................................................................................................................27
APPENDIX 2............................................................................................................................................27

LIST OF TABLES
Table 4.1 Demographic characteristic of respondent and their educational qualification.

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Table 4.2 Respondents response for know how about budgetary performance
Table 4.3 Employees participation during budget preparation
Table 4.4 Respondent response factor affecting the organization budgetary performance
Table 4-5. Does the organization implement its budget effectively?
Table 4.6 Respondent response budgetary allocation is mostly allocated by
Table 4.7 respondent response for budget deficit occur within the organization
Table 4-8 respondent response about the organization used its capacity to reduce budget deficit
Table 4.9 Respondent response in which method the organization uses to know the amount of
utilized budget.
Table 4-10 System or techniques used by the organization to reduce budget deficit.
Table 4.11 The planned and actual budget of the four year report of the organization

CHAPTER ONE

INTRODUCTION
1.1. BACKGROUND OF THE STUDY
Budget is a predetermined statement of management policy during a given period, which
provides a standard for comparison with results actually achieved. Budgetary performance of the
organization against many problem such as budget deficit, unequal distribution of budget, etc.

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Hence, there should be an inviting effort to minimize budget deficit (Chandra 1998). Budget is a
qualitative expresses of plan of action and aid to coordination and implementation. It is a
financial plan that indicates a proposed expenditure for the year and the means of financing
them, since budget is a financial plan of or any activities and serve as evaluating performance,
coordinating activities implementing plan and communicating, motivating and authorized action
in governmental and nonprofit organization, budget appropriates serve as authoring and ceiling
for management action, budget is a tool that aids managers in both their planning control
function budget is help for manager for future (Cahles Horngrei, 2002).

However, manager also uses them to evaluable what happened in the pact (Donald Axelrod,
1989). They used budget as a bench mark measure for estimated or desired performance against
which they compare actual performance against which they compare actual performance (Cahles
Horngrei, 2002).

Most of people associated the world budget with limitation on spent for example government
often approved spending budget for their various agencies, then they expect the agencies to keep
their expenditure within the emit prescribed by budget, budget is an interment for manager to
look ahead and ready for changing condition, this forced planning is by for greatest contribution
of budget to management (A. Prenchand, 1959).

Budget is essential element for the financial planning control and evaluates process of any
organization. As well as managed organization has the following budgetary cycle. It is also a
common in governmental and non-profit organization and university non-profit making
organization that requires appropriate budget to utilize human and financial resources efficiently
since the university is recently opened. It prepare budget and strategic planning to achieve long
term of objective for design basic strategic planning to make success, it is future dream, finally to
achieve the objectives of the organization it requires commitment of managers sub-branch
managers and employees of the organization to translate strategic planning in to action(s) (Lynn
& freeman, 2003).

The study would be focused to show the solution of budgetary performance, deficit and how to
assess or utilize the budget to the organization. The objective of the study is to assess the
budgetary performance in Ezha Wereda Finance and Economic Office & to see the organization
if they are earning a good return on budget or not.

1.2. STATEMENT OF THE PROBLEM

Budget preparation and implementation are the basic requirement for an organization to use their
resources efficiently, however, if budget is not effectively control and implement, then it brought
a lot of problems to the organization or institution since it is not efficiently and effectively used
and utilized hence it would have a direct effect on achieving organizational goals. And also if

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preparation and implementation not proper and satisfactory, in achieving the long term
objectives of the organization. This problem is identified by different scholars among them
(Burklead, 1974).

A budget is regally approved plan of finical operation embodying the organization of

expenditure for specified purpose to be made during the budget period and the proposed means
of financial them (Paul and Taylor, 2006). Most growth theories imply that industrialization is a
carrier of economic growth. Nonetheless, for developing country such as Sudan, Somalia,
Kenya, whose economy in predominantly agrarian the emphasis on budget should not be stressed
by under mining the role of other sectors in the economy rather complementary balance has to be
established between the sectors of the economy to reach the relative benefit of budget. Budgeting
is the most budgeting used accounting tool for planning and controlling an organization and
planning managers an able to anticipate and correct potential problem before they happen (Tracy,
2009). Managers then can focus on exploiting opportunities in stated of fighting fires (Journal of
Ethiopia law).

The problem of budgeting is not only in preparation stage but also on implementation. The
concern of this study is to examine the assessments of budgetary performance in particular area
Ezha Wereda Finance in Gurage Zone. The study primarily focused on the office, in order to
give the final solution and suggestion to the problems.

The researcher raised the following question that would be answered in this course of study.
 What are the factors that affect budgetary performance of the organization?
 How to assess budget utilization on Ezha Wereda finance organization?
 Why budgetary performance is necessary?
 What means the organization use to prepare good budget system?
1.3. OBJECTIVE OF THE STUDY
1.3.1. General Objective
The general objective of the study is the assessment of budgetary performance in case study of
Ezha Wereda finance organization in Gurage Zone.

1.4.2. Specific Objective

The specific objective of the study are the following
 To see the organization effectively implement its budget or not
 To indicate for the finance organization how properly managed budget is important
successfully and to exhibit which factors affect the demand for budgetary performance.
 To know the purpose of budgetary performance in the finance organization
 To identify ways and means by which the organization budgetary performance improved
to best level expectation.

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 1.4. SIGNIFICANCE AND SCOPE OF THE STUDY
1.4.1. Significance of the study

This study would help the organization to have a good budgetary practice and to properly budget
the available resources and to effectively implement it. In addition to this study would be used to
provide ground line information for the organization about its budgetary performance, which is
very help full for the organization advancement to provide a better service.

The study helps to examine about the factor affecting budgetary performance in the organization
and create awareness to the organization about budget utilization and implementation, which
requires improvement. Furthermore, it helps to identify ways and means by which the
organization budgetary performance is improved to the best level expectation, in addition to the
above the following play a great role to avoid the problem of budgetary performance for the
future society
Initiate the employees to undertake a great measure over the problems concerning budgetary
performance.

1.4.2. Scope of the study

To come up with effective and better study, it was better if the study would be conducted on over
all organization performance as compared with other similar organizations performance but due
to the financial and other constraints this study conducted only in Ezha Wereda finance therefore
the study is limited to the organization.

1.5. LIMITATION OF THE STUDY

In doing this research paper, the researcher face the following problems.
- During data collection some respondent are not willing to give information.
- Lack of sufficient materials from the expected organization.
- Time and financial constrains

1.6. 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, limitation 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.

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CHAPTER TWO

LITERATURE REVIEW
2.1. 2.1 Reviews of related theoretical and empirical literature

2.2. Meaning of budget

Budgeting is the most widely used accounting tool for planning and controlling organizations.
Budgeting system turn managers are able to anticipate and correct potential problems before they
else. Managers can then focus on exploiting opportunities instead of fighting fires. As one
observes said for business plan to fail but many of those that flop failed to plan budgets can
financially reflect many of the evolving cost accounting and management themes for example
budgets can quantity the plans financial effects of activities aimed at continuous improvements
and cost production (Horn green 10th edition, 2005, p 17) Almost everyone makes plan shortly
after waking up each morning most people think a head about what they will to during the day.
These thinking a head are a form of planning. Likewise, most business managers naturally think
ahead about how they will conduct their business (Unfortunately the planning is frequently as
informal as making is lacks the capacity for effective communication. The business manager
knows what she/he superiors and subordinates have no knowledge for these objective. If a
managers plans are in consistent with her/his superiors plans considerable amounts of time and
effort will likely be wanted before the disagreement is discovered. Similarly, subordinates must
what until the managers tells them what to do they have no why to exercise self-initiative
because they do not know what is expected of them. Budgeting attempt to solve these problems
by acting as communication objectives to both superiors and subordinates (Managerial
accounting 10thedition, 2006 p.320). A budget is a detail plan expressed in quantitative terms,
that specifies how an organization will a quires and use resources during a particular period of
time. A budgeting system comprises the procedures used to develop a budget. Budgeting system
have five primary purpose; planning, facilitating, communications and coordination’s allocating
resource, evaluating performance and providing incentives (cost management 3rd,2000 p.597)

2.3. Budget and Budgeting cycle

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A budget is the quantitative expression of proposal plan of action by managers or management
for future time period and is an aid to the coordination and implementation of the plan. A budget
can cover both financial and non-financial aspects as a blue print out the organization to follow
in the upcoming period. Budget covering financial aspect quantity management expectations
regarding future income, cash flow and financial position, just as individual financial statement
are prepared covering part periods. So they can be prepared covering future periods for example
a budget Income statement a budget statement of cash flow, a budget balance sheet. Uncertainly
these financial budgets can be non-financial budgets for, say units manufactured sold head
counts and number of new products being introduced to the market. (H. Garison, 2005)

2.4. Classification of budget

According to Burklead, 1974, budgets are usually classified according to their nature. The
following are tops of budgets. For each part of the organization aggregation in to an overall
budget for the entire organization.

1. Classification of budget on the basis of functions

A. Operating budgets: - there related to the various activities or operations of firm. The
number of such budgets depends on the size and nature of the organizations.
Commonly used operating budget are:-sales budget, production budget, purchase
budget, labor budget etc.
B. Financial budgets: - are concerned with cash receipts and disbursement working
capital, capital expenditure, financial position and result of organization operations.
The commonly used financial budgets are:- capital budgets working capital budgets
and etc financial budget focuses on the effect that the operating budget and other
plans will have on cash.
C. Master budgets:- master budgets is the summary of various functional budgets a
master budget are a primary budget in corporation functional budget master budget
is prepared by the budget officer and it remains with the top level management.
Master budget is the product that consists of all individual budgets. Well managed
organizations usually have Planning the performance of the organization as while as
well as its submits and its management team agrees as to what is expected,
Providing a frame of reference a set of specific expectations against which actual

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 results can be compared, Investigating variations from plans. If necessary, corrective
action follows investigation, planning again, considering feedback and changed
conditions.

2 . Classification based on time.

A. Long term budget: - these are prepared to depict long-term planning of

organization. The period of long term budget varies between five to ten years.
Long term budget are Prepared for some sectors such as capital expenditures,
research and development, long term finances etc
B. Short-term budget:- these are generally for one or two year and the form of
monitory terms. Consumes Goods industries, such as sugar, cotton textile etc..
Use short term budget etc.
C. Current budget: - this period of current budget is generally of month and
weeks.
3. Classification on the basis of flexibility

Based on their flexibility budget are classified in to fixed and flexible:- Fixed budget also known
as static budget is a budget which is designed to remain unchanged in irrespective of the level of
activity actually attained .Fixed budget are prepared for a given level of activity. The budget is
prepared before the beginning of the fiscal years, the financial year starts in January then the
budget will be prepared a month or two ear lies. The changes in expenditure arising of out of
anticipated change will not adjust in the budget there is a difference of twelve month in the
budget and annual figures where as flexible, budget also knows as dynamic budget or variable
budget is defined as a budget by which recognizing the difference between fixed, semi fixed and
variable. Cost which is designed to change in relation to the level of activity. A flexible budget
costs of a series of budget for different level of activity. Therefore, it varies with the level of
activity attained. A flexible budget is prepared often taking in to consideration for seen changes
in the conditions of the business. (H. Garrison, 2005).

2.4. ..Strategy and plans

Budgeting is most useful when done as an integral part of an organization strategy analysis
strategy describes how an organization matches its own capabilities with the opportunity in the

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market plan to accomplish its overall objectives. It includes questions such as what are the
cereal objectives of the organization , form of organization and financial structures serve the
organization best , the risks of alternative strategies and the organization contingency plans if
its proffered plans fail and whether the market for its service local, regional, National or global
(Donald Axelrod , 1989).

2.5. Establishment of Budget committee

In large concerns generally the direction and execution of the budget is delegated to budget
committee, which reports directly to the top management. The financial controller is usually
appointed to serve as the budget director. He is in charge of preparing budget manual of
instructions and accumulates the budget and actual figures for reporting. Other members of the
budget committee usually comprise of basic as head of functional department like sale manager,
Chief Accountant, etc as shows in the above organization chart. Each member prepares his own
department budgets. This will be then considered by the committee for c -ordination.

The main function of budget committees such as providing historical data to department head,
helping in estimating , issuing in structure to department regarding requirements data of sub
mission of estimate etc, defining the general policies of the management in relation to the
system , receiving budget estimate from various department for consideration and review,
coordinating work, preparing budget summaries discussing difficulties with departmental
heads and suggest possible revision , evaluating and revise the estimate before preparing the
final budget and preparing a master budget after functional budget have been approved (A.
Prenchand, 1959).

2.6. Preparation of Budget Manual

To be useful a budget requires a substantial amount of time and effort by the person who
prepared it. This process can be improved by the viable on organizational budget manuals which
is a detailed set of intro motion and guidelines above the budget processes. The manual should
consists of statement of the budgetary purpose and its desired results, a listing of specific budget
activities to be prepared , a calendar of scheduled budgetary activities , a sample budgetary forms
and original revise and approved budgets((A. prenchand , etal 1959).

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2.7. Budget Period

Budget period is a length of time for which a budget is prepared and operated. Budget period
vary between short term and long term and no specific period can be paid down for budget. If
varies among concerns and industries as a result several factors. A budget is un usually prepared
for one year, which corresponds to the accounting year. It is sub divided in to quarters and in turn
each quarter is broken down in to three separate months when a business experiences reasonable
fluctuations. The budget period may be fixed to cover one seasonal cycle covers two or three
years along term budget should be prepared to cover the period. This long period may then be
broken in to smaller period by preparing short-term budgets. Budgets for capital expenditure are
usually prepared on a long term basis for example in electricity companies which in cur very
heavy capital expenditure, the need for new power stations is possibly forecast five to ten years
in advance such long term budget are supplemented by short term ones. An important point to
note is that short term budget will be much more detailed and are costly to prepare and operate
while long term budgeting considerably effected by unforeseen conditions(willaiam O. stratton ,
2007).

2.8. Characteristic of budget

Budget is characterized by in terms of quantity or policy or both, it is prepared for a define
future period. In other word a budget is prepared in advance of the period during which it is
to operate and a budget is prepared for the implementation of the policy formulated by the
management for attaining a given objective.
2.9. Components of master budget

Two main components of master budget are separating and financial budget. A master budget is
a work consisting of many separate but independent budgets this work is illustrated as the
following. Purchase budget, ending inventor budge.

3.1. Operating budget includes:

A. Sales budget
B. Purchase budget
C. Cost of goods sold budget
D. Operating expense budge

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3.2. Financial budget include
A. Capital budget
B. Cash budget
C. Budgeted balance sheet
D. Budgeted statements of cash flows.
2.10. Preparation of Budget in the organization

As it is known that budget is the vehicle for addressing objectives, strategies and problems in the
most intelligent way. It is the vehicle which gives reality to the organization objectives and
strategies and should reflect the organization considered decision strategy. The many
organization have their own budget that prepared in their organization. Also the organization
have manual budget. As interview response, indicated that the finance department manager, the
organization has been preparing a budget since it was established. Based on the respondent
responses for the question was budget prepared for one year /annual and recurrent budget type is
the known budget (Lynn & freeman, 2003).

2.11. Budget responsibility

Based on the respondent response for the question, which department of your organization is
responsible to prepare budget? The head replied/answered that the finance department is
responsible for the preparation of budget in the organization.

Furthermore, the research tries to identify whether the departments or sector in the organization
prepare their own budget in the interview question with the department head. Accounting
department is responsible, till now the sectors, prepares their own budget.

2.12. Outline of procedural steps and approach

The following procedural step and approaches are out lined by the controlling authority to be
followed by the organization.

2.13. Budget procedure and timing

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The two steps of budget procedures and timing are developing an out of the budgets procedures
if not already on file from previous budget and Preparing and distributing a time table for budget
component preparation input.

2.13.1. Preliminary budget

The procedural steps used to prepare preliminary budgets are reviewing previous budget file to
identify existing information which is usable and the organization which are normally updated
by each division, Collecting need assessment of each faculty for the next budget year or
obtaining a forecasting of external constraints affecting the next fiscal year, Dividing the budget
preparation in to division based on functional units such as faculties, finance administration etc.
discussing with division heads and with organization managers about the performance
expectations for the next fiscal year like percentage growth new initiatives, major changes
expansion for facilities by including new programs and their effects, Preparing detailed budget
worksheet for each major component. Carefully defining and recording the assumptions used in
preparing the work sheet and subsequent budgets, Preparing and summarizing an operations and
financial fore casting for the current fiscal year with preliminary interpretive components.
Distributing the worksheets along with current year’s results and preliminary comments to
divisional heads for review and comments (Lynn & freeman, etal 2003).

2.14. Types of budget of the organization

Budgets in most companies span of a period was one year or less but in case the activities they
conduct may researcher wants to know the span of the budget prepared by the organization. To
get answer for this question the researcher made interview with the organization finance
department head. He replied that the budget prepared by the organization runs for a year.
According to the question what type of budget does your organization use? the response acquired
from finance department head shows that the organization use both real recurrent and capital
budget type that is based on treasury/ government and internal revenue such as from value added
tax (VAT) and etc. government result was the basic source of finance for the organization since
it’s a public service rendering organization. The internal revenue is the supplementary source of
finance for the organization.

2.15. Factors affecting the organization budget preparation

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While they prepared budget the organization has faced may face different kinds of problems.
Some sector may not know or don’t have full knowledge of the exact amount for their
department need (Donald Axelrod ,etal 1989).

Due to this, the budget designated for that sectors may be lower or higher their need. If the
budget is lower than the need, it will create budget transfers, which will again create or other
problem budget shortage.

Lack of experience, according to the interview response from the department head reasons out
that, even if the organization was the oldest, did not enable the employees to have enough
experience.

Unexpected circumstances like breakage of machineries, cars, equipments, natural disasters and
like may require the organization on the budget. But since the costs of such unforeseen
circumstances may not exactly know due to this the organization faces problems.

2.16. Performance Reports

Performance reports are not effective unless there is a continuous flow up of the report by
authorized bodies. These reports should be prepared at regular intervals/say each on quarterly;
semiannually and annually to show comparison of actual with that of budgeted. Such report
showing favorable/ fair/ or unfavorable/ unfair/variance from budget figures from this points
does the organization prepared performance reports with in a years? This question enabled the
researcher to know for how many times the organization does prepare a performance report
every monthly, the performance report is prepared every month through daily and weekly
reports prepared by each sectors. The performance of the organization is evaluated by the
management and authorized bodies there is a great variance between actual and budget the
organization adjusts the variance periodically by using different budget adjusting system
(Donald Axelrod, 1989).

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CHAPTE THREE

METHODOLOGY
1.1 RESEARCH DESIGN
The study was focused on the problem associated with “Budget preparation and implementation
in Ezha Woreda Finance and Economy Office”. Descriptive survey study design was used in this
study by using both qualitative and quantitative research approach.
1.2 SOURCE OF DATA
To collect the necessary data the study team used both primary and secondary source of data.
Primary data: - Was gathered from employees of the organization by distributing questionnaire
and interview through related parties.
Questionnaire: - contain both open-end and close-end questions
Interview: - by directly communicate with the finance manager
Secondary source of data was collected or obtained from review of selected materials which are
related to the assessment of budgetary performance, like reference book, magazines, used
internet and the organization budget report document.

1.3 SAMPLING TECHNIQUES & SAMPLE SIZE

The researcher was focused on the employee of the finance and economy department by using
Census technique to acquire the necessary information and to make clear investigation for the
current research. So, the researcher was used all the 14 employees working in Ezha Woreda
Finance and Economic Office to gather the primary data.

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 1.4 METHOD OF DATA ANALYSIS
In this study the data has been analyzed and interpreted using different methods, the method
include tabulation and percentage. Tabulation used to arrange data in a table or other summary
format to facilitate the process of comparison of various data analysis.

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CHAPTER FOUR

DATA ANALYSIS AND INTERPRETATION

This part deals with the major findings of the study. For data analysis and interpretation purpose
the relevant information was gathered from questionnaires distributed to the employees of the
organization and face to face interview with finance manager and also the four year budget
report from the organization

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
percentage and table.

Table 4.1 Demographic characteristic of respondent and their educational qualification.

Sex Educational level

Degree Diploma 12th Complete Total
No % No % No % No %
Male 2 14.3% 5 35.7% 2 14.3% 9 64.3%
Female 1 7.14% 3 21.4% 1 7.1% 5 35.7%
Total 3 21.43% 8 57.14% 3 21.4% 14 100%

(Source: Field survey, 2018)

From the above table, the respondent answer indicates that 8(57.14%) of the respondent are
diploma holders, 3(21.43%) are degree holders and also 3(21.43%) of the respondent are 12th
complete. In addition to this the respondent response indicates that most of the employees are
males that is 9(64.3%) of the total population and the rest 5(35.7%) of the respondent are female.
Table 4.2 Respondents response for know how about budgetary performance
Type of response No of respondent Percentage (%)
Yes 14 100%
Source: field survey, 2018)

From the above table we can observe that all respondents 14(100%) of the organization know
about the budgetary performance
Table 4.3 Employees participation during budget preparation
Types of response No of respondent Percentage (%)
Yes 4 28.57%
No 10 71.43%
Total 14 100
(Source: field survey, 2018)

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The above table indicates that 10(71.43%) of the respondents response are the employees not
participated during budget preparation. The rest 4(28.57%) of the respondent response yes, this
indicate more than half of the respondents are not participated during budget preparation.

From interview the response of the finance manager indicates participatory budget are important
instrument for overall organization activity. In many constraints it is difficult to participate all
employee during budget preparation like overload of work and sickness of employees.

Table 4.4 Respondent response factor affecting the organization budgetary performance
Budgetary performance affecting factors No of respondent Percentage (%)
In appropriate budget allocation 7 50%
The organization manager 3 21.43%
Employees of the organization 3 21.43%
Shortage of fund 1 7.14%
Total 14 100%
(Source: field survey, 2018)

From the above table, out of the total (14) respondents 7(50%) of the respondent response that
the major factor affecting the organization budgetary performance is in appropriate budget
allocation, 3(21.43%) of the respondents answered indicates that factor affecting the organization
budgetary performance is the organization manager and also 3(21.43%) of the respondent
response indicate that employees affecting the budgetary performance of the organization. The
rest 1(7.14%) of the respondent says that budgetary performances is affected by shortage of fund.

From interview the manager response indicates that the employees are affect the budgetary
performance of the organization by low involvement during budget preparation, doesn’t
participate in their specific job accordingly &recording of revenue and expense is not recorded
accurately. Due to this reason the organization budgetary performance is affected.

In general the manager response the major factor which affect the organization budgetary
performance are the following.

Inappropriate budget allocation:- this means that during budget preparation time the allocation of
budget for each department is not fairly balanced with its activity, the 2 nd factor which affect the
organization budgetary performance is employees, employees affect budgetary performance due
to not participated at specific job. The 3rd factor is low coordination of employees and manager,
this problem is created due to unwillingness of employee doing their activity.

Table 4-5. Does the organization implement its budget effectively?

Types of response No of respondent Percentage (%)
Yes 8 57.14%

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 May be yes 4 28.57%
No 2 14.29%
Total 14 100%
Source field survey, 2018

From the above table, we can understand that 8(57.14%) of the respondent says yes, which
means the organization implement its budget effectively. 4(28.57%) of the respondent response
that may be yes & the rest 2(14. 29%) of the respondent says the organization no implement its
budget effectively.
Table 4.6 Respondent response budgetary allocation is mostly allocated by

Responsible body to allocate budget No of respondent Percentage (%)

The organization manager 4 28.57%
Finance department 10 71.43%
Total 14 100%

(Source: field survey, 2018)

From the above table, 10(71.43%) of the respondent response indicate that the responsible body
to allocate budget is finance department and the rest 4(28.57%) of the respondent response
shows that budget is allocated by the organization manager.

Table 4.7 respondent response for budget deficit occur within the organization

Types of response No of respondent Percentage (%)

Yes 9 64.29%
No 5 35.71%
Total 14 100%
(Source: Field survey, 2018)

From the above table we can understand that out of the total (14) respondents 9(64.29%) of the
respondent response say that budget deficit occur within the organization. Similarly out of 14
respondents 5(35.71%) of the respondent response says budget deficit not occur within the
organization.

Table 4-8 respondent response about the organization used its capacity to reduce budget deficit

Types of response No of respondent Percentage (%)

Yes 8 57.14%
No 6 42.86%
Total 14 100%

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 (Source field survey, 2018)

The above table indicates that 8(57.14%) of the respondent response that the organization used
its capacity to reduce budget deficit. On the other hand 6(42.86%) of the respondent response the
organization does not used its capacity to reduce budget deficit.

According to the respondent response the organization used its capacity to reduce the problem of
budget deficit are the following
 By giving short period orientation to all employees about budget utilization and effect of
budget deficit.
 By transferring some amount of fund from excess budget to shortage budget
 By promoting proper communication of employees and the manager of the organization
 By promoting appropriate allocation of budget to respective department
 By utilizing good budget system within the organization

According to the finance manager response budget deficit occur within the organization during
spending exceeds revenue. The organization uses various mechanisms to reduce budget deficit
like:-
 Transfer some amount of fund account excessive budget to other which has shortage
 Reducing expense by coordinating different tasks
 By active implementation of budget

Table 4.9 Respondent response in which method the organization uses to know the amount of
utilized budget.

Method (techniques) No of respondent Percentage (%)

By recording revenue and expense
By planned accordingly
By recording inventory valuation
Total
(Source: field survey, 2018)
7 50%
5 35.71%
2 14.29%
14 100%

From the above table we can understand that 7(50%) of the respondent response indicates the
organization know the amount of utilized budget by recording of revenue and expense amount.
5(35.71%) of the respondent says the amount of utilized budget known by using planned
accordingly & the rest 2(14.29%) of the total sample are agree by recording of inventory
valuation

Types of budget within the finance organization

Most of the time the finance organization prepare budget for 1 year or less than one year period,
but in different case of activities they conduct it may be vary form organization to organization.

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According to the finance head the type of budget system preferable during several year of
experience are flexible budget.

Table 4-10 System or techniques used by the organization to reduce budget deficit.
Budget deficit reducing techniques No of respondent Percentage
Adopt good budget system 6 42.86%
Effective manager 4 28.56%
Active participation of employee 2 14.29%
Effective allocation of budget 2 14.29%
Total 14 100%
(Source field survey, 2018)

From the above table out of the total (14) respondent 6(42.86%) of the respondents response
budget deficit is reduce by using or adopting good budget system within the organization.
4(28.56%) of the respondent response indicates that budget deficit reduced by introducing
effective manager with in the organization. 2(14.29%) of the respondent response budget deficit
reduced by active participation of all employees at their specific job and the rest 2(14.29%) of
the response indicates the organization budget deficit reduced by using effective allocation of
budget.

Respondent response to reduce the organization budgetary performance problem by using the
following way.
 Adapt good or well budget system within the organization.
 The allocation or distribution of budget allocated by appropriately or correctly way.
 Active reporting of recording data by employee to respective body.
 Active participation of all employee during budget preparation.
 Introducing professional or effective manager.
 Giving orientation to employees of the organization about budget preparation and its
related problems.

According to the respondent response the main objective to implement budget by the
organization were fulfilling the following purpose.

 To attaining or achieving the organization goals.

 To facilitate communication and coordination with in the organization.
 For formulating or implementing the future plan of the organization.
 For managing financial and operational performance of the organization.
 It acts as coordinator machinery between different functional groups.

Table 4.11 The planned and actual budget of the four year report of the organization

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 Year Planned budget Actual budget Variance (favorable) %
2006 9,747,496.60 7,310,622.45 2,436,847.15 75%
2007 11,421,519.72 8,566,139.79 2,855,379.97 75%
2008 11,020076.67 9,036,462.87 1,983,613.80 82%
2009 12,446,282.81 10,579,340.39 1,866,942.42 85%
(Source: The organization budget report from 2006- 2009)

From the above table we can understand that the organization budget actually used 75% in 2006
and 2007, 82% in 2008 and 85% in 2009.

In the year 2006 and 2007 budget utilization remain constant that is 75%, this two year data
shows that the organization not take any corrective action to improve good budget utilization.
But in the remaining two consecutive years that is 2008 and 2009 the budget utilization of the
organization shows improvement, this lead to the performance of the organization increase.

The variance observed in the organization were favorable for the four consecutive years, this is
due to the amount of planned budget is greater than actual budget.

According to the finance head response the variance is occurred within the organization because
of unforeseen circumstance and externality (uncontrollable factor) such as change in market
condition and increase in general and administrative expense.

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CHAPTER FIVE

SUMMERY OF FINDING, CONCLUSION AND

RECOMMENDATION
5.1. SUMMARY OF FINDINGS AND CONCLUSION
 The assessment of budgetary performance in an organization is to identify how about
budget utilization within the organization. Hence, it is necessary to carry out study in the
area of budget to promote good assessment methods which could be vital in improving
the performance of budget in an organization (Ezha Wereda Finance)
 The organization use in appropriate budget allocation. When the budget are not planned
accordingly cause budget deficit.
 Since budget is the financial plan of the organization for the period of year and it enable
to predicting financial result and the 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.
 Even if the organization effectively implemented its budget, variance were observed
when compared actual results with budgeted estimates and the reason for occurrence was
increase general and administrative expense and market change.
 When he budget was prepared it can be fixed or flexible. However, he organization
prepare flexible budget is a preferable one from the organization point of view
 Most of the respondent which is 8(57.14%) of response indicates that the organization
effectively implement its budget. Whereas 4(28.57%) of the respondent response were
not surly the organization implement its budget effectively & the rest of the respondent
which is 2(14.29%) are not the organization effectively implemented its budget, from this
it can conclude that the organization implemented its budget effectively.
 The organization adopt poor communication and coordination of managers and
employees, this gap create inappropriate budget allocation and employee does not
participate on their specific job. To conclude from the above point, the assessment of
good budgetary performance requires effective budget utilization and communication in
order to accomplish the organization financial activity and objectives.
 Regarding the impacts of variance weather it was favorable or unfavorable on the
performance of the organization seemed as:-
 Most of the variance observed was favorable.
 Its impact was not serious rather it motivates to employees of the organization to work
hard.
 When we compare the budget year of 2006, 2007, 2008 & 2009, the organization has
shown more improvement in budget year of 2008 and 2009. From this point we can
concluded that the organization budget utilization is increase from year to year.

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 5.2. RECOMMENDATION
Based on the data findings and conclusions made the following recommendations are forwarded.
 The organization enable to modify the budgeting system to improve management
decisions and facilitates attainment of the firm’s objectives. The management on its part
should widen the areas of decision making by using reliable good budget system.
 Even if, the organization effectively implemented its budget but 42.86% of its employees
did not believe surely the effective implementation of budget. Since effective
implementation of budget is not simple matter, it is advisable to clear and open
communication among employees and department for better performance.
 The finance organization use appropriate allocation of budget to performing the financial
activities of the organization.
 The organization must adopt a good budgeting system in order to achieve or facilitate
there goals and objectives.
 Use active coordination system: which helps the organization from the top managers to
the low level managers should be coordinate and communicate properly.
 Active participation of all employees to their specific job is important for the
organization by minimizing budget problems.
 Variance were created within the organization due to effective and ineffective
implementation of budget. There for the organization use effective implementation of
budget in order to achieve favorable variance.
 Responsibility and assignment of authority are essential for preparing good budgeting.
The organization should give employees authority and responsibilities in order to prepare
good budget system
 For providing a better reporting of budget performance, use or increase the organization
professional employees.

25
REFERENCE
1. Cahles HORNGREIN,(2002), cost accounting( 12th edition.), Candida , Canada printing
press
2. Lynn & freeman(2003, Managerial accounting (4th edition)
3. A. Prenchand (1959). Government budgeting and expenditure controls- Theory and
practice(2nd ed : IMS printing press , Washington.
4. Federal government of Ethiopia (2001), Budget reform design Manual: Chart of
Accounts, budget preparation and presentation for the Federal Government, Addis
Ababa, Ethiopia.
5. Burklead (1974).Government budgeting Charles T. Horngven, Gary L. Sundem,
willaiam O. stratton (2007)..
6. Donald Axelrod (1989). Govoernment Budgeting. Introduction to management
Accounting 12thEd, USA India, New Delhi.
7. www.wikipedia.com

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APPENDIX 1
WOLKITE UNVIERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING

Interview Questions

For finance head

Dear respondent:- This questionnaire is designed to help in examining and assessing the
budgetary performance of the organization in Ezha wereda finance. So you are kindly
requested to give the right response you think, since it contribute a lot for the success
available for the study.

1. Participation of employee during budget preparation is important or not? Why?

2. What type of budget (flexible or fixed) used the finance organization?
3. Why budget deficit occur? In what way control it?
4. Is variance occur within the organization? What is the cause for the occurrence of
variance?
5. What is the reason behind employees affect budgetary performance?

THANKS IN ADVANCE FOR YOUR COOPERATIONS

APPENDIX 2
WOLKITE UNVIERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING

Questionnaire

Dear respondent:- This questionnaire is designed to help in examining and assessing the
budgetary performance of the organization in Ezha Wereda finance. So you are kindly requested
to give the right response you think, since it contribute a lot for the success available for the
study.

NB.:- There is no need of writing your name

27
Make a thick mark () in box which you think an appropriate response

I. Personal profile
I.1 Sex Male 
Female 
I.2 Education level
12 complete 
Diploma 
Degree 
Others 
II. General question
1. Do you know about budgetary performance?
A. Yes 
B. No
2. Do you participate during budget preparation?
A. Yes 
B. No 

If no why? ____________________________________________________
_______________________________________________________________
3. What is the major factor affecting the budgetary performance of the organization?
A. Employees 
B. Shortage of fund 
C. In appropriate budget allocation 
D. The manager of the organization 
4. Does the organization effectively implement its budget?
A. Yes 
B. May be yes 
C. No 
5. Budgetary allocation is mostly allocated by?
A. The organization manager 
B. The finance department 
C. The market department 
D. Others 

6. Is budget deficit occur in the organization

A. Yes 
B. No
7. On basis of question No 6 if yes why? _____________________________________
__________________________________________________________________
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8. Do you think the organization used its capacity to reduce budget deficit
A. Yes 
B. No 
9. From question no 8 if yes in what way? ___________________________________
__________________________________________________________________
10. In which method use the organization in order to know appropriate utilization of budget
amount?
A. By recording revenue and expense 
B. By recording inventory valuation 
C. By planned accordingly 
D. By other ways 

11. Which system used the organization in order to reduce budget deficit?
A. Adopt good budget system
B. Use effective manager
C. Effective allocation of budget
D. Active participation of all employee

12. To reduce the organization budgetary performance problem what means the organization
accomplish?
______________________________________________________________________
____________________________________________________________________
______________________________________________________________________
13. What are the main objective to implement budget by the organization?
________________________________________________________________
______
______________________________________________________________________
_______________________________________________________________________

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