ASSESMENT OF THE EFFECTIVENESS OF BUDGET

DISTRIBUTION AND ITS UTILIZATION IN DESSIE

PREPHERAL HOSPITAL

A SENIOR ESSAY SUBMITTED TO DEPARTMENT OF

ACCOUNTING AND FIANCÉ, COLLEGE OF BUSINESS AND
ECONOMICS WOLLO UNIVERSITY THE PARTIAL
FULFILLMENT OF REQUIREMENTS OF BA DEGREE IN
ACCOUNTING AND FINANCE

Prepared By:DEBREWORK MENGSTIE

IDNO WOUR/3136/09

Advisor:SELAMAWIT.L(MSC)

DEPARTMENT OF ACCOUNTING AND FINANCE

COLLEGE OF BUSINESS AND ECONOMICS

Wollo University

2015

Dessie Ethiopia
 ACKNOWLEDGEMENT

Above all I would to thanks for my almighty God for his matter marry his forgiveness as
well as for my success throughout my life first and for most I would like to my advisor
Mr.Kenzu Y. for his valuable and constructive suggestions and criticism and commonly.
Special thanks is extended to my brother Tewachew Abilie and my sister Alemitu
Kerebih for their material support from the time when I select the title of this study up to
the end presentation of this paper and since cooperation of Debretabor Amangeneral
hospital. Although my very special gratitude also dedicated to my families specially my
Father Mulu Guadie,mothers Eriget Anagaw well.
 ABSTRACT

This study was conducted the general objective of finding out analysis of the effectiveness
of budget distribution and its utilization in Debretabor hospital. The researcher has studied by
collecting both primary and secondary sources of data the most important method is that help to
gather information was collected through personal interview and questionnaire budget is a
qualitative expression of a proposed plan of action by management for a future time period and
is an aid to coordination and implementation of the plan. A budget can be covered both financial
and non fanatical aspect of those plan and acts as above print for the organization to follow in
upcoming period. The researcher so as to make easy and able to reach in the targeted objectives
the overall methodology applied in the study was census sampling techniques. This can be help
to analyze the researcher to forward recommendation and solution of the cause and effect by
using descriptive data analysis.Finally, the study analysis the factors that effect the budget
distributer, the cases of budget deficit, the procedure of budget distribution, the function of
budget committee and budget director and the responsibilities or duties of budget administrator
in the organization the type of budget which the organization uses and the case of unfair utilized
budget in the organization.
 Table of contents

ltem Page
Acknowledgement
Abstract
Tables of content
List of table
CHAPTER ONE
1. Introduction
1.1. Background of the study
1.2. Background of the study area
1.3. Statement of the problem
1.4. Objective of the study
1.4.1. General objective of the study
1.4.2. Specific objective of the study
1.5. Significance of the study
1.6. Delimitation and limitation of the study
1.6.1. Delimitation of the study
1.6.2. Limitation of the study
1.7. Organization of the study
CHAPTER TWO
2. Literature review
2.1. Theory of budget
2.2. The concept of budget
2.3. Function of budget
2.4. Budget structure
2.5. Budget administration
2.6. Budget committee
2.7. Budget director
2.8. Budget manual
2.9. Purpose of budget
2.10. Advantage and disadvantage of budget
2.11. Budget and budgeting preparation
2.12. Approach to budgeting
2.13. Basic element budgeting
2.14. Budgeting and forecasting
2.15. Essential of budgeting
2.16. Budget cycle
2.17. Types of budget
2.18. Budget deficit
2.19. Budget utilization
CHAPTER THREE
3. Research methodology
3.1. Research design
3.2. Sources of data
3.2.1. Primary sours of data
3.2.2. Secondary sources of data
3.3. Method of data collection
3.4. Sampling technique and sample size
3.5. Method of data analysis and
interpretation
CHAPTER FOUR
4. Data analysis and interpretation
CHAPTER FIVE
5. Summary, conclusion and recommendation
5.1. Summary
5.2. Conclusion
5.3. Recommendation
Reference
Appendix
 List of Table

Item Page
Table 4.1.1.personal information about sex………………………………………….....
Table 4.1.2.Age distribution ………………………………………………………….
Table 4.1.3.Educational status of respondent …………………………………………..
Table 4.2Existence of budget manual in the organization
Table 4.3Budget committee and budget director in the organization
Table 4.4Budget administrator in the organization
Table 4.5Budget distribution in the organization
Table 4.6Procedure of budget distribution
Table 4.7Factor that affect budget distribution
Table 4.8Activity of budget utilized in the right way
Table 4.9Farness of budget distribution
Table 4.10The difference between the distributed and utilized budget
Table 4.11The responsible body during budget distribution
Table 4.12Types of badger in the organization
 CHAPTER ONE

1. INTRODUCTION
1.1. Background Of The Study

The word budget is derived from the old French word bad get, that means small bag or punch
that held the medieval cost exchange. Budget is a financial plan of any budget for a given
accounting period. Budget is a comprehensive and coordinate plan expressed in a financial term
for the operation and resource of an enterprise for the same specific period I the future.
(Im,Pandy, 1983).

Budget reflect what the government intended to do government budget like personal and
business budget involve total revenue and total expenditure, tax provide most government
income of important area of spending government budget includes health, education, national
defense, social security and transportation. (World book encyclopedia 2001).

Budget is a detailed plan expressed in quantitative plan of action. The budgeting process forces
the individual who constitute on organization to plan ahead. The development of quarterly
budget a certain hotel, for example force the total manger, the reservation manger the food and
belle rage mangers to plan for stating and supply needed to meet anticipated demand for the hotel
service. /Hilton et. Al 1981) budgeting is the most wildly used accounting tool for planning and
contriving organization advantage of budget are major feature of most management control
system which administers wisely budget complete planning including the implementation plan
provide performance criteria and promote coordination and communication with the
organization. However budget must e care funny and intelligently administered by management.
(Hilten et. Al 1987).

Budget is the main activity of government unit each and every activity depend on budget
program. The budgeting practice in Ethiopia has introduced 1931 by the proclamation number
55/1931). But it was acted in 1958. In Ethiopia the government spent the budgeted fund for

1
different sector such as health, education to satisfy the need of society. (Im,Pandey, 1983).

In this study the researcher will assess the effectiveness of budget distribution and its utilization
of Dessie Repheral hospital.

1.2. Background Of The Study Area

Dessie Repheral hospital is one of the Ethiopian hospitals especially in Amhara

region. This hospital is a government organization which’s located in Southe Wollo zone
administrative town known as Hotie the site of Dessie town with aim of rendering services. It
was established in 1923 EC but, it started to give services after seven years (1930 EC).

The contractor of Dessie hospital was Meriewe contractors whose name Berniro According to
the provisional employees, during the starting tie there were only 13 employees, but know there
are more than 288 employees (Workers). Now a days Dessie Repheral hospital is given
services to different woredas.

1.3. Statement Of The Problem

It is already known that budget distribution and utilization as the most commonly used in the
government and nongovernmental organization, but this study will focus on governmental
organization. In much activity there are so many problems, in Dessie Repheral hospital would
faced the following problems, such as in appropriate use of budget, shortage of government fund,
in appropriate budget allocation during thebudget time. Employee not participate in the specific
jobs and not reported effectively, the organization does not adopt good budget system, the
organization manger lack of communication with each employee from this there is no any
researcher have been done about this research in Dessie Repheral hospital,here the researcher
will be highly interested and motivated to conduct the research on analysis of effectiveness of
budget distribution and its utilization in Dessie Repheral hospital. (Dessie hospital manual,
2003-2005) 2

1.4. Objective Of The Study

 1.4.1. General Objective Of The Study

The general objective of this study will the analysis of effectiveness or budget distribution and its
utilization in Dessie Repheral hospital.

1.4.2. Specific Objective Of The Study

Beyond the above general objective the specific objectives are

1. To identify the factor that affect budget distribution and its utilization in the organization
2. To check whether budget surplus or budget deficit at the end of accounting period from
2003 – 2005.
3. To identify the budget distribution and its utilization from starting budget period to
completing budget period in the fiancédepartment.
4. To identify the procedures of budget distribution in the organization
5. To make possible suggestions and recommendations.

Research Question

1. What are the main factors that affect budget distribution and its utilization in this
organization?
2. Is their budget surplus or budget deficit in the organization from 2003 to 2005 EC?
3. How budget the budget distribution and its utilization look like from within the budget
periods in this organization?
4. What are the procedures or budget distribution in the organization?

1.5. Significance Of The Study

This study will be important to the organization and the researcher in the organization it may
helps to know the existing problem, it will serves as starting point for other researcher. It will
give insight understanding the budget distribution for the manger, it will helps to manage and use
budget in effective and efficient manner, itmay to minimize unwise use of time by creation
awareness of proper budget distribution and its utilization of budget.

1.6. Delimitation And Limitation Of The Study

1.6.1. Delimitation Of The Study

This study will be delimited to the analysis of effectiveness of budget distribution and its
utilization on Dessie Repheral hospital from 2005to 2007.

1.6.2. Limitation Of The Study

During this study the researcher will face the following difficulty. From this difficulty shortage
of material, shortage of written document of the background of thestudy, environmental
constraint like temperature, distance from the office from the researcher residence shortage of
computer access to write the final draft and shortage of reference book in the library.

1.7. Organization Of The Study

The organization of the study contains five chapters. The first chapter was containing the
introduction part, the second chapter comprises literature review part, the third chapter contains
research methodology, the fourth chapter contains data analysis and interpretation part, and lastly
the fifth chapter contains conclusion,summary and recommendation.

CHAPTER TWO
 2. LITERATURE REVIEW
2.1. The Concept Of Budget

The government budget represents a plan or forecast by government of its expenditure and
revenue for specific period. Commonly government budget is prepared for a year known as fiscal
year. In Ethiopia fiscal year is from July 7 of this year to July 6 of the coming year. (Humle 1 –
sene 30 in Ethiopia). Budget involves different tasks one expenditure and revenue side of the
government fiancé. On the side of expenditure deal with the determination of total size of budget
i.e., (total amount of many for the year) size outlay on different function and the magnitude of
out lays of various activity. On the revenue side it involves the determination of the size of
overall revenue and foreign aid. Furthermore budget also address the issue of budget deficit (i.e.
the excess outlay over domestic revenue) and its financing. Budget is not slowly a nature of
finance in narrow sense. Further it is an important part of government general economic policy
and also budget is not slowly a description of fiscal policy and financial plan, the economy of its
main objective are to advice tangible directives and implement the long term, medium term and
annual administrative and development program.

2.2. Theory Of Budget

Budget is a time bonded financial program which systematically worked out and ready for
extinction and the insuring fiscal year. It is comprehensive plan of action statement of all
financial requirements of the government.

Budget goes into operation only approved by the parlament. Budget is comprehensive and
coordinate plan expressed in financial time for the operation and resource of all enterprise for
some specific period in the future (Im, Pandy 1983).

Budget is a quantitative expression approved plan of action by management for future time
period and is an added to the coordination and implementation of plan. A budget can cover
financial and non – financial aspect and act as a blue print for the organization to follow in the
upcoming period. (Charless. T. Heren).

Budget is a common accounting tool company is use for implementing strategy management use
budget to communicate, direction and goal through a company. Budget tern mangers
perspectives forward and aid in planning and controlling the action must undertake to satisfy
their customer and successes in the market place. Budget provides measure of the financial result
the company expect its planned activity. (Im. Pandy 1983).

Government budget like personal and business budget involves total revenue and total
expenditure tax provides most government income important are spending government budget
including healthy education national defense and transportation. (World book encyclopedia).

Budget refers to a detail plan of a question of financial and other resource over a specified time
period.

2.3. Function Of Budget

Budget have the following main functions those are proper allocation of resource, tolerate major
decisions to the state of national economically long term economic growth which means to
ensure efficiency and effectiveness in the implementation of the government programs, to
facilitate legislative control over the various phases of budget process, equitable distribution of
income and wealthy and securing economic stable and full employment to the countries
development. (Im. Pandey 1985).

2.4. Budget Structure

Budget structures are the format that organized budgeted data budget data could be classified in
to different way end for different purpose. In early days for instance budget classification
focused on providing better understanding of intention and purpose of government for which
fund were planed and to be spent. Later in the budget structures are started to be influenced
largely by the issue of accountability. That is in addition to provide information for what the
government proposed to do the budget stricture indicate the full responsibility spending agency.
(Im. Pandy 1983).

2.5. Budget Administration

It need become impassive again the budget preparation is line function while the organization
and administration of budgeting is staff function. The line executive has responsibility of
deciding what the plans are to be. It isnot the function of staff organization to decide what the
plan are to be the areas of responsibility other than its all. The primary responsibility of staff
organization is to assess line executive in preparing budget by providing data technical advice
and coordination of the budget from various department to form master budget.(Im,Pondy1983).

2.6. Budget Committee

A joint effort of all manger need to prepare budget all should participate in setting goals,
developing plans and formulating policy, generally the administration of budgeting may be
delegated to a budget committee. The member of budget committee consists of executive from
each department frequently member from production, seal and finance are included on the
budget committee. The budget director is over all in charging the budget committee (Im,Pandy
1983).

2.7. Budget Director

The overall responsibility of budget committee lies on the budget director or the budget officer.
He/she is responsible for drawing a detail time table for the preparation of budget and makes
necessary adjustment and calculates to consolidate individual budget to master budget (Im,Pandy
1983).

2.8. Budget Manual

It is usually describe to express objective goals procedures organizational structure and authority
and responsibility in writing this mater are explicitly set out in budget manual. The budget
manual is written set of instruction and information that serve as arule book and reference for the
implementation of budget program, it tales what to do, who to do it, when do it, which from to
do it on. (IM pandy 1983).

Statement of Expectation

A budget is a means of expressing goals to achieve in short run in formal terms. It establishes a
harmony between short rungoals and long ran objectives of the firm. The targets of expected
performance are laid down when budget is prepared. These targets are directional and
motivational in nature. (IM, Pandy 1983).

Communication

A more clear statement of goals and the means to achieve those does not implies that goal will be
accomplished. The people of an enterprise should know what the goals are; they should
understand and support them. (IM,Pandy 1983).

Planning

Planning is essential to accomplish goals and to reduce uncertainty and provide to the employees
by determining the course of action in advance. It is a formalized plan management intended
action and there result, budgeting and planning in other hand involves the determination of what
should be done, how the goal may be reached and what individual or in it are to be assume
responsibility and be hold accountability. Budget provides an orderly way to proceed to attain
goals and also provide a time schedule for tutu reaction to produce a measurable result (IM,
Pandy 1983).

Coordination

Coordination is a major function of budget coordination implies striking a proper balance

between labor martial and resource to that the goal are attained at a minimum cost the activity of
various department must remain in a harmony with other budget department. (IM,Pandy 1983).

Controlling

One compressive and coordinated plan of action has been developed with the cooperation and
participation of employees and has been communicated to them, each employee is required to
implement the plan and accomplish goal of enterprise. Budget may, therefore, be used to serve as
an index for measuring employee performance. The actual performance of employee compare
with the budget performance to provide feedback ((IM,Pandy 1983).
 2.9. Advantage And Disadvantage Of Budgeting Advantage Of
Budgeting

Budgeting is a management to at it is, away of managing many benefit are derived from
budgeting, also it is a means of not an aneed itself the following are advantage of budgeting
those are forecast planning, coordination operation, performance evaluation and control,
effective communication, optimal utilization of resource, productivity improvement and
management by exceptions and efficiencies are the main advantages of budgeting. (IM,Pandy
1983).

Disadvantage of Budgeting

Budget is a systematic approach to some the problems, but it is not full proof it suffer from a
certain problems and limitations.

The major problem in developing budget system are seeking the support and involvement of all
level of management, developing a meaning full forecast plans, establishing realistic objectives
policies procedures and standard performance and applying budgeting system in a flexible
manner. (IM,Pandy 1983).

2.10. Budget And Budgeting Preparation

Budget and budgeting process are used to identify the most efficient allocationcorporation’s
resources and to provide planning and controlling mechanisms over fund flows corporate
mangers use several types of budget in planning and executing the firms operation. Financial
mangers combine those budgets in order to estimate the corporation fund flows, profitability and
financial conduction over given planning period. A cash budget is forecast or a firms cash
inflows and out flows over a designated planning period.

The cash budget helps indentify periods of cash surplus. As well as periods during which
additional financial will be needed. Thus a cash budget helps the financial manager to measure
the amount and duration of cash shortages and to prepare repayment schedules if cash shortages
are to be financed with borrow fund. The organization follows up the procedures to prepare the
budge like, budget study, budget preparation, budget appraisal, approval summary, and the
allocation budget based on the plan of organization (IM,Pandy 1983).
 2.11. Approaches To Budgeting

Depending on their intended usage, they can be prepared under of several approaches. The major
ones are:

A. Object of expenditures ( line –item) approach

B. Performance approach
C. Program and planning – programming budgeting (PPB)
D. Zero base budgeting (ZBB)

Approaches differ based on the type of information presented and the way expenditures are
aggregated.

A. Object Of Expenditure Approach

The line item, also called traditional, approach is the most popular to budgeting, under this
approach, the budget shows every budget category of expenditures to be made as line item
during the year.

B. Performance Approach

Under performance approach, budget emphasizes the output and efficiency. Output is measured
interms of goods or services produced, thenumber of cases handled, the number of person’s
impacted etc. efficiency is measured interims of cost per unit of output, the main focus is on the
evaluation of the performance. The information presented in a performance budget centers on
activities and tasks, rather than on organizational sub units and objectives of expenditures.

C. Program And Planning – Programming Budgeting (PPB) Approach

The program approach to budgeting is aplanning oriented once which emphasis program,
activities and functions rather than evaluation and control. The program may take several forms.

The known form of the program approach is the planning – programming – budgeting system
(PPBS) under this approach information is presented in the form of budgetary requests and
reports on broad programs, rather than the forms of detailed listing of activities and line items.
The program approach requites the organization to identify the fundamental objectives. Then all
activities are related to these objectives. The future implication and cost of each activity must be
identified. Finally, and analysis of the various alternatives must be performed these alternatives
then became the programs that make up the budget.

D. Zero – Based – Budgeting (ZBB)

The zero budgeting approach is one that forces managers to assess the value of each activity and
to justify continuation of each activity under their supervision. Every activity is justified each
year. The manger start from scratch or zero, hence, the name “Zero – based – budgeting” zero
budgeting is a combination of though and action processer. A service of budget unit is developed
after the review of top to down. Each unit consists of a description of: - the project or activity the
exacted level of achievement, the advantage of retaining the activity, the consequence of the
terminating activity, and the monitory estimates of alternatives ways of performing a given
activity. An important aspects of zero based budgeting is the consideration given to each level of
“accomplishment” that is likely to result from an activity.

2.12. Basic Elements of Budgeting

It’s a comprehensive and coordinating plan;it’s expressed in financial terms. It’s a plan for the
firms operation and resource; it’s a future plan for specified period.

Integral Plan

A budget is the plan of firm’s expectations in the future, planning involves the control and
manipulation of relevant variables – controllable and non controllable and reduces the impact of
uncertainty it maxes management active to influence the environment in the interest of the
enterprise. A budget expresses the plan informal terms and helps to realize the firms’
expectations. It’s a comprehensive plan in the sense that all activities and operations are
considered when it’s a budget of the enterprise as a whale.

Financial Qualification
For operational purposes, a budget is always quantified in a financial terms. Initially the budget
may be developed interims of varieties of quantities, but finally they must be expressed in the
money unit (rupees, dollars or pounds, etc).

Operation and Resource

A budget is a mechanism to plan for the firms all operations or activities the two aspects of every
operation are; revenues and expenses. The budget must plan for aquantifying should not only be
done for revenues and expenses, but the resource to carry out operations should also be planned
the planning of resources will include planning for assets and sources of funds.

Time Element

Time dimension must be added to a budget a budget is meaning full only when it is related to
specified period of time, the budget estimates will be relevant only for some specific period. A
typical budget spans over a period of one year, which may be sub – divided in to quarterly or
sometimesmanly budget.

2.13. Budgeting And Forecasting

A budget is not the same thing as a fore cast. Aforecasting is the likely hood of events
happening, given the past and expected changes there is no assumption regarding the
commitment of management for realizing the fore cast. A budget is an expression of the
management intension of achieving for casts through positive and conscious actions and
influencing theevents.

It contrasts of to a budget; a forecast has the following features

 It does not involve any commitment on the part of forecaster to attain the forecasts

It’s based on historical information, and is revised when ever new data becomes available

It needs no necessarily be expressed in the financial terms

It does not always confirm to one year period of time

It does not involve negotiations, approval and review

 2.14. Essential Of Budgeting

A successful and sound budgeting system is based up on a certain pre requests. This pre requests
represent management attitude, organization structure and managerial approaches necessary for
the effective and efficient application of the budgeting system.

The following are some of the important essentials or fundamentals of successful. Budgeting:-
top management, clear and realistic goal, assessment of authority and responsibility, creation of
responsibility centre, adaptation of the accounting system (responsibility accounting), full
participation, effective communication, budget education, flexibility.

2.15. Budget Cycle

A well manage organization usually have the following budgeting cycle, planning the
performance of the organizations as well as its same unit, providing a frame of reference, a set of
specific expectation against which actually results can be compared.

If investing variations from plans were necessarily corrective action follows investigation,
planningagain considering feedback, and changed conditions.

2.16. Types Of Budgeting

There are so many types of budgets but based on organization activity the following types of
budget.

A. Recommended budget Vs approve budget

B. Operation budget Vs financial budget
C. Capital budget Vs recurrent budget

A.Recommended Budget Vs Approved Budget

Recommended budget it is prepared and approved by executive public bodies. This will intern
will be presentedparliament for revenue and final approver.

Approved budget it is are commended budget that has been revised reviewed and approved by
parliament. ((IM,Pandy 1983).

A. Operating Budget And Financing Budget

Operating budget it is relate to panning of activity or operation the enterprise.

Financial budge it is concerned with financial implementation of the operating budget.

(IM,Pandy 1983).

B. Capital Budget Vs Recurrent Budget

It refers to budget for expenditures on long term facilities. There are so many kinds and verities
of capital budgets are impossible. This much is universally true: a capital budget as used by
government is not primarily mechanisms for recording and measuring changes in assets a capital
budget does not account for an economics might liked to measure as additions social capital or
what a business man measures to net worth. The capital budget consists economic developments,
social developments and general developments. The capital budget is usually financed by
external borrowings and grants.

2.17. Budget Deficit

Budget is considered as surplus or deficit according to the position of revenues accounts of the
government. Thus surplus budget is one in which revenue receipts exceed expenditure charged to
revenue account regardless of the gap in capital accounts, while a deficit budget is one in which
expenditure is greater than current revenue receipts. Budget deficit is the excess of the total
expenditure over total revenue of the government. The deficit financing donates the direct
addition to gross national expenditure through budget deficits whether the deficits are on revenue
or capital accounts. It implies that the expenditure of the government ever and above the greater
receipts of revenue account and capital account is treated as a budget deficit of the government
(IM,Pandy 1983).
 2.18. Budget Utilization

The primary goals resources are to ensure that your company’s properly utilized. Utilization
according to units 0 project management glossily is the extent to which some thing is turned to
practical use of accountant to really evaluate why any utilization was low that the organization
takes measurement if there is abudget deficit and they transfer fund from unit with excess budget
to units with budget deficit and the organization this to minimize the shortage of fund. Therefore
the organization has to improve tax collection system, wisely use of budget economically,
appropriate allocation of budget with the target plan, active participation of all employee in their
specific job, active report of budget utilization and the utilization of their fund depend on
recurred revenue and expenditure in the general ledger account and subsidiary ledger account
respectively (Charles. T Horenren 2000).

2.19.Empirical literature review

Today there is a wide body of research that examiner efficiency in budget allocation and the
issues is ultimately empirical one.Some evidence show that << what ironic about educational
expenditure in Ethiopia is that relatively small amount of budget is allocated and the
allocated budget amount is not properly utilized in spite of the Ethiopia government claim it has
accorded high priority to the educational the amount of budget that allocate to educational the
amount of budget that allocate to education as a percentage of total expenditure is still far lower
than the average for all low income countries. In terms of share of budget allocation out of the
national income the Ethiopia scenario is still lower than the average for sub Saharan Africa (EEA
second annual report of Ethiopia economy 2000 /2005)

Education share SSA Kenya Ethiopia

Y.GNP 5.4 6.6 4

1993-96 total 16.7 13.7

expenditure
 1997x.GNP 6.5 4

(source UNDP 1999( for the fig, 1993-96) world Bank 2000 (for fig 1999)

Researchers will be studied the average allocation of resources we can categorized the
regions in to three as those with relatively high allocation, those with relatively low
allocation and those that is in between .Amahara, Oromia and SSNR for under
grouped in high allocation which afar ,Somals ,B/gumeze , Gambela and A.A for
tinder the low allocation. The rest have medium relativeallocation. ( EEA)

2.2.1 Trends in the distribution of education expenditure

In consistent weight on level of education across region as it has been expressed in

different forms the government has rendered priority to primary level education. In fact
one of the target of EIDP is that about 60% of the total education expenditure shoud be
geared towards primarily education. The total regional average is well above the target
shared. However there is a gap among the regions on the focuses they give the primarily
education in terms of budget allocation. For instant which SNNP region allocated 79.2% of
its total education budget to primarily education. Tigray on the country allocated only
8.9%in 1990EC(the second annual report on the Ethiopian economy, 2000/2001).

2.2.2.High Differential in Utilization Between Recurrent and Capital

Budget

If we go farther and look at which component of the budget accounts for the difference in
utilization rates, it is easy to notes that the recurrent component utilization on average is
roughly similar across regions. The highet and the lowest performance were 122%
(Gambella) and 81%(Afar) respectively. This consistent performance rate would not be
asuprize given the nature of the component. In addition the recurrent b udget does not
have aforeigh resorses component and would be less exposed to disbursement related
problem than the capital component on the other hand the capital component of
expenditure contrasingly reveals that the highest and the lowest utilization rates for the
same period were percent,(Oromia) and 27%(Addis Ababa) respectively while Tigray
Amhara,SNNP and Oromia could be listed as the better performing region(Brihanu Nega
and Getahun Tesfaye)

CHAPTER THREE

3. RESEARCH METHODOLOGY
3.1. RESEARCH DESIGN

The study will conduct on the effectiveness of budget distribution and its utilization a Dessie
repheral hospital. For this purpose the researcher will use descriptive survey study.

3.2. Source Of Data

3.2.1. Primary Source Of Data

The primary data will be conducted from management body and employee of the organization.

3.2.2. Secondary Source Of Data

The secondary data will collected from mainly written document in the organization like
published and unpublished and internet access.

3.3. Method Of Data Collection

For collected the appropriate data the suitable technique through distributed both one and closed
ended questions to the selected respondents and will be conducted unstructured interview to the
manager. Furthermore, the data will collect through reviewing recent literature from different
books and internet.

3.4. Sampling Technique And Sample Size

The total population under this study twenty employees under budget related department in the
organization. Regarding sample size determination the total number of are very small due to this
the researcher would use census technique to get reliable and account information the reason that
the researcher used census technique because census is appropriate method to obtain information
and n sampling error.

3.5. Method Of Data Analysis And Interpretation

After the data will be collected in the form of qualitative and quantitative ways,the qualitative
data will be collected through interview and analyzed in the form of statement and discussion the
quantitative data will be collected in the form of distributing question. The analyzed data will be
interpreted by using table and percentage.
 CHAPTER FOUR

4. DATA ANALYSIS AND INTERPRETATION

This chapter deals with the analysis and interpretation of data collected from the organization (
Dessie Repheral hospital) it also examined the response to questionnaire interview
information obtained from secondary source of data in order to identify and recommend the
analysis of budget distribution and its utilization on the enhancement of the organization
objective and goal.

4.1. Background Of The Respondents

4.1.1. Sex

Table 4.1.1; Sex Distribution of Respondents

No Sex No of respondents Percentage (%)

1 Male 15 15
2 Female 5 25
Total 20 100
Source: questionnaires 2015

As the above table (4.1.1.), clearlyshown that the greater number of respondent which account
(75%) were male where as the remaining (25%) of the respondent are females.

4.1.2. Age
Table.4.1.2. Age Distribution of Respondents

No Age/year No of respondents Percentage (%)

1 Below 20 3 15
2 20 – 40 13 65
3 40 – 50 3 15
4 Above 50 1 5
Total 20 100
Source: questionnaires 2015

As the above table clearly stipulates the majority respondents were aged bellow 40 years which
accounts 65% of respondents and the remaining (35%) of the respondent above the age of 40
years.

4.1.3. Educational Status

Table 4.1.3; Educational Status of the Respondents

No Educational No of respondents Percentage (%)

status
1 Certificate - -
2 Diploma 7 35
3 Degree 13 65
4 Master - -
Total 20 100
Source: questionnaires 2015

As the above table (4.1.3) shows the majority of respondent which account (65%) were degree
holders where as the remaining respondent were considered (35%) of the respondent was
Diploma.

Budget Manual
The budget manual is awritten set of instructions and pertinent information that serves s a rule
book and a reference for the implementation of a budget program it tells what to do how to do
for, when to do it and which form to do it on.

Table 4.2;budget manual in the organization

Item Response No Percentage

Is there budge manual in Yes 14 70
the organization? No 6 30
Total 20 100
Source: questionnaires 2015

As shown in the above table (4.2), 14 of the respondent (70%) replied that there is abudget
manual in the organization and the remaining respondent (30%) replied there is no budget
manual in the organization, above table there is a procedure of budget manual in the
organization, and thus procedure of budget manual follows in the following way or steps.

 Every department head as different procurement realization quarterly of a year.

 To give the answer of the demand of the procurement in the entire department.
 To transfer all transaction to zone finance and economic development sectors.

This implies that the budget manual helps to know what to do it, how to do it, when to do it and
which form to use it on.

Types of Budget in Debre tabor Hospital

Different governmental organizations have implemented their types of budget to achieve their
objective, so Debretabor hospital also uses its own types of budget to achieve their objectives
these are capital and recurrent budget the capital budget is used is for different activities that
need high capital to accomplish their objective like to day plant assess such building construction
of roads, to buy car.

The recurrent budget administered by ministry of finance and economic development. It’s used
for daily activity of contract payment for workers to treat the patient and for other activates but
this organization (Debretabor hospital). Mostly uses the recurrent types of budget. As per the
respondents response their organization started the budget distribution in April 30 and completed
in June 30.

Budget Committee and Director

The budget committee in fact, is a management committee. It brings to gather activities of all
departments in a coordinated way and controls those activities in an effective mannerbudget
director draw up detail time table for the preparation of budgets and making necessary
adjustment and calculations to consolidate individual budgets in to a master budget.

Table 4.3; budget committee and budget director

Item questions Response No Percentage (%)

Is there the budget committee Yes 11 55
and budget director in the No 9 45
organization?
Total 20 100
Source: questionnaires 2015

As shown the above table (4.3), majority (55%) of the respondent replied that there are a budget
committee and budget director in the organization who draft the annual budget and fore cast
future budget demand in the organization. the remaining (45%) of the respondent replied that
there is no budget committee and budget director in the organization who allocate how to used
the budget properly.

As per the response of the interview, the respondents replied that the following are the main
function of budget committee and budget director in the organization, the so called /Debre tabor
general hospital) those the drafting the annual budget of the organizational, forecasting future
budget demand in the organization to decided the annual budget, to classify the approved budget,
to distributed budget for different by the name of different budget code allocate the budget to be
utilize properly during the year, and to administer (control) the approved budget.
Budget Administration in the Organization

It need be emphasized again the budget preparation is a line function, while the organization and
administration of budgeting is a staff function.

Table 4.4 budget administration

Item question Sex No of respondents Percentage (%)

Is this budget Yes 20 100
administration the No - -
organization?
Total 20 100
Source: questionnaires 2015

As shown in the above table (4.4), (100%) of the respondents replied that there is a budget
administrator in the organization who controls budget distribution and its unitization for desired
activities they also replied that budget administrator who has the following responsibilities
(duties) in the organization. These are to distribute the budget to different department,
controlling the budget in order to utilization appropriate place and time. If there is excessive
budget in one code it will be transfer to the deficit areas (the reverse is true), classify thebudget
and control every budget in its code, helps the organization not to out from is desired budget,
monitoring and controlling he budget based on the budget. Manual approved at the beginning o
the year, check whether the budget is implemented as for gated purchase or not and control all
activity of the organization is the distribute budget.

Budget Distribution

A budget distribution is a way of allocating the budget in to different departments in the

organization by identifying the most efficient allocation of resource and provides controlling
mechanism over the fund flow.

Table 4.5 budget distribution in the organization

Item question Response No of respondents Percentage (%)

Is the organization using Yes 15 75
 effectively the distribute No 5 25
budget?
Total 20 100
Source: questionnaires 2015

As clearly shown in the above tables (4.5), majority (75%) of the respondents replied that
theorganization utilize effectively the distribute budget. it transfers the budget properly in to uses
and the remaining (25%) of the respondents replied the organization does not effectively utilize
the distribute budget. The organization effectively use the distributed budgets by assessing the
overall activity of the utilize area, departmental assessingof the budget, orientation full effective
budget utilization, identify the locus cost supply plan purchase and empower the hospital
department in utilizing budget allocated to them.

Budget Procedure

Budget procedure is the mechanism of distributing or allocating the budget based on the
following procedures. Like budget study, budge question distribution, budget preparation and
budget approval and summary based on the plan of organization.

Table 4.6 budget procedure in the organization

Item question Response No of Percentage

respondents (%)
Is there any procedure during Yes 12 60
budget distribution in the No 8 40
organization?
Total 20 100
Source: questionnaires 2015

As clearly shown in the above table (4.6), (60%) of the respondent replied that there are a
procedure to be followed during the budget distribution and the remaining (40%) of the
respondents replied the organization does not procedure during budget distribution. response in
the following are the procedure:- those are distribute the budget question to each sub unity of the
organization, collect budget unity of each unit, organize and assess the overall needs and make
abudget decision and finally allocate thebudget based on the plan of the organization.

Factor affecting budget distribution and its utilization factors that affect or hinds for the
distribution of budget is not effectively distribute and utilized in the organization.

Table 4.7 factor of budget distribution in the organization

Item question Sex No of Percentage (%)

respondents
Is there any factor that affect Yes 20 100
the budget distribution and No - -
utilization in the organization
Total 20 100
Source: questionnaires 2015

As clearly in the above table (4.7) all (100%) of the respondents replied that there are factors that
affect the distribution of budget in the organization. S per the respondents responded the factors
are the shortage of government budget, duty in proper plan, fluctuation inmarket, the amount of
budgeting that is approved by the government body, the superior administer, the last year budget
use, fluctuation number of consumer with their needs, employee hire and fire off in appropriate
budget allocation during the budget time and the expected account receivable does not collected
from the expected period.

Table 4.9 fairness of budget distribution in the organization

Item question Sex No of Percentage (%)

respondents
Is the budget distribution in Yes 17 85
the organization is fair? No 3 15
Total 20 100
Source: questionnaires 2015

As clearly show in the above table (4.9), majority (85% of the respondent replied that the budget
distribution in the organization is not fair. The remaining (15%) of the respondents replied that
the budget distribution in the organization is fair. As per the responses the reason of where
budget distribution unfair is, due to lack of management system, lack of coordination during
budget distribution, makes corruption, fault and bias during the distribution of budget. This
implies that the organization fair with difficulties in performing itactivates in proper time and
place.

Responsible body for budget distribution

The responsible body for evaluating and analyzing the budgeted based on the organization plan.

Table 4.10 responsible body of budget distribution

Item question Sex No of Percentage (%)

respondent
s
Who are the good Accounting department 11 55
responsible body’s Budget department 8 40
during the budget Top management 1 5
distribution? Management - -
department
Total 20 100
Source: questionnaires 2015 As shown in the above table (4.10), the
majority (55%) of the respondents replied that the budget distribution is fully a responsibility of
accounting department to evaluate and analyze the budget amount in achieving the organization
objective, and the remaining (40%) of the respondent replies that the budget department, (5%) of
the respondents replied that top management. This implies that most activities done in the
accounting department rather than the budget departments. In addition to this accounting
department and budget department are top management during budget distribution because all
departments have this knowledge to share information during budget distribution. Therefore, its
mandatory to participate and should the other departments like top management and budget
departments as successful of the budget distribution.

Budget utilization in the right activity means the activity for budget utilization and aright quality,
right quality at a right time and right place in the organization.

Table 4.8 Budget Utilization in the Organization

Item question Sex No of Percentage (%)

respondents
Is the budget utilized to the Yes 17 85
intended or right activity? No 3 15
Total 20 100
Source: questionnaires 2015

As shown in the above table (4.8), majority of (85%) of the respondents replied that the intended
budget was utilized in the right way. The customers of employees use correctly and properly the
amount of budget on the given time period.

The remaining (15%) of respondents replied that the distribute budgets not utilize or the intended
activity.

Fairness of budget distribution the organization the fairness of budget distribution means that the
distribution budget is equally allocate in to different department based on the required budget.
 Budget Surplus or Difficult

When revenue greater than expenditure, surplus is occur. When revenue is less than expenditure,
deficit is occurred or when distributed budget greater than utilized budget the budget surplus is
occurred and when the utilized budget is less than the distributed budget deficient is occurred.

Table 4.11; budget surplus and deficit

Year Request Approved Distributed Utilize Surplus or

budget budget budget budget deficit
2003 439511189 3414835.76 7810047.65 7867265.40 (57217.75)
2004 5443408 3876430 10519838 10579838 (60,000)
2005 6257402.1 4862484.88 11119887 11253846 (133959)
2
Source: annual report of the organization

Note:- surplus /deficit = revenue – expenditure

According to the above schedule 4.11 by comparing the required approved, distributed and
utilized budget in the organization was filling the budgetdeficit starting from 2003 – 2005 this
indicates the distribute budget is less than the utilized budget and also the response from
interview the case of budget deficit are: lack of utilization of budget based on plan. These refers
to the organization is not used appropriately as per approved budget a salary of employee in
charged or increased in the future. The amount of budget that are approved by the governing
body and the lost year budget use not correlated each other this may be lack of information
which leads to budget deficit and unexpected forecasting future demand in the organization is
leading to excuses of expenditure over revenue is the case of budget deficit. So the organization
can require additional budget from government and transfer any surplus budget from the
previous year and borrow from other institutions to run the organization.
 CHAPTER FIVE

5. Summery, conclusion and recommendation

5.1. Summery

The study is undertaken by the researcher under the topic of “effectiveness of budget distribution
and its utilization having a case study of Dessie Repheral hospital. The main objective of the
researcher is to understand the way or system of budget distribution, to reinvestigate the
problems in relation to budget distribution and to come up with constructive suggestions for the
identified problems on the case of Dessie Repheral hospital.

The study contains both general and specific objectives, the scope was focused only in Dessie
Repheral hospital and the source of data used both primary and secondary data and collected by
using questionnaire. The sampling techniques was census, the data was analyzed both
quantitative and qualitative and interpreted by using percentage and table. The need for budget is
to plan of forecast the organizations future activity and the approach of governmental budget are
objective expenditures (line item) approaches, performance approach program and planning
programming budgeting and zerobudge budgeting. Budget can be classified as recommended
budget Vs the approved budget operating budget Vs financial budget and capital widget Vs
recurrent budget and the organization used both capital and recurrent budget.

5.2. Conclusion

The conclusion was based on the result and analyzed data. The properly distributed budget
provides a government end non government organization with several or various benefits. The
findings indicate how the important analysis of effective budget distribution and its utilization in
the creation of awareness of budget distribution in the organization the so called Dessie Repheral
hospital. The main function of budget committee and budget director in the organization is
drafting the annual budget of the organization and for costing future budget demand of the
organization.

The main duty of the budget director is help the organization not to go out formats decided
budget, monitoring and controlling based on the budget manual approved at the begging of the
year, and checking whether the budget is implemented as targeted purpose or not. The
organization uses the distributed budget effectively with their procedure so as to achieve its
objective there are serious problems that hinder the budget distribution Dessie Repheral hospital
like shortage of government budget, the amount of budget that are identified by the government
body, superior administrator hire and fair off past year budget used and market fluctuation and
customer need.

5.3. Recommendation

Based on the report of the study and the conclusion made the following recommendation was
given to salivate (solve) the existing problems with related to budget distribution and its
utilization.

1. The budget committee and budget director must define their power segregation and if
should be known the final authority during the decision making.
2. Even though the budget administrator should control the deficit and surplus of budget
because the obligations are under his/her many but the organization does not change the
 deficit so in addition to this give advice to the budget director and the budget committee
to change these conditions for the future time.
3. Even if the budget is distributed effectively, it must be continued year after year in order
to stable this good and well done task.
4. The budget process and procedure must be defined directly by avoiding any influence
that can task to do.
5. All the existed problems must be avoided to example the budget shortage should be
solved by using a well trained and skilled men power those have the knowledge of
balancing.
6. Since the budget is unfair as the respondent said they should be give attention to this
issue by discussing the problem that make un fair and transparency, integrity and
cooperation is the easiest way that can be solved that crisis.
7. The organization must use effectively and efficiently the recurrent and capita budget.
8. To decrease the gap between the proposed budget and approved budget for the
organization. Their budget employee can search the market to the given organization.
9. Until now the organization cannot change the condition of budget deficit, therefore in
advance change the budget deficit by increasing the distributed budget time to time.
10. Finally I hope the hospital should treat the above mentioned problem findings conclusion
and recommendation in the overall budget system.
 REFERENCES

 Charles T Horengren, (1997), Cost Accounting, Managerial Emphasis 10th Edition

 Charles T Horengren, (2000), Cost Accounting, Managerial Emphasis 13th Edition
 IM. Pandy, (1983), Management Accounting 3rd Revised Edition
 IM. Pandy, (2005), financial management 9th edition
 World book encyclopedia
 APPENDIX

DEB RETABOR UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

QUESTIONNAIRES

Dear respondent thank you in advance for your time scarification of participation and this
survey. This questionnaire is designed to analyze the effectiveness of budget distribution and its
utilization in Debretabor hospital with an ultimate goal of drawing conclusion and
recommendation. The researcher will expect true and confidential information from you. Finally
the researcher wants to thank your willingness and time response in advance.

NB. Dear respondent put ( √) mark in the small box for your choice.

a. Personal data
1. Sex Male Female
2. Age bellow 20 20 – 40 40 – 50 above 50
3. Educational status certificate diploma degree mater
b. Specific question about budget distribution
1. Is there budget manual in the organization? Yes No
2. If your answer for question number 1 yes what are the producer of the budget manual in
the organization? Please state briefly

3. Are the budget committee and budget director in the organization?

Yes No
4. If your answer for questions number 3 yes what are the function of budget director and
budget committee? Describe briefly

5. Is there budget administer in the organization Yes No

6. If your answer for question number 5 is yea what the responsibilities are?

7. Is the organization using effectively the distributed budget? Yes No

8. If your answer for question number 7 is No what are the major factor?

9. Is there any procedure during the budget distribution? Yes No

10. If your answer for question number 9 is yes what are the procedures?

11. Are any factors that affect budget distribution and utilization in the organization?
Yes No
12. If your answer for question number 11 is yes what are the factors?

13. Is the budget utilized to the intended way? Yes No

14. Is the budget distribution is fair? Yes No
15. Is there difference between distribute budget and utilized budget from 2003 – 2006

Yes No
16. If your answer for question number 15 s yes what are the differences?
Surplus deficit
17. What are the responsibility bodies for the budget distribution?
Top management accounting department
Budget department if others specify
18. Which types of budget used in the organization
Capital budget recurrent budget
If others specify

Interview Questions

1. What are the duties or responsibilities of the budget administrator in the organization?

2. What are the factors that affect budget distribution in the organization?

3. What are the reasons of budget deficit?

4. Which type of budget used in the organization?

5. When the budget distributed started and completed in the organization?