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Assessement of Budgetadminstration Performance Analysis in The Case of Addis Ababa University
Assessement of Budgetadminstration Performance Analysis in The Case of Addis Ababa University
ABABA UNIVERSITY
BY
ALAZER ZELEKE
OF THE REQUIREMENTS FOR THE DEGREE OF BACHELOR OF ARTS IN ACCOUNTING AND FINANC
NO. Number
CHAPTER THREE
3. RESEARCH METHODOLOGY .................................................................................................................................................... 15
3.1. Research Design .................................................................................................................................................................. 15
3.2. Research approach .............................................................................................................................................................. 15
3.3. Source of Data and Type ..................................................................................................................................................... 15
3.4. Data collection method ....................................................................................................................................................... 16
3.5. Target population ............................................................................................................................................................... 16
3.6 Sampling techniques ........................................................................................................................................................... 16
3.7 Methods of data analysis…………………………………………………………………………………………………………………………………………………16
CHAPTER FOUR
4. Data Presentation, Analysis, Interpretation And
Summary Of Finding, Conclusion……………………………………………………………………………………………………………………………………………….17
4.1. Budget preparation………………………………………………………………………………………….…………………………………………………………17
4.2. Budget System…………………………………………………………………………………………………………………………………………………………….18
4.3 Budget Performance Report of the Organization………………………………………………………………………………………………………….23
4.5. Summaries of Findings…………………………………………………………………………………………………………………………………………………25
4.6. Conclusion……………………………………………………………………………………………………………………………………………………………….…25
4.7. Recommendatio……………………………………………………………………………………………………………………………………………………..….26
Reference .................................................................................................................................................................................. .23
Appendix .................................................................................................................................................................................... 29
List of Table and Chart
Table 1. Respondents’ Response For Know How About Budgetary Performance ........................ 17
Table 2. Key Priorities .................................................................................................................... 18
Table 3 Budget Performance Report of the Organization 2015E.C ............................................... 23
Table 4. Budget Performance Report of the Organization 2015 E.C………………………………………….23
The budget also provides an important tool for the control and evaluation of sources and the
uses of resources. Using the accounting system to enact the will of the governing body,
administrators are able to execute and control activities that have been authorized by the
budget and to evaluate financial performance on the basis of comparisons between budgeted
and actual operations. Thus, the budget is implicitly linked to financial accountability and
relates directly to the financial reporting objectives established by the GASB.
(nces.ed.gov/pubs2004)
The limitation of performance budget is the potential for disagreement on where spending
priorities should lie, in the case of a government with multiple agencies, the potential for a
department to manipulate data in order to reach a target, which could lead to a need to spend
funds on an independent party to verify results, this study is requests how to administer this
type of obstacle occurs.
University College of Addis Ababa which was then the only institution of higher education. The
university college began offering courses in law and engineering as early as the academic year
of 1952/53. In the late 1950s, programs in social sciences such as History, Geography, etc. were
included. At the beginning, in-service programs were in line with regular pre-service programs.
Later on, when Addis Ababa University (which was then called Haile Selassie I University) was
1|Page
inaugurated in 1961/62 academic year, a separate department known as University Extension
was established and started offering continuing education in the evening to adults at diploma
and degree levels.
In addition to evening and weekend programs, continuing education has been offered in the
form of Summer In-service program particularly meant to upgrade the level of qualification of
teachers and other education personnel working in the system of education of the country.
AAU has played a significant role in the development of higher education and research in
Ethiopia. The university offers undergraduate and postgraduate programs in various fields of
study, including natural sciences, social sciences, humanities, engineering, health sciences, and
business. It consists of several colleges, faculties, and institutes, each specializing in specific
disciplines.
AAU has also established collaborations and partnerships with international institutions and
organizations to enhance academic and research activities. These partnerships facilitate
knowledge exchange, joint research projects, faculty and student exchanges, and capacity
building initiatives.
The university is governed by a board of governors and is led by a president. The academic
programs and administrative functions are managed by various faculties, colleges, and
administrative units.
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profit. Other conditions that can also cause results to vary suddenly from budgeted
expectations include changes in interest rates, currency exchange rates, and commodity prices.
A fundamental challenge for any performance budgeting process was lack of transparency and
accountability, to clarify who are the end users and identify their data needs; these is the
consequence of information over load. The result showed that among the organizational
factors, absence of continuing and systematic evaluation of budget performance at different
organizational structure, delay in approval of project proposal and the absence of full
involvement of the line managers in planning and budgeting process.
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organizations (AAU). Then the study highlights the solution to control these issues by using
budget and other researcher’s uses as a reference related to the topic.
CHAPTER TWO
LITERATURE REVIEW
2.1.1. The Concept and History of budgets
Budgets are financial blue print that qualifies a firms plan for the future. It’s a detailed plan that
outlines the acquisition and use of financial and other resources over a given period of time.
According to Flam Holtz (1983) a budget in an organization acts as a mechanism for effective
planning and controlling. Schick (1999) concurs by stating that the main purpose of a budget in
any organization is for planning and controlling in order to achieve organizational goals and
objectives. A budget is a standard against which the actual performance of an organization can
be compared and measured. A budget stipulates which program and activities should be
pursued. Lucey, (2002) defines a budget as a quantitative statement, for a period of time which
may include planned revenues, assets, liabilities and cash flows.
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2.1.2. Budget Process
Budgeting process pushes managers to take time to create strategies, targets and goals before
activity begins. Budget preparation helps management focus on the next month or the entire
coming year. The budgeting process forces managers to assess current operating conditions
and aids in forecasting and implementing needed changes (Anderson, 1996).
Budgets analysis should be a regular and ongoing part of management duties because helps
chart the course of operations and provides a means to evaluate performance once the task
has been completed. If realistic goals have been established comparing the actual results with
budgeted targets can help management assess how well the organization performed (Belverd,
1996).
The long-range goals themselves should include some information about the expected quality
of products or services and growth rates. Second, 8 short range goals: These short-range targets
and goals form the basis for the organization’s operating budget for the year. Third,
responsibility and interaction principles: Budgeting success or failure is in large part determined
by how well the human aspect of the process are handled from top management down through
the organization all appropriate people must take part actively and honesty in the budgeting
process (Anderson,1996).
In addition, budgets formulate a basis for effective revenue and cost control. for companies to
benefit from budgetary control, they should first set quantitative goals, define the roles of
individuals, and establish operating targets. Short term or one-year plans are generally
formulated in a set of period budgets. A period budget is a forecast of operating results for a
segment or function of a company for specific period of time (Caldwell, 1996).
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2.1.5. Budgeting Techniques
There are two main techniques for budgeting i.e. Incremental budgeting and zero-based
budgeting. An incremental budget is a budget in which the figures are based on those of the
actual expenditure for the previous year with a percentage added to cover for an inflationary
increase for the New Year. It is an easy technique that saves time but is often inaccurate. This
budgeting technique is only appropriate for organizations where each year is very similar to the
earlier one in terms of activities. In normal situations however, very few dynamic organizations
or projects are so stable as to make this budgeting technique really work for them (Lucey,
2004).
In zero based budgeting scenarios, past figures are not used as the starting point. the budgeting
process starts from „scratch‟ fore posed activities for the year. This results in a more detailed
and accurate budget, although it takes more time and energy to prepare. This technique is most
useful for new organizations and projects but is also probably the best route to go in a dynamic
organization that is proactive in taking on fresh challenges (Kariuki, 2010).
There is a major problem in setting the levels of attainment to be included in budgets and
standards. Although much research has been done in these areas by Sturdy, Becker and Green
and others, knowledge is still incomplete. There are many factors to be considered including
the aspiration level of individuals, group pressures, and the extent of participation and past
performances (David, 1988).
The law of requisite variety states that for full control the control system must have as much
variety as the system being controlled so that concentration on a single measure (Sales budget
level, return on capital employed) cannot hope to control adequately a complex system.
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Numerous organizations have attempted to deal with the problem of assessing managerial
performance using multiple criteria and one of the pioneers was the General electrical
company of America which identified eight key result areas: Productivity, personal
development, profitability, market position, product leadership, employee attitudes, public
responsibility, balance between short term and long-term goals (Horngren, 2000).
The regular systematic monitoring of results compared to plan that is the budget provides
information upon which either, to adjust current operations to bring them into line with the
previous plan or, to make adjustments to the plan itself where this becomes necessary. The
integration of budgets makes possible better cash and working capital management and makes
stock and buying policies more realistic (Lucey, 2004).
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financial performance management reporting systems will draw on a number of information
sources and reflect the range of stakeholder and departmental perspectives (MelekEker, 2007).
There are a variety of approaches to developing the performance metrics and the reporting of
performance. But without integration of the financial resources consumed, the firm cannot
measure value for money or make informed choices about future resourcing and service
priorities. One way in which the in-year operational performance and financial information can
be integrated more closely is to develop a system which encourages the issues to be considered
together and to develop management reports that provide a rounded picture (Hansen and
Mowen, 2005).
The best management reports detail what has happened and what is expected to happen in the
future. The accounts and report provide the information needed to take any corrective action
required. Such action needs to take place for the firm as a whole, so it is important that all
areas are covered. This implies that the operational data and financial data are presented
together in a comparable and consistent form (Kariuki, 2010).
Unfortunately, there is a significant conflict between two of the budgeting objectives: the
contradiction between planning the best result achievable and budget that "will be beaten" this
conflict of objective is the first of the inherent problems, the budgeting obstacles that are
fundamental to the activity of budgeting and cannot be avoided or removed.
The fundamental problem of budgeting can be summarized from the obstacles. The budget
deals with next year. Many things about next year are uncertain because.
Of the part that can be known the people who know best the functional management directly
on the firing line are not motivated to be realistic in their budgeting submissions. The finished
budget is then (usually cost in concrete and (always) used to measure the participants (wakjira,
P. 11)
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2.1.12. Performance evaluation and management control
The purpose that needs performance report performance reporting for internal management
use is an important part of a comprehensive profit planning and control system. The
performance reporting phase of comprehensive significantly Influences the extent to which the
organization's planned year and objectives are attained.
The following overview of financial reports indicates the extensive reporting requirements
needed by business firm. Those are:
*. Report to owner
These reports by and large are based on "GAAP" foot not and generally report data that
have been subject to an audit by an independent CPA.
*. Internal report: These confidential reports are prepared within the company for
internal use only this report is subdivided into three different sub classifications;
Statistical report, Special report and Performance report
All companies, regardless of their size, have reporting requirements for all the categories listed
above. (Glenna welshe and ET alp. 543)
Reports that communicate effectively to all levels of management stimulate action and
influence decisions. (GlnnaWelsch P. 542-43) It has been agreed that a business firm focus
difficulties in making capital budgeting decision under uncertainty. Methods that employee
with risk adjusted discount ration or dollar risk premium suffer from a large of normative
theory. There has been none theoretically accepted method proposed for a business man to
apply in determining the amount by which the time value of money should be adjusted for risk
or the site of the dollar risk premium that should be deducted from the net present value of an
investment that has been computed by using a default. Free discount rate as the time value of
money (Journal of finance Vol.20 No. 51-2 1973)
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2.1.14. Management Follow up Procedures
Well-managed companies use monthly performance report covering call aspects of operations.
These reports give favorable and unfavorable variances between actual and planned
performance for the month just ended and cumulatively for the year to date. Take place for
different company according to their preferred other in written or by conferences to discuss the
causes and corrective action to be taken follow-up procedures should begin at the top
management level to discuss and analyze both unsatisfactory and satisfactory conditions.
Full-up procedures should embody contractive action to correct unfavorable conditions rather
than punitive actions for failure, the result of which obviously cannot be raised. (Ibid p, 554)
The annual forecast of revenue to be raised by government through taxation and other
discretionary measures amount of revenues raised this way differ from country to country both
in magnitude and structure. (Standard classification of nominal accounts no, 17 in series of
publication July 1953).
Expenditure should be show in the budget classified by the funds from which they are paid by
the departments, bureaus, divisions or other agencies spending the many by the object of the
expenditure are made and by the activities for which the expenditure. The object classification
provides greater detail top judging and controlling estimates but greater emphasis should be
land on activity than on object. (A standard classification of municipal account no.17 in series of
publications July 1953)
In preparing the expenditure the aim was to estimate probable developments, including those
resulting from the effort of government to promote a desirable rate of growth but not all
government programs are included that might be considered desirable in the interest of
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economic growth or of social objectives or that have been recommended by various gropes of
knowledgeable and responsible export (Gorhord calm and peter WAGNER)
Budget also classified based on specific level of governmental organization. Over the past many
years, a variety of budget types and formats have been utilized governmental organizations.
The development of more advanced budget philosophies reflects growth in both scope and
complexity of government operations and the need for systems which are capable of
translating the variety of policy decisions into financial plans. The budget that currently being
used by various government organs are:
II. Planning programming and budgeting (PPB). And IV. Zero-base budget
The strategic budget is forward looking type of budget, which sets the overall goals and
objectives of the organization. Some businesses analyses do not classify the strategic budget as
an actual budget, though because it does not deal with a specific time frame, and it does not
produce forecasted financial statements.
The strategic budget led to long-range budget which produces, forecasted financial statements
for five-to-ten-year periods. Long-term budgets are prepared to quantify formally the long-term
goals and determining the means to achieve them. The financial statements are estimates of
what management would like to see in the company's future financial statements. Long-term
plan is coordinated with capital budgets that contain detail of the planned expenditures for
facilities, equipment, new products and other long-term investment. Long-range plans and
budgets give the company direction and goals for the future, while short-term plans and
budgets guide day-to-day operations. (Grennuwelshe p. 556)
3. Capital budgeting
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Capital budgeting is the process of considering alternative capital projects and selecting those
alternatives that provides the most profitable return on available fund. In addition to this
capital budget contain the plans and resource allocations for capital acquit ion to support the
program of the organization. It often governed by low and regulation capital budgets involve
multi-year expenditure projections with approval for ucurrent year expenditure. Capital budget
also consider alternative to purchase, build. Lease, or renovate buildings, equipment, or other
long range. Major items of property, based on the input available on his had managed give
decision. (Her manson p. 1112-38)
Short term budget is prepared to formally express the short-term plan in quantities terns
usually a year is considered as short-term plan period short term planning addresses broader
issue such as developing new product line replacement of plans and equipment and other
issues. Which require year of advance planning Long-term budgets therefore? Could have a
time from 5 year to 10 years even more range.
This budget reflects the inventory of the firm; manufacturing overhead budget, it is a summary
of overhead material need to product the quantity of finished products indicated in the
production budget, this budget is a schedule presenting a summary of marketing and cost
related that the company incurs over the budget period. , budgeted income statement: this is a
performances statement that presents a summary of the above separate schedules, financial
budget. Focuses on the effect of those operational budgets and other plans such as capital
expenditure and repayment of debt will have on case on the other hand finical decision center
focus on how to obtain the fund to acquire those available resources. (Horgren, 2003)
Line budgeting is a way of allocating fund in a very detailed way. It also a budget list in vertical
columns, each of the government organizations revenue sources and each of the types or
classes of items the government organization will purchase during the Fiscal year.
However, its demerits lie on the fact that if fails to make any relationship between the goods
and services provided and the overall program. (Ibid, p.17)
Performance budget is management-oriented type of budgeting. It has been utilized since 1949
G.C. The focus of this approach is on efficiency (based on the measurement of the cost and
standard process input) and the budget is considered a “performance contract” between the
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superior and his/. her subordinate”. Performance budgeting must appropriately associate with
a budget classification that emphasizes the things which government does, rather thing which
government buy. Performance budget shifts emphasis from the mean of accomplishment to
the accomplishment itself. Some characteristics of performance budget are listed:
- It presents the purpose and objectives for which funds are required. Generally, its method is
particularly interested in reducing work cost. blcsseburkhead p. 133)
Zero base budget is an emerging process adopted by variety of industrial organizations, as well
as municipal governments in the USA, Governor Jimmy) curter of Georgia first adopted Zero
Base Budget (ZBB) in government for preparation of fiscal 1973 budget. Zero-base budgeting
has many interpretations. "Zero base" means the evaluation of all programs under ZBB all
programs and expenditure are reevaluated every year. (Ibid P.133)
2. Master Budget
Master budget is a comprehensive expression of managements operating and financial plan for
future time period (usually a year) that is summarized in a set of budgeted financial statements.
The master budget is a network consist too many separate budgets which are interdependent.
The master budget can be classified just like impact. It means that as operational budget and
financial budget.
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errors. The variance was caused by a specific management decision
. Many variances are explainable in terms of the effect of UN controllable factors that
are identifiable.
. Those variances for which the underlying causes are not known should be of primary
concern and should be carefully investigated. These are the exceptions that usually
require corrective action. (Ibid 1976)
2.2. Empirical Review
Below is a summary of previous Empirical studies on budget administration performance
analysis in the context of different countries.
Amanuel Meles (2011): 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 data collected from
questionnaire and through interview. The secondary source of data collected from reference
books, internet and also used the four-year budget report of the organization.
John Mbugua, and Charles Rambo (2020): The purpose of the study was to assess how budgets
influence performance of research projects of public universities in Coast region, targeted
population of 1110 academic and non-academic employees for the two universities were used
for this study. A sample of 285; consisting of 173 from Technical University of Mombasa and
112 from Pwani University was employed through proportionate and simple random sampling
to obtain a representative sample.
Abdullah, (2016) on a study about the effect of budgeting and budgetary control in following
strength; the local government should prepare a meaningful budget so as to adhere with the
central government priorities and its budget preparations should be participatory. Once the
budget has been prepared it should be well monitored and at the end its implementation
should be reported and timely review of its implementation so as to detect deviation for
corrective actions and finally it should be noted that a budget is a working manual of
management and not a substitute for management. The literature has the weakness of
discussing only budgeting and budgetary in general but has not discussed the budget
performance of the development projects. Also, the literature was done in Nigeria and
therefore it sites only the factors that are favorable in Nigeria which is different to this study
which is aimed to be undertaken in Tanzania.
Yanxia Qi (2012), did the study on the analysis of the associated effects of performance-based
budgeting which may occur on state government expenditure. The study was qualitative and a
survey design was used with the sample size of budgets from 50 states for the financial year
2000 to 2009 from the National Governors Association. The study believed that assessing
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budget performance is aimed increasing the operations of the government in making sure that
services are present to the community. This is done through evaluating the acquired outputs
relatively to the actual expenditure incurred to provide the services (Qi, 2012). The study
indicates that exercising performance-based budgeting in the government is positively
influenced by policies that are political in nature. The results indicated policies of a political
nature that influence budget performance but it has not taken into consideration of other
factors, which this study intends to analyze. The study findings showed that there is a negative
association in exercising a performance-based budgeting with total expenditures from general
fund. Also, it noticed that there is a positive association of budgeting with total expenses that
are incurred with other state budget funds.
CHAPTER THREE
RESEARCH METHODOLOGY
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3.3 Source of Data and Type
The study used both primary and secondary sources of data for the primary data like. Interview
and observation are conduct, regarding secondary source of data available of organization
documents. The source of the data for accomplishing the study was Addis Ababa university
website. Also used other different research paper for the purpose of full up of the procedure
and system they design.
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CHAPTER FOUR
This part deals with the data analysis and interpretation to 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 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
Yes 5 100%
From the above table could observe that all respondents 5(100%) of the organization were
knew about the budgetary performance. According to the respondent the entire employee of
the organization was known budgetary performance.
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Table-2 Key Priorities
Key Priorities
(primary: Source)
The operational budget covers the day-to-day expenses and activities of the university, such as:
The operational budget is derived from various sources, including government subsidies, tuition
and fees, and other revenue streams.
The operational budget is allocated to the different academic and administrative units based on
their needs and approved plans.
The Finance Directorate closely monitors the utilization of the operational budget and ensures
adherence to established financial procedures.
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Capital Budget:
The capital budget is focused on long-term investments and the development of the
university's physical infrastructure and assets, such as:
The capital budget is typically funded through government allocations, grants, and other
external sources of funding.
The capital budget planning and execution process involves extensive feasibility studies, project
management, and coordination with relevant stakeholders.
The university's leadership, in collaboration with the Finance Directorate, is responsible for
prioritizing and allocating the capital budget based on the institution's strategic priorities and
available resources.
1, Revenue Sources:
Availability and reliability of government funding and subsidies provided to AAU Generation of
own-source revenues through tuition fees, research grants, consultancies, and other income-
generating activities Ability to mobilize additional funding from donors, development partners,
and private sector collaborations
Effectiveness of the budget preparation process, involving input from various stakeholders
Alignment of budget allocations with the university's strategic priorities and needs
Flexibility to reallocate funds between different budget lines as per evolving requirements
Robust monitoring and evaluation mechanisms to track budget utilization and performance
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4, Governance and Accountability:
5, External Factors:
Macroeconomic conditions, such as inflation and exchange rate fluctuations, which can impact
purchasing power
Changes in government policies and regulations affecting the university's financial operations
6, Institutional Capacity:
Addis Ababa University (AAU) appears to effectively implement its budget to support the
institution's operations and strategic priorities.
The university has a well-established budget preparation process that involves input from
various academic and administrative units.
The Budget Directorate and Finance Directorate work closely to ensure the budget aligns with
the university's strategic goals and available funding sources.
The budget approval process, involving the AAU Senate and the Ministry of Education, provides
oversight and accountability.
The Finance Directorate allocates the approved budget to different departments and units
based on their needs and approved plans.
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Budget holders are responsible for managing and monitoring their allocated funds, ensuring
effective utilization.
The university has established procurement and expenditure procedures to ensure compliance
and efficient use of resources.
The Finance Directorate closely tracks the university's actual income and expenditures against
the approved budget.
Regular financial reporting and internal audits help identify any variances or deviations,
allowing for timely corrective actions.
The university's budget system allows for some flexibility to accommodate changes in priorities
or unexpected circumstances.
The university provides training and support to budget holders and finance staff to enhance
their budget planning and execution capabilities.
The Finance Directorate works collaboratively with academic and administrative units to build
their financial management skills.
The presence of experienced finance professionals and sound financial management practices
contribute to the effective implementation of the budget.
The budget process and allocation decisions are closely aligned with the university's strategic
objectives, such as expanding STEM programs, upgrading infrastructure, and increasing access
for underprivileged students.
The budget supports the university's efforts to modernize, innovate, and better serve the needs
of students, faculty, and the broader community.
Revenue Diversification:
Expanding the university's sources of revenue beyond government funding, such as:
Increasing student tuition and fees, while ensuring accessibility for underprivileged students
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Enhancing revenue from research grants, consultancies, and intellectual property
Attracting more external funding from donors, development partners, and industry
collaborations
Cost Optimization:
Budgetary Reforms:
Aligning the budget with the university's strategic priorities and academic plans
Carefully managing student enrollment, program offerings, and tuition fee structures to
optimize revenue generation
Implementing targeted scholarship and financial aid programs to ensure affordability and
access for students
Asset Optimization:
Maximizing the utilization and commercial potential of the university's physical assets, such as:
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Investing in the financial management skills and capabilities of the university's administrative
staff
Engaging with the government, funding agencies, and industry partners to secure additional
financial support and resources
Revenue Report
Expense Report
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Projects
5 Capital Expenditures 150 million Birr
Revenue Report
Total budget approved for AAU in the 2016 E.C. fiscal year was 3.5 billion Ethiopian Birr.
Expense Report
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Budget Utilization Rate:
AAU utilized 96% of its total approved budget in the 2016 E.C. fiscal year.
Variance Analysis:
Tuition fee revenue was 3% higher than budgeted due to an increase in student enrollment.
Research grant revenue was 4% higher than projected due to the successful acquisition of
several new research projects.
Capital expenditures were 8% lower than planned as a result of delays in the completion of a
major construction project.
Continue to explore ways to diversify revenue sources and reduce reliance on government
subsidies.
Expand financial aid and scholarship programs to improve student access and retention.
The budget process involves individual departments and units at AAU preparing their own
budget proposals based on their annual work plans. These proposals are then consolidated and
reviewed at the institutional level.
The main sources of AAU's revenue include sales of electricity/power, loans and aid, customer
contributions, and government funding. However, there have been challenges in consistently
collecting the expected revenue amounts.
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4.6. Conclusion
Funding Sources: AAU likely receives funding from a variety of sources, including the Ethiopian
government, tuition fees, research grants, and potentially international donors or development
organizations. The composition and breakdown of these funding sources may be reported in
the university's budget. Budget Transparency: Many universities strive to be transparent about
their budgets, but the level of detail and public accessibility of AAU's budget reporting is
unclear to me without more recent information.
Budget Cycles: Universities typically operate on an annual budget cycle, aligning with the
government's fiscal year. AAU's budget would likely be set, approved, and reported on an
annual basis.
Budget Categories: University budgets often include line items for categories such as
faculty/staff salaries, academic programs, research, facilities, administration, and student
services. The level of detail provided in AAU's budget breakdown is uncertain.
Budgeting Processes: Universities typically have established budgeting processes that involve
various stakeholders, such as administration, faculty, and sometimes student representatives.
These processes often include budget proposal, review, and approval stages.
Budget Reporting Formats: University budgets may be reported in different formats, such as
line-item budgets, program-based budgets, or activity-based budgets. The level of detail and
presentation can vary.
Budget Oversight: University budgets are usually subject to some form of internal and external
oversight, such as review by a board of trustees, audit by the government, or reporting to the
Ministry of Education.
Budgetary Challenges: Universities worldwide often face budgetary constraints and must
prioritize funding allocations. This can lead to discussions around resource allocation, tuition
fees, and the balance between teaching, research, and other activities.
4.7. Recommendation
Enhance Transparency Public Disclosure AAU should consider making its budget
documents publicly accessible online. Detailed reports can help build trust and
transparency with stakeholders.
Detailed Breakdown: Provide a detailed breakdown of revenue sources and expenditure
categories. This includes specifying amounts allocated to salaries, academic programs,
research, infrastructure, and student services.
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Stakeholder Involvement Inclusive Budgeting: Involve a wide range of stakeholders in
the budgeting process, including faculty, staff, and student representatives. This ensures
that the budget reflects the needs and priorities of the entire university community.
Feedback Mechanisms Implement feedback mechanisms where stakeholders can
provide input on budget priorities and allocations.
Regular Reporting Annual Reports Publish annual budget reports that summarize the
financial status of the university, including income and expenditure for the year.
Quarterly Updates Consider providing quarterly financial updates to keep stakeholders
informed about the university’s fiscal health and any mid-year adjustments.
External Audits Independent Audits Engage independent auditors to review the
university’s financial statements annually. This adds an extra layer of accountability and
credibility to the financial reporting.
Audit Findings Make the findings of these audits publicly available to ensure
transparency and accountability.
Training and Capacity Building Financial Training: Provide training for university staff on
budget management and financial reporting. This can improve the accuracy and
reliability of financial data.
Capacity Building: Invest in building the capacity of the finance department to handle
complex budgeting and reporting tasks efficiently.
Leverage Technology Financial Management Systems: Implement robust financial
management systems to streamline budget preparation, monitoring, and reporting
processes.
Online Portals Develop online portals where stakeholders can access budget
information, submit queries, and provide feedback.
Address Budgetary Challenges Resource Mobilization: Explore diverse funding sources,
including partnerships with international institutions, grants, and alumni contributions,
to mitigate budget constraints.
Cost Efficiency Regularly review and assess the university’s expenditure to identify areas
where cost efficiencies can be achieved without compromising quality.
Policy and Governance Clear Policies Establish clear policies and guidelines for budget
preparation, approval, and reporting. Ensure these policies are well-communicated and
adhered to.
Governance Structure: Strengthen the governance structure overseeing the budget to
ensure effective oversight and accountability
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Reference
https://etd.aau.edu.et/items/791250d1-d11a-4c3f-abc3-e16b7057f371
https://www.aau.edu.et/documents/budget-and-finance/
https://www.nerdwallet.com/article/finance/what-is-a-budget
https://en.wikipedia.org/wiki/Budget
https://www.accountingcoach.com/blog/what-is-a-budget-2
https://ec.europa.eu/programmes/erasmus-plus/project-result-content/4d828916-38fa-4fb8-
83d0-28f27ccb71be/budgeting%20and%20financial%20planning%20booklet.pdf
https://www.elibrary.imf.org/downloadpdf/book/9780939934256/9780939934256.pdf
David J.C. (1988). Management and Cost Accounting Second Edition: International Thomas
Press London.
https://www.investopedia.com/terms/b/budget.asp
https://msbrijuniversity.ac.in/assets/uploads/newsupdate/Budget1.pdf
Horngren C. T. (2000). Cost Accounting, a Managerial Emphasis. 4th edition, Prentice Hall
India, New Delhi.
JeseBurkhead (1965) Government Budgeting: John Wiley John, Inc New York
Michael BahunakisGlnna, welsch and etal (2001), Budgets: profit planning and control.
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APPENDIX
AAU
COLLEGE OF BUSINESS, ECONOMICS, AND SOCIAL
SCIENCE
DEPARTMENT OF ACCOUNTING AND FINANCE
Questionary
1. During the budget planning process, are key stakeholders actively involved?
A) Yes
B) No
C) Unsure
2. Does the budget align with the strategic objectives of the organization?
A) Yes
B) No
C) Unsure
3. Are revenue and expense forecasts considered accurately during the budget planning phase?
A) Yes
B) No
C) Unsure
A) Monthly
B) Quarterly
C) Annually
5. Are budget variances analyzed to identify causes and take appropriate actions?
A) Yes
B) No
C) Partially
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6. Are measures in place to ensure adherence to the budget?
A) Yes
B) No
C) Partially
A) Highly flexible
B) Moderately flexible
C) Not flexible
A) Yes, extensively
9. Are performance metrics used to evaluate the effectiveness and efficiency of budget
processes?
A) Yes
B) No
C) Partially
10. Are training and development initiatives provided to staff involved in budgeting?
A) Yes, regularly
B) Yes, occasionally
11. To what extent are technology and automation tools utilized in budget administration
processes?
A) Extensively
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B) Moderately
C) Minimally
12. How often are best practices and industry benchmarks considered in evaluating budget
administration performance?
A) Always
B) Sometimes
C) Rarely
A) Yes
B) No
C) Partially
14. Are there mechanisms in place to manage financial risks associated with budget
administration?
A) Yes
B) No
C) Partially
A) Very effectively
B) Moderately effectively
C) Ineffectively
16. What recommendations do you have for improving budget administration performance?
17. Budget Monitoring and Reporting: Examine the frequency and comprehensiveness of
budget monitoring and reporting mechanisms. Evaluate the tools and systems in place to track
and communicate budget performance, such as financial reports, dashboards, or real-time
monitoring.____________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
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______________________________________________________________________________
_______________________,
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