COLLEGE OF MANAGEMENT AND PUBLIC SERVICE

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTEMNT OF ACCOUNTING AND FINANCE

ASSESSMENT OF BUDGET PREPARATION, ALLOCATION AND ULILIZATION

(CASE STUDY OF SRS FINANCE AND ECONOMIC DEVELOPMENT BUREAU)

A PRPOSAL SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIRMENT

FOR THE AWARD OF BACHLOR OF ART DEGREE IN ACCOUNTING AND
FINANCE

BY:

1. Abdifatah Nour Dahir EV/012/12

2. Abdulahi Mohamed Hussein EV/035/12
3. Amin Muhumed Abdisalam EV/058/12
4. Eid Badal Abdi EV/066/12
5. Rahma Maqadin Hassen EV/083/12

Advisor: Wubeshit Ch.

August-2022

JIGJIGA, ETHIOPIA
Table of Contents
Table of Contents ........................................................................................................................................... I
CHAPTER ONE ........................................................................................................................................... 1
1. INTRODUCTION ................................................................................................................................ 1
1.1. Background ................................................................................................................................. 1
1.2. Statement of the Problem ............................................................................................................ 3
1.3. Research questions ...................................................................................................................... 4
1.4. Objectives of the study................................................................................................................ 4
1.4.1. General Objectives of the study .................................................................................................. 4
1.4.2. Specific Objectives ..................................................................................................................... 4
1.5. Scope of the study ....................................................................................................................... 4
1.6. Significance of the Study ............................................................................................................ 4
1.7. Limitations of the Study.............................................................................................................. 5
1.8. Organization of the study ............................................................................................................ 5
CHAPTER TWO .......................................................................................................................................... 6
2. LITERATURE REVIEW ..................................................................................................................... 6
2.1. Concepts of Budgets ................................................................................................................... 6
2.2. Budget Preparation...................................................................................................................... 6
2.3. Budget Utilization ....................................................................................................................... 8
2.4. Concepts of under and over utilization of Budget ...................................................................... 8
2.5. Reason for Variations between Budgeted and Actual Expenditure ............................................ 9
2.6. Internal control ............................................................................................................................ 9
2.7. Managing and Monitoring Budget Utilization .......................................................................... 10
2.8. Empirical literature ................................................................................................................... 10
2.9. Budget Process Overview in the case of Ethiopia .................................................................... 10
2.10. Budget Transfer ........................................................................................................................ 12
2.11. Budget Supplement ................................................................................................................... 13
CHAPTER THREE .................................................................................................................................... 14
3. METHODOLOGY ............................................................................................................................. 14
3.1. Introduction ............................................................................................................................... 14
3.2. Research Design........................................................................................................................ 14

I
 3.3. Sample Design .......................................................................................................................... 14
3.3.1. Population Size ......................................................................................................................... 15
3.3.2. Sampling Techniques ................................................................................................................ 15
3.4. Types of Data Collection and Sources of Data ......................................................................... 15
3.4.1. Primary Data Sources................................................................................................................ 15
3.4.2. Secondary Data Source ............................................................................................................. 15
3.5. Data Collection Methods ................................................................................................................ 16
3.5.1. Questionnaire ............................................................................................................................ 16
3.5.2. Interview ................................................................................................................................... 16
3.5.3. Observation ............................................................................................................................... 16
3.6. Methods of Data Analysis ......................................................................................................... 17
4. Budget ................................................................................................................................................. 18
5. Work Plan ........................................................................................................................................... 19
6. REFERENCE ...................................................................................................................................... 20

II
 CHAPTER ONE
1. INTRODUCTION

1.1. Background
From the perspectives of public policy and budgetary process, the Finance sector shares many of
the characteristics of other sectors of government. This means that the citizens of any country was
usednefit from a Finance sector that is subject to the same broad set of rules and procedures that
are applied to other sectors. For budgeting and utilization processes to be effective and economic,
they must be based on well-argued and elaborated plans and program. Contemporary studies show
that governments which have effective fiscal rules have stronger budget discipline.These rules
focus on formal and informal procedures for preparing and utilizing the budgetSchick (2007).
Poor performance is often to be found in the weak links between policy making, planning and
budgeting. At one level, policy making and planning are unconstrained by what a country was
usedable to afford over the medium term. At another level, policy making and planning are
insufficiently informed by their budgetary implications and by their likely impacts in the wider
community. The inadequacy of hard budget restraints on decision makers at the planning and
budget formulation stage of the cycle leads to inadequate funding of operations, poor expenditure
control and unpredictability in the flow of budgeted resources to agencies responsible for service
delivery Malcolm (1998).
When we see the case of Ethiopian budget classification system, it is possible to see exactly which
resources are assigned to which public bodies and to follow up that the money has been used in
accordance with the intended priorities. Budgets are assigned to public bodies or sector offices and
their respective departments, divisions, programs or projects, in turn, assign responsibilities for
their effective use. With devolution, it is crucial that the planning and budgeting cycles at each
level are harmonized and coordinated. This is also why a basic understanding of the procedures
and timelines in preparing the budget at federal level is important in order to understand the budget
process at regional and Woreda level. Furthermore, budgets define “use” and “purpose”. The
purpose or objective of a budget is related to the intended outputs. This means all budget items are
related to the planned activities on which the public funds are spent and the purpose of the
spending.

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Finding adequate resources to finance systems has become a real challenge for countries around
the world. This challenge is exacerbated in developing countries that lack sufficient funds to meet
their populations’ basic Finance needs and demands. Increased pressures on Finance care resources
have led policymakers, administrators and clinicians to search for more efficient ways to deliver
Finance services. Increasing public resources for Finance or more precisely, expanding “fiscal
space” for Finance does not necessarily need to come from greater tax revenue or larger budgets.
Often times, it is not the amount of Finance spending, but the effectiveness with which those funds
are used, that matters most. Effectiveness and efficiency improvements in the Finance sector, even
in small amounts, can yield considerable cost savings and even facilitate the expansion of services
for the community. Minimizing waste, corruption and other forms of ineffectiveness and
inefficiency estimated between 20-40 percent of total Finance spending World Finance
Organization Report (2010) that means countries’ Finance systems can achieve more with the
available resources.
In the case of Ethiopia one of the main challenges hampering Finance care access and quality is
the lack of resources. To address this challenge and hence to mobilize adequate resources for the
Finance sector, different resource mobilization activities have been implemented, including: (i)
revenue retention by Finance facilities for quality improvement; (ii) implementation of fee waiver
system for enhanced equity; (iii) establishment of private wings and outsourcing for better
efficiency; and (iv) pilot and implementation of community based and social insurance schemes
for improved financial access to Finance services, avoiding payment at the point of care report
(2006).
Besides to this, for effective use of resources and to gain an understanding of how public funds
have been utilized, and how they contribute to government policies, it is important to monitor the
results of expenditure. This has led to the establishment of government monitoring and evaluation
(M&E) systems. A common feature of such systems involves the Ministry of Finance
keeping spending agencies in check by requesting reports on financial and non-financial
performance. The latter is also referred to as the results of government spending, and can be
measured at the levels of outputs, outcomes and impacts, which involves defining performance
indicators. It is important for governments to define and keep track of indicators to consider what
they are trying achieve with their policies and how far they are progressing and to use the
information to plan accordingly. For this reason, there is a strong link between budget monitoring

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(understanding how public resources are being utilized) and performance-based budgeting
(Rebecca, Natasha & Imran, 2011).
To sum up, this paper explores how the public budget is being prepared and utilized effectively
and how this can be enhanced. Having assessed these issues, the paper puts forward viable
recommendations for decision makers regarding strategies to take advantage of existing and
emerging opportunities for improved sector financing and budget execution. It suggests steps to
be taken in the preparation and utilization of budget in Finance Bureau, by taking existing problems
into account. This was help contribute towards improved and sustained future Finance service
development interventions.

1.2. Statement of the Problem

There are different budget users at different level of Finance Bureau and each of the budget users
has the responsibilities of preparing and utilizing budget. In budget preparation and utilization
there are various type of problem encountering, in the case of Finance Bureau the problems can
be categorized in two levels: On each level of budget users and on Planning and Budget
Department of the Finance Bureau.
In many of the budget users, gaps are observed in organizing their plans as per the strategy of the
Finance Bureau; with regard to budget planning and utilization, the annual report of Finance
Bureau shows the existence of inefficiencies in budget preparation and utilization. Some of the
deficiencies identified in the report are: there is no strong follow up and control by successive
leaders on the budget preparation as well as utilization at each respective budget users; each budget
users unable to report comparisons of utilized and unutilized budget including the reason why it is
not consumed. Besides to this, there is a recommendation given by BOFED as if there are
unutilized budget by Finance Bureau that can be used for other developmental activities. On the
other hand, Planning and Budget Department of the Finance Bureau, has a lion’s share role to
follow-up the implementation of Finance Bureau budget whether it is prepared and utilized for
the intended purpose or not. In this regard, there is no strong way in budget reporting, supervising
and controlling system by the Finance Bureau for each budget department of budget users and
problems would arise for weak budget preparation and utilization as reported by BOFED. This
problem requires further investigation with scientific approach how the budget preparation and
utilization within the Finance Bureau.

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The research concentrated on the assessment of the budget preparation,allocation and utilization
performance in Finance Bureau. Little will do to evaluate/determine the causes that probably
affect the preparation,allocation and utilization of budget in Finance Bureau.
study on the assess that may hinder the budgeting preparation,allocation and utilization
performance of the Finance Bureau.

1.3. Research questions

 How is the budget preparation processed?
 How is performance of budget utilization?
 What weaknesses are observed in budget preparation and utilization

1.4. Objectives of the study

1.4.1. General Objectives of the study

The general objective of the study is to assess issues related to the budgeting preparation, allocation
and utilization of Finance Bureau and to provide suggestions for future actions.

1.4.2. Specific Objectives

 To examine budget preparation process
 To assess the budget utilization and its performance
 To suggest possible recommendations on the observed problems and gaps

1.5. Scope of the study

The scope of this research is limited at Finance Bureau within. The research goes through to
investigate on how budget prepared in the selected area of study and utilized accordingly. The time
horizon of the study covered by this research had been limited to assess the last two years budget
utilization of Finance Bureau covering from 2012 up to 2013 E.C.

1.6. Significance of the Study

The researcher believes that the result of this research will have the following significances. Apart
from being the obligatory requirement for fulfillment of this study, the research report give some
necessary recommendation to have relevant information for Finance Bureau on budget

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preparation,allocatio and utilization. At large, the study will be employe by Finance Bureau in
addressing some of the problems related to budget preparation,allocatio as well as utilization. It
may also contribute to create awareness among the budget users, and any other concerned body on
the role of budget management and to the success of vision of Finance Bureau. Moreover, it can
be referred and make the base for further research on the same topic for others researchers.

1.7. Limitations of the Study

There will use external or uncontrollable variables that defer the quality of the study out put in
addition to limitations of the research design it self. The quality of the output of this study will
contingent on the genuine responses from the respondents. But there will suspicion that the
respondents may not give what is in their heart, because they may suspect that they will face
problems from the tax officials. In addition, shortage of time and lack of sufficient fund may have
its own impact on the qualities of the study output. The respondents were in doubt their responses
are kept confidential.
Moreover the researcher would exert his at most effort to go according to time and budget
schedule.

1.8. Organization of the study

This research paper will organize in five chapters. The first chapter contains introduction of the
study which includes background of the study and study areas, the statement of the problem,
objectives, scope, limitation and significance of the study. The second chapter provides review of
related literature concerning budget preparation and utilization. Chapter three describes about
research design and methodology. The fourth chapter describes data presentation, analysis and
interpretation of the study and the fifth chapter contain summary of major findings, conclusion and
recommendations for the gathered and analyzed data.

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 CHAPTER TWO

2. LITERATURE REVIEW
In this chapter the concept of budgets, budget preparation and the budget utilization and some
empirical literatures are discussed. This is achieved by gathering the available literature by
scholars and academicians on the subject.

2.1. Concepts of Budgets

The English word “budget” derives from the Middle French bougette, which is the diminutive of
bouge, a leather bag. At its most basic, therefore, a budget is a small leather bag. During the middle
Ages in England, letters of particulars about taxes and spending were brought before Parliament
by putting them in a small leather bag, which was placed on a table before the assembly. As
centuries passed, the word came to be applied to the contents as well as to the bag itself, though
originally only in the sense of a group of things (Quick & New, 2001).

The meaning of the term has, of course, changed since the days when a country's resources were
deemed to be the personal property of the king, along with the political evolution from absolute
monarchies to constitutional governments. In most countries today, including a majority of African
countries, approval of the budget (the “power of the purse”) is the main form of legislative control
over the executive, with public money spent only under the law (Shah & Von 2007).

2.2. Budget Preparation

Maitland (2001) mentions that the process of preparing and agreeing on a budget is a means of
translating the overall objectives of the organization into detailed, feasible plan of action. Public
budget preparation is one of the tedious tasks that any country should look upon. The preparation
process for the annual budget involves a great deal of energy, time, and expense. Hence, it is
important that a country must be able to follow accurately all the methods of preparing an annual
budget. In budgeting, the focus is not only to prepare the budget, but more importantly to have a
follow-up operation for budgeting and to act according to known data.

6
Falk (1994) states that budgets are financial expressions of a country’s plan for a period of time.
It tells where and how the organization was spend money and where the money was come from to
pay these expenses. He adds that budgets set limits.

Besides setting limits, Andrews and Hill (2003) say that budgets also provides the assurance that
the most important needs of a country are met first and less important needs are deferred until there
are sufficient funds in which to pay for them. Even though budget preparation is not the sole thing
that needs consideration in budgeting, the basis of it is still needed in order to have at least close
estimation.

As per Shah (2007) preparation of the budget usually takes many months and involves all public
institutions: the Ministry of Finance manages the process; the Cabinet/President sets or approves
the policy priorities, line ministries plan and advocate for their resource needs and the legislature
reviews and approves the final plan. Preparation is at the heart of the political process: it is the
decision on how to allocate the state’s limited resources to competing demands.

Preparing a budget proposal that suggests a set of recommended policies and stays within whatever
financial limits are considered politically realistic has been a prominent issue in public budgeting
Bunch and Straussman (1993). One approach is to set specific dollar ceilings on budget requests.
This approach has the distinct advantage of making agencies prepare requests that include only
financially feasible options Lee (1992). This method is often called fixedceiling budgeting. Budget
ceilings instruct agencies to request next year's budgets based on certain assumptions, such as their
set of priorities regarding rankings. Another approach is for the governor to provide policy
guidance in terms of overall priorities and/or guidance by major program.

According to Schiavo-Campo and Tommasi (1999) and Allen and Tommasi (2001), the main
starting points for the preparation of the annual budget should be a clear definition of fiscal targets
and a strategic framework consisting of a comprehensive set of objectives and priorities. As
Schiavo-Campo (2007) stated a successful budget preparation process combines top-down
direction and bottom-up planning. The overall budget envelope and sector/ministry spending
ceilings are usually set by the Ministry of Finance and the Cabinet/executive in accordance with
policy objectives. These are then communicated to the line ministries, which are responsible for
preparing their respective sector budgets. Through an iterative process of review, debate and

7
bargaining, a consolidated budget is hammered out. A budget proposal is then presented to the
legislature, where it is debated and negotiated with the executive and eventually passed into law.

2.3. Budget Utilization

Once a budget has been approved by the legislature, the government embarks on the challenging
task of spending funds. Utilizing public funds effectively to meet stated policy objectives while
ensuring value for money is often just as challenging than planning how to spend it. Several
reviews of Public Financial Management performance in developing countries show that countries
score significantly better on budget preparation than on budget utilizing.

According to Schiavo-Campo and Tommasi (1999) budget utilization is the phase where resources
are used to implement policies incorporated in the budget. As they argued, it is possible to utilize
badly a well-prepared budget; it is not possible to utilize well a badly prepared budget.

As per Allen and Tommasi (2001), successful budget utilization depends on numerous factors,
such as the ability to deal with changes in the macroeconomic environment, and the
implementation capacities of the agencies concerned. Besides to this, the budget system should
assure effective expenditure control. In addition to a realistic budget to begin with, a good budget
utilization system should have complete budgetary/appropriation accounting system. It is
necessary to track transactions at each stage of the expenditure cycle (commitment, verification,
payment) and movements between appropriations or budget items Schiavo-Campo and Tommasi
(1999).

2.4. Concepts of under and over utilization of Budget

Allen and Tommasi (2001) stated that over utilizations are sometimes caused by non-compliance
of budget managers with the spending limits defined in the budget, when committing expenditures.
Since cash allocated to spending units for appropriated expenditures is generally 15 controlled,
these overruns generate spending arrears. Overruns are often the result of off-budget spending
mechanisms (payment from special accounts, etc.).

In some countries, payments made through exceptional procedures are not controlled against the
appropriations and are therefore an important cause of overruns; lack of compliance can be
addressed through strengthening the audit system, and reporting system, and ensuring the

8
effectiveness of the basic budget execution controls. Moreover, overruns can be caused by
deficiencies in budget preparation. Sound budget preparation processes and adequate institutional
arrangements are a prerequisite for avoiding overruns.

On the other hand, Allen and that Tommasi (2001) expressed in a number of countries, the official
budget is under spent, particularly its non-wages expenditure items. This does not necessarily mean
that there is good fiscal discipline in these countries. In some countries with poor governance,
under spending of the official budget may coexist with large amounts of off budget spending. On
the whole, in most cases, under utilization as well as over utilization is related to insufficiencies in
budget preparation and program preparation. An overestimated budget and unrealistic projections
of revenues may lead to budget revisions during budget utilization and to a practice known as
“repetitive budgeting”.

Peters (1998) identified the following weaknesses in resource allocation and use: poor planning;
no links between policy making, poor planning and budgeting; poor expenditure control;
inadequate funding of operations and maintenance; little relationship between budget as
formulated and budget as utilized; inadequate accounting 16 systems; unreliability in the flow of
budgeted funds to agencies and to lower levels of government; and poor cash management.

2.5. Reason for Variations between Budgeted and Actual Expenditure

As per Omitoogun and Hutchful (2006), there are a number of factors that can explain why actual
expenditure deviates from the levels approved at the beginning of the financial year in any sector.
The reasons for deviations may vary over time. Some of the more common causes are: deviation
in aggregate expenditure; reallocation of fund during budget implementation; policy changes
during the year; an inability to implement policies, program and projects; and a lack of financial
discipline contribute for variation in budgeted and actual expenditure.

2.6. Internal control

As explained by Rebecca, Natasha & Imran (2011) internal control systems are the policies and
procedures put in place by the management of a government agency in order to ensure the agency
achieves its objectives and complies with external laws and regulations. Such policies and
procedures tend to cover financial accounting and reporting, performance monitoring, asset

9
management and procurement. Large agencies was have an internal audit unit comprising internal
auditors that independently review and report on the implementation of management policies to
the head of the agency.

2.7. Managing and Monitoring Budget Utilization

As indicated by Tommasi (2007) there should be distribution of responsibilities for budget
utilization, budget appropriation management rules and budget revisions, various special issues
related to budget utilization, and the monitoring of budget execution. At the same time budget
execution covers both activities related to the implementation of policies and tasks related to the
administration of the budget. Both the central agencies (the ministry of finance, the ministry of
planning in a dual budgeting system, and the prime minister’s office) and the spending agencies
are involved in these tasks. The distribution of responsibilities in budget management should be
organized according to the agencies’ respective areas of responsibility and accountability.

2.8. Empirical literature

According to Horngren, Sundem, Stratton, Burgstahler & Schatzberg, (2008) state that, recent
surveys show just how valuable budgets can be. They assert that, a study of more than 150
organizations in North America listed budget preparation and utilization as the most frequently
used as most important part of budget process. One of the usefulness of the process of budgeting
forces manager to become a better administrator and puts planning in the fore front of managers’
mind.

However, empirical evidence from Nigeria showed that from country other than the developed
ones on the value of budget preparation and utilization. The study concludes that most companies
in Nigeria operate budgets annually, thereby confirming its widespread use. We can also conclude
that budget preparation and utilization is a veritable part of budget process. It is recommended that
efforts through researches should be directed towards improving the budget preparation and
utilization rather than calling for its total abandonment.

2.9. Budget Process Overview in the case of Ethiopia

Currently, the annual budget formulation process has two dimensions: the identification of
priorities and goals, and allocation and management of funds. The budget formulation process has

10
four stages: the planning stage, the budget preparation stage, the budget legislation and budget
implementation and control stages. Several stakeholders are involved at each step of the budget
cycle, with some contributing exceedingly more than others. The executive body has considerable
power in the budgetary process with Ministries playing important roles in planning, budget
formulation and implementation. Ethiopia has a dual budgeting system in which recurrent and
capital expenditure are considered separately (MOFED, 2009).

MOFED is the major clearing house for the preparation of the federal budget in Ethiopia, although
this is done in consultation with the various ministries that are the beneficiaries of the budget. The
responsibilities of the Minister of Finance and Economic Development, as stipulated 20 in the
Council of Ministers Financial Regulations No 17/1997, consist of formulating and issuing
directives that detail government financial policies in all areas of government finances; developing
and maintaining appropriate standards of work and conduct for application throughout all public
bodies; internal auditing functions; and preparing a financial plan for the country. Each public
body needs to take the initiative to commence budget preparations before they receive the budget
call letter from Ministry of finance and economic development (MOFED) with their budget
ceilings, such as development of unit costs (where appropriate), a midyear program review, and
the preparation of work plans.

Various steps are involved in the process of budgeting in Ethiopia. The first step in the process is
the sending of Budget Calls and ceiling notifications to line ministries by the MOFED. The various
line ministries submit their budget request as per the established regulations. After the budget
hearing and defense process at the MOFED, the final budget was used submitted to Parliament by
the Prime Minister for approval.
It is important to distinguish between the approved budget and the annual appropriations. The
budget that is approved by the Council of Peoples Representatives is a detailed budget, i.e., by
public body, sub-agency, project, expenditure item, etc. However, the appropriations are at a more
aggregate level. An appropriation is a legal mandate to spend money out of the consolidated fund.
After the Council of Peoples Representatives has approved the budget, it is the responsibility of
the civil service to implement that budget.
Implementation of the approved budget is also known as budget execution MOFED (2006). the
implementation phase of the budgetary process covers not only measures for disbursing funds

11
already allocated but also the monitoring of how funds are spent to ensure that they are used
judiciously and for the intended purposes. It is the responsibility of Ministry of finance and
economic development to inform all public bodies of their approved budget. It uses forms to notify
each public body of their approved recurrent and capital budget respectively; and between July 8
and 15 (MOFED, 2006).

Funds are dispersed to ministries each month on the basis of the allotted budget.
Every Ministry is required to submit a monthly disbursement request in which it reports the
previous month’s expenditure, detailing what was spent and how it was used, and makes a request
for the next month’s allocation through a work plan. The Ministry’s Fund Disbursement
Department handles the process of fund disbursement for the ministries and keeps records of all
transactions.
The budget registrar in the Disbursement Authorization Department records the original budget,
all transfers and supplementary budgets, the disbursements made and any undisbursed allocation.
Each public body is required to enter details of its approved budget onto their budget expenditure
subsidiary ledger cards for each budget institution, sub-agency, or project. The cards are used to
keep track of approved budget, budget adjustments/transfers, supplements, and commitments.
Although planning and budget processes should be thorough and attempt to anticipate needs of
the next year, not all future circumstances can be foreseen with accuracy. When the situation
demands, the approved budget can be legally adjusted during the year to adapt to unforeseen
circumstances. Budget adjustments are not desirable and can be avoided by proper planning and
budgeting. There are two types of budget adjustment permitted by law: budget transfer and budget
supplement.

2.10. Budget Transfer

It is Possible to move budgeted funds between public bodies, budget institutions, projects or items
of expenditure, without changing the total approved budget. Budget transfers between public
bodies, budget institutions, projects or items of expenditure are authorized by the Financial
Administration Proclamation No. 648/2009 and the Financial Regulations No. 17/1997, subject to
certain restrictions and the required level of approval or authorization. These include:
 No transfers are permitted from other recurrent expenditure to salaries, wages or
allowances;

12
  No transfers are permitted from the capital budget to the recurrent budget;
 All other transfers must be approved by the authority specified in Part Four of the Financial
Administration Proclamation No. 648/2009 and the Financial Regulations No. 17/1997. On
the other hand, MOFED is empowered to transfer funds within items of expenditure of the
recurrent budget; and budget from one capital project to another within a public body
FDRE (2009).

2.11. Budget Supplement

The total approved budget can be increased with the approval of the Council of Peoples
Representatives on recommendation of the Council of Ministers. It is additional authority to spend
beyond the original approved budget. During a budget year, while an approved budget is in the
process of being implemented, it is possible that an unforeseen or urgent need for increased
expenditures arises, (e.g. a natural disaster) or a new project, not included in the original approved
budget, is approved for commencement during the budget year; Additional resources become
available (e.g. from external assistance or loans) that can fund increased total expenditures,
including any new projects. Any of these circumstances may require additional expenditures
during the budget year by a public body beyond those in the approved budget. In these situations
a supplementary budget and appropriation are required. These are also authorized by Part Four of
the Financial Administration Proclamation No. 648/2009 and the Financial Regulations No.
17/1997.
Supplementary budgets are coordinated and prepared by MOFED, based on requests or proposals
received from public bodies. Public bodies are required to prepare their supplementary budget
requests in writing and submit to MOFED Budget Department. Then, MOFED notifies public
bodies of their approved supplementary budget. Subsidiary ledger card must be kept up to date by
public bodies so as to show the correct adjusted budget and to prevent any overspending or over
commitment of funds available.

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 CHAPTER THREE
3. METHODOLOGY

3.1. Introduction
The study will apply both qualitative and quantitative approach to describe and evaluate the budget
preparation and utilization performance in Somali Regional state Finance Bureau.
Well designed and implemented quantitative research has the merit of being able to make
generalizations, for a broader population, based on findings from the sample. Therefore, the
applications of both approaches enable the researcher to obtain adequate, relevant and reliable data
to the issue under study..
In this section the research design that will use, population, samples, types of data, sources of data,
data gathering tools, and the methods of data analysis will discuss very well.

3.2. Research Design

The study will asses the performance of budget preparation and utilization of public organization
in Somali regional state particularly Finance Bureau. In order to have a clear concept of the nature
of the performance of budget preparation and implementation of Finance Bureau. The study will
employ a descriptive research type which involves both qualitative and quantitative approach of
data analysis.

The reason for using this design is that it enables to describe the performance of budget preparation
and utilisation performance in Somali regional state Finance Bureau.

The main criterion to choice of this research design will the availability of information in relation
to the research problem at hand and the characteristics of a descriptive research type make harmony
with the purpose of the study.

3.3. Sample Design

In order to select the appropriate representatives to the total population and to make the study
findings more relevant and accurate, the sample design will use well structured as the following.

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 3.3.1. Population Size
The total population of the study will include all employees of Finance Bureau and the researcher
will select 35 employees from the budget users of Finance Bureau and 10 employees from BOFED
which totals 45 sample responents and taking this in to account on factors it is found necessary to
use personal judgment.

3.3.2. Sampling Techniques

To come up with good study results it needs determining sample size and sampling techniques as
part of the broad sample survey. Hence, some information sources were deliberately chosen using
purposive sampling method.
The research, therefore, focus on the employee of the organization by using purposive sampling
techniques to acquire the necessary information and to make clear investigation for the current
research.

3.4. Types of Data Collection and Sources of Data

To get more specific information concerning as well as the requirement of the problem statement,
the research objectives and questions, the study will use both primary and secondary type of data.
the sources of data collection will use gathering the necessary information that is needed for
effective writing of this research work. These sources will use the primary and the secondary data.

3.4.1. Primary Data Sources

The main base for the study is primary data which will collect by using data collection tools such
as questionnaires, interview and through observation of the researcher by personally vesting the
service delivery of the tax authority and the taxpayers premises.

3.4.2. Secondary Data Source

The secondary data source will gather from different sources like published and unpublished
documents, reports of the BOFED, journals, internet, regulations, proclamations and other various
related materials about the research as well as books and all these materials will use used as a base
of the analysis.

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 3.5. Data Collection Methods
There are various methods of collecting data that brings a tangible research in order to treat the
stated problem needs to use the most appropriate methods of collecting data. Among these
methods, the most appropriate methods of collecting data for this research will use questionnaire,
interview and observation technique.

3.5.1. Questionnaire
Questionnaires will use to collect the primary data from the respondents, the main purpose used
this questionnaire technique will to generate truthful data from the selected samples of employees,
the questionnaire will use. To gather the necessary data both open and closed end questions will
use .

Questionnaires will use distributed to the select respondents to get primary data on the research.
the main reason will select to this type of data collection tool is that since questionnaires is more
advantage and to cover a large area easily and quickly.

3.5.2. Interview
Since the objectives of the study will to assess the performance of budget preparation and
utalization , interview will use carriy out to the purposively select official from BOFED and
conducted individually from Finance Bureau.
These were helped us to get information that helped to verify the reliability of the response given
by the other respondents. The reason to selected this type of data gathered tool will an advantage
in conducting a report with respondents were promoted to obtain primary information.
Therefore, these data collection techniques that will use by the researcher are suitable and
appropriate.

3.5.3. Observation
To make more tangible the data gathered through the above two research techniques and gather
additional information for the study, observation will use carried out on the budget preparation and
utilization performance of Finance Bureau .

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 3.6. Methods of Data Analysis
Analyzing the data is a crucial part of the research study. The findings and conclusion arrived are
through analysis and interpretation of the data. The researcher will use both qualitative and
quantitative research approaches by using the appropriate tools and instruments such as
percentiles, tables, charts and others to facilitate the interpretations of the data.
The method of data analysis applied this study will use descriptive Analysis in that the collected
data analyzed by using the methods of descriptive Statistics.
The data that will obtain through questionnaires distributed to the sample respondents employees
to investigate the problems associated with the budget performance were assessed by the use of
quantitative analysis and applied descriptive statistical tools based on which statistical
interferences or deductions made. Those sets of data gathered through interviews from the
respondents they respond the problems and challenges related with the management of the system
will use analyzed by the use of qualitative analysis.
The method of data analysis which will select and apply this study is descriptive research method.
This method will preferre because it focus only on the description of the tangible facts related to
the subjects of the study and it is more appropriate than others methods of research because the
researcher has no control over the behavior of the subjects of the study. Since detailed analysis and
diagnosis not conducted the descriptive research method is preferable and applied. This research
method is suitable because it minimizes bias and maximizes the reliability of the data collected
and analyzed

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 4. Budget
S/n Description Unit Qty U/price Total
1. Note book PC 10 40 400
2. Writing Page 25 5 125
3. Internet Hrs 20 15 300
4. Coffee Pcs 3 20 60
5. Transportation Bajaj and Force 5 100 500
6. Cello Pen Pc 10 15 15
7. Dot pencil Pc 10 10 100
8. Mobile card Pc 5 25 125
9. Printing paper Page 25 5 125
10. Binding Book 1 40 40
Total 1,790

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 5. Work Plan
No Activity Week 1 week 2 Week 3
1 Development of Proposal
2 Development of Questioner
3 Sample Size Selection
4 Data analysis
5 Collection of secondary data
6 Submission of proposal

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 6. REFERENCE
1. Alemayehu Geda and Dawit Birhanu (2011) Spending without proper planning: A Macro
Perspective.IAES Working Paper Serious NO A10/2011.
2. Allen, R. (2009) The Challenge of Reforming Budgetary Institutions in Developing
Countries: Working Paper. Washington, DC: IMF.
3. Allen, R. and Tommasi, D. (Eds) (2001) Multi-Year Budgeting and Investment
Programming Managing Government Expenditure: A Reference Book for Transition
Countries. Paris OECD SIGMA.
4. Allen, R., Shiavo-Campo, S. and Garrity, T.H. (2004) Assessing and Reforming Public
Financial Management: A New Approach. Washington, DC: World Bank.
5. Annand, M., Sahay, B. S., & Saha, S. (2004). Cost Management Practices in India: An
Empirical Study. ASC1 Journal of management, 33(1-2), 1-13.
6. Andrews, M., &Hill, H. (2003), "The Impact of Traditional Budgeting Systems on the
Effectiveness of Performance-Based Budgeting: A Different Viewpoint on Recent
Findings." International Journal of Public Administration 26, no. 2: pp135).
7. Blocher, E.J., Chen, K.H. and Li T.W. (2000), Cost Management: a Strategic Emphasis,
2nd ed., Mc Graw-Hill International, New York, NY.
8. Bourne, M. (2004). Driving Value through Strategic Planning and Budgeting. Retrieved
June 8, 2015 from http://www.cimaglobal.com/ Documents/ Imported Documents/ better
budgeting techrpt.pdf.
9. Bunch, B.S. and Strassman, J.D. (1993) State Budgetary Processes, the Two Faces of
Theory: Public Budgeting and Financial Management
10. Chenhall, R.H., Smith, K. L. (1998), Adoption and Benefits of Management Accounting
49 Practices: An Australian Study, Management Accounting Research, and Vol.9 Pp.1-19.
Constitution of the Federal Government of Ethiopia and article 62 of the Financial
Administration Law of Federal Government
11. Cherrington “Cost Accounting managerial Approach 2nd edition
12. CIMA & ICAEW, (2004). A report on Better Budgeting Forum. July, 2004. Retrieved June
30, 2021 fromhttp:// www.icaew.com./index.cfm/route.
Falk, S. (1994), "When Budgeting, Focus on Value: Nine Strategies for Value Basing." Public
Management.

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