Chapter one

1. Introduction
1.1. Background of the study

Axum town Berea of finance and economic development studies to give a service to the whole
population on that town. Governmental finance is the lifeblood of a business. Therefore,
financial planning is a most of significant to a businessman. Financial planning is concern with
raising fund and their effective utilization with a view to maximize the wealth of the company. In
spite of good financial plan, the desired result may not be achieved if there is no effective control
to ensure it supplementation. A budget is an important tool for financial planning and control.
The budget represent a set of yardsticks or guidelines for use in controlling internal operation
often organization. The management through budget can evaluate the performance of every level
of the organization. This discrepancy between planned performance and actual performance is
highlighted through budget. Budget the financial culmination of prediction and assumption about
of achieving not only financial but also non-financial goal and objectives. Budget is a plant
relating to a period expressed in quantities and monetary tem. In the language of the business, a
budget is a formal expression of the expected income and expense for definite future period. A
budget sector is a system of controlling cost through budget. Budget sector curtail one of the
important tools of control. It involves a constant checking and evaluation of actual with budget
figures in order to take corrective action where every necessary.

Expenditure is designed to fore cost how much of revenue is collected to each activity for a
given period. (Public finance, 2005 and http/Google.com)

1.2. Statement of the problem

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Budget is use full for planning any economic activity, mostly for business, government agencies
and individual. All these entities make financial planning to carry out routine operations, to plan
for major expenditures to help in making financial decision.

Because there is financial difficulty in allocating capital improvement fund among competing
projects, coordinating operations of an organization and in facilitating the whole organization
activities smoothly.

In order to ensure its existence as well as profitability, and organization should have strong
budget system. However, if there is ineffective and poor budget system may face different
problem like inadequate communication of plan, lack of benchmark for controlling ongoing
operational and improper allocation of score resource. So budget is used as awhole.

1.3. Research question

As it is known, budgeting is very important for attaining organization goal it need detail
management system. In addition, in this study the research tries to answer the following basic
question in budget system.

1. What are the major problems associated with budget preparation and control?
2. Does the cooperation follow an appropriate budget method?
3. Do the budgets prepared at department level is fair and it includes only the item and
quality actually required by department?
4. Does the cooperation follow efficient and effective budget control policies and
procedure?
5. Did the problem that exists in practices and control have any effect on fulfillment of
the objective of the cooperation?
6. What action should be taken for the future to improve the problem recommend budget
practice and control?
1.4. Objective of the study
1.5. General objective

The study is undertaken to assess the effectiveness of the budget preparation and controlling
system of Bureau of finance and economic development and to identify area problem of occurs
in relation to the budget system.

1.5.1. Specific objective of the study

In order to achieve the general objective of the study the research conceder is the following
specific objectives
1. To investigate whether cooperation budget system support its operation
2. To assess whether the cooperation seriously follow the budget system policies and
procedures which controlling its budgets.

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 3. To identify reasons for poor budget system cit any.
4. To indicate the cooperation potential to improve their budget system.
5. To evaluate the companies operation in relation to budget for two consecutive years.
6. To identify company’s organizational structure influences effective budget system.

1.6. Significance of the study

This research work is significant to;

a. Provide valuable information and better approach to deal with maintaining goal budget
system in the organization.
b. Help the writer to have avoided pictures of how the theoretical concepts are applied in the
actual practices of the organization.
c. Give way for other research who wants to make further investigation in the area and to
conduct detailed research on the problem.
d. Enriches the knowledge of the reader on the budget system of the organization.

1.7. Scope and limitation of the study

1.7.1. Scope of the study

This research paper concern with the budget preparation and control of Bureau of finance and
economic development. The cooperation has no branches for the time being this paper
concentrated on home office.

1.7.2. Limitation of the study

In understanding, the study researcher may face following limitations.

1. Difficult accessing personal due to work over load.

2. Lack of available material and researcher related to the study.
3. The time given to process the paper is too short.
4. Existence of additional course during the study.
5.
1.8. Methodology

This paper attempts to explain the budget preparation control of Bureau of finance and economic
development. The researcher used primary and secondary data to gather the information

 Primary source
 Questionnaire
 Observation method
 Interview
 Secondary source

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  The organization manuals
 Different books

1.8.1. Data sampling technique

The researcher used random sampling technique to avoid bias and to go accurate information
from the study.

The reasons for conveniences sampling technique are;

 Conveniences sampling is used to explanatory research when the research is interested in

getting an inexpensive approximation the truth.
 Conveniences sampling is often used during preliminary research efforts to get a growth
estimation of the result with out in currying the cost of or time required to select random
sample.
 This method is often the only feasible one particularly for students or others random
sample.
 This method is often the only feasible one particularly for students or other with restricted
by time and resource.
1.8.2. Sample size

To acquire the necessary information, with shortage of time, & money for accuracy purpose.
From the total employees of 30, questioner will be distributed to 10 of them by using simple
random sampling technique.

1.9 Organization of the paper

This paper is organized in to four chapters.chapter one which tells about introduction part
including: background of the study, statement of problem, objective of the study, significance of
the study, scope and limitation of the study, methodology, chapter two deals with literature
review and uses as theoretical framework of the research; chapter three deals with data
presentation and analysis of Bureau of finance and economic development: The last chapter
deals with conclusion and recommendation.

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 CHAPTER TWO

2. Literature Review

2.1 Definition of budget and budgetary control

A budget is a detailed from the acquiring, financial, and other resource over a specified time
period. Budget consist two different components. These are revenue and expenditure budget. A
budget is a plan relating to a period of time, expressed in quantitative tests. If has been defined
by as “a financial and/or qualitative statement prepared prior to a defined periodic time of the
policy to be pursued during that period for the purpose of attainting a given objective.”

Budgetary control is “a system of controlling cost through budget. Budgeting is that is only a
part of the budgetary control. London defines budgetary control as the establishment of budget
relating of the responsibilities of executives of policy and the continuous comparison of the
actual with the budgeted result. Either to secure by individual act on the objectives the policy or
to provide a basis for its revision. (http//www.googel.com)

2.2 Characteristic of budget and budgetary control

2.2.1 Characteristic of budget

a) A budget may be expressed, in terms of quantity or policy or both

b) A budget is prepared for a define future period. In other word a budget is prepared in
advance of the period during which it is to operate

c) A budget is prepared for the implementation of the policy formulated by the management
for attaining a given objective.

d) It relates to future

2.2.2 Characteristic of budgetary control

a. establishment of budgets for each function or department of the organization

b. compare actual performance with the budget on a continuous basis

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 c. Analysis of variations of actual performance from that of the budgeted
performance to know the reasons there of.

d. Taking suitable remedial action where necessary.

e. Revision of budgets is view of changes in conditions

(PASS 2007 Allah Bakash S.Moha. Aritpasha 657, 92)

2.3 The objective of budgets and budgetary control

1. To indulge in planning for the future in conformity with good business practice

2. To iron out seasonal fluctuations in production by developing a new strategy of “full

in products and there by accomplishing phase or economic planning

3. To ensure co-ordination among different department in organization such as

production, marketing finance and administration, through consummation among the
head of the department and mutual agreements on policy

4. To provide a firm assurance of earning capacity of the unit of the capital invested so
as to achieve long term stabilities

5. To improve the operational efficiency of the divisions, department and cost centers of
the plan.

6. To impose adequate and satisfaction norms of performance over the various activities
of the unit. To ensure that the valuable assets and resource of the enterprise are
utilized most efficient and effectives.

7. To fore cast operational activities as well as financial position and accordingly

acquire and allocate resource required for such operational activities

8. To eliminate waste of all kinds to improve economy and efficiency and to obtain the
targeted in came as planned.

9. To aid in obtaining better control over inventory, turnover as well as cash, to ensure
economical use of capital

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10. To enlist the co-operation and commitment of organization members to achievement
of the predetermined goals of the organization. (D.R.N UINAYARANIP. 17-18)

2.4 Advantages of budgets, budgeting and budgetary control

1. It brings about efficiency and improvement in the working of the organization

2. It is a way of communication the plans to various units of the organization by

establishing the divisional, department, section as budget, exact responsibilities
assigned of this minimized the possibilities of back positioning if the budget requires
are not met.

3. It is away or motivating managers to achieve the goals set far the unit.

4. It helps in developing are am spirit where in budgeting in encouraged

5. It serves as bench mark for controlling going operation

6. It helps in reducing wastage and losses by revealing them in time for collective
action.

7. It serves as a basic for evaluating the managers

8. Ensures efficient use or resource of business

9. Provides incentives when set results area achieved

10. It serves as a means of educating the managers

11. Compels management to plan economically and carefully

12. Promote coordination and communication. Coordination is meshing and balancing all
as percent production or service and all departments is in a company in the bust way
for the company to meet its goals. Communication is moving sure; those goals are
understood by all employees.

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 13. Clearly defines areas of responsibility. Requires managers of budgeters to be mad
responsible for the achievement of budget targets for operation under their personal
control.

14. provides yardstick against which actual result can be composed

15. Enable remedial action to be taken as various emerge

16. Motivates employees by participating in the setting of budgets

17. It assists in delegation or authority and assignment of responsibility

18. Economies management time by using by exception principle

19. Improve the allocation of scarce resources (Allah Bakashs 2007 P 512 and 181
GEORGE FOSTER 2006)

2.5 Limitation of budgetary control

1. Budgets are based on estimates. Therefore, absolute accurate is not possible in budgetary
control. The strength or weakens depends largest on the accurate with which the
estimated are prepared.

2. The estimation or budgetary control system is a costly affair as it involves the

employment of expert staff which small business units may not afford

3. It is only a tool in the hands of management and if cannot be regarded as a master.

Exhibition or budget does not ensure the success of the organization and will occur
automatically. If there is no co-operation and team work of all concern the whole system
will collapse.

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 4. It is a time consuming process and it may take several years to attain a good system of
budgetary control. Again the estimated may so wrong and the conditions may change
while at the time or implementation

5. It must be continuously adopted to fit the changing circumstances

6. Budgetary control is essentially a tool of decision-making and helps the management in

taking sound decision. But it cannot replace the management

2.6 Steps Budgetary Control

1. Establishment of budgets for each section of the organization

2. Comparison of actual performance with the budget

3. As entwinement of the reasons for such variations of actual form the budgeted
performance

4. Taking remedial action wherever necessary (Allah Bakash.S)

2.7 Essentials of Successful budgeting

Budgetary control system con prove effective only when certain conditions and attitudes control
system or which will negate to a large extent value of a budget system in any business. Such
condition and attitudes, which are essentials for effective budgeting, are as follows;

1. Support of top management if the budget system is to be successful. It most is fully

supported by every management and the impetus and direction must from the very top
management. No control system can be effective unless the organization is convinced

2. That top management considers the system important. The top management must be
committed to the budget ideas as well as to the principles, police and philosophy
underling the system.

3. For the success of budgetary control, there should be participation of the executives
allowed be clear-cut delegation of authority and responsibility.

4. The figures in the budget should be realistic and attainable or reasonable goals

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 5. The staff involved in the process should be properly motivated to achieve the goals

6. Clearly defined organization in order to derive maximum benefits the budgetary system
well defined responsibility centers should be built up within the organization. The
controllable cost to each responsibility centers should be separately shown.

7. There should be a close relationship between the accounting and budgeting, as budgets
have to be prepared based on historical factors.

8. The budgeted figures should be compared with the actual to ensure the take and to take
necessary remedial action.

9. The budgets should be flexible enough to allows the adjustments under changed
circumstance

10. Maximum profit: the ultimate objective of realizing the maximum profit should always
be kept upper most

11. Cost of the system: the budget system should not cost more that it is worth since it is not
practicable to calculate exactly what a budget system is worth it only implies a cautions
against adding expensive refinements unless their value clearly justifies them.

12. Integration with standard cost system: where standard costing system is also used, it
should be completely integrated with the budget program in budget preparation and
variance analysis. (Allah Bakash.S P 512-513)

2.8 Classification of budget

Budgets are simple things but they are often abused we are asked to prepare a budget to show we
would spend money it we get it a program or project so we inflate everything assuming that will
never get as much as we ask or perhaps the budget prepared on cost years figures is not doing too
well is year so the prepare a Approaches to Budgeting.

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 1. Line item budgeting

A traditional approach to budgeting and the one that is most likely present in some
portion or every government budget today is line it more object of expenditure,
budgeting. A simplistic approach to budgeting line item is

A. Incremental budgeting

In essence, on incremental budget is derived from the current tears budget by adding amount
expected to be required by line items. The incremental budget is particularly troublesome when
top management seeks to identify in efficiencies and waste in face in efficiencies tend to grow in
the incremental budget because it is easy for them to get hide. In the typical incremental budget
bathing ever gets cut. Each budget begins with the funds all a acted for the cost period to which
unit managers add a percentage for inflation and request for those new or expanded activities the
seek to purse. To management only looks at the requests for incremental changes

B. Zero Basic Budgeting (ZBB)

As the name indicates the basic concepts of ZBB is that the very existence of each activity as
well as the amount of resources requested to be allocated to each activities must be justified each
year, which is a move toward program budgeting. ZBB shift the burden of proof to the manager
to justify why his or he unit should get any budget all ZBB is no panacea like incremental
budgeting, it has its own set of drawbacks. It increases paper work and requires time to prepare.
The important activities that managers wont funded tend to have their benefits inflated, and the
eventual outcome largely differs much from what would occur through an incremental budget.

2. Performance Budgeting

The Evaluation of the concept a budget from “an estimate of proposal expenditures and the
proposal means of financing them” to an “operation.

Plan” was an a rural accompaniment to the development the concept of Progression management
in public Administration, an in business administration, the concept f professionalism demand
that administrators of managers attempt to put the source resources of qualified personnel money
to the best possible uses.

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Performance budget historically focused on the relation between input and output of each
organization unit father than programs. Entities that use performance budgeting consider it a
financial management tool and not a sub field or accounting.

3. Program Budgeting

The program budgeting is a term sometimes used synonymously with performance the item is
more generally used to refers to a budget form are that disclose me full cost of program of
function regard to the number of organization if that might be involved in performing the various
aspects of the program or function as store and local governments have experimented with
program budgeting they have developed stand alone budget offices to analyze the cost and
benefits of program that at across department or division lines.

4. Entrepreneurial Budgeting

Another evolution of budgeting that removes it even further from the purview of the accounting
department is entrepreneurial budgeting, an approach that passions budgeting so that it is the
responsibility of the highest level person in the government most of them the chief executive
officer.

In the approach, strategic plans incentive and accountability are merged in to the budget and
communicated to citizen as a package. (Wilson Reck.P535-537)

2.9 Preparing a budgeting

Most computer accounting packages will enable you to draw up incremental budget
automatically. The program simply takes the total for the previous year and allures them
accordingly. You can then change whatever items you wish but at least you have guidance as to
the current years expenditure you can also draw up a zero based budget using an accounting
package instead of using totals from the current year, the program merely draws up a list of items
in the current budget and lets you enter the figure for coming year.

I am not an accountant and not happy with financial aspects of management. However, have
managed large budget. In one of the job, for example, we had to be within 5% of the budgeted
total attended or the financial year, if you looked like spending too much. You simply refused to
spend anything in the last weeks or months ignoring the pleas and cries of your staff and
departments, if you looked like not spending enough. You went berserk and procured items you

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might not real need. The problem was that if you were more than under budget. You had no hope
of getting to same amount again and certainly, no hope setting any increase regards of changes to
your programs.

Program budgets are difficult because you have nothing to go on. You have to make estimates
and try to cover all contingencies. This happens to me now when I apply for funding for the
community organization I run when want to develop new project.

Applying for continuing funding for the scheme itself is no problem. The computer produces an
incremental budget and I make minor change to it. The problem arises when we think we could
fly something new if we could get money for it.

Here is a sample budget which a use in my sessions on planning conferences and workshops.
You should be aware that if it were available to you as a spreadsheet, you could adjust
expenditure figures and see what the outcome could be on the balance. To maintain a slight
profit you could then see how to adjust the income categories. A major international IT
conference went horribly wrong in this part of the work recently when organizes planned on
some 3000 registrants pea day they delegates got 30. The conference was wrapped up on date 3
When is gusted went state and federal governments were involved in the subsequent
investigation.

2.10 Establishment of Budget committee

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

The main function of a budget committee is:

1. To provide historical data to department head, to help in estimating

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 2. To issue in structure to department regarding requirements data of sub mission of
estimate etc

3. To define the general policies of the management in relation to the system

4. To receive budget estimate from various department for consideration and review.

5. To coordinate work

6. To prepare budget summaries

7. To discuss difficulties with departmental heads and suggest possible revision

8. To evaluate and revise the estimate before preparing the final budget

9. To prepare a master budget after functional budget have been approved

2.11 Preparation of Budget Manual

To be useful a budget requires a substantial amount of time and effort by the person who
prepared it. This process can be improved by the a viable on organizational budget manuals
which is a detailed set of intro motion and guidelines above the budget processes.

The manual should include

1. Statement of the budgetary purpose and its desired results

2. a listing of specific budget activities to be prepared

3. a calendar of scheduled budgetary activities

4. a sample budgetary forms and

5. original revise and approved budgets

2.12 Budget Period

Budget period is a length of time for which a budget is prepared and operated. Budget period
vary between short term and long term and no specific period can be paid down for budget. If
varies among concerns and industries as a result several factors. A budget is un usually prepared

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for one year, which corresponds to the accounting year. It is sub divided in to quarters and in turn
each quarter is broken down in to three separate months when a business experiences reasonable
fluctuations. The budget period may be fixed to cover one seasonal cycle covers two or three
years along term budget should be prepared to cover the period. This long period may then be
broken in to smaller period by preparing short-term budgets.

Budgets for capital expenditure are usually prepared on a long term basis for example in
electricity companies which in cur very heavy capital expenditure, the need for new power
stations is possibly forecast five to ten years in advance such long term budget are supplemented
by short term ones.

An important point to note is that short term budget will be much more detailed and are costly to
prepare and operate while long term budgeting considerably effected by un fore seen conditions.

2.13 Budget Report

Budget control is not effective un less there is a continues flow of budget reports. The report
should be prepared at requires intervals to show comparison of actual performance with that
budget. Such reports may be presented to heads of the budget center showing favorable or
advance variances form budgeted figures. These hoods of budget centers should be immediately
required to explain these variances to the top management so that necessary corrective action
may be taken without delay. The contents of the budget report differ according to the need of
managerial level.

For example, tower level of management is generally provided with detailed and a report of
such activities with which manager is directly concerned with report concerning his own section
as the level of management grows higher.

The amount of act all becomes less although the coverage of the report will widen. The
following essential should be kept in mind while prepared budget reports

a. The budget reports should be simple and suitable for the of understanding for the user

b. Report should be presented promptly

c. The principle of exception should be utilized where possible

2.14 Budgeting and responsibility accounting

Responsibility accounting is one of the basic components of goal control system. Budgeting and
variance analysis are thus part of the responsibility accounting process to attain the goal
described in the master budget. A company must coordinate the efforts of all its employees from

15
the top executive through all level of management to every supervised worker. Coordinating the
company’s efforts means assigning responsibility to managers who are accountable for their
action in planning and controlling human and other resources. (Shames T, Holmgren 2009)

2.15 Organization structure and responsibility

Organization structure is an arrangement of lines of responsibility within the organization a

company such as Bharal petroleum may be organized primarily by business function exploration,
refining and marketing with each manager have decision making authority even her function the
managerial of the individual divisions (tooth paste soap and so on) would each have decision
making authority concerning all the business functions (manufacturing marketing, marketing and
so on responsibility accounting is a system that measures the plans, budget, actions and actual
result of each responsibility center.

There four types of responsibility center

1. Cost center: the manager is accountable for cost only

2. Revenue center: the manager is accountable for revenue only

3. Profit center: the manager is accountable for revenue and cost

4. Investment center: the manager is accountable for investment revenue and costs.
(Charles, T, 2009)

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 CHAPTER THREE

3. DATA PRESENTATION AND ANALYSIS

3.1.1 over view of Budget

Budget as mentioned earlier is a basic tools to allocate score resources affectively efficiently to
meet the goals of an organization either a given period of time. To attain their goals the
organization would have some sort of mechanism that leads to better administration of their
budget. The resources observed that bureau of finance and economic development has will
design budget polices and procedure manual.

3.1.2 General police and procedure of budget preparation and control in bureau of
finance and economic development

The bureau of finance and economic development budget policy cover preparation authorization
and utilization operational budget monitoring of both capital and operation budget.

The budget shall serve as a tool to controlling the performance of each business unit in the
organization control costs the official at each budget shall bear responsible for ensuring that there
to obtain the respective budget and manage the organization financial and other resources as
economically, efficiently and effectively.

To serve as a guideline in the implementation of modern budget or controlling and management

system, the following has identified as policy matters.

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Table 3.1 Level of segregation of duties

Question Number of respondents Percentage

Yes No Yes No

Is their segregation of 10 - 100 -

duty

Done according pan 4 6 40 60

faction

Source: own of questionnaire, 2012

From the above table all the respondents believes that in bureau of finance and economic
development there is segregation of duty between budget allocation budget approval
implementation and record keeping from these respondents 40% done according to the plantation
and 60% not according the plantation. Therefore, this feedback is a problem in done according to
plan faction.

3.1.3 Sources of revenue in bureau of finance and economic development.

The source of revenue is from different services they hindered such as:

 Total
 Special assessment
 Licenses and permits
 Intergovernmental revenue
 Fins and forfeits
 Changes for services.
 Miscellaneous revenue
Table 3. 2 Information in budget preparation

Question Number of respondent Percentage

Is there read equate Yes No Yes No

information goals and
objectives

4 6 40 60

Source: own questioner result, 2012

From the above table 60% respondents say that there is no adequate how of information about
the goals and objectives of the organization. It indicates at the time of budget prepared there is
some discussion from the goals and objectives.

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 3.1.4 Approach of budgeting in bureau of finance and economic development

The budget technique used by the corporation zero based budgeting.

Table 3.3

Question Number of respondent Percentage

Do you follow purely zero Bureau Never believe believe Budget

base budgeting? believe

4 6 40 60

Source; own questioner result 2012

From the above table of the respondents say was the cooperation does not follow on appropriate
budget practice they explained that zone estimate their budget according to their previous
experience rather than following what is state in the manual. 40% agree for the presence of on
appropriate budget practice from this feedback we can inter that there is problem of or
implementing the techniques placed in the manual.

3.1.5 Budget period and calendar

Bureau of finance and economic development budget period shall run from July 1 to June 30.
The budget calendar of the cooperation run from October 1 to June 15 the budget time table set
in the financial procedure. Manual shall be strictly followed practically to budget utilization

Report submitted to cooperation in once department on time. They report their performance
weekly, monthly, quarterly annually to budget departments.

The bureau of finance and economic development prepare budget annually, source from
secondary data.

3.1.6 Revenue budget

Revenue budget shall be prepared by strategic business unit based on the traffic estimation to
each type of units based on the revenue budget shall be budgeted based on part condensed
futures fore cases.

3.1.7 Purpose base and method of preparation in bureau of finance and economic
development

Bureau of finance and economic development budget shall be established to reliable to provide a
tool of the preparation of the budget shall be based on a thorough analysis that includes a clear
identification of the budget’s purposes to the mission goals and objectives of the corporate unit
strategic business units, town and special service.

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 A comprehensive assessment of the unit’s financial needs is required in order to full fill its goals
to revise plant to increase resources or modify goal and observe in current resources fall short of
meeting a units needs budget preparation shall be based on the plan of action at each level of
operation.

3.1.8 Budget Transfer and Alteration

 Budget transfer ability and alterative shall not be allowed, however in exceptional
circumstances unless appropriates formalities indicated there on fulfillment.
 Operational a budget transfer from one budget line to another budget line or from one
budget code to shall be up on approval by chief executive officer.
 Capital budget can be transferred or altered with the prior approval of the management
board of the corporation.
 The total budget figure shall not be altered unless unforeseen circumstances complete
and the management board or its delegates approve the revision.
 Capital budget lines and figures shall be altered after evaluating the financial
consequence to ensure that anticipated benefits are greater than costs.
3.1.9 Budgets performance evaluation and monitoring
 Each budget holder shall be responsible for ensuring that all expenditures are within the
approved budget.
 Budget holder at each level or activities is responsible for monitoring their budget
utilization and reports every month.

 Actual financial results shall be compared to the budget on a quarterly basis.

 When actual financial results vary significantly from budgeted amount, executive
officers and managers in the respective operating unit special service centers must
determine the cause, evaluate the activity, and take collective action on time.
 Each budget holder shall only submit supplementary budget request if there are
foresee circumstances that necessities additional budget. The thief executive officer of
the management board with justification shall submit the request.
 All the budget expenditure must comply with all relevant policies. (Recruitment,
polices, human resources policy its.) rules and regulation in operation within the
corporation.
 Quarterly budget utilization report shall be submitted to the operation financial
department.
 Corporate finance departments should review and consolidate the quarterly budget
utilization report and pass the same to the management committee to gather with its
comment.
3.1.10 Budget holder

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The overall responsibility to administer the corporation’s budget lines with the chief executive
officer. Executive officer, sub general managers. Town and division managers. The level of
responsibility shall be show in the procedure manual excusive officers. Sub general managers,
town and division manager are the budget holder for the approved budget of their level of
authority. It is their deities to follow up the budget all of to their respective office and give
periodic performance report.

As the respondents answer for question raised in the questionnaire corporation wisely the budget
for the specific purpose for the sanctioned and the budget holder follow up the budget their
respective office and give periodic performance report this indicates that the budget holder
perform their duty according to the police.

Table 3.4 level of solving budgeting problems

Question Number of respondents Percentage

Overcome budget Agree Disagree Agree Disagree

problems based on 3 4 42.85 57.15
principles.

Source: own questioner result, 2012

From the above table 42.85% of the respondents says that the corporation face the
problem of over wisely to budget because of
 Some work in the organization have characteristics of urgency of this firm even if the
budget limits the wisely to continue the operation the business unity use above the
budget.
 The service by the organization is technological and for always change in technology
this also an impact for over wisely of the budget.

Table 3.5 Effectiveness and efficient budget control

Question Number of respondents Percentage

Is there effective and Believe Never Believe Never believe

efficient budget believe
control
4 6 40 60

Source; own questioner, result 2012

From the above table 60% of the respondents say there is no effective and efficient
budget control system in bureau of finance and economic development and the other
respond that there is control system.
Table 3.6 Variances

Question Number of respondents Percentage

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 Use variance analysis Agree disagree agree disagree

8 2 80 20

Source: own questioner result, 2012

From the above table the respondent who requested the question that corporation adopts
a variance analysis80% say “Agra” but they raise some problem for the proper
implementation of the analysis this are:-
 Lack of full information about the code of some budget it cries so the budget section
collect unrelated codes to gather this makes the various analysis in relevant for the
purpose intended.
 The control system by itself has problem.
 The organizational structure of the budget department bills self. From this feedback
bureau of finance and economic development has a properly of controlling the budget
effectively and efficiently.
Table 3.7. Impact on fulfillment goal and objective

Alternatives. No of Percentage
respondents

Yes No yes No

Does the corporation take corrective 5 10 25 75

action on time?

Does the controlling problem have 20 5 80 20

impact on fulfillment of the
objective the corporation?

Sources: Questionnaire results, 2012.

From the above table 80percentage of the respondents that the cooperation does not take
collective action when there is variation from bureau amount 25% respondents that the
cooperation take corrective action. From this feedback, use can say the corporation doesn’t take
effective action.

The problem exists in practices and control have an effect on fulfillment on the objective of the
organization 80% says that have impacted 20% says no this indicates here is problem of attaining
the objectives and goal of the organization because of lack of effective control on budget.

The major person for the preparation of variance analysis report is to make corrective action if
there is intolerable division from the plan ties the core of the corrective action be taken. In the
cooperation, the budget dependent prepares a variance analysis but it will not be commented to

22
be improved. The cooperation on manual system, which is a poor controlling but has to be
revised.

Source; questionnaire result 2012

3.1.11 Finding

1. The major reason for the preparation of variance analysis is to make corrective action if there
is material deviation from the plan. In the corporation, the different zone and region prepare a
various analysis but the budget department does not take corrective action on time.
2. As we can see from the analysis part in the corporation there is lack of adequate how of
information about the goal and objective of the organization.
3. For the analysis we find that the over wisely of their budget in the corporation in the
corporation is due to the nature of the service organization rendered.
4. From the feedback of the respondent the corporation has a problem of implementing the
budget techniques placed in the manual.
5. The overall control of budget in the organization is not good. The corporation use variances,
which is a better controlling does not show the real variance.
6. As we can see from the analysis the corporation use codes for their budget types there is a
problem of coding.
7. There the analysis the corporation has good policy and better segregation of duty.
8. There is lack of adequate communication of information between the working unit and the
budget department.
Table 3.8 .budget includes the right item and quality

Question Number of respondents percentage

The budget includes Yes No yes No

the right items and
quality 8 2 80 20

Sources: own questioner result, 2012

From the above table 80% from the respondents of that budget includes right item and quality
required by the department say “yes” but 20% of the respondents explained that the budget does

23
not include the right item and quality required by the department their reasons that preparation
does not participate the working unit.
From the more or less the budget includes the right item and qualities required by the
department.

CHAPTER FOUR
4. Conclusion and recommendation
4.1 conclusion

Budget is prepared to allocate scarce resource effectively and efficiently in order to achieve the
goal and objective of finance in general and the unit in particular. For every business budget
plays a key role in order to make business in ordinary course of action .Thus it need better
forecasting and preparation to attain the goal of the organization, however forecasting is not
simply enough, what is important is that strict policies and procedures. In is possible to say a lot
about budget, but the researcher scope limited in Bureau of finance and economic development
budget system. In general the researcher concludes on the following point, budget are prepared
by head office ,town but the controlling is performed in the head office level budget in bureau
of finance and economic development is prepared I accordance with policies and procedures .
This paper mainly focuses on the budget preparation, control in bureau of finance and economic
development, and has tried to show the general and actual practice of budget system in bureau of
finance and economic development.

 As the finance procedures manual and from the data the different budget
section of the finance such as town, and cost centers of the budget section
prepares budget.
 The manual stated that transfer of one budget code to another budget codes
not allowed unless approved by the chide executive officer from the analysis
we see some deviation from this rule because of poor communication
between the budget section and the budget department this may make the
controlling process difficult .
 The finance controlling system is a weak.
 From the analysis, the major aim or preparation of variance analysis report
was to make corrective action if there is a material deviation from the budget.
In bureau of finance and economic development the budget section prepare
the variance analysis with their justification but there is lack of taking
corrective action by the budget department on time.

24
  Bureau of finance and economic development has plan to achieve the goal
and objective of the operational of the organization and management effective
and efficient but there is inadequate flow of information about the preparation
of the budget and how to implement the plan this brings a problem of over
wisely.

4.2: RECOMMENDATION

 To attain the goal and objective of the organization effective and efficiently the
finance flow of information should be improved
 When the budget departments make any change on the codes of proposed
budget prepared by the different town and cost center they should aware then on
time this make responsible center not to include unrelated codes together at the
time they prepare variance.
 The finance should increase the behavioral culture of the budget department to
have effective control system
 When there is exaggerated estimation, on the proposed budget responsible
center take corrective action on time and motive ted budget sections to have
good awareness about how to prepare their budget.
 In bureau of finance and economic development the budget police are good but
there is problem of implementation they policy so the finance should turn the
employees of department to enhance there is capacity.
 Aksum town bureau of finance and economic development study to give a
service to the whole population on the town governmental finance is life blood
of a business .In spite of the good financial plan, the desired result may not be
achieved if there is no effective controlling it supplementation.

Thus it need special control to use those scarce resource effective and efficiently through
budget to achieve the goal and objective of the organization.

In this prepare the writer tries to look producer of preparation and control of the budget system
in bureau the finance has good policy but there is a problem of implementation so they finance
should revise the organization structure of budget department.

25
 ARBA MINCH UNIVERISTY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING and FINANCE

ACCOUNTING PROGRAM - BA PROGRAM

Questionnaire to be filled by employees of Bureau of Finance and Economical Development

26
Introduction

Dear Respondent

The purpose of this questionnaire is to collect primary data for conducting a study on the topic
“An Assessment of Internal Controlling on budget and Expenditure -A case study of Bureau
of Finance and Economical Development A/Minch town.” As partial fulfillment to the
completion of the degree of Accounting (BA) Program at A/Minch University. In this regard, I
kindly request you to provide me reliable information. I would like to extend me deep-heart
thanks in advance for your corporation to devote your valuable time in feeling this form.

 Direction
 No need to write your name
 Kindly request you to answer by making a (X) make or in writing where ever
appropriate
PART-I: PERSONAL PROFILE
1. Sex Male Female
2. Educational background
Diploma Second degree and above
First degree
3. Age
20-25 26-30 31-35 Above 40
4. Material status
Single Married Divorced

PART-II: SPEICFIC INFORMATION

1. What are the general policies and procedure of budget preparation and controlling
in bureau of Finance?

2. Is there segregation of duties?

Yes No
3. If your answer for question 2, No, why? Specify.

4. What are the sources of revenue in this finance?

27
5. Is there adequate information goals and objectives?
Yes No
6. Do you believe that this finance follow appropriate methodology in the practice
estimate budget?
Believe Never Believe
7. Do you agree that there is a problem of budget to use wisely?
Strongly Agree Strongly Disagree
Agree Disagree
8. If you agree with question 9 what are these problems?

9. What are the purpose, base and method of preparation budget in the bureau of
Finance and Economical Development in Aksum Town?

10. What are the method of budget transfer and its alteration?

11. What are the evaluation of budgetary performance and monitory of this finance?

12. Do you believe there is effective and efficient budget control?

Believe Never Believe
13. Do you agree that this Finance use variance analysis?
Strongly Agee Strongly Disagree
Agree Disagree
14. If you agree with question 13, what is this variance analysis?

15. Does the Finance take corrective action on time when there is a variation?
Yes No
16. Does the controlling problem have impact on fulfillment of the objectives financial
performance?

28
 Yes No
17. What are the major reasons for preparation of variance analysis report?

18. What are the overall controls of budget in organization?

Excellent Very Good Good
Other, please specify,

19. Do you agree there is lack of adequate communication of information between the
working unit and budget department?
Agree Disagree
20. Does the budget include the right item and quality required by Department?
Yes No
21. If your answer for question 20, No why? Specify,

BIBLOGRAPHY

29
1. Allah Bakash .S, 2007, 12th edition Cost accounting,Stanford university,12th edition
2. A.H, Hanen 2005,4th edition Public finance ,North Carolinasfare university
3. Charles .T,Hornger,2009, Cost accounting Notth carolinasfafe,8th edition
4. D.R.N Vivanay Anayar ,2007,Management accounting ,Stanford university,12th edition
5. George Foster,2006 ,Cost accounting universalof conlonbia,15th edition
6. Internet .www.net Fragled.com
7. Wilson on Reck, 2007,Accounting for government and nonprofit universal of missouci
conglobe 12th edition

30