COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING & FINANCE

ASSESSMENT OF BUDGETARY PERFORMANCE (CASE STUDY ON

GAMO ZONE FINANCE BUREAU)

BY:

ROBISHA KITANBO

ID NO. SSHR/1796/12

ADVISOR: - MELIKAMU GEZEMU (MSc)

A SENIOR ESSAY RESEARCH PAPER SUBMITTED TO DEPARTMENT OF

ACCOUNTING AND FINANCE, IN PARTIAL FULFILLMENT OF THE
REQUIREMENT BA DEGREE IN ACCOUNTING AND FINANCE

SEPTEMBER,2023

ARBA MINCH, ETHIOPIA

ACKNOWLEDGEMENT

First of all, I would like to express my deepest thanks go to the Almighty of God for let me to
stay in life to this day and enables me to complete my academic life. I also would like to express
my deepest gratitude to my technical advisor Melkamu Gezemu (MBA) for his enthusiastic
support from the preparation until the final discussion of this paper with frequent follow up with
receiving in detail, main body of the paper and forwarding constrictive suggestion and
comments.

I am greatly thanks for my family they had been assisted my schooling life and to give advice
how can I goes with my planning activity to finish my academic schooling in this university.

Finally, I would like to acknowledge all individual and institutions that have helped me
materially and morally during the preparation of this paper.
 ABSTRACT
The establishment of effective budgetary performance is important for every organization in
order to achieved its objectives and future plan of action. The purpose of this study is mainly to
examine the assessment of budgetary control system and its performance organization in gamo
zone finance bureau. Beside this, it also tries to identify problems associated with budgetary
controls and offer alternative solutions. This study is conducted to the assessment of budgetary
performance in gamo zone finance organization. The objective of the study is to assess the
budgetary performance and identify any problems which affect its effective implementation of
budget in general. In collecting data, the researcher used both primary and secondary source of
data. The primary data collected from questionnaire and through interview. The secondary
source of data collected from reference books, internet and also used the four-year budget report
of the organization. The sample used for this research were simple random sampling techniques.
The data analysis would be carried out based on tabulation and percentage method and
interpreted accordingly. The researcher would give recommendations to gamo zone finance
organization bureau after the study completion.

Table of Contents

ABSTRACT........................................................................................................................4
Chapter one..........................................................................................................................5
1. Introduction.....................................................................................................................5
1.1. Back ground of the study......................................................................................................5
1.2. Statement of the problem......................................................................................................6
1.3 Research Question.................................................................................................................7
1.4. Objective of the Study..........................................................................................................7
1.4.1. General Objective..........................................................................................................7
1.4.2. Specific Objective..........................................................................................................7
1.5. Significance of the study......................................................................................................8
1.6. Scope of the study.................................................................................................................8
1.7 Organization of the paper......................................................................................................9
CHAPTER TWO.................................................................................................................9
2. Literature Review............................................................................................................9
2.1 Theoretical of literature review..............................................................................................9
2.1.1 Meaning of Budget.........................................................................................................9
2.1.2 Purpose of Budget.........................................................................................................10
 2.1.3. Types of Budgets .........................................................................................................11
2.1.4. Budgeting Techniques .................................................................................................12
2.1.5 Budget relative to time..................................................................................................13
2.1.7 Basic Principles of budgeting.......................................................................................13
2.1.8 THE BASIC OBJECTIVE OF BUDGETARY CONTROL.........................................15
2.1.9 Budgetary Control Process budgeting........................................................................16
2.1.11 Budget Implementation...............................................................................................16
2.1.10 The Effective of budget and Budgetary Control ........................................................17
2.2 Empirical literature review..................................................................................................18
2.3 RESEARCH GAP...............................................................................................................19
CHAPTER THREE...........................................................................................................20
3. RESEARCH METHODOLOGY..................................................................................20
3.1 Introduction ........................................................................................................................20
3.2 Research Design..................................................................................................................20
3.3 Source of data and collection techniques.............................................................................20
3.4. Target Population................................................................................................................21
3.5 Sample design......................................................................................................................21
3.6 Method of Data analysis......................................................................................................21
Chapter one

1. Introduction

1.1. Back ground of the study

Budget is a quantity of future plan of action and aid to the coordination and implementation of a
plan. It is systematic and formalize approach for stating and communicating firms’ expectation.
Budget is a predetermined statement of management policy during a given period, which
provides a standard for comparison with results actually achieved (Brown and Haward 8th
edition)

A budget is a forecast of revenue and expenses over a specified future period. Budgets are
utilized by corporations, governments, and households and are an integral part of running a
business (or household) efficiently. Budgeting for companies serves as a plan of action for
managers as well as a point of comparison at a period's end (Jonas Elmerraji 2021).

The study focusses on the assessment of budgetary performance in the organization. Each year
there is an inventory valuation process which is taken up on regular basis out according to the
growth of the organization, it is not fully recorded and not taken the extent as a means of budget
utilization. Most of the time budget deficit should be controlled by finance organizations and by
periodical performance of the organizations. But taking this case into account there is a gap
created with in the organizational system which affect the goal of the organization.
The study will be focused to show the solution of budgetary performance, deficit and how to
assess or utilize the budget to the organization. The objective of the study is to assess the
budgetary performance in gamo zone finance organization & to see the organization if they are
earning a good return on budget or not.

Generally, now a day, every business is required budgetary performance, it shall be available
management tool, express plan for the future year and it states how available resources would be
employed and what additional resource would be needed.

1.2. Statement of the problem

In any business organization a budget features a great role in determining the future revenue and
expenditure and also the risks associated to it. A budget is a financial plan that is used to focus
attention on finance and the overall operations of an organization. It forces firms’ management to
make better forecasting. Moreover, budgets enable a company’s managers to measure actual
performance against predicted target. Likewise, budget coordinates all working units of the firm
for attaining goals by ensuring common understanding among them (Horngren. et. al, 2012).
This is therefore, firms prepare budget with due care to improve their performance. A budgetary
control is also playing a vital role to effectively develop a budget plan and periodically compare
actual spending against the planned budget so as to stay on the right way by conducting all the
required adjustment in timely manner.

There are organizations feel they have problem in their budgetary performance but their view
this deficiency as a problem of their personals in giving performance but not taken as their
organization systematic deficiencies. Some business organizations do not even know the link
between budgetary system and performance, and this affects their performances negatively. The
organizational overall performance depends on both properly design budget proposal and it
active implementation.

Good budgetary performance can be a vehicle for addressing of objectives and goals in the most
carful way. But in preparing budget many problems were take place and consequence creates a
great impact on the performance of the organization. The problems are using inappropriate
budget preparation procedures & not well utilization of budget for each department within the
organization. The problem of budgeting is not only in preparation stage but also on
implementation. The concern of this study is to examine the assessments of budgetary
performance in particular area gamo zone finance bureau. In addition, the previous researchers
didn't find this study area in gamo zone finance bureau yet. The study is will be focus on the
organization, in order to give the final solution and suggestion to the problems.

1.3 Research Question

The researcher will be raised the following question that would be answered in this course of
study.
  What are the factors that affect budgetary performance of the organization?

 How to assesses budget utilization on Gamo zone finance organization?

 Why budgetary performance is necessary?

 What means the organization use to prepare good budget system?

1.4. Objective of the Study

1.4.1. General Objective

The main & general objective of my research paper is to the assessment of budgetary
performance in case of gamo zone finance bureau.

1.4.2. Specific Objective

The specific objective of the study is the following

 To see the organization effectively implement its budget or not

 To indicate for the finance organization how properly manage budget is important
successfully and to exhibit which factors affect the demand for budgetary
performance.
 To know the purpose of budgetary performance in the finance organization
 To identify ways and means by which the organization budgetary performance
improves to best level expectation.

1.5. Significance of the study

This study would be helping the finance organization to have a good budgetary practice and to
properly budget the available resources and to effectively implement it. In addition to this study
will be used to provide ground line information for the organization about its budgetary
performance, which is very help full for the organization advancement to provide a better
service.
The study would help to examine about the factor affecting budgetary performance in the
organization and create awareness to the organization about budget utilization and
implementation, which requires improvement. Furthermore, it helps to identify ways and means
by which the organization budgetary performance is improve to the best level expectation, in
addition to the above the following play a great role to avoid the problem of budgetary
performance for the future society

Initiate the employees to undertake a great measure over the problems concerning budgetary
performance.

1.6. Scope of the study

To come up with effective and better study, it was better if the study would
be conducted on over all organization performance as compared with other
similar organizations performance but due to many problems may be found
in the area, this study mainly conducted only in Gamo zone finance
organization therefore the study is limited to the organization.

1.7 Limitation of the study

The researcher faces certain problems at the time of conducting the study. Among them:

At the time of data collection some respondents were not presents that elongate data collection
period more than expected. There was reluctance on the part of some numbers of the respondents
to give genuine information when asked. .

1.8 Organization of the paper

This paper would be organized in to five chapters. The first chapter would be present the
introduction part which reflecting the background, statement of the problem, objective of the
study, significance of the study, scope of the study, limitation of the study and organization of he
papers. The second chapter deals with literature review. The third chapter deals with
methodology of the study. The fourth chapter deals with data analysis and interpretation and the
fifth chapter consists of summary, conclusion & recommendation.

CHAPTER TWO

2. Literature Review

2.1 Theoretical of literature review

2.1.1 Meaning of Budget

Budget is defined as a comprehensive and coordinated plan, expressed in financial terms, for the
operations and resources of an enterprise for a given future period. It is also a formal statement
of the financial resources set aside for carrying out specific activities in a given period of time so
as to help and coordinate the activities of organization (Omolehinwa and Naiyeju, 2015).

A budget is a numerical expression of a proposed plan of action which includes both financial
and nonfinancial aspects of the plan, and it serves as an outline to follow in an upcoming period
(Horngren et al, 2012).

2.1.2 Purpose of Budget

Agalega (2014) pointed out the following purposes that budget may be prepared to achieve.
These are: -

Planning: Budget development needs complete information of earlier performance,

determination of the existing position and forecasting of the upcoming time. Planning gives data
about the structure and behavior of expenditure, sources and trends in revenue and demands of
various functions. There is therefore the need for constant monitoring of activities and programs
to ensure that actual performance conforms to plans and corrective actions are taken on
deviations from plans. Managers are forced by forward planning to formally reflect possible
future courses of action, properly evaluate them and select the most appropriate option.

Coordination: For any organization to fulfill its vision, it is essential to coordinate its several
activities and ensure that they are on the way to achieve those goals. The budgeting system is a
good platform to create this coordination.
Communication: The budgeting system allows communication within an organization, both
vertically and horizontally. There is communication at all stages of the budgetary control
process, particularly during budget preparation and control.
Control: Performance of the organization compared with the budget point out the proper
management action to be taken to direct its operations to achieve its objectives. Here, a budget
review is an important tool to make sure that the execution process stays on the right track.
Motivation: Budgeting system can influence the conduct of managers and employees, and it
may motivate them to increase their performance. An inappropriate target can possibly be de-
motivating effect. In this aspect there should be a level of cooperation in the budgeting process
as participation can have a positive motivational effect.
Performance Evaluation: Performance of managers is frequently evaluated by the
budget targets. Rewards, for example, bonuses or performance-related pay can be associated
with the achievement of budgetary targets. Managers can also use the budget to assess their own
performance and explain that they are so near to meeting the agreed performance targets. This
way, budgeting acts as a performance evaluation tool.
 2.1.3. Types of Budgets

There are different types of budgets that have been developed for different purposes.
Some of the most important classifications of the budgets are discussed in this sub
section. Pushpender Pal (2020) identified four major types of classification of budget.
These are: On the Basis of Time, On the Basis of Function, On the Basis of Flexibility,
and On the Basis of Nature of Business Activity.
Based on time that budgets will cover, they could be classified as long-term, short-term, and
current budgets. Long-term Budgets are budgets prepared with the long-term plan or based on
the long-term forecasts of the organization. This is budget is usually developed for a period of
five to ten years. Short-term Budgets are budgets which have to be prepared based on short term
forecasts for a period of one or five years. While, Current Budgets are budgets that are prepared
for a very short period like from one month to one year.
Budgets that are prepared for specific period may also be classified according to the basic
functions that are being carried on in the business concerns. Therefor budgets can be grouped in
to two major categories based on the basis of functions. Those are master budget and functional
budget. Master Budget is a summary budget of the functional budgets. Master budget is the
blueprint showing the proposed activity and the anticipated financial results during the coming
year. It usually takes the form of budgeted profit and loss account and balance sheet items. It
consolidates the overall plans of an organization for a shorter duration of time that is usually
prepared on an annual basis.
Coming to the Functional Budgets are prepared on the basis of approved plans for specific
department or unit. These may vary in number from business to business. The
production budget, raw material budget, labor budget, plan budget, overheads budget, and
financial budgets that is cash budget, capital budget and expenditure budget.
Based on Flexibility criterion budgets can be classified as Fixed and flexible. Fixed budgets are
budgets that are developed for a fixed or standard volume of activity. That is these categories of
budgets do not change with the change in the volume of activity. These budgets are prepared
well in advance and are not important for making comparison.
Flexible Budget is a budget which is intended to change in accordance with the level of
activity achieved. This has been developed with the objective of changing the budget facts
gradually to match to the actual output.
Based on the nature of business activity, budgets may be classified as operating and capital
budgets. Operating Budgets is also called Revenue Budgets. These are budgets those that deal
with the plans for routine activities, that is operations. These budgets are prepared in accordance
with the forecasts/plans of routine activities such as sales, production, costs, revenues etc. On the
other hand, Capital Expenditure Budgets are budgets that are related to the plans aiming at
creating manufacturing facilities. These budgets are very important for the large and advanced
manufacturing concerns. It denotes Projected expenses on the fixed assets require for the period.
This budget type particularly requires a strong management control, as it could comprise large
amount of expenditure that needs approval from the top-management of the organization.
Broadly speaking, budgets can be classified into two major categories. These are:
Operating budgets: - this type of budget includes plans for all activities that make up the
normal operations of the organization. The main elements of an operating budget include sales,
production, inventory, materials, labor, overheads and R & D budgets.
Financial budgets: - Financial budgets are used to control the financial aspects of the business.
These budgets reveal the influence of the operating budgets on the firm’s financial position and
earnings potential. This category of a budget includes a cash budget, capital expenditures budget
and balance sheet and income statement (Cohen et al, 1994).
 2.1.4. Budgeting Techniques

Institute of Chartered Accountants of Nigeria (2006) identifies the following budgeting

techniques:

1) Flexible Budgeting Technique: A flexible budget includes fixed and variable costs

which vary in relation to the level of activity accomplished in a period.

2) Zero Based Budgeting Technique: Zero-based budgeting technique requires each cost
element to be specifically justified, as though, the budget related were being undertaken
for the first time; without approval, the budget allowance is zero.

3) Incremental Budgeting: in this technique budgets is prepared using prior periods

budget or actual result as a basis and add certain amounts to develop the new budget.

The change typically comes in percentage term and could either be an increase or a

reduction depending on many factors, primarily the organizations needs and situation.
4) Activity Based Budgeting Technique: This is a budgeting technique that is established on an
activity framework and utilizing cost driver data.

5) Planning, Programming, Budgeting Technique: Here the preparation of a long-

standing corporate plan that creates the objectives of organizations.

6) Continuous/Rolling Budgeting Technique: This budgeting technique involves

continuously updating budgets by reviewing the actual results of the period in the budget

and determining a budget.

2.1.5 Budget relative to time

Development of an annual budget is only one segment of the ongoing planning process of
business, for the planning process to be more successful, there must be long range goals,
intermediate objective and short-term plan of action according to Cherrington P141
2.1.5.1 Long range goal:
Identify the direction of a company over a 5 year to 10 year the goal is stated in general term but
deal with specification in which the company intended to be successful

2.1.5.2 Short term plan:

Is budget or annual forecast, identify the activity to be accomplishing during the coming year.

2.1.5.3 Intermediate Objective:

Identifies the specific stages that will lead to accomplishing the long-term goals, they provide a
link between short term plan and long-term objective

2.1.7 Basic Principles of budgeting

The preparation of an organizations budget is important to its success for three reasons, first,
preparing a budget forces management to look ahead & plan both long range and short-range
goals and events. Second the entire management team must work together to move and carryout
the plans. Third, by comparing the budget with actual results and it is possible to review
performance of all levels of management.

1. Long range goals principles

Annual operating plans cannot be made unless those preparing the budget known the direction
that top management expects for the organization long range goals, projections covering a five to
ten years period, must be set by top management (Needles, Anderson, Caldwell P.802)

2.Short range goals and strategies principle

One management has set the short-range goals the controller or budget director takes charge of
preparing budget. These person designs a complete set of budget development plans & time with
deadlines for all levels and parts of the years’ operating plan (Needle, Anderson, Caldwell,
P.804)

3. Human responsibilities and interaction principle

First the section of a budget director (and staff, if necessary) a very important to an effective
budgeting system. These people must be able to communicate well with the people both above
and below in the organization hierarchy 2 nd we have mentioned that all participants should be
identified and informed of their responsibilities, the identification process begins with high level
managers. Full communication throughout the budgetary process is our final interaction
principles. In particular, the budget must be communicated clearly to the participants each one
of these people playing a part in developing the budget and implementation effective budgeting
then require participative budgeting, which means that all level of personnel task part in the
budgeting process in meaning full active way.

(Source, Needle, Anderson, Caldwell P804)

4. Budget housekeeping principles

Which means that three guidelines should be followed, first a realistic approach must be taken by
the participants. Second deadlines must be meet. Third the organization must use the flexible
procedures for implementing the budget. Realisms a two-way street. Top management must
first suggest attainable targets and goals, there each manager must provide realistic information
and not place departmental goals a head of the goal of the whole organization.

Deadlines are important because budget preparation depend on the timely cooperation of many
people if one or two people ignore a dead line for submitting information, the budget might not
be ready on time, management should communicate the important of time table to all participant
& should review time submission of budget data as part of each manger performance evaluation.

Our final principle of budget housekeeping call for flexibility. Budget should always be treated
as guide and not as absolute truths; budget is important guide to the action of management.

5. Budget follow-up principle

Since the budget consist of projections and estimates, it is important that it be checked and
corrected continuously. It more sense to correct and error than to work with an incorrect guide.
Budget follow up and data feedback are part of the control aspects of budgeting cost organization
and departmental expectations can also be unrealistic. Such problems are detected when
performance reports compare actual results with budgeted results. (Source Needle, Anderson,
Caldwell, P.805)

2.1.8 THE BASIC OBJECTIVE OF BUDGETARY CONTROL

1. It lays down define targets of production and sales with corresponding allowable expenses.
Which can be exceed only with prior approval

2. It provides definite and precise guidance regarding sales, production and finance. Types and
quantities to sold and expense allowable for sale are clearly indicated. As regards production,
definite instructions regarding types, quantities materials, labor and other allowable expense are
available similarly, from the point of view of finance; guidance is available with respect to
working capital and capital expenditure to be incurred.

3. It acts as coordinating machinery between different functional heads. Otherwise, there might
be production without chance of sales, or there may be commitment for supply when chance of
production would be meager, or production might be held up for want of certain materials, or for
certain grades of labor

4. This is helpful in controlling production by limiting chance of wastage. Similarly, it keeps in

control cost and expense by limiting the allowable expenses where decentralized functioning of
is essential.

5. An aid to management in policy matters, from working of one budget management may
change future plans and programs by eliminating proper line and by concentrating on more
profitable illness or area. Budgetary control thus continually helps management in modification
and revision of policy, and the revised policy shall be the basis of the next plan and budget.

6. It provide objective basis of judgment executives rather than pure guess these providing them
with an opportunity to strive for some calculated better result Budgetary control is the system of
management control in which all the operations sale purchases, production etc. are for case in
advance and the results, when known, are compared with the planned targets.

(HRISHIKESH CHAKRABORTY & SRIJIT CHAKRABORTY, P. 584)

2.1.9 Budgetary Control Process

Budgetary control is a process of setting organizational goal and objectives and

comparing actual result with the planed objectives and goals. The variation between
the actual result and planed result called variance. This sets a controlling framework
that help to keep the costs and expenses of an organization to the standard limit.
Budget variances are noted frequently proposing the required corrective measures
(Lucey, 2008).

According to the Institute of Cost and Works Accountants of India (2008), budgetary
control is a means of control in which the actual results are compared with the
budgeted targets so that proper action may be taken if there are any deviations
between the two. Budgetary control has the following stages. The first stage is
developing various budgets. The budget centers should be defined and develop
budgets for each centers accordingly. In the second stage there should be a proper
system of recording the actual performance achieved. This will smooth the
comparison between the budget and the actual results. The third stage of budgetary
control is the comparison between the budgeted and the actual performance of
budget. The purpose of such comparison is to discover the deviation between the two
and provide a base for taking remedial action. Finally, taking appropriate corrective
action on the basis of the comparison between the budgeted and actual results is the
essence of budgeting.

2.1.11 Budget Implementation

Budget implementation is the responsibility of the budget directory. Communication and
support determine the success of budget implementation process proper communication of
expectation and targets to all key people in the company is essential. All employees involved in
the operations of the business must know what is expected of them and they must receive
directions on how to achieve their goals. Equally important top management must support the
budgeting processes and encourage implementation of the budget. The processes will succeed
only if middle, and lower-level managers can see that top management truly is interested in the
outcome and willing to reward people for meeting the budget goals.

Budgets must be classified and then charged to the different general ledger account the projected
financial statement are the end product of the budgeting process

At this point, management must decide whether to accept the proposed master budget, as well as
the planned operated results, or ask the budget director to change the plans and do part of the
budget over again.

(ANDIRSON, CALDWELL, P.812)

2.1.10 The Effective of budget and Budgetary Control

Different studies state different determinants of budgetary control. Budgetary control depends
on a number of issues. For instance, Vander (2000) identified some of the major determinants
such as availability of enough financial resources, availability of skilled personnel, and full
participations of all stakeholders in the process of preparing a budget.

On the other way round Mubina Shaikh (2016), pointed out that sound forecasting, goal
orientation, proper recording system, participation, top management support, flexibility,
timeliness, efficient organization, proper coordination, sound administration, constant review,
reward and punishment and results take times basics of effective budgetary control system.

Moreover, Siyan bola Tirmizi Tunji (2013) has set the major conditions that are basic factors for
having an effective budgetary control system. Some of the issues that were pointed out by him as
the major conditions for a budgetary control system to be called effective are: An involvement
and support of the top management; A clear information about long term company objectives; A
realistic organizational structure with clearly defined responsibility; A genuine and full
involvement of line managers in all aspect of the budget process; An appropriate accounting and
information system; A regular revision of budget and targets, where necessary; and To be
administered in a flexible manner.

Coming to the characteristics of a good budgeting system, different literatures identify various
points which comprise participation, comprehensiveness, and based on the established standards.
Flexibility which allows for changing of circumstances and feedback which must constantly
monitor performance and analysis of costs and revenues are also important characteristics of a
good budgeting system (Gregory, 2005).
2.2 Empirical literature review
The empirical study concerns on previous academic studies on the budgetary performance. In
this study there are some researches stated which are done by different researchers as follows.

Lambe (2015) in his study on A Systematic Review of Budgeting and Budgetary Control in
Government Owned Organizations in Nigeria stated that budgeting and budgetary control entails
the establishment of goals by the management of an organization and designing a process which
serves as a framework within which an organization effectively articulates overall planned
activities. The involvements of all relevant stakeholders in budget preparation are necessary and
sufficient condition for achieving effective budgeting and budgetary control. On other hand
budgeting and budgetary control contributes to management efficiency and high productivity of
an organization, all relevant stakeholders must be involved in the budget process, from
preparation to implementation, in other to guarantee overall goal attainment.

Yesuf (2015) in his study on budgeting and budget monitoring practice in NGOs operating in
Ethiopia stated that budgetary participation has a direct relationship on the managerial
performance. Even bureaucratic and mechanistic organizations should encourage budgetary
participation as it is evidenced to influence performance. The results also suggest that budgetary
participation indirectly affects managerial performance through the mediating variable of
organizational commitment.

Nicoleta (2010) conducted a study on public Budgeting on Republic of Moldova as a case study
by reviewing both theoretical and practical analysis done by World Bank with the objectives of
illustrating if public Budget is efficient or not and impact of applications of practice. The study
found that the general trend concerning the Budget method and procedures is directed to the
achievement of results, performance indicators and performance information.

Gladstone Stanley, (2020), The effect of budgetary control on effectiveness of NGOs in Ghana,
proves that most of the non-profit organizations in Ghana recognize the importance of budgeting
and establish well-resourced budgeting unit in their organizations for effective monitoring and
evaluation of their operations. And it helped the NGOs to score about 71.11% in the performance
indicators of the organization. It is also noted in the research that having the budgeting unit in
NGOs helped them to achieve the 30% administration cost and 70% program costs requirement
in the country.

2.3 RESEARCH GAP

To generalize based on the empirical literature review above, the budgetary organizational
performance has been studied by some different researchers. There are limited researches that are
conducted in financing sector. Moreover, majority of the study have tried to show the role or
impact of budget and budgetary control processes on financial performance in particular.
However, this research would emphasis to find out the assessment of budgetary control systems
as well as its effective on the overall organizational performance of gamo zone finance bureau.
In addition, the previous researchers didn't find this study area in gamo zone finance bureau yet.
Therefore, this study would be intended to fill these gaps.

CHAPTER THREE

3. RESEARCH METHODOLOGY

3.1 Introduction

This chapter outlines numerous approaches that the researcher will take to
complete the study. It includes the study area, research design, source of data and
collection techniques, sample design and method of data analysis. Most decisions
about the choice and approach of respondents, as well as the completion of the
entire research project, are made as follows.

3.2 Research Design

Ogula (2005) describes a research and design as a plan, structure and strategy of investigation to
obtain answers to research questions and control variance. An appropriate research design is
important to any research as it will guide the process from collecting the desire data to the
analysis of data. This study uses to a descriptive research design. The descriptive research design
helps to describe the assess budgetary control in organizational performance. The researcher use
to survey method in which it attempts to collect primary data from employees of the organization
and describes existing phenomena base on their responses about the issues raise base on the
research objectives.

3.3 Source of data and collection techniques

Data collection tools are the instruments which are used to collect the necessary information
needed to serve or prove some facts (Mugenda and Mugenda, 2003). By distributing the
questionnaire and conducting interviews with relevant parties, primary data will be collected
from the organization's manager and employees. Both open-ended and closed-ended questions
will be included in the questionnaire, and the interview will involve direct communication with
the organization's finance manager.
Secondary sources of data are those that are gathered or obtained through the examination of
specific documents related to the evaluation of budgetary performance, such as encyclopedias,
periodicals, the internet, and the organization's budget report document. Employing a carefully
constructed questionnaire that they personally deliver.

3.4. Target Population

A population is a group of individuals, persons, objects or items from which samples are taken
for measurement (Kothari, 2004). The target population of this study will be employees on gamo
zone finance Bureau. The total number of populations of the study finance Bureau is 90.

3.5 Sample design

Sampling is a procedure, process or technique of choosing a sub-group from a population to
participate in the study (Ogula, 2005). The research's sample was chosen carefully to ensure that
it accurately reflected the population as a whole and included individuals who were regarded as
high-ranking employees of the finance organization. In order to get the essential data and
conduct a thorough examination for the current research, the research is therefore focused on the
employees of the firm. 90 employees would make up the study's total population. Taking into
consideration these and other relevant aspects, the researcher would analyze only forty-five (45)
or fifty (50%) randomly chosen personnel from the total.

3.6 Method of Data analysis

To present the results of the study, the researcher used a method of descriptive data analysis. The
necessary analysis is made utilizing tabular and percentage style of presentation accompanied by
relevant explanation in order to make all the data collected and stored comprehensible and
consumable. This chapter analyzes and discusses data gathered through surveys distributed to
respondents, interviews conducted with some authorized organization personnel, and personal
observations. Simultaneously, data gathered from secondary sources such reports and related
forms will be analyzed using a variety of techniques including simple tabulation % and simple
statement.

CHAPTER FOUR

Data analysis and interpretation

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

Finally, the collected data organizes and arranged in appropriate manner, that will be readable
and understandable to the reader by using different analysis and interpretation techniques like
percentage and table.

qualification Table 4.1 Demographic characteristic of respondent and their educational

Sex Educational level

Degree Diploma 12th Complete Total

 No % No % No % No %

Male 7 15.55% 15 33.33% 7 15.55% 29 64.43%

Female 4 8.9% 8 17.77% 4 8.9% 16 35.57%

Total 11 24.45% 23 51.1% 11 24.45% 45 100%

(Source: Data collected through questionnaires)

From the above table, the respondent answer indicates that 23(51.1%) of the respondent are
diploma holders, 11(24.45%) are degree holders and also11(24.45%) of the respondent are 12 th
complete. In addition to this the respondent response indicates that most of the employees are
males that is 29(64.43%) of the total population and the rest 16(35.57%) of the respondent are
female.

Table 4.2 Respondents response for know how about budgetary performance

Type of response No of respondent Percentage (%)

Yes 45 100%

Source: data collected through questionnaires)

From the above table we can observe that all respondents 45(100%) of the organization are
known about the budgetary performance

Table 4.3 Employees participation during budget preparation

Types of response No of respondent Percentage (%)

Yes 14 31.11%

No 31 68.89%

Total 45 100

(Source: data collected through questionnaires)

The above table indicates that 31(68.89%) of the respondent’s response are the employees not
participated during budget preparation. The rest 14(31.11%) of the respondent response yes, this
indicate more than half of the respondents are not participated during budget preparation.

From interview the response of the finance manager indicates participatory budget are important
instrument for overall organization activity. In many constraints it is difficult to participated all
employee during budget preparation like overload of work and sickness of employees.
 Table 4.4 Respondent response factor affecting the organization budgetary

performance

Budgetary performance affecting factors No of respondent Percentage (%)

In appropriate budget allocation 23 51.11%

The organization manager 9 20%

Employees of the organization 9 20%

Shortage of fund 4 8.89%

Total 45 100%

(Source: data collected from questionnaires)

From the above table, out of the total (45) respondents 23(51.11%) of the respondent response
that the major factor affecting the organization budgetary performance is in appropriate budget
allocation, 9(20%) of the respondents answered indicates that factor affecting the organization
budgetary performance is the organization manager and also 9(20%) of the respondent response
indicate that employees affecting the budgetary performance of the organization. The rest
4(8.89%) of the respondent says that budgetary performances is affected by shortage of fund.

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

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

Table 4-5 Does the organization implement its budget effectively

Types of response No of respondent Percentage (%)

Yes 26 57.78%

May be yes 13 28.89%

No 6 13.33%

Total 45 100%

Source data collected through questionnaire

From the above table, we can understand that 26(57.78%) of the respondent says yes, which
means the organization implement its budget effectively. 13(28.89%) of the respondent response
that may be yes & the rest 6(13.33%) of the respondent says the organization no implement its
budget effectively.

Table 4.6 Respondent response budgetary allocation is mostly

allocated by

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

The organization manager 14 31.11%

Finance department 31 68.89%

Total 45 100%
(Source: data collected through questionnaire)

From the above table, 31(68.89%) of the respondent response indicate that the responsible body
to allocate budget is finance department and the rest 14(31.11%) of the respondent response
shows that budget is allocated by the organization manager.

Table 4.7 respondent response for budget deficit occurred with in the

organization

Types of response No of respondent Percentage (%)

Yes 29 64.44%

No 16 35.56%

Total 45 100%

(Source: Data collected from questionnaire)

From the above table we can understand that out of the total (45) respondents 26(64.44%) of the
respondent response say that budget deficit occurred within the organization. Similarly, out of
45 respondents 16(35.56%) of the respondent response says budget deficit not occurred within
the organization.

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

reduce budget deficit

Types of response No of respondent Percentage (%)

Yes 26 57.78%

No 19 42.22%

Total 45 100%

(Source questionnaire collected from the employees)

 The above table indicates that 26(57.78%) of the respondent response that the organization
used its capacity to reduce budget deficit. On the other hand, 19(42.22%) of the respondent
response the organization does not used its capacity to reduce budget deficit.

According to the respondent response the organization used its capacity to reduce the
problem of budget deficit are the following

 By giving short period orientation to all employees about budget utilization and effect
of budget deficit.
 By transferring some amount of fund from excess budget to shortage budget
 By promoting proper communication of employees and the manager of the
organization
 By promoting appropriate allocation of budget to respective department
 By utilizing good budget system within the organization
According to the finance manager response budget deficit occurred within the organization
during spending exceeds revenue. The organization uses various mechanisms to reduce budget
deficit like: -

 Transfer some amount of fund account excessive budget to other which has
shortage
 Reducing expense by coordinating different tasks
 By active implementation of budget

Table 4.9 Respondent response in which method the organization

uses to know the amount of utilized budget.

Method (techniques) No of respondent Percentage (%)

By recording revenue and expense 23 51.11%

By planned accordingly 16 35.56%

By recording inventory valuation 6 13.33%

 Total 45 100%

(Source data get from questionnaire)

From the above table we can understand that 23(51.11%) of the respondent response indicates
the organization know the amount of utilized budget by recording of revenue and expense
amount. 16(35.56%) of the respondent says the amount of utilized budget known by using
planned accordingly & the rest 6(13.33%) of the total sample are agree by recording of inventory
valuation

Types of budgets within the finance organization.

Most of the time the finance organization prepare budget for 1 year or less than one year period,
but in different case of activities they conduct it may be varied from organization to organization.
According to the finance head the type of budget system preferable during several year of
experience are flexible budget.

Table 4-10 System or techniques used by the organization to reduce budget

deficit.

Budget deficit reducing techniques No of respondent Percentage

Adopt good budget system 19 42.23%

Effective manager 14 31.11%

Active participation of employee 6 13.33%

Effective allocation of budget 6 13.33%

Total 45 100%

(Source data collected through questionnaire)

From the above table out of the total (45) respondent 19(42.23%) of the respondent’s
response budget deficit is reduce by using or adopting good budget system within the
organization. 14(31.11%) of the respondent response indicates that budget deficit reduced by
 introducing effective manager with in the organization. 6(13.33%) of the respondent
response budget deficit reduced by active participation of all employees at their specific job
and the rest 6(13.33%) of the response indicates the organization budget deficit reduced by
using effective allocation of budget.

Respondent response to reduce the organization budgetary performance problem by using the
following way.

 Adapt good or well budget system within the organization.

 The allocation or distribution of budget allocated by appropriately or correctly way.
 Active reporting of recording data by employee to respective body.
 Active participation of all employee during budget preparation.
 Introducing professional or effective manager.
 Giving orientation to employees of the organization about budget preparation and its
related problems.

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

 To attaining or achieving the organization goals.

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

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

organization

Year Planned Actual budgetVariance %

 budget (favorable)

1999 2,436,847.1 75%

9,747,496.60 7,310,622.45
5

2000 11,421,519.7 2,855,379.9 75%

8,566,139.79
2 7

2001 1,983,613.8 82%

11,020076.67 9,036,462.87
0

2002 12,446,282.8 10,579,340.3 1,866,942.4 85%

1 9 2

(Source: The organization budget report from 1999- 2002)

From the above table we can understand that the organization budget actually used 75% in 1999
and 2000, 82% in 2001 and 85% in 2002.

In the year 1999 and 2000 budget utilization remain constant that is 75%, this two-year data
shows that the organization not take any corrective action to improve good budget utilization.
But in the remaining two consecutive years that is 2001 and 2002 the budget utilization of the
organization shows improvement, this led to the performance of the organization increase.

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

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

SUMMERY OF FINDING, CONCLUSION AND RECOMMENDATION

5.1 Summary of findings and conclusion

 The assessment of budgetary performance in an organization is to identify how about

budget utilization within the organization. Hence, it is necessary to carry out study in
the area of budget to promote good assessment methods which could be vital in
improving the performance of budget in an organization (Gamo Zone finance)
 The organization use in appropriate budget allocation. When the budget is not
planned accordingly cause budget deficit.
 Since budget is the financial plan of the organization for the period of year and it
enable to predicting financial result and the contents of the financial statement over
the year. There for effective implementation of budget should enable to achieve the
desire objectives and goals of the organization.
 Even if the organization effectively implemented its budget, variance was observed
when compared actual results with budgeted estimates and the reason for occurrence
was increase general and administrative expense and market change.
 When her budget was prepared it can be fixed or flexible. However, the organization
prepare flexible budget is a preferable one from the organization point of view

 Most of the respondent which is 26(57.78%) of response indicates that the

organization effectively implement its budget. Whereas 13(28.89%) of the
respondent response were not surly the organization implement its budget effectively
& the rest of the respondent which is 6(13.33%) are not the organization effectively
implemented its budget, from this it can conclude that the organization implemented
its budget effectively.

 The organization adopt poor communication and coordination of managers and

employees, this gap create in appropriate budget allocation and employee does not
 participate on their specific job. To conclude from the above point, the assessment of
good budgetary performance requires effective budget utilization and communication
in order to accomplish the organization financial activity and objectives.

 Regarding the impacts of variance weather, it was favorable or unfavorable on the

performance of the organization seemed as: -
1. Most of the variance observed was favorable.
2. Its impact was not serious rather it motivates to employees of the organization to
work hard.
 When we compare the budget year of 1999, 2000, 2001 & 2002, the organization has
shown more improvement in budget year of 2001 and 2002. From this point we can
concluded that the organization budget utilization is increase from year to year.
5.2 Recommendation

Based on the data findings and conclusions made the following recommendations are forwarded.

 The organization enable to modify the budgeting system to improve management

decisions and facilitates attainment of the firms’ objectives. The management on its
part should widen the areas of decision making by using reliable good budget system.
 Even if, the organization effectively implemented its budget but 42.22% of its
employees did not believe surely the effective implementation of budget. Since
effective implementation of budget is not simple matter, it is advisable to clear and
open communication among employees and department for better performance.
 The finance organization use appropriate allocation of budget to performing the
financial activities of the organization.
 The organization must adopt a good budgeting system in order to achieve or facilitate
their goals and objectives.
 Use active coordination system: which helps the organization from the top managers
to the low-level managers should be coordinate and communicate properly.
 Active participation of all employees to their specific job is important for the
organization by minimizing budget problems.
 Variance were created with in the organization due to effective and ineffective
implementation of budget. There for the organization use effective implementation of
budget in order to achieve favorable variance.
 Responsibility and assignment of authority are essential for preparing good
budgeting. The organization should give employees authority and responsibilities in
order to prepare good budget system
 For providing a better reporting of budget performance, use or increase the
organization professional employees.
References

Omolehinwa, E.O. and Naiyeju,J.K.(2015). Government Accounting in Nigeria; An IPSAS

Approach, Lagos, Pumark Nigeria Limited.

Horngren, Rajan, & Dater, D. (2012). Cost accounting: A Managerial Emphasis, 4th Ed.

Agalega E. (2014). Public sector accounting and finance, Ziphin Business World, 2nd Edition,
Ghana, Koforidu

Pushpender Pal (2020). Classification of Budget/ Cost Accountancy; Retrieved online from
https://www.accountingnotes.net/cost-accounting/budget/classification-of-budget-cost-

ohen Jerome B., Robbins Sidney, Young Allan (1994): The Financial Manager. Columbus (OH):
pp. 681, Publishing Horizons.

Cherrington “Cost Accounting managerial Approach 2nd edition

Hrishikesh Chakraborty & Srijit Chakraborty 1997 Management Accounting

Lucey, T. (2008), ―Costing, New York, DP Publications

Institute of Cost and Works Accountants of India (2008), Cost Accounting and Management

Mubina Shaikh (2016). Budget and Budgetary Control, International Journal of Commerce and
Business Studies, Volume 4, No 1, 14-20

Siyan bola Tiramisu Tunji (2013). The Impact of Budgeting and Budgetary Control on the
Performance of Manufacturing Company in Nigeria, Journal of Business Management & Social
Sciences Research (JBM&SSR), ISSN No: 2319-5614, Volume 2, No.12.

Gregory, J.N. (2005). The End of Traccountancy/4812

Conditional Budgeting, Performance Management, 18 (1),27-39

Lambe Isaac, (2015), A Systematic Review of Budgeting and Budgetary Control in Government
Owned Organizations in Nigeria, Bingham University, Karu, Nasarawa State. Nigeria, Research
Journal of Finance and Accounting Vol.6, No.6, 2015.

Gladstone Stanley, (2020), The effect of budgetary control on effectiveness of NGOs in Ghana

Yesuf Ahmed, (2015), budgeting and budget monitoring practice in NGOs operating in Ethiopia,
Addis Ababa University.

Appendix

ARBA MINCH UNVIERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

Interview Questions

For finance head

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

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

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

THANKS, YOU IN ADVANCE FOR YOUR COOPERATIONS

 Appendix

ARBA MICH UNVIERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

Questionnaire

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

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

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

I. Personal profile
1. Sex Male Female
2. Education level
12 complete
Diploma
Degree
 Others

II. General question

1.Do you have known about budgetary performance?
1.1 Yes

1.2 No

2. Do you participate during budget preparation?

2.1 Yes
2.2 No

If no why? ____________________________________________________

_______________________________________________________________

3. What is the major factor affecting the budgetary performance of the

organization?

3.1 Employees
3.2 In appropriate budget allocation
3.3Shortage of fund
3.4 The manager of the organization

4. Does the organization effectively implement its budget?

4.1Yes
4.2 May be yes
4.3No

5. Budgetary allocation is mostly allocated by?

5.1 The organization manager

5.2 the finance department

5.3 The market department

5.4 Others

6.Is budget deficit occurring in the organization

6.1 Yes
6.2 No

7. On basis of question No 6 if yes why? _____________________________________

__________________________________________________________________

8. Do you think the organization used its capacity to reduce budget deficit

8.1 Yes
8.2 No

9. From question no 8 if yes in what way? ___________________________________

__________________________________________________________________

10. In which method use the organization in order to know appropriate

utilization of budget amount?

10.1 By recording revenue and expense

10.2 By recording inventory valuation

10.3 By planned accordingly

 10.4 By other ways

11. Which system used the organization in order to reduce budget deficit?

11.1 Adopt good budget system

11.2 Use effective manager

11.3 Effective allocation of budget

11.4 Active participation of all employee

12. To reduce the organization budgetary performance problem what means

the organization accomplishes?

______________________________________________________________________

_____________________________________________________________________

______________________________________________________________________

13. What are the main objective to implement budget by the organization?

______________________________________________________________________

______________________________________________________________________

_______________________________________________________________________