Research Proposal

College of Business and Economics

Department of Accounting and finance

RESEARCH Proposal 

ASSESSMENT OF BUDGET ALLOCATION, UTILIZATION AND EVALUATION IN NORTH SHEWA ZONE:  THE CASE OF THREE SELECTED WOREDAS

TABLE OF CONTENTS                             PAGE

ACKNOWLEDGMENTS ……………………………………………………………………….. III

ABSTRACT ……………………………………………………………………………………... IV

LIST OF TABLES ……………………………………………………………………………… V

LIST OF ABBREVATION ……………………….…………………………………………….. VI

1.       CHAPTER ONE INTRODUCTION ……………………………………………………01

1.1 BACKGROUND OF THE STUDY …………………………………………………….…… 01

1.2 STATEMENT OF THE PROBLEM ……………………………………………………..….. 03

OBJECTIVE OF THE STUDY …………………………………………………………………… 05

GENERAL OBJECTIVE ………………………………………………………………………….. 05

SPECIFIC OBJECTIVE ……………………………………………………………………………. 05

RESEARCH QUESTION …………………………………………………………………………… 05

SIGNIFICANCE OF THE STUDY ………………………………………………………………….. 06

SCOPE OF THE STUDY …………………………………………………………………………….. 06

LIMITATION OF THE STUDY ……………………………………………………………………... 06

ORGANIZATION OF THE STUDY …………………………………………………………………. 07

CHAPTER TWO LITERATURE REVIEW ………………………………………………………….. 08

THEORETICAL REVIEW …………………………………………………………………………….. 08

OVER VIEW OF THE BIDGET ……………………………………………………………………….. 08

BUDGET TIME FRAME ………………………………………………………………………………. 12

BUDGETTIME PROCESS …………………………………………………………………………… 12

BUDGET TIME PROCEE IN ETHIOPIA ……………………………………………………………. 13

BUDGET TIME PROCESS AT REGIONAL LEVEL ………………………………………………... 13

BUDGET TIME PROCESS AT WOREDA LEVEL …………………………………………………. 15

BUDGET ALLOCATION, UTILIZATION & EVALUATION ………………………………………. 16

BUDGET ALLOCATION FORMULA ………………………………………………………………. 16

FACTORE AFFECTING BUDGET …………………………………………………………………… 17

CHAPTER THREE RESEARCH DESIGN & METHODOLOGY ……………………………………. 19

RESEARCH APPROACH ……………………………………………………………………………… 19

TARGET POPULATION OF THE STUDY …………………………………………………………… 19

SAMPLE & SAMPLING TECHNIQUES ……………………………………………………………. 20

TECHNIQUES OF DATA COLLACTION …………………………………………………………… 20

DATA ANALYSIS & PRESENTATION ……………………………………………………………… 20

I

CHAPTER FOUR WORKPLAN & BUDGET …………………………………………………………. 22

TIME TABLE ………………………………………………………………………………………….. 22

BUDGET ……………………………………………………………………………………………….. 22

BUDGET SUMMERY ………………………………………………………………………………… 22

REFERENCES …………………………………………………………………………………………... 24

 

ACKNOWLEDGMENTS
ABSTRACT
CHAPTER ONE
INTRODUCTION
1.1  Background of the study
1.2. Statement of the problem
1.3.1  General objective
1.5. Significance of the study
1.6. Scope of the Study
1.7. Limitation of the study
1.8 Organization of the study
CHAPTER TWO
LITERATURE REVIEW
2.1. Theoretical Review
2.1.1 Overview of Budget

1. Planning:  Budgets force managers to think about and plan for the future.

1. Coordination:  Budgets coordinate the activities of the entire organization by integrating the plans of its various parts. It helps to ensure that everyone in the organization is pulling in the same direction.

1. Communication:  Budgets communicate management’s plans, strategic objectives and of progress towards meeting these objectives throughout the organization.

1. Control:  Budgets ensure that all parts of the organization are working together to achieve the goals set down at the planning stage.

1. Allocation of resources: The budgeting process provides a means of allocating resources to those parts of the organization where they can be used most effectively.

1. Motivation: A participatory and all-inclusive budgeting system will help promote a coalition of interest and thus increase motivation.

1. Performance evaluation: Budgets define goals and objectives that serve as benchmarks for evaluating performance.

1. A means of authorizing actions

1. Setting unrealistic targets- padding to the de motivational effect, staff withdrawing interest.

1. Excessive reliance on past data and extrapolating past trends.

1. Budgets are only used at the end of the budget period to evaluate performance.

1. Budgets are too often used to attribute blame for 'bad' performance.

1. Budgets are too often imposed on staff from top management.

1. 'Budgetary slack'. A manager will exaggerate the costs required to achieve objectives.

1. Budgeting as if functional areas are independent of the rest of the organization (i.e. budgets reinforce departmental barriers rather than encourage knowledge sharing).

1. De motivational budgets- if the budget process is essentially authoritarian with little or no effective participation, the middle managers and staff may feel undervalued and hence resent to work to budget.

1. Budgetary slack (padding budgets) – some managers may have an incentive to negotiate a budget that is not difficult to achieve. This produces a phenomenon known as 'padding the bud an incremental approach to budgeting-   fails to recognize that not all costs increase at the same rate. At its worst it positively encourages misuse of resources and overspending of current allocations, to ensure a bigger budget next period.

2.1. Budget time frame
2.1.1 Budget Process
2.1.2 Budget Process in Ethiopia
2.1.3 Budget Process at Regional Level
2.1.4 Budget Planning at Woreda Level
2.1.1.4 Budget Allocation, utilization and evaluation
2.1.1.4.1 Budget allocation Formula
2.1.5 Factors affecting budget allocation, utilization and evaluation
3.3. Sample and Sampling Techniques
3.4. Techniques of data collection
3.5. Data Analysis and Presentation

No	Activities	Month
		Dec	Jan	Feb	March	Apr	May
1	Research Proposal Summit	X
2	Data collection		X	X	X
3	Data analyzing and processing		X	X	X
4	Report submission			X	X
5	Research presentation				X

 

First of all I would like to thank the almighty GOD for helping me in the successful accomplishment of this paper.

 

This work comes in to end not only by the effort of the researcher but also the support of many individuals and organizations. To begin with, I would like to thank  my advisor, for his constructive suggestions throughout my work. Had it been without his support, this work would not have been come in to reality. Secondly, my heartfelt thanks go to my family for her moral and financial support even during her pregnancy. In addition, North Shewa zone each selected woreda employees should be greatly praised for their zealous efforts in filling questionnaires.

Moreover, my thanks extended to THE revenue office for providing personal computer services important for the research work

This study is conducted to assess the budget allocation, utilization and evaluation taking North Shewa zone specifically, Kewot, Efratana Gidm and Tarmaber woreda’s of education, Health, agriculture, water and rural road sectors as a case. To the best of my knowledge, there is no document that reports a study on the probable causes that may hinder the allocation utilization and evaluation of budgeting in the selected woredas. Thus, the objective of the paper is to assess the budget allocation, utilization and evaluation of the selected woreda’. Proximate budget employees were purposively selected from each budget holders with a total of 90 respondents. demonstrate that there was poor transparency and late timely report delivery in budget utilization, there was no market-oriented cost estimation practice. Lack of adequate and experienced budget experts was another issue that contributes to worsen the problems and there is no evidence-based evaluation mechanisms in the budget utilization at each level of the sectors. Therefore, to improve budget preparation and utilization in each woreda sectors heads and budget experts should take possible actions in the years to come.

 

   Key Words:   budget, allocation, utilization, evaluation, public sectors, budget implementation

 

 

 

 

 

 

 

 

 

 

 

IV

LIST OF TABLES

TABLES                                                                                                                 Pages

Table1: Time Table .......................................................................... …………… 08

Table2: Financial Requirement ………………………………………………… .. 08

LIST OF ABBREVIATIONS

PASDEP---------------------Plan for Accelerated and Sustained Development to End Poverty

 

BOFED----------------------Amhara Bureau of Finance and Economic Development

WOFED--------------------- Woreda Office of Finance and Economic Development

ZOFED----------------------Zone Office of Finance and Economic Development

ANRS-------------------------Amhara National Regional State   

UNCDF-----------------------United Nations Capital Development Fund

VIP---------------------------variable inflation factor

ADLI -----------------------agricultural development –led industrialization

 DW---------------------------Durbin Watson

 RSDP------------------------road sector development program

 TVET------------------------technical and vocational education and training

 SARDEP--------------------Sida-Amhara rural development program

  CSOS------------------------civil society organizations

  PPIP-------------------------plans and public investment program

  MEFF-----------------------macroeconomics fiscal framework

 PM&E-----------------------participatory monitoring and evaluation

 

 

Budget is the most important tool for evaluating performance, coordinating activities, implementing plan and communicating, motivating and authorizing action in governmental and nonprofit organizations (Ketema, 2015).

Budget is central to realize national development, goals and programs. Budget has multiple functions. Such as: control of public resources, planning is the allocation of resources and management of resources.  However, the relative strength of each function depends on the current view of the function of budgeting and budgeting tool and techniques, but also depends on the strength of organizations and/or institutional arrangements to support these functions (World Bank, 1998). 

Budget utilization is defined as total annual program costs as a percentage of annual budget authority.  Utilization rates of ninety eight percent or higher are considered full performance (Finkel, et. al, 2003).

Management makes budget allocations after examining anticipated revenues and departmental expenses. Budget allocation is an important part of all business and not-for-profit financial plans. Budgets are typically set annually and involve allocating anticipated income and resources between different departments and business interests.  Budgeting forms the baseline for a company's future performance. Managers create the budget anticipating financial conditions and market expectations for future periods. These managers calculate revenues and expenses for the period being budgeted. When the period reflected in the budget arrives, the managers compare actual expenses to the budget numbers and evaluate the department's performance (www.ehow.com).

 

The need for effective participatory monitoring and evaluation (PM&E) system is increasingly recognized as an indispensable tool of program/project management. The designed PM&E system is aiming at both for accountability and learning purpose. The system was implemented in a participatory approach, through the active involvement of concerned stakeholders at each level, giving special emphasis for the grass root community. It also tries to consider the three major aspects to be monitored and evaluated in Sida- Amhara rural Development Program (SARDP) III, as a poverty alleviating program which includes: the delivery of services to the beneficiaries (input-output), the use of services by the beneficiaries (outcomes) and effects of using these services to reduce poverty (impact).  It enables to track the progress of activities during implementation and take timely corrective action, to determine the efficiency, effectiveness, relevance, impact, sustainability and to learn lessons for future use (SARDP, 2007).  

During the fiscal year, however, not all allocated budgets are used as per the proposed plan. These could be cases where the approved funds may not be enough to fully accomplish the intended goal. In other instances, the amount allocated to a project may be more than what the project can consume. The disparities between the budget allocated and actual expenditure arise due to multiplicity of factors and improper costing of County functions (Rotich and Ngahu, 2015).                                                                                                                                            

Evaluation is the comparison of actual project impacts against the agreed strategic plans. It looks at what you set out to do, at what you have accomplished, and how you accomplished it. It can be formative (taking place during the life of a project or organization, with the intention of improving the strategy or way of functioning of the project or organization). It can also be summative (drawing learning’s from a completed project or an organization that is no longer functioning). Someone once described this as the difference between a check-up and an autopsy! What monitoring and evaluation have in common is that they are geared towards learning from what you are doing and how you are doing it, by focusing on Efficiency, Effectiveness and Impact (http://www.civicus.org).

In addition to this, how the effectiveness and efficiency of budget utilization can be achieved is becoming the issue of researcher in the study area.

 This study was expected to identify and analyze the allocation, utilization and evaluation of budget in North Shoa Zone under selected woredas finance and economic development office and PASDEP focused sectors like Education, Health, Water, Agriculture and Rural roads of kewot, Efratana Gidm, Tarmaber and the contribution in attaining the objective of the organization.

In developing countries, it has become complex to manage public expenditure allocation because the roles of the government have been expanded and financial resources are in scarce supply to meet this ever-increasing social needs and population growth. Due to inadequate financial resources as opposed to an increasing demand for public service, there is a need to improve resource allocation through proper economic policy and expenditure planning. There are different factors that should be considered during budget allocation at regional level like expenditures priorities, Revenue generating capacity, population size. Knowing such types of factors in budget allocation is essential and crucial to the allocation of the budget to sectors (UNCDF, 2007).

The significance of knowing the factors for budget allocation and utilization is to ascertain whether the approved budget is equally allocated from woreda to woreda and also to equalize the development of woredas infrastructure. In addition to this it is important to improve the fund utilization capacity of woredas and identifying the gap and giving training for budget officials and woreda cabinet. In practice at woreda level budget is allocated by woreda cabinet and Woreda finance and economy office adhering the Bureau of Finance and Economic Development (BOFED) direction by giving priority high sharing of Plan for Accelerated and Sustained Development to End Poverty (PASDEP) sectors such as Education, Health, Agriculture, water and Rural roads.

Consequently, according to the annual report of (BOFED 2008, 2009,) indicates that 67.4 percent of the regional budget is allocated to of PASDEP sectors such as Education (30 percent), Health (12 percent), Agriculture (8.5percent), water (6.9percent), and rural roads (10 percent) are the details.

(BOFED 2008, 2009) Besides, there is also Lack of clear guideline to utilize budget and budgeting system on which budget decisions are made. The existing problems that are shown in North Shewa zone selected woredas, like lack of clear realistic goal, lack of management support, lack of proper communication and less adaptation of accounting system. So, this shortcoming leads the concerned bodies to corruption, conflict and under taking responsibility. In addition to that there is Lack of participation of concerned bodies in budget process and Lack of transparency (BOFED 2008, 2009). 

In today’s rapidly changing environment, the biggest role of managers is effective and efficient utilization of budget and minimizations of inefficiencies and ineffectiveness. In addition, well managed organizational budget with appropriate evaluation methods can motivate and retain employees and hence has the competitive advantages of reduced turnover; an increase in productivity; increased revenue; improved performance and achieved organizational goals (Lin Y. 2007).

As to the available literature, there are little or no adequate empirical studies about internal factors affecting budget utilization in public organization in the region in general and in the study area in particular.

Therefore, the purpose of this study is to assess budget allocation, utilization and evaluation practices   taking education, health, water, agriculture and rural roads in Kewot, Efratana Gidm and Tarmaber woreda as a case. 

1.3 Objective of the study

The general objective of this study is to assess and analyzes Budget allocation, utilization and evaluation practices in north shewa.

1.3.2  Specific objectives

This study has the following specific objectives.

1.  To investigate the problems of budget utilization and evaluation in the area under study.                                          

2.  To assess factors considered budget allocation, utilization and evaluation of selected woredas.

3.  To assess the extent of participation, transparency, and accountability in budget process of the selected woredas (PASDEP) sectors.

4.  To review how the mechanisms in budget allocation, utilization and evaluation of selected woredas finance and economic development office and PASDEP sectors.

1.4. Research questions

 To address the objective of the study, the following general research questions are formulated.

1.  What problems are observed in budget evaluation and utilization?

2.  What factors are influencing budget allocation, utilization and evaluation?

3.  How much is the extent of participation, transparency, and accountability in budget process of the selected woredas (PASDEP) sectors?

4.  Does finance and economic development office and PASDEP sectors have a means to take corrective action on the weaknesses of budget allocation, utilization and evaluation?

Therefore, this study was aimed to raise the above research questions and address the critical problem by suggesting possible recommendation in the future.

 

The study will give direction to woredas finance and economic development office about the main factors considered in the budget allocation, utilization and evaluation. The significance of knowing the factors is to fulfill the gap of knowledge of woreda budget officials and woreda cabinet to equalize budget allocation for each woreda and to enable BoFED and woreda of finance and economic development (WoFED) to create justifiable formula. It will also provide better information about the organization budget allocation, utilization and evaluation and it also create awareness about how budget is allocated, utilized & evaluated effectively. Finally, it will pave a way for further studies and serve as literature.

The study focuses on the allocation, utilization and evaluation of budget at woreda level in North Shewa Zone. Therefore, it was restricted geographically in North Shewa zone at woreda level and in concept indicated on the above. The scope of this study is limited to the analysis of expenditure planning and budget allocation in the public sector. It doesn’t consider profit making government enterprises.

Having the above significance, the study will be subjected to some limitations. There will be limitation on research literatures done on the area of budget allocation formula particularly in the study area. The study did not represent all woredas in North Shewa because; it is difficult to generalize the results of study conducted on three woredas for the whole woredas and city administration. Analysis of the expenditure planning and budget allocation in Ethiopia is very difficult. There may not well-established and comprehensive public expenditure management system.

To achieve the stated objectives and to finalize the paper, the study was structured in the following way chapter one includes; statement of the problem, objective of the study, significance of the study, scope of the study, delimitation and limitation of the study. Chapter 2 contains literature reviews. Chapter 3 includes about the research methodology, sampling, data collections and data analysis. In chapter four, the results and findings of the study was discussed. Finally, the last chapter incorporate summary of findings, conclusions, recommendations and areas where further researches may be conducted.

 

Budget is a formal written statement of management’s plans, expressed in financial terms. Thus, it serves management’s primary functions in the same manner that the architect’s blueprints and the builder and the navigator’s flight plan aid the pilot. A budget, like a blueprint and a flight plan, should contain sound, attainable objectives. If the budget is to contain such objectives, planning must be based on careful study, investigation, and research. Reliance by management on data thus obtained lessens the role of guesses and intuition in managing a business enterprise (Warren, 1984).

A budget is a plan that tells us the amount and source of money to be allocated for the provision of a certain service among the priority lists. A budget could be prepared by the federal government, a regional government, Woreda or a city administration. In Ethiopia, budgets that are prepared at the Federal, regional, woredas and urban administrations levels based on government policies and priorities. Among the most important current priorities are: expansion of health services to citizens, creating access to potable water, construction of roads and education facilities. The government policies outline goals that are to be achieved, for example increased enrolment in primary schools.  In order for more children to go to school, however, money is needed to pay teachers, building new schools, buy furniture and books, etc. This is provided in the budget. Most policies that have the potential to make a difference to people’s lives cannot do so without a budget (http://www.mofed.gov.et).    

The effective managerial planning must be accompanied by control. The control feature of budgeting lies in periodic comparisons as disclosed by budget performance reports between planned objectives and actual performance. This ῝feedback῎ enable management to seek corrective action for areas where significance differences between the budget and actual performance are reported. The role of accounting is to aid management in the investigation phase of budget preparation, to translate management’s plans into financial terms, and to prepare budget performance reports and related analyses (Warren, 1984).

The budget process may be carried out by individuals or by companies to estimate whether the person or company can continue to operate with its projected income and expenses. Budget is an estimate of costs, revenues, resources over a specified period of, reflecting a reading of future financial conditions and goals. One of the most important administrative tools, a budget serves also as a plan of action for achieving qualified objectives, Standard for measuring performance, and device for coping with foreseeable   adverse situations ((Wilson and Ghua, 1993).

 Budgets are similar to standards in several ways: They are estimates of the future performance of an organization. They help people with an organization to plan the future (feed forward control), and they enable people to know how well they and the rest of the organization have performed (feedback control). However, budgets are different from standards in that they model the activities of the organization. In this way a budget presents a more comprehensive picture of the organization and its range of activities. The budget for an organization is essentially a model (representation of the expected physical, financial and (to a limited extent) non-financial consequences of all its activities for a certain period in the future. The budget is one of the most important communication devices within an organization and is intimately related to the process of organizational control. We shall illustrate some of the roles which budgets play in organizations through Tocher's control model. To refresh your memory, Tocher (1970-1976) argued that for an activity to be controlled there must exist: an objective for the activity being controlled; a means of measuring the inputs and outputs along the dimensions specified by the objective; a predictive model of the activity being controlled; and a choice of relevant alternative actions available to the decision maker (Wilsonand Ghua,1993)                                                                                                                                                                     A budget is a document that translates plans into money - money that will need to be spent to get your planned activities done (expenditure) and money that will need to be generated to cover the costs of getting the work done (income). It is an estimate, or informed guess, about what you will need in monetary terms to do your work (www.civicus.org).

Budgets also assign responsibility. The Ethiopian budget classification system makes it possible to see exactly which resources are assigned to which public bodies and to follow up that the money has been used in accordance with the intended priorities. Budgets are assigned to public bodies or sector offices and their respective departments, divisions, programs or projects, in turn, assign responsibilities for their effective use. With devaluation, it is crucial that the planning and budgeting cycles at each level are harmonized and coordinated. This is also why a basic understanding of the procedures and timelines in preparing the budget at federal level is important in order to understand the budget process at regional level. Furthermore, budgets define ῝use῎ and῎ purpose῝. The purpose or objective of a budget is related to the intended outputs (for example, number of constructed water points). (http://www.mofed.gov.et).

Advantages of Budgets

Disadvantage or Weakness of Budgeting

The problems which are encountered with budgeting in practice are mostly linked to human behavior.  Some of these problems are highlighted below (Nelly et al., 2001):

There are time frames for the preparation of different planning documents that are required for the elaboration of the budget as well as for the different phases in the budget process. The time frame may vary from one region to the other, but the frameworks are all similar and are developed based on the time frame for block grant allocations by the federal government. This budget timeframe is known as the budget calendar. Budget calendar is important so that it can show when citizens can provide input to the initial planning documents, when the final budget priorities are made and when the budget can be expected to be finalized. Timelines allow for participation and dialogue, not just for a declaration when the budget is approved. The Ethiopian budget year starts on july8th and ends on July -7^th and the entire budget processes should comply with this time framework (http://www.mofed.gov.et)

Budgets may be developed over the time horizons. They may be monthly, yearly or five-yearly budgets depending on the content and purpose of the budget, for the purpose of this section we shall concentrate on the preparation of the annual budget as this is one of the most common budgets found in organizations. Usually an annual master or fixed budget is first prepared. A master budget is a budget that is based on a particular, fixed level of activity or output. For instance, let as assume that the expected level of activity for the coming year will be 500,000 units. This is, we expect to produce or service 500,000 units. Using this level of activity as our base, we then construct revenue, expense, and cash budgets as well as budgeted income statements and balance sheets (Wilson and Ghua, 1993).  

The method by which the annual budget is prepared will clearly differ from organization to organization. In some organization budgeting may be a well-organized, well documented procedure, while in others the budget may be prepared in a rather abhor and disorganized manner. Thus, not all organizations will follow the budgeting procedure set out below. This procedure is representative and illustrative of the method usually followed by organizations but there can be many variations depending on the circumstances facing each organization (Wilson and Ghua, 1993).  

The annual budget hearing is one part of the budget preparation process. It is meeting that gives the opportunity to the federal public bodies to explain and justify their budget requests to MOFED so that it enables MOFED to proceed to the preparation of a draft recommended budget. This information serves as the basis for allocation of available funds. It provides for effective communication among all administrative levels in the budgeting process and provides an appropriate and financially sound method of allocation funds. At the federal level, the first stage of the budget process is to produce an estimate of total expected government revenue. This estimate is produced by the MOFED in consultation with the National Bank of Ethiopia. This macro framework is then reviewed and approved by the prime Minister’s office. Based on the above information, expenditure budgets are then allocated to the regional and federal governments and are divided into budgets for recurrent and capital expenditure. As part of this process, the Ministry of Finance determines an overall budget ceiling, which is the basis for the submission of budget proposals to each ministry. Once budget proposals have been prepared, negotiated and reviewed by the Ministry of Finance, they are submitted to the Council of Ministers. After the Council of Ministers review the proposals and make their recommendations, the budget proposals are submitted to the Council of People’s Representatives for approval. After they have been approved, the Ministry of Finance announces the budgets for each ministry for the next financial year (MOFED, 2009).

One component of the federal budget is a grant from the Federal Government to the state governments. The allocation of this grant is determined by the Federation Council, which bases their decision on a formula that includes variables such as the population in each state and the capacity of each state to generate their own revenue. The states with less capacity to generate their own revenue are entitled to get a larger allocation of this money (MOFED, 2009).

The state governments follow similar budget planning and preparation procedures to the Federal Government. Regional finance bureaus prepare ceilings for expenditure by the regional bureaus for each sector, which include allocations for capital and recurrent expenditure. This is done after the grant for each state from the Federal Government is announced. The finance bureaus at the zonal and Woreda levels also follow this process at their levels of the administration. The regional finance bureaus then submit their budget proposals to the regional councils for approval.  Once the budget proposals have been approved, they are published in the regional Negarit Gazeta (MOFED, 2009).

The Regional Budget calls is issued and sent to sector offices and Woreda WOFEDs between January and May. With the budget call, directives, a manual for budget preparation and the federal and regional policy priorities for the coming fiscal year are included and distributed.

The starting point for the budget process is the estimates made by BOFED of the available sources of own revenue and the amount resource coming from the federal block grant. These estimates are usually based on the regions’ three-or five-year plans and on the Federal Government’s three-year estimates of the subsidy.

The region’s budget planning processes start by estimating the budget sources. The planning stage considers the expected federal subsidy, own revenue and foreign loan and aid. Some regional bureaus of finance and economic development (BOFEDs), prepare multi-year projections of expenditures using macroeconomic fiscal framework (MEFF) plans and public investment programs (PIP). After receiving tentative pre-ceilings on the expected federal government subsidies from MOFED in early or mid-February, regional BOFEDs determines allocations to regional public bodies or sector bureaus (such as health, education, water, rural development, etc) for the following budget year. In all regions, the federal budget subsidy accounts for a substantial share of the budget. Due to this, regions’ and Woredas’ budget processes are highly influenced by the timeframe and the amount of budget ceiling provided from MOFED to regions. BOFED experts use estimates to give notice about pre-ceilings to public bodies, both at regional and woreda level. Each region allocates about two-thirds of their budgets to woredas and urban administrations. Regional and woreda Inland Revenue offices are primarily responsible for collecting the regions’ revenue, mainly, in the form of taxes. Different regions might have slightly different tax rates and different abilities to raise their own revenue (MOFED, 2009).

Woredas mostly start their budget plan preparations six months after the budget year starts. Sometimes, they get budget pre-ceilings to prepare their budget plans. In the absence of pre-budget ceiling, they are guided by the previous year’s trend and by the prioritized needs of communities which is mostly compiled by sector offices. WOFED consolidates sector offices’ work plans with budget proposal and submits to the woreda Cabinet to be checked, scrutinized. WOFED adjusts based on the comments from the Cabinet and submits the plan to the region via the zonal office, (where there are zones) which plays a facilitation and coordination role.

Approved budget notification, with some variations from the Woredas’ proposed budget, normally reaches Woredas around mid-July-Ethiopian calendar. Once the approved budget is received, WOFED makes final adjustments based on the approved ceiling and submits the same to the Woreda council to be approved and proclaimed. Budget utilization report is sent to the zonal ZOFED on monthly basis and quarterly, bi-annual and annual reports are also submitted to the region and the Woreda council. Closing of accounts is done annual basis by the sector offices’ internal auditors who also regularly check and verify accounts. The existing practice for external auditors to audit the Woredas’ accounts is once in two or three years. It is important to note that the federal budget subsidy accounts for a substantial share of the Woredas budget. Due to this, regions’ and Woredas’ budget processes are highly influenced by MOFED’s announcement of budget-ceilings to the regions. Before receiving notification, BOFED experts may use estimates to give notice about pre-ceilings to public bodies, both at regional and Woreda level. Each region allocates about two-thirds of its budget to Woredas and urban administrations. Woredas through their Inland Revenue offices are primarily responsible for collecting the region’s revenue, mainly in the form taxes (MOFED, 2009).

RachelBennettThis article was created by a professional writer and edited by experienced copy editors, both qualified members of the Demand Media Studios community. All articles go through an editorial process that includes subject matter guidelines, plagiarism review, fact-checking, and other steps in an effort to provide reliable informatioBudget allocation is an important part of all business and not-for-profit financial plans. Budgets are typically set annually and involve allocating anticipated income and resources between different departments and business interests. The amount of funding allocated to each area imposes restrictions on the scope of a department's development. For example, if there is a reduction in funding, then some staff may have to be made redundant. Budgets are normally reviewed annually and set for a 12- to 24-month period. Budgets are normally set on the basis of the previous year's expenditures, plus or minus any changes in spending, such as the recruitment of new staff or adjustments in staff salaries. For example, in a university or school, each department or faculty is given an amount of money to spend over the course of the year. The department head normally takes responsibility for allocating the funding to his staff. A budget aims to take into account all expenditures, including staff salaries, the cost of buying resources as well as miscellaneous expenses for any unforeseen needs. In an educational institution, the expenditure is normally calculated at a cost per child for the purposes of grant writing and funding.       

Ø  Typically, budgets are divided into allocation components. These are often based on the business' or institution's core priorities. For example, in a university setting, typical components are student enrollment and research. Many institutions also include performance incentives in the budget to boost staff morale. The components are divided into a matrix, and a monetary value is allocated for each component. This is further divided into a value for the subcomponents.

Ø  Budgets normally include a percentage rate of adjustment, which is typically between 2 and 5 percent. This allows for unforeseen expenses and under or over estimation of expenditures. Budgets are reviewed and adjusted periodically throughout the year to account for changes in expenditures and income.

Ø  If a business or educational institution operates in multiple geographic areas, a geographic location adjustment is included in the budget. This accounts for different living costs and wage levels in different areas, often including a hardship allowance for those living in developing countries. Typically, a cost-of-living index is used to calculate the typical cost in each area and the budget is adjusted accordingly (www.ehow.com/info-7784618-budget-allocation.html).

Getachew (2005) in the study entitled analysis of medium-term expenditure planning and budget allocation in Ethiopia. A research that Ethiopia has been one of the most centralized economies in Africa until early 1991. After the fall of the Dreg regime in 1991, socio political- system is based on the establishment of federal arrangements and fiscal decentralization. The system of intergovernmental transfers (subsidies or grants) had begun in 1992/93.Federal transfers to regions take the form of block grants. The block grants formula is based on a weighted average of four elements; relative population, a development index, poverty index and an index of revenue raising effort. The weight of the population, which increased from one third prior to 1998 to 60 percent in 1998 and currently, it has been reduced to 55 percent (World Bank 2001). Based on these parameters, the subsidy allotted to regional states for nine years for the budget year 1993/94 to 2001/02 from the total expenditure 65 percent expenditure was allocated to Amhara, Oromiya and SNNPR, while the remaining 35 percent is allocated to the other regions for the year 2001/02.

According to Gizachew (2005), Analysis of the policies and Practices in public expenditure allocation is difficult in Ethiopia. There is no well-established and comprehensive public expenditure management. The existing documents are mainly empirical and disorganized. The allocation of operating expenditure is almost based on ad hoc unit costs, last year’s budget allocation and execution. For example; at Federal level, the allocation of recurrent expenditures for two public bodies is based on the following unit costs:

a/ Hospital expenditure per-day per-patient for food and medical supplies is birr 6 and 21.75 respectively.

b) Higher Education Expenditure for supplies of educational materials and food per student for a year is Birr 813.6 and 1400 respectively,

c) Expenditure for maintenance and fuel consumption of vehicle is Birr 8,000 and Birr700 respectively. These unit costs are based on simply arbitrary determination.

Arbitrary budget allocation is the method by which budget is allocated on the basis of Inadequate information, unreliable unit cost and process, often without source of knowledge of how past appropriation was used or what was accomplished in the past budget year. This practice dictates that money is allocated to public sector without detail review of programmed objectives. Therefore, an assessment of the strength of expenditure planning and budgetary process in Ethiopia shows unsatisfactory results. Regional governments have wide differences in utilizing the resources due to in the differences of the availability of skilled staff, particularly lack of professionals such as accountants, economists, managers, planners and lawyers. These problems hinder the implementation and efficiency of public resources (World Bank, 2000 e). The government has undertaken different efforts to solve these capacity problems. The establishment of Civil Service College is one of the strategies to solve the capacity problems of the regions. Politically affluent people are recruited from different regions and trained in this college to become accountant, economist, lawyers and other high government officials. In addition to lack of skilled and technical manpower, high turnover of civil servants has led to a poor-quality investment decision and inadequate utilization of the financial resources. Because of the shortage of skilled manpower and limited institutional capacity, capital budget utilization in different regions is undermined and inadequate. The Somali region utilizes, on average, less than 60 percent of capital budget for the year 1993/94-2001/02. Tigray has utilized, on average, 85.7 percent of their capital budget, which is the highest achievement compared to federal and other regions. This is due to high political commitment of the region.

CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

This chapter deals with the research methods used in this study. It comprises four sections. The first section focuses on the choice of the appropriate research design based on the research objectives and questions. The second section deals with the sample and sampling procedures used. The third section focuses on data collection methods and procedures followed to get the data for the research questions to be answered, and elaborate the techniques used for data analyses.

3.1 Research Approaches

To achieve the objective of this study, the researcher applies both quantitative and qualitative method of research approach with descriptive and explanatory research design. Thus, the researcher assessed major factors affecting budget allocation, utilization and evaluation to sectors with selected woreda. The study will be focused on five poverty reduction sectors; education, health, roads, water and agriculture. The major parts of the public budget are allocated to these sectors. The researcher employs explanatory in that the relationship between variables is correlated with an aim of estimating the integrated influence of the factors on budget allocation, utilization and evaluation performance. So, in this research descriptive and explanatory types of research and quantitative and qualitative methods of analysis was applied.

3.2. Target population of the study

The target population of the study will be the employees of Amhara National Regional State north Shoa zone (Kewot, Efratana Gidm and Tarmaber ) woredas in finance and economic development office and PASDEP sectors (education, health, roads, water and agriculture sectors).The total number of target population is three woredas planning and budgeting process owners, Budget officials, budget monitoring and evaluation officers, accountants, Internal auditors and PASDEP sectors limited numbers of qualified personnel. From the population the researcher selected 90 staffs by their position.     

The extent to which a sample represents a population depends on the sample frame, the sample size and the specific procedures of selecting potential respondents. Accordingly, from the 11 zones found in Amhara region, one zone (North Shewa zone which comprise thirteen woreda) and from the 13 woredas and administration city found in North Shewa zone three woredas (Kewot, Efratana Gidm and Tarmaber) are selected as a sample of the study based on purposive sampling method.

This research used primary and secondary sources: The primary data will be collected through structured questionnaire and interview of senior experts engaged with budget allocation utilization and evaluation. The secondary data will be collected for five years annual budget allocation and utilization report from three selected woreda finance and economic development office, BOFED budget allocation document, research papers, account documents and internet. The basic tool/instrument during primary data collection system is Questionnaires. The questionnaire is used to gather information about opinions and attitudes of the budget officers at woreda level. The questionnaire contained both Likert scale and close-ended. To have interpretive data, in some sort of quantitative sense, the researcher constructs the close-ended question items in the form of Yes or No with items to be chosen as their possible reasons for their responses, items having five points ranging from strongly disagree to strongly agree (Likert scale) with the suggested values which run through one to five and multiple choice.

Data analysis intended to derive descriptive statistics by classifying, organizing and summarizing the data into tables and frequency and tables as deemed appropriate. In addition, narration will be used to summarize the important points obtained through documentary review. Data analysis assisted with the use of Microsoft Excel for analysis basing on descriptive analysis. Data will be systematically presented according to theme following the chronology of research objectives that enabled easy interpretation of the findings.

Chapter 4. WORK PLAN and Budjet

         4.1 Time Table

Reference

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