BAHIR DAR UNIVDERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCUNTING AND FINANCE

ASSESMENT OF BUDGETERY CONTROL

PROCEDURES & UTILIZATION (A CASE STUDY IN
BAHIR DAR UNIVERSITY)
A RESEARCH PROPOSAL SUBMITTED IN PARTIAL
FULFILLMENT OF THE REQUIREMENT BACHELOR OF
ARTS (B.A) DEGREE IN ACCOUNTING AND FINANCE
DEPARTMENT

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 NAME ID
Getnet Yibeltal………………………………………….0802152

Molla Walie …………………………………………….0802294

Mihret Assefa ……………………………………………0802280

Mekitew Feleke…..........................................0802246

Mitiku Getnet ……………………………………………0802289

Habtamu G/mariam………………………………….….0802170

Mengistu Geremew……………………………………...0802262

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 Acknowledgment
Above all, thanks to almighty GOD for his priceless help during the entire period of our life.

We owe enormous depth of thanks to Dr.Assefaw our instructor for his help plentiful advice. without his
advice and professional criticism not have accomplished our proposal successfully. Next we would like
to express our heartfelt thanks to the most loving our Family and our friends.

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 Abstract
The study will be conducted at Bahir Dar university which is located in the regional city of Amhara.

The study will be an investigation of the assessment of Bahir Dar university’s budgetary control
procedure and utilization. The objective of the assessment of budgetary control procedure and utilization
and its related problems of the case of Bahir Dar university will be to identify the problems that
seriously hamper the success of budget. For identified problem feasible solution will be recommended.

The study will use primaries of data in order to collect the information. Mostly the focuses will be given
to primary source of data which will be collected by questionnaire and interview method of data
collection.
After the data has been gathered, it will be processed, analyzed and presented. The data analysis will be
carried out based on tabulation and percentage method and the data will be red scribed by descriptive
method.
Net careful interpretation of the analyzed information will be carried out to arrive at reasonable
generalization.
Ultimately the research will be expected to provide reasonable results that will help the management to
take reasonable decision for their future activity.

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Table of Contents

Acknowledgment………………………………………………………………….I
Abstract……………………………………………………………………………II
Table of content………………………………………………………………………………………………….III

CHAPTHER ONE
1.1 back ground of the study…………………………………………………………………………………………….6
1.2 Statement of the problem…………………………………………………………………6

1.3 Objective of the study……………………………………………………………………..7

1.3.1 General objective…………………………………………………………………….7

1.3.2 Specific objective…………………………………………………………………….7

1.4 Research Methodology……………………………………………………………………..8

1.4.1 Research Design………………………………………………………………………8

1.4.2 Source of data…………………………………………………………………………8

1.4.3 Data collection tools…………………………………………………………………..8

1.4.4 Sampling Techniques……………………………………………………………….....8

1.4.5 Sampling Method……………………………………………. ………9

1.4.6 Method of data analysis……………………………………………….9

1.5 Significance of the study………………………………………………………………9

1.6 The scope of the study………………………………………………………………….9

1.7 Limitation of the study………………………………………………………………..10

1.8 Organization of the study……………………………………………………………10

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 CHAPTER TWO
REVIEW OF RELATED LETRATURE
2.1 Definition of budget…………………………………………………………………………………..10

2.1.2 Characteristics of budget…………………………………………………………………….11

2.1.3 Type of budget…………………………………………………………………………………….11

2.2 Budget allocation and utilization…………………………………………………………………12

2.3 Role of budget…………………………………………………………………………………………….12

2.4 Budget approach………………………………………………………………………………………….13

2.5 Advantage of budget…………………………………………………………………………………….16

2.6 Time coverage of budget……………………………………………………………………………...16

2.7 Budget preparation process………………………………………………………………………….16

2.8 Initial budget proposal……………………………………………………………………………………17

2.9 Budgetary control……………………………………………………………………………………………17

2.10 Procedures to achieve budget control……………………………………………………………18

CHAPTER THREE
TIME AND COST BUDGET
3.1 Time budget…………………………………………………………………………………………………20

3.2 Cost budget………………………………………………………………………………………………….21

3.3 Reference…………………………………………………………………………………………………….22

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 List of tables
3.1 Description of time………………………………………
3.2 Description of cost…………………………………………

CHAPTER ONE

INTRODUCTION

1.1Back ground of the study

Budget is the quantitative expression of a proposed plan of action by management for specified
period and aid to coordinate what needs to be done to implement that plan. Budget serves as
evaluating performance, co-coordinating activities, implementing plan and communicating,
motivating authorized action in governmental and non for profit organizations.(Horngreen, 2015)

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A budget is a quantitative expression of a financial plan for a defined period of time. It may include
planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and
cash flows. It expresses strategic plans of business units, organizations, activities or events in
measurable terms.[1]
A budget is the sum of money allocated for a particular purpose and the summary of intended
expenditures along with proposals for how to meet them
1.2Statment of the problem
Budgetary control is a system of controlling costs through preparation of budget. It is establishment
of budget relating to the responsibilities of executives’ of a policy and the continuous comparison of
the actual with the budgeted result, either to secure by individual action the objective of the policy or
to provide a basis for its revision.
Budget is key element for proper utilization of public resources. The organizations over all
objectives depend up on properly prepared budget proposal and its implementation well and on
appropriate budget control and utilization system is one of the basic assurance in achievement of
desired goals.
A budgetary control system can prove successful only when certain condition and attitudes exist
absence of which will regale to a large extent the value of a budget system is any business.
Budget is a quantitative expression for set of time period and proposed future plan of action by
management and other concerned body. Thus budget preparation for the purpose of controlling and
utilization public resources need much consideration especially via of its source and implementation
area. However; there are problems related to the process of budgeting which hinders its contribution
in the achievement of deserted goals. The concern of this study will be to examine the assessment of
Bahir Dar university’s budgetary control and utilization in particular area of COBE’s Finance and
Economic Development; which force problem of improper utilization of budget and budget control.
The problem arises when the organization fails to utilize its budget effectively and efficiently.
Based on the above clarification the researcher will raise the following basic questions that will be
answered in this course or study.
1. What are the main problems related to budget control and utilization in that specific area?
2. Who is the responsible body to control; budget and its implementation?
3. How to create awareness in the responsible body while they are developing budget proposal?
4. at what time interval the organization proper budget utilization report?

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 5. What mechanism or system applied in budget preparation and controlling?
6. How to perform budget utilization in the organization?

1.3objective of the study

1.3.1General objective

The overall objective of the study will be to assess Bahir Dar university’s budgetary control
procedures and utilization .

1.3.2Specific objective

1. To find out the problem related to budget control and utilization in that specific area
2. To examine the main problem the organization gives training concerning budget utilization and
controlling procedures to the concerned body.
3. To create good awareness in the responsible body while they develop budget proposal
4. To determine time interval the organization proper budget utilization report
5. To assess the mechanism or system applied in budget preparation and controlling.
6. To assess perform budget utilization in the organization.

7. To identify into the budget system that adopted by BDU

8. To examine factors that hinder the effective and efficient utilization of budget

1.4 Research Methodology

1.4.1Research Design

Depending on the nature of the study, this study will be carried through descriptive research design. The
data will be gathered by distributing questionnaires’ to the respondents and interview (unstructured)
and will be analyzed using table and percentage.

1.4.2 Source of Data

In order to be the researcher clear and concise the researcher study will use the primary source of data.

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1.4.3 Data collection Tools

The researcher will be using primary data for completion of the research. The primary data will be
gathered through structured questionnaire consists close ended and unstructured interview
1.4.4 Sampling Techniques
To determine sample size.
n=N/1+N(e)^2
n= sample size
N= Population size
e = error of team (10%)
n=36/1+36(0.1) ^2=16.47
The target population of the study will be 36 permanent employee of the organization. Sample
size will be depending on the permanent employees, and hence 16 respondents will be chosen
from the total number of employees.

1.4.5Sampling Method

The researchers will apply the Random sampling design which is subjected stratified random sampling
method. By way of selecting Judgment method of sample because the researchers to take sample based
on the purpose of this study.

1.4.6 Method of data analysis

After data being collected through questioner and interview it will be analyzed by using appropriate
tools. The data will be collected through questioner ;edited, coded, classified and further process then
the process will be analyzed and interpreted through tabulation percentage and proportion. Tabulating
will use among data table or summary format to facilitate the process of comparison of various data
analysis that will be made by the help of descriptive data analysis.

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 1.5 Significance of the study
This paper will be conducted to organize the information gathered from the employee and
documents of the organization. Therefore, the significance of the study is that it will benefit the
organization with some possible situation and recommendations. In addition; the paper will enable
the organization
 To create budget utilization system properly and to have the proper control on the utilization system
to provide a ground line information about budgetary procedure of the organization
 To create god awareness to the staff members of the organization about budgetary issues
 Serve as a starting point to make further study on budget utilization and control system
 And it will also enable the writers to hold vivid pictures how the theoretical concept on applied in
actual practices of the organization

Furthermore the study will help in improving the way to those who are interested to undertake detail
research on the same stream in the future

1.6The Scope of the Study

Due to financial and time constraint the scope of the study mainly will focus on factors affecting
budgetary control procedures and utilization in particular area of Bahir Dar University. Because the
organization may have many problems regarding to budget such as lack of proper management, efficient
utilization of resource, and lack of feeling responsibility. Therefore, the scope of the study will be
limited only to this specific problem of the Organization of the Study

1.7. Limitation of the Study

In doing this research, the researcher may face many problems. Among those problems, the major one
are as follows
1. Time pressure to collect adequate information and data for the study.

2. Shortage of clear information from different respondent.

3 . Lack of experience on conducting research on the side of researchers.

1.8 organization of the study

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This study will be divided in to four major chapters. The first chapter deals with the background of the
study statement of the problem, objective, research methodology, significance, scope of the study. The
second chapter will focuses on the review of related literature. The third chapter will present data
analysis and presentation. The fourth chapter will contain summary of major findings, conclusion,
recommendations and references.

CHAPTER TWO

REVIEW OF RELATED LETERATURE

2.1 Definition of budget

Budget is a quantitative expression for a set of time period of the proposed future plan of action
management. The word budget has been derived from French word “bouquet,” which means small bag.
It emphasizes a bag containing the financial proposal. (Quick and New, 2001)

Different scholars defined budget and budgeting in different manners. However , most of them have
come up with similar connotation of budget and budgeting some of selected are presented below.

Budget is the process, of preparation of budget which determines the target for budget and it includes
preparation of plans, implementation and evaluation.

A budget is an itemized estimate of the operating result of an enterprise for a future time period. The
form of a budget varies from organization to organization, but it is eventually summarized in to the form
of the financial statement. The major difference between the budget and financial statement is the data
used to develop each. Financial statements are based on actual, result of past operation, whereas budgets
are based on planned operation of a future time period. For this reason, budgets may be referred to as
perform statements, (OWEN CHERRINGTION) page 140

2.1.2 Characteristics of Budget

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As per the definition show above a budget has the following characteristics

It is a quantitative statement expressed in terms of money

It is prepared in advance and approved prior to a definite period of time during which it is to operate

It relates to future in other word budget are prepared for future implementation.

A budget is prepared for the implementation of the policy formulated by the management for the
purpose of attaining a give objective.

2.1.3 Types of budget

According to their nature governmental entities prepare and implement several types of budget. Budget
for governmental entities may be classified as follows:-

Operating Vs. Capital Budget

The operating budget also called revenue budget deals with recurring expenditure such as supplies and
means of financing expenditure such as salaries, payments and supplies as a means of financing them.

Capital budget on the other hand it of larger or capital facilities including building, vehicles and
machines and means of financing them. Budget for operating expenditure are usually prepared on
manual bases. Budget for acquisitions of long term facilities is known as capital program. Capital
programs shows details of longer of facilities of o acquire over relatively long period of time such as
five to ten-twenty years. Comparable program budget in case of Ethiopia is the public investment
program which is as the year rolling financial plan for capital expenditure and capital program are
broken down into annual budget is known as the current budget.(T.Horngreen,2015)

Fixed Vs. Flexible Budget

Fixed budget are those in which preparation are for a specific fixed dollar amount and may not be
exceed because of changes in demand for governmental goods or services. On the other hand ,
expenditure authorized by flexible budget are fixed per unit of goods or services but are variable in
total , according to demand for either production or delivery of the goods or services.

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2.2 Budget allocation and utilization
Budget utilization is an important part of all business and not -profit-organization financial plans.
Budgets are typically set annually and involve allocating, anticipated income, and resource between
different departments and business interest. The amount of funding allocated to each area impasses
restriction on the scope of department’s development.

Budget are normally set on the bases of the previous years expenditure, plus or minus any change in
spending.

2.3. Role of Budget

Budget plays a number of vital rules in economic measurement of public sector. According to UNESCO
(1963). The role of budget is grouped in to three categories. This include distribution of resources,
allocation of resource and control activities.

 distribution of resource: though national budget, one can distribute the scarce resource to different to
different public sectors and produces goods and services. The budgeting activities should play a major
role in planning and programming.

Allocation of resources; As resources are limited human wants are unlimited at times the government
should identify the most relevant activities to be done first and allocate the necessary resources.

Controlling activity : government taxation and spending influences the nations general level of
economic activity that is, when the tax allocation is less than or equal to or greater than the spending of
government activities it will have it’s own impact on economy. As the case may be budget is a
mechanism of controlling and establishing the economy. Further, through beget records, the controlling
authority can variety the legality and correct implementation of public resources.

2.4. Budget approach

The several general approaches to governmental budgeting have marked difference in their emphasis on
planning, control and evaluation. At this point it may be useful to point at that the principal groups that
excise control are executive branch official and the legislator the most common approach to operating
expend items, budgeting may be characterized as follows.

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The object of expenditure approach
It is often referred to as the transitional approach and expenditure control orientation. It becomes popular
as the basis for legislative control over the executive branch. This method involves
subordinator ,agencies, submitted budge request to the chief the chief executive in terms to be made that
is the number of people to be hired in each specified position and salary level and the specify goods and
services to be purchased during the upcoming period. Request for the organization to the legislative in
the some object of the expenditure terms and frequently thorough not necessarily the request along
object expenditure input lines performance of program, data may be included in the budget documents
but they are used only to supplement of support the object of expenditure request.

This method facilitates accounting control in the budget execution process and that comparable data may
be accumulated for a series of years in order to facilitate trend comparison. They content that most
program are of an ongoing nature, and most expenditures are relatively in available decision must in the
real world on change programs and affection can most reading be giving to change proposed compare
with prior year data and the object of expenditure approach does not preclude supplementing object of
expenditure (Lynn and Freeman, 1983, pp60-63).

Performance approach
The performance approach originates near to turn of the century and came in to popular usage in the
fifties. This approach embodies shifting of in phases from object of expenditure to measurable
performance of activities and work program. The primary focuses in an evaluation of the efficiency with
which existing activities are being carried out its primary tools are cost accounting and work
measurement. The total budget for an agency would be the sum of the products of its unit cost standards
multiplied by the sum of the products of its unit cost standards multiplied by the expected unit of activity
in the upcoming period. The enacted budget is viewed somewhat as a performance contract between the
legislative branch and the chief executive. The most important contribution of this approach it its
emphasis on the inclusion on the need to measure output as well as input. The performance budget
emphasizes the activities for which funds are requested.

The performance approach provides the chief executive with and additional revenue of control over his
subordinates, rather than being restricted merely to how much has his subordinate spend; he may

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evaluate the performance of activities in terms of dollar and activity unit standards. (Lynn and Freeman
1983).

The program and planning – programming budget approach (PPB).

The national council on governmental accounting (NCGA) defined a program budget where in
expenditure are based primarily on program of work and secondarily on character and object a
transitional type of budget between the traditional character and object class budget. On the other hand
program budget in refers to a planning oriented approach which emphasizes up on evaluation or control
performance measurement is not prefer quest to program budgeting or budget it may be a useful act.

The major distinctive characters tics of PPB are

1. Future year implication are explicitly identified

2. All pertinent costs are considered.
3. It focuses on identifying the fundamental objective of the government and the relating all activi-
ties to these regardless of organizational placement).
4. Systematic analysis of alternatives is performed.
Among the benefits to state and locality attributed to the PPB approaches are:

- Plans and programs are reviewed continuously

- Inter government planning is improved.

- Inter agency coordinating of program is strength.

Government budget
The budget of the government is a summary of plan the intended revenue and expenditure of a
government budget. A government budget is a legal document that is often possessed by the legislation
and approved by the cheap of executive or a president. For example, only certain types of revenue may
be imposed and collected property tax frequently municipal and country revenues. While sale tax and by
income taxable the bases for state revenues. The two basic elements of any budget are revenue and
expense. In the case of the government revenue are delivered primarily from the taxes of government
expense include spending on current goods and services which economists call government on
summation, government spending investment such as infrastructural, investment of research expenditure

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and transfer payment like an employment retirement benefits. Budgets have an economic, political
technical base, unlike a prior budget they are not entirely doing to allocate scarce resources.

Capital Vs Current Budget

Sound governmental fiscal management requires continual planning for several period in the future.
Most governments are involved in programs to provide certain good or services continuously, in
acquisition of building can or other major items of capital, out lay that must be scheduled and financed
long term debt service commitments. Although some prepares comprehensive multi year plans, which
include all of these more common practice is for such plans to include only the capital outlay plans for
the organization.

Capital budget
A plan of proposed capital outlays and means of financing them for the current fiscal period. It is
usually apart of the current budget.

Current budget

The annual budget prepared for and effective during the present fyical year or in the case of some state
government (lynn and freeman 1983: pp55-56)

2.5 Advantages of budget

 Compares strategic planning and implementation of plans.

 Provides success the companies’ goal of objectives.
 Motivate managers and employees.
 Provide a frame work for judging performance.
 Promotes co-ordination and communication among sub units within the company
(HORNGREN) page 177.
2.6 Time Coverage of Budget

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Budget typically has a set period, such as a month, quarter, year and soon. The set period can be itself be
broken in to sub period.

For example, a month cash budget may be broken in to 12 monthly periods so that cash inflow and out
flow can be better coordinated. The most frequently used budget period is one year, which is often
subdivided into months and quarters. The budgeted data for a year are frequently revised as the year
goes on. For example, at the end of first quarter, managements may change the budget for the next three
quarters in light of new information obtained during the first quarter.(Horngreen, 2015)

2.7 Budget Preparation Process

Budget and budgeting process are used to identify the most efficient allocation of the organization
resources and to provide planning and control mechanism over fund flower the organization modern use
several types of budget in planning and executing the organization, operation. The budget department
performance the following function:-

Publisher procedures and forms for the preparation of budget

Make sure that information is properly communicated between interrelated organization units

Provides assistance to budget in preparation of their budget

Analyzed proposed budget and make recommendation first to the budget and subsequently to the
senior management.

Administers the process of making budget revision during the year.

Issuance of Guidelines

Unlike budget preparation development of the strategic plan usually does not involve lower level
responsibility center manager. Thus whether or not there is as strategic plan, the first step in the
budgetary preparation process in the develop guidelines that govern, the preparation the budget for
dissemination to all responsibility center manager.

2.8 Initial Budget Proposal

Using the guidelines, responsibility center manager assisted by their staffs, develop budget requests.
Budget most responsibility centers will start the budget year with that some facilities, personnel and
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other resource that they have currently this budget is based on the existing levels which are then
modified in accordance with the guidelines.

2.9 Budgetary Control

The budgetary control is the establishment of the budget relating to the responsibility of executives to
the requirement of a policy, and the contentious comparison of actual with the budgeted results, either to
secure by individual action the objective of that policy or to provide an organization bases for its
revision.

The budget that is appropriated by the council of people’s representatives (CPR) each year provides
budgetary institutions (BI) with its authorization to spend money.

Budget Control

Budget control has two key elements;

1. Expenditure is incurred only if there is an available budget.

2. Actual expenditure does not exceed budgeted expenditure.

The budget section is tasked with the responsibility of budget control.

Approved Budget

The approved budget is the detailed break down of the appropriated by ;

 Sub-agency or project ,and

 Source of finance

The budgetary institution (BI) is notified of its approved budget on recurrent budget notification for sub
-agency and capital budget notification for project at the beginning of a fiscal year.

Revised Budget
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The revised budget means the approved budget adjusted for additions to and /or reductions from the
approved budget. The revised budget is the bench mark for budget control, as an item of expenditure
must not exceed its revised budget.

2.10 Procedures To Achieve Budget control

Budget control is achieved through a combination of commitment accounting and expenditure approvals
at the budget section. Each of these processes is described below.

Commitment

A commitment is a way of marking off part of the budget that has not yet been spent but that is obligated
for a specified expenditure. After the budget has been approved, the budgetary institution may inter in to
contracts or issue purchase orders. These obligations to spend money are treated as commitments ;that
is, before the good or service is ordered and before the payment is actually made, the amount of
purchase order is subtracted from the budgetary institutions approved budget. A commitment is a tool
that prevents over spending by identifying amounts committed to pay for items that have been requested
but not yet ordered and to determine the budget that is available (uncommitted) for expenditure.

The budget section record the commitment and signs the source document as evidence of recording the
commitment in the budget ledger card and confirming that budget is available for spending.

The Expenditure Approval

As an additional control measure , when expenditures are to be incurred by the budgetary institution , all
payment vouchers are verified by the budget section prior to approval for payment by the accounts
section. The budget section approves all expenditures to verify that expenditure remains within the
budget.

Characteristics of Budgetary Control

Following are the characteristics’ of budgetary control

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 - Comparison of actual performance with the budget on a continuous base.
- Analysis of variation of actual performance from that of the budget performance to know
the Establishment of budget for each function or department of the organization.
- reasons there of.
- Taking suitable remedial action, where necessary.

Objective of Budgetary control

The general objectives of a budgetary control are:

Planning: a budget is a plan of action which provides a detailed plan for a definite period of time. By
planning in advance a business can anticipate many problems much before they arise and solution can be
sought through a careful study. In other words it compels the management to think a head to anticipate
and prepare for the future possibilities.

Coordination: is the process whereby different division of a concern works in harmony to achieved the
objective of a business. Effective planning contributes in achieving coordination among the various
departments. A comprehensive budgetary control requires that these plans be formally lead down in the
budget and copies to circulate among the different departments for proper information and
functioning.

Control: control is the action necessary to ensure that the plan and objectives is being achieved. It is
possible to control or to compare the actual performance against predetermined plans and reporting the
difference to the management for taking corrective action.(Mannual-3 FGE Accounting System)

CHAPTER THREE
TIME AND COST BUDGET
3.1 TIME BUDGET
Time plan or time budget is a time table explaining how the researchers expected to carry out
there project. It is a plan interims of months and expected completion date.
It is presented in the table form or charts in the following schedule.

No Activities Time period(months)

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 may Jun july august septembe October
april e r
1 Title selection XX
2 Proposal XX
writing
3 Proposal XX
submission
4 Data collection XX
5 Data
processing & XX XX
analyzing
6 Report
writing & XX
presentation

3.2 COST BUDGET

There are different cost table incurred to undertake this study. the researchers estimate the following
Minimum cost per unit

Activities Unit Unit cost |Birr| Total cost |Birr|

Transportation cost - - 25
Secretarial service-

For writing proposal - - 65

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Pays of researchers for 12 2 24

Teas & etc

Pen 6 4 24

Pencil 2 3 6

Paper 2 pad 100 200

Copy cost for getting 20 0.50 10

related document

Cost for flash 1 200 200

Total 554

References
Douglas A.Lind et al. Basic Statistics For Business and Economics ; 3 rd edition
J O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper
Saddle River, New Jersey 07458: Pearson Prentice Hall. p. 502.
Lynn.(1983). Fund Accounting Theory and practice
Manual-3 FGE Accounting system, Volume 1,P(24-28)
Own cherrington. (1980 ).cost Accounting; Managerial approach, 2 nd edition.
Quick J.A and New C.C.(2001).Grant seeker’s budget toolkit, john willy and
sons ,Inc,Australia.
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Tracie L. Miller et al. (2015). Horngreen Accounting. ( 11 th ed)
UNESCO.(1983).The Role of Budgeting And Education Planning Paries.

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