WALLAGA UNIVERSITY

SCHOOL OF GRADUATE STUDIES

COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING AND FINANCE

DETERMINANTS OF BUDGET UTILIZATION AT PUBLIC ADMINIS

TRATION OFFICE (A CASE STUDY OF KELLEM WALLAGA
ADMINISTRATIVE ZONE)

By
HABTAMU DENU SADI

April, 2023
Nekemte, Ethiopia
 WALLAGA UNIVERSITY
SCHOOL OF GRADUATE STUDIES
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING AND FINANCE

DETERMINANTS OF BUDGET UTILIZATION AT PUBLIC ADMINIS

TRATION OFFICE (A CASE STUDY OF KELLEM WALLAGA
ADMINISTRATIVE ZONE)

A RESEARCH PROPOSAL SUBMITTED TO THE COLLEGE OF

BUSINESS AND ECONOMICS DEPARTMENT OF ACCOUNTING AND
FINANCE IN PARTIAL FULFILLMENT OF THE REQUIREMENTS
FOR THE MASTERS OF SCIENCE DEGREE IN ACCOUNTING AND
FINANCE

By
HABTAMU DENU SADI
Advisor: Adunya M. (Ass. Prof)
April, 2023
Nekemte, Ethiop
 APPROVAL SHEET FOR SUBMITTING RESEARCH PROPOSAL

TITLE: DETERMINANTS OF BUDGET UTILIZATION AT PUBLIC

ADMINISTRATION OFFICE

Submitted by:

_______________________ _____________ ______________

Name of student Signature Date

Approved by:
1. _______________ ______________
Name of Major Advisor Signature Date

2. _____________________________ _______________ ______________

Name of internal Examiner Signature Date

3. _____________________________ ______________ ______________

Name of external Examiner Signature Date

4. _____________________________ _______________ ______________

Name of Chairman Signature Date

5. ____________________________ _________________ __________

Department, PGC Signature Date

6. ____________________________ _______________ ______________

Name of College Dean Signature Date

7. _____________________________ ______________ _______________

Name of Dean, SGS Signature Date
 TABLE OF CONTENTS
Contents Pages

TABLE OF CONTENTS............................................................................................................. i

LIST OF TABLES..................................................................................................................... iii

ACRONYMS ...............................................................................................................................v

ABSTRACT............................................................................................................................... vi

CHAPTER ONE ........................................................................................................................ 7

1. INTRODUCTION ............................................................................................................... 7

1.1 Background of the study ................................................................................................. 7

1.3. Objectives of the study ................................................................................................. 11

1.3.1. General objectives ................................................................................................. 11
1.3.2. Specific objectives ................................................................................................. 11

1.4. Research Hypothesis .................................................................................................... 12

1.5. Significance of the Study ............................................................................................. 12

1.6. Scope of the study ........................................................................................................ 13

1.7. Organization of the Study ............................................................................................ 13

CHAPTER TWO...................................................................................................................... 14

2. REVIEW OF RELATED LITERATURE............................................................................. 14

2.1. Theoretical review ........................................................................................................ 14

2.1.1. History of budget ................................................................................................... 14
2.1.2. Definition of budget............................................................................................... 14
2.1.3. Benefits of Budget ................................................................................................. 15
2.1.4. Principles of budgeting .......................................................................................... 15
2.1.5. Budgeting process in a state or local Government ................................................ 16
2.1.6. Budget preparation ................................................................................................ 16
2.1.7. Budget Utilization.................................................................................................. 17

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 2.1.8. Controlling and Monitoring Budget Utilization .................................................... 17
2.1.9. Budget procedure ................................................................................................... 18
2.1.10. Budget process in Ethiopia .................................................................................. 18
2.1.11. Function of budget ........................................................................................... 19
2.1.12. Stages of the budget process / cycle in Ethiopia .............................................. 19
2.1.13. Budget structure in Ethiopia ............................................................................ 20
2.1.14. Budgetary Controls .......................................................................................... 20
2.1.15. Program budgeting ........................................................................................... 20

2.2. Empirical review .......................................................................................................... 21

2.3. Literature Gap .............................................................................................................. 24

2.4. Conceptual framework of the study ............................................................................. 25

CHAPTER THREE.................................................................................................................. 26

3. RESEARCH DESIGN AND METHODOLOGY .................................................................. 26

3.1. Introduction .................................................................................................................. 26

3.2. Background of the Organization/case area................................................................... 26

3.3. Research Design ........................................................................................................... 27

3.4. Data source and method of data collection .................................................................. 27

3.5 Target Population of the Study ..................................................................................... 27

3.6. Sample Design.............................................................................................................. 28

3.7. Data Analysis and Interpretations. ............................................................................... 29

3.8. Model Specification ..................................................................................................... 29

CHAPTER FOUR ................................................................................................................... 31

4. RESULT AND DISCUSSION .............................................................................................. 31

4.1. Descriptive Statistics .................................................................................................... 31

4.2. Econometrics Result ..................................................................................................... 31

4.2.1. Diagnostic test Result ............................................................................................ 31

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 4.2.2. Multi-collinearity Test Result ................................................................................ 31
4.2.3. Correlation Test ..................................................................................................... 32

4.3. Descriptive Analysis .................................................................................................... 33

4.2. Analysis of secondary data on budget Utilization ........................................................ 34

CHAPTER FIVE ..................................................................................................................... 35

CONCLUSION AND RECOMMENDATION ......................................................................... 35

5.1. Conclusion.................................................................................................................... 35

5.2. Recommendation .......................................................................................................... 36

Reference................................................................................................................................. 37

Appendix ................................................................................................................................. 39

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 LISTS OF TABLE
Table1: Sample size determination for each District using proportion .................................. 28
Table 4.1: descriptive Statistics for dummy variable.............................................................. 31
Table 4.2: descriptive Statistics for Continuous Variable ...................................................... 31
Table 4.2: variance inflation factor ......................................................................................... 31
Table 4.3: Correlation Test Result .......................................................................................... 32
Table 4.3: Coefficient Regression........................................................................................... 32
Table 4.4: Comparison of Adjusted budget with recurrent expenditure and capital
expenditure in Kellem Wollega .............................................................................................. 34

LIST OF FIGURE
Figure 1. Conceptual Framework ........................................................................................... 25
Figure 4.1: Sex of Respondent ................................................................................................ 33
Figure 4.2: Education Level of Respondent ........................................................................... 33

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 ACRONYMS

ANOVA Analysis of Variance

BOFED Bureau of Finance and economic development
CMA Chartered of Management Accountant
EFY Ethiopian Fiscal year
IBX Integrated Budget Expenditure
IFMIS Integrated Financial Management Information System
MEFF macro-economic and fiscal framework
MOFEC Ministry of Finance and economic cooperation
OFAG Office of the Federal Auditor General
PB Program Budget

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 ABSTRACT
This study's goal is to identify the variables that affect how the budget is used in the Kelem
Wollega Administrative Zone. Descriptive research methods were used to achieve these goals.
Both a qualitative and a quantitative methodology were used in the investigation. . The study
used the response from 117 employees directly related to budget preparation, implementation
and controlling. Five-year (2017-2021) data has been collected from secondary sources and
also primary data were collected through questionnaire. The researcher used both questionnaire
and interviews to collect data for the research. The questionnaire contained open and closed
ended questions and covered areas of budget utilization to come up with good raw data for the
research. Data obtained from respondents were entered into STATA 15X64 software
application for analysis. For this study, seven independent variables were identified including
inflation rate, government policy, and staff capacity, auditing system, political stability and
corruption. Therefore; based on output of STATA the variables government policy affects
budget utilization significantly. The remaining three variables; inflation rate, staff capacity,
political stability and auditing are insignificant at p>0.05.

Key word: Budget Utilization, Kelem Wollega

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 CHAPTER ONE

1. INTRODUCTION

1.1 Background of the study

In Ethiopia, budgets that are prepared at the Federal, regional, Worde and urban admi
nistrations levels based on government policies and priorities. They should set out
objectives and targets and present the required resources to achieve the desired
outcomes in the budget year. MOFEC,(2009). Ethiopia has a dual budgeting system in
which recurrent and capital expenditure are considered separately. Until recently these
two budgets were prepared separately by the Ministry of Finance and the Ministry of
Economic Development and Cooperation, respectively. In October 2001, these two
ministries were merged to form the Ministry of Finance and Economic Development.
The new ministry determines budget ceilings for federal ministries and agencies and
for the regions. In doing so, it takes stock of the performance of the economy for the
previous year and makes economic projections for the following year in terms of
growth, revenue, and so on. The MoFEC does this in consultation with other state
agencies, such as the National Bank of Ethiopia and the Central Statistical Authority.
At the federal level the amount to be allocated to recurrent and capital expenditure is
determined by government priorities, ongoing projects, nondiscriminatory expenditure
and institutional capacity. (Ramaswami, 2005).

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 MoFEC 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

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Representatives for approval. After they have been approved, the Ministry of Finance
announces the budgets for each ministry for the next financial year (MOFEC, 2009)

Organizations have paid increased attention to the economic management of resources

in the current economic climate, where competition is fierce, and the use of budgets as
tools for monetary management at the organizational level has increased. As a result,
the budget is the most important tool in carrying out any task successfully. It's also the
method via which a company's management translates its mission statements into action
and numbers. So, continuing to come up with any economic activity is a necessary part
of the success of these activities, whereas failing to come up with any economic entity's
activity would detach from encompassing reality, and wherever continuing to come up
with any activities during a laissez-faire economy conditions guarantees the survival of
these activities (Kpedor, 2020).

Before becoming legislation and an economic tool, the budget goes through a series of
steps. In the drafting of a periodic budget, all centers, programs, and administrative
units of an institution participate in the process. It refers to the entire set of processes
that a budget goes through before becoming a document. Identification and establishing
of developmental goals are the most important aspects of budget preparation. That is,
it entails determining budgetary priorities and strategies in light of the development
plan (Horngren et al., 2014).

According to Abshiro (2014) given that limited availability of resources as compared

with competing demand, the process of budget making assumes a critical role in
decision- making process of governments in order to optimize the use of existing
resources.

A budget is a quantitative expression of a plan of action prepared in advance of the

period to which it relates. It is a plan expressed in terms of money prepared and
approved prior to the budget period which show income, expenditure and capital to be
employed.((Luccey, 1996) The public budget planning is a process by which
government sets the level of expenditure, collects revenues and allocates the spending
of resources among all sectors to meet national goals (Shah, 2007). Budget
implementation on the other hand is the actual execution of the budget and application
of funds to the planned activities. During the fiscal year, however, not all allocated

8
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 country functions (Rotic, 2015).

In Ethiopia budget process is guided by a directive (financial calendar) issued by the

ministry of Finance and Economy cooperation (MOFEC) to all entities listed as public
bodies. This directive has a schedule to make sure that planning and budgeting are
prepared, approved, appropriated and executed so in line with the pre-set development
agendas (MoFEC, 2010). Budget preparation is often guided by a document known as
the Macro-Economic and Fiscal Framework (MEFF) prepared by MoFEC. The MEFF
provides, among others, forecasts of government revenue and expenditure; expenditure
financing, the division of total expenditure between federal and regional, and divide
federal expenditures between recurrent and capital expenditures for the next three years
which the program budget is planned for (MoFEC, 2010). Ministry of Finance and
Economic cooperation (MoFEC) states that the objective of budget in three aspects:
allocation of resource, distribution of resources and stabilization of economy.
Budgetary strategies are primarily concerned with planning the use of resources and
controlling the effective use of personnel. The main objectives of the public sector in
Kellem Wallaga zone are to provide public services, infrastructure and various
facilities to the associations. To achieve its objectives, it must have an effective budget
utilization system. Despite these facts, the reasons for the use of the budget in Kellem
Wallaga will be determined by the investigation.

1.2. Statement of the problem

In developing countries it has become increasingly 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(Darge 2018). 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(Negera, 2005).

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The planned budget should be guided by the period of time chosen for future budget.
Budget is a vital expenditure and planning tool for any institution. The budget
utilizations provide a lead on the target and expected output’s evaluation. Effective
Application of budgeting

Methodologies and execution of the same has been attributed to bear positive impact
on the listed budget lines In this case the expected performance of finance
management and improvement of the development through anchoring enterprises
establishments does play critical role in utilization of set resources and paying back
with high margin of benefits(Kathungu, 2015

According to Franzen(2007) the collections of revenues facilitate budget gaps and with
addition into the financing of major budget lines as structured before execution. The
poor tax collections and revenue misappropriation contributes to budget deficit and
financial mismanagement in institutions both public and private. The public officials
are noted to be effective than private collectors when appointed as revenue collectors.
Without proper professionalism and capacity towards the collection of revenues adds
into the series of inefficiencies that cause the utilization of budgets to be more
complex and not possible for implementation or otherwise creates constraints in
accessibility of the resources required for the implementations.

According to Yemisrach (2012) argues that among the critical challenges facing feder
alministries that become as an obstacle to the effective utilization of budget is the lack
of adequate institutional and managerial capacity to support its implementation. And
variation in understanding the concept of differentiating objectives from targets, goals
and results, problems related with costing and cost distribution between programs, lack
of harmony and uniformity on terms and definitions and difficulties in making the
structures of the organizations few among other Dejene, (2016) studies concluded that
the causes for miss-utilization of public budget are mainly due to lack of incapacitated
budget staffs in terms of skill and knowledge in each respective budget offices, lack of
knowledge in the use of information (ICT) by management and the experts at
each level, inadequate human resources, lack of continuous monitoring and
evaluation, lack of commitment of top management, among others.

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According to Keno (2015) studies lack of focus on achieving result and management
process needs to involve the auditor in office activities, lack of proper training to
employees on functioning and implementation of budget, poor data base for planning
and budgeting, weakness in budgeting process, allocation and distribution.

As mentioned above, various studies on the critical use of budget have been conducted
in various parts of Ethiopia, many researchers have explained the lack of budget,
Management capacity, inability to collect revenue and the like. Although researchers
say this , this is not the only problem with the use of budgets from the researcher 's
knowledge perspective The researcher also reviewed previous findings of other
researchers in Ethiopia, variables that have not yet been included in their research such
as political stability, corruption and inflation on the other hand, no critical research has
been done to assess budget utilization as in Kellem Wallagaa Zone So; the researcher
is going to thoroughly study the impact of political stability , inflation , Government
policies, audit system and staff capacity on budget utilization and also identify obvious
research gaps.

1.3. Objectives of the study

1.3.1. General objectives

The general objectives of the study are to identify major Determinants of budget
utilization at public administration office (a case study of Kellem Wallaga
administrative zone).

1.3.2. Specific objectives

 To study the effect Government Policy on budget utilization

 To study the effect Corruption on budget utilization
 To study the effect of political stability budget utilization of Kellem Wallaga
zone
 To study the effect inflation on budget utilization of Kellem Wallaga zone
 To study the effect staff capacity on budget utilization of Kellem Wallaga zone
 To study the effect auditing system on budget utilization of Kellem Wallaga
zone

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1.4. Research Hypothesis

The study tested the following research hypotheses formulated based on previous
literature.

Ho1: Government policy has positive and significant effects on budget utilization in
Kellem Wallaga zone.

H02: Auditing and monitoring has positive and significant effects on budget utilization
in Kellem Wallaga zone.

Ho3: Staff capacity has positive and significant effects on budget utilization of the
Kellem Wallaga zone.

Ho4: Inflation rate has negative and significant effect on budget utilization

Ho5; political stability positive and significant effects on budget utilization of the
Kellem Wallaga zone

Ho6: Corruption has positive and significant effects on budget utilization in Kellem
Wallaga zone.

1.5. Significance of the Study

It will serve as a reference tool to identify the budget utilization process in Kellem
Wallagga Zone and identify the problems affecting the budget utilization and find
solutions This study examined the Kellem Wallaga administrative area to ensure how
the use of budgets and budgets can help management achieve their financial objectives
and to ensure that organizations know that the existing budgetary control system is
consistent with set policies and procedures that will be enabled. It also helps
management in evaluating their performance assessment on budget utilization. The
researcher himself/herself is greatly benefited in a manner that can enhance research
experience and skills. Moreover the researcher through carrying this research to
enhance his/her knowledge on topics like budgeting, budget preparation, budget
management and related concepts.

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1.6. Scope of the study

This study determinant of budget utilization of public administration by focusing on

finance and economic development offices of districts, Dambi Dollo city and Kellem
Wallaga Zone. This study consider budget Utilization in terms of political stability
staff capacity, Government policy, Inflation Corruption and Auditing System of
determinant budget utilization in public administrations.

1.7. Organization of the Study

The study has the following structural build-up. The first chapter consists of the
introduction Part. That is it contains background of the study, statement of the problem,
objectives of the Study, significance of the study, scope of the study, limitation of the
study, and organizations of the study Chapter two is about literature review, chapter
three is about the methodology, chapter four is about result analysis and discussion, and
chapter five is about summary of the findings, conclusions and recommendations.

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 CHAPTER TWO

2. REVIEW OF RELATED LITERATURE

2.1. Theoretical review

Budget is a detailed plan which sets out, in money terms the plans for income and
expenditure with respect to future period of time. It is prepared in advance of time
period and is based on the agreed objective. Abshiro, (2014)

2.1.1. History of budget

Ethiopian starts the practice of government budget early at the regimes of Hailesilase.
However, at the beginning, it was not structured in such a way as to permit
efficient financial administration, but through time period continuous modification of
the budget system was made before it attained its present status. The budgetary system
varied in diffident regimes based on the administrative structure each government
followed. In centralized system, resource allocation and financial administration is the
major responsibility of central government. The budget would be formulated and
resources allocated by the central government.

The entire spending process was also under a closer supervision of executive bodies at
central government. In a decentralized governmental structure on the other hand,
the responsibility of financial administration is developed in to autonomous and
semi-autonomous governmental unit like ministry offices, regional and local
governments. Ethiopians budgeting systems reach to this current situation, after a
number of modifications. This modification were approved by the constitution of the
country

The Federal Democratic Republic of Ethiopia (FDRE) constitution defines the budget
system and its structure briefly under article 65 and proclamation No.1/1995, 57/1996
and 17/1997.

2.1.2. Definition of budget

Drury (2011) defines a budget as a plan articulated in quantitative, generally monetary

terms, spanning a specified period of time, usually one year, in other words, a budget

14
is a methodical plan for the use of personnel and material resources. A budget in a
business organization is an estimate of anticipated expenses and income. According to
Horngren et al. (2014), a budget is a quantitative description of management's proposed
plan of action for a given period, as well as a tool for coordinating what needs to be
done to put that plan into action.

2.1.3. Benefits of Budget

According to Anthony and Govindarajan (2014), budgets may be utilized for a variety
of purposes by both management and donors; some of the budget's benefits for both
donors and management include:

(1) The budget will give direction and coordination, allowing corporate ambitions to
become a reality; (2) Budget will assist in assigning responsibilities to budding
entrepreneurs; (3) Budget will assist in forecasting income and expenses for projects,
including the timing and availability of income (such as additional grant funds); (4)
Budget will assist in forecasting income and expenses for projects, including the timing
and availability of income (such as additional grant funds); (5)Budget will assist in
forecasting income and expenses for projects, including the timing and availability of
income (such as additional grant funds); (6) Budget represents the framework for
assessing performance with the indicated parameters that the company needs to realize
in order to achieve the objectives; (7) Budget helps to provide leadership through
exception because if the budget is well designed, management needs to know other
sources of funds for the work;

2.1.4. Principles of budgeting

A budget process needs to be governed by principles like participation, transparency,

accountability, and equity and inclusiveness. These are the ideals but not all budgets
follow them. Each budget system should be considered in terms of these standards
Annularity, Comprehensiveness, Accuracy, Non-diversion of funds authorized for
specific purposes, Periodic review and corrective action, participation Transparency,
Accountability, and Equity and inclusiveness (S.S.Karnik, 1997)

15
2.1.5. Budgeting process in a state or local Government

A good budget process is far more than the preparation of a legal document that
appropriates funds for a series of line items. It consist activities that comprehend the
development, implementation, and valuation of a plan for the provision of services and
capital assets. Governments share scarce resources to programs and services through
the budget process. As a result, it is one of the most central activities done by
governments. As the crucial point for key resource decisions, the budget process is an
influential tool. The quality of decisions resulting from the budget process and the level
of their acceptance depends on the features of the budget process that is used.

2.1.6. Budget preparation

The Ethiopia budget process is guided by a directive (financial calendar) issued by the
ministry of Finance and Economy cooperation (MoFEC) to all entities listed as public
bodies. This directive has a schedule to make sure that planning and budgeting are
prepared, approved, appropriated and executed so in line the pre-set development
agendas (MOFEC, 2009). Its preparation is often guided by a document known as the
Macro- Economic and Fiscal Framework (MEFF) prepared by MoFEC. The MEFF
provides, among others, forecasts of government revenue and expenditure; expenditure
financing, the division of total expenditure between federal and regional, and divide
federal expenditures between recurrent and capital expenditures for the next three years.
There are several budgeting processes that we could consider whenever budgeting. As
stated a successful budget preparation process combines up-down direction and bottom-
up planning. The overall budget envelope and sector/ministry spending ceilings are
usually set by the Ministry of Finance and the Cabinet/executive in accordance with
policy objectives. These are then communicated to the line ministries, which are
responsible for preparing their respective sector budgets.

Budget planning and preparation are essential for effective expense control in any firm.
Organization expenditure management systems require four types of fiscal and
financial discipline to be fully effective: control of aggregate expenditure to ensure
affordability; effective means for achieving a resource allocation that reflects
expenditure policy priorities; efficient delivery of organization services (productive
efficiency) (Reck & Lowensohn, 2016

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2.1.7. Budget Utilization

Once a budget has been approved by the legislature, the government embarks on the
challenging task of spending funds on planed programs. Utilizing public funds
effectively to meet declared policy objectives at the same time as ensuring value for
money is often just as challenging than planning how to spend it several reviews of
Public Financial Management performance in

Developing countries show that countries score significantly better on budget

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

Allen and Tommasi (2001), stats that successful budget utilization depends on
numerous factors, like the ability to deal with changes in the macroeconomic
environment (like inflation, unemployment and the implementation capacities of the
agencies. On other hand, the budget system should assure effective expenditure control.
In addition to a realistic budget to begin with, a good budget utilization system should
have complete budgetary/appropriation accounting system. It is necessary to follow
transactions at each stage of the expenditure cycle (commitment, verification, payment,
all necessary documents) and movements between appropriations or budget items
Schiavo-Campo and Tommasi (1999)

2.1.8. Controlling and Monitoring Budget Utilization

Budgetary control is a use of comprehensive system of budgeting to aid management

in carrying out its functions of planning, coordinating, and controlling operations. A
budgetary control is one of the important tools of control. The institute defines
budgetary control as “the establishment of budgets relating to the responsibilities of
executives to the requirements of a policy, and the continuous comparison of actual
with budgeted results, either to secure by individual action the objectives of that policy
or to provide a firm basis for its revision.” Budgetary control of revenue to establish
accountability for revenue and permit budgetary control, actual revenues should be
recognized in the general ledger accounts of governmental funds credits to the revenue

17
account (offset by debits to receivable accounts for revenues that are accrued or y debits
to cash for revenue recognized when received in cash).

2.1.9. Budget procedure

Budgeting policy and procedures are the foundation of the discipline of Budgeting.
Large Corporation usually have voluminous budgeting manual that is constantly
updated. Medium sized companies are less formal but have written procedures and
small companies are usually produce a written set of instruction for each budgeting
process (Newcomer k, 1999)

2.1.10. Budget process in Ethiopia

Ethiopia’s budget process has the same four stages (budget preparation, budget
approval, budget implementation, and budget control) at all level of jurisdiction
(Federal, Regional, Woreda and urban administration level). Ethiopian government laid
down long term, medium term or annual expenditure budget cycle is follows in the
preparation and implementation of national budget.

The Zonal administrations under-take the zonal Expenditure Review to analyze their
past expenditure against the government priorities as outlined in the government Vision
or the corresponding Medium Term Plan. The analysis of the review sets the
benchmarks for the subsequent budget years’ activities and the resources required to
successfully undertaking the planned activities. The result of this process highlights the
lessons learnt, good practice, and challenges and how to mitigate them in the
implementation of the annual budget. (MOFEC

2009).

The review retains all the line sectors expenditures and activities in check, as they must
links to guiding policy document and the budget there by establishing the integrity of
performance. The Sector Working Groups prepare and submit initial sector reports to
the treasury for consideration. These sector reports are prepared from inputs that arise
from line MOFED and input submissions from officers to the relevant MOFEC or
BOFED headquarters. The budgetary department compile all sectors budget request
and submits the estimates to the cabinet for comments and cabin submit the budget to
the people`s representatives for approval. Upon approval, the line sectors can then start

18
take over the funds as per the budget. Budget implementation is the actual execution of
the budget and application of funds to the planned activities. (Yimer, 2011)

2.1.11. Function of budget

According to Ramaswami ( 2005) budget have the following main function; Proper
allocation of resource, long term economic growth, ensure efficiency and effectiveness
in the implementation of government programs, facilitate legislative control over the
various phases of budget, equitable distribution income and wealth and securing
economic stability and full employment. Function of budget are known; planning,
coordination, communication, motivation, target/ mission statement, authorization,
control/monitoring and evaluation. (Anwar, 2007)And (Petri, 2008)

2.1.12. Stages of the budget process / cycle in Ethiopia

In Ethiopian context in first stage of budget process all public bodies are required to
perform all budget preparation activities and including the mid-year program reviewing
for the current fiscal year, preparation of unit costs work plane for upcoming fiscal year.
Ethiopia, EFY From July 7 of this year to July 6 of the next year (Hamle 1 to Sene 30
in Ethiopian calendar

In second phases, BOFED circulates a budget call letter and guideline to all public
bodies. Every public body is required to prepare their budget requirement and submit it
to the central agency. The central agency is responsible for summarizing and
consolidating the national budget and finally presenting it before the council of
ministers and/ or parliament. This call latter includes recurrent and capital ceiling,
priority of focal areas to be considered in preparing budget, submission date on budget
request by public bodies to the respective Mo-FED institution in all jurisdictions.

In the third stage, once the recommended budget is, revised and adjusted by the councils
of minister and then presented to the parliament for debate and approval. Annual
appropriation of the approved budget will then follow.

The four stages is disbursement of the approved budget to the important agencies,
implementation of planned activities, and recording expenditure. This is the process of
the transfer and spending of the money, which ensures that activities can happen to
reach the required goals.

19
In the final stage in the budget, process is control or performance monitoring. This
involves monitoring activities in terms of annual public bodies` reports and audit
reports to the parliament, i.e., accounts for expenditure, evaluation and audit. This stage
provides information that can be useful for planning propose.

2.1.13. Budget structure in Ethiopia

Budget structures are the formats that organize budget data. Budget data could be
classified in different ways and for different purpose. MOFEC (2009) moreover in the
early days, budget classification basically focused on providing a better understanding
of intention and purpose of government for which fund was planned and to be spend.
Later on, the budget structure started to be influenced largely by the issue of
accountability. That is in addition to provide information on what the government
proposed to do. The budget structure indicates the full responsibility of the spending
agency. To this ends the budget heads the full responsibility spending agency. To this
end the budget head or nomenclature of the budget are mostly mapped to each spending
agency.

2.1.14. Budgetary Controls

Budgetary Control is define by the Chartered of Management Accountants (CMA)

(2007) as the establishment of mechanism authorizing responsibilities of executives to
the requirements of a policy and the continuous comparison of actual with budgeted
results either to secure by individual action the objective of a policy or to provide a
basis for its revision.

2.1.15. Program budgeting

One of the models of budgeting system is Performance Based Budgeting System.

According to Robinson and Last (2009), performance-based budgeting system (PBBS)
aims to improve the efficiency and effectiveness of public expenditure. Unlike other
budgeting system, PBBS use the resources to ensure that it can help in achieving the
expected results and outcome based on the targeted area or planning.

20
2.2. Empirical review

This section reviews the empirical studies which have been advanced on budget
utilization both globally and locally. As researcher reviewed different Empirical
studies the following highlighted issues affecting budget utilization; according to
Mwai, Mathenge, and Shavulimo (2017) budget utilization was affected by lack of
staff capacity, poor participation, poor governance, inadequate investments in various
systems and structures, inappropriate use of financial regulations, lack of proper
prioritization of expenditure, lack of proper mechanisms and channels to collect
revenue hence not achieving the organizational targets and leading stakeholders not to
realize value for their money. Rotich (2017) in his concluded that for any economic
growth to be effective in the county level, there have to be conducive environment for
business expansion. A well-defined measure of budget operational should be in place.

According to Keno (2015) factor affecting of budget utilization in Nekemte Technical

College was lack of focus on achieving result and management process, needs to
involves the auditor in office activities, lack of proper training to employees on
functioning and implementation of budget, poor data base for planning and budgeting,
weakness in budgeting process, allocation and distribution, over and under spending,
lack of clear performance indicator to base the actual, lack of accountability and
transparency, lack of effective communication, and coordination to all staff ,and lack
of experienced personnel are the major factor influence budget utilization.

According to Abshiro ( 2014) Strong system of internal control is very essential in

achieving certain goals of an organization. Internal control includes all the procedures
and actions taken by an organization in order to manage the expiating assets, ensure
conformity with organizations policy and governmental rules, evaluate operating
efficiency and ensure precise and reliable operating data and accounting records.

Garedew (2018) investigated the problems and opportunities of budget development

and implementation in a Kaffa zone finance bureau. A total of 94 employees were
chosen as the population, and secondary data from the previous five years was
collected, as well as primary data via a self-administered questionnaire and a semi-
structured interview. There were also qualitative and quantitative methodologies
applied. The descriptive and empirical models were used to analyze all of the data

21
collected. And the findings revealed that while the budget preparation procedure in
Kaffa zone was good, the budget usage practice was not. When comparing the recurrent
and capital budgets, the recurrent budget has a reasonable usage rate, whereas the
capital budget has an inefficient rate. The findings also revealed that contractor
capacity, auditing system, and shifting funds from planned to unanticipated activities
all have a substantial impact on budget utilization, however staff capacity and Inland
Revenue collection have no significant impact. Budget utilization performance should
be more focused on capital budget rather than recurrent budget, according to the study.
Strong laws and societal participation are required to protect capital project delays and
poor quality. Finally, in the Kaffa zone, focusing on a planned program, a solid auditing
system, re-structuring planning, and the construction and design department are the
most significant mechanisms for overcoming budget usage issues.

According to studies made by Christine (2012), most factor that affects budget
utilization are structural and cultural factors with the training and educational
programmers coming out as the least factor that affect the utilization of budget
funds. In the external factors that affect budget utilization, the study found out that
interference by the treasury on the ministries activities affected the budget
utilization. The structural factors were also identified as a major factor that
influences level of utilizing the budgets, lack of alignment between the
organizational structure and structure of performance reporting requirements, value
and usefulness of performance information undermines the budget utilization came
out strongly as inhibiting the level of budget utilization. Boudreaux (2008) observed
that currently budgeting is being influenced by ideas
Surrounding performance based budgeting a reform
that focuses both on performance
measures or outcomes and on managerial entrepreneurialism. She concluded that the
theory performance based budgeting has become interlinked with program budgeting
because of the intuitive idea that programs are level at which managers should be
given flexibility to achieve results

Meseret (2016) did a study titled “Assessment of Save the Children International
Ethiopia's Budget Preparation and Budget Utilization.” During the project cycle
periods, the study focused on budget preparation, monitoring, and utilization activities.

22
The descriptive design and census method were utilized to identify respondents in order
to meet the thesis's goals. The example organization's managers were contacted to
identify the key personnel involved in the budgeting process. Out of 50 employees
selected by the organization's managers, 44 were chosen as respondents from the
program, finance, and grant management departments. Respondents were given a self-
administered questionnaire. Budget performance reports, financial accounts, and
manuals were also used to gather secondary data. According to the findings, the
organization's entire budget planning and utilization method did not include the input
of concerned employees. Staff participation in budget planning aids in the achievement
of budget objectives such as: collaboration, communication and motivation in the
process of obtaining the desired level of performance. As a result, the researcher
suggested that the business include concerned employees in budget planning, budget
monitoring, and budget utilization.

Karani (2007) in his article; Program Budgeting in OECD countries, sought to explore
ways in which countries can reform their budget classification to focus more on results.
He observed that in the last two decades, a number of OECD countries have reclassified
their central government budget for the purpose of authorization

Other factors that might influence utilization as outlined by Dixon (2005) are: technical
assistance to the agencies as they move towards budgeting; synergy between the
MOF and the agencies in terms of both reporting and accountability; political
commitment to the implementation process e.g. time limits for the process;
implementation on a pilot basis to learn from and deal with probable problems in the
system and the sequencing of implementation of the budgeting approach.

According to Help Age International, (2008), For Poor financial management

implications are lack of effective planning and implementation, dumping of spending
on last quarter. Fund diversion; the government often divert funds to other
programmers; unexpected events: the government has a contingent reserve to deal with
unexpected events (e.g. disasters); inadequate funding sometimes the budget fail to fund
a programmed adequately and Weak oversight: capacity limitation and Corruption,
because of weak financial management system.

23
According to (Economic Department, 2012) Budget utilization challenge is more
problems reflect on local government authorities that Ministry of finance (MF) , and
further an utilization difficulties are reflected in significant intra-year reallocations and
the failure to implement planned activities. The single-biggest concentration constraint
for local government is poor forward planning, which intensifies all other difficulties.
It is found that many important consumption constraints relate to the efficiency of the
budget process as a whole, and are largely beyond the control of individual spending
units or sectors. These includes-Poorly managed procurement, Unpredictability in the
availability of and access to budgetary supplies, Delayed releases, inefficiencies
collection of local resources, Staff Capacity, contractors capacity, Intra governmental
coordination and Weak supervision, auditing and accountability mechanisms.

Dejene (2016) has also found that organizational structure induced factors such as lack
of effective budget monitoring, lack of a decentralized budget administration system,
absence of clear hierarchy in the administration of budgets, structural relationship
between different department and lack of effective communication are some of the main
factors that affect public budget utilization in Ethiopia.

2.3. Literature Gap

As previous literature reviewed by researcher indicates little has been done to

evaluate/determine the factors that probably affect the effective utilization of budgeting
in Ethiopia particularly at Kellem Wallaga zone .Those research conducted on factors
affecting budget utilization like lack of adequate institutional and managerial capacity
to support its implementation, variation in understanding the concept of differentiating
objectives from targets, goals and results, problems related with costing and cost
distribution between programs, lack of harmony and uniformity on terms and
definitions and difficulties in making the structures of the organizations few among
others are challenges that affect budget utilization.

As the researcher reviews other investigators previous finding in Ethiopia, there are
variables that are still not included on their research like, inflation rate, staff capacity,
political stability, auditing and monitoring and government policy. On other hand, no
research has done to Determinant of budget utilization in Kellem Wallaga public

24
sectors. Therefore; Based on this the study aims at identifying determinants of budget
utilization at public organizations in the case of Kellem Wallaga Zone.

2.4. Conceptual framework of the study

The conceptual framework illustrates the variables under study. The dependent
variable is budget utilizations. The independent variables including staff capacity,
government policy, and Political stability inflation rate corruption and auditing system.

Independent Variable

Dependent Variable
 Staff Capacity
Budget Utilizations
 Government Policy
 Inflation rate
 Auditing system
 Corruption
 Political Stability

Figure 1. Conceptual Framework

25
 CHAPTER THREE

3. RESEARCH DESIGN AND METHODOLOGY

3.1. Introduction

In this chapter, the researcher will discuss all those method or techniques are to conduct
the research. Thus, it refers to basic elements of research design and methodology
which include background of the organization/case area, research design, target
population, sampling techniques, and data gathering instruments, data collection
procedures and method of data analysis.

3.2. Background of the Organization/case area

Kellem Wallaga zone is one of the zones in the west Oromia Region of Ethiopia and
the prominent zones located in western part of Ethiopia. Kellem Wallaga is bounded
on the east, west Wallaga , on the West , Sudan, on the north Beneshangul Gumuz
region and on the south west, Gambella region and Illubabor zone . The zone is sub-
divided in to Ten woredas namely; Gidami , Jimma Horroo , Gawo Kebe , Dalle Wabera
, Sadan chanka , Haroo Sabbuu , Lalo Kile , Hawwa Galan , Sayyoo and Anfillo .

Based on the 2007 Census conducted by the Central Statistical Agency of Ethiopia
(CSA), this Zone has a total population of 797,666, of women 401,905 are men and
395,761 women. 76,277 or 9.56% of population are urban inhabitants. A total of
159,353 households were counted in this Zone, which results in an average of 5.01
persons to a household, and 152,916 housing units. The two largest ethnic groups
reported in Kellem Wallaga were the Oromo (94.08%) and the Amhara (5.13%); all
other ethnic groups made up 0.79% of the population. Afaan Oromoo was spoken as a
first language by 94.12% and 5.32% spoke Amharic; the remaining 0.56% spoke all
other primary languages reported. The majority of the inhabitants were Protestants, with
48.45% of the population having reported they practiced that belief, while 26.9% of the
population professed Ethiopian Orthodox Christianity and 23% of the population were
Muslim.

26
3.3. Research Design

The study employer a descriptive survey and explanatory research design, which aim
to assess the budget utilization in Kelem Wallaga zone. This study use both qualitative
and quantitative approaches. Quantitative research is associated with a deductive
approach to testing theory, often using number or fact. The researchers use the facts or
information already available to analyze and make a critical evaluation of the data.

3.4. Data source and method of data collection

The researcher use both primary and secondary data to obtain relevant data. The
questionnaires consisted, both close and open ended questions. A five point Likert scale
ranging from strongly agrees to strongly disagree use to in measuring the extent of the
responses provided. And also there is semi-structured interviews’ with responsible
persons. Five Year (2018-2022Gc/2010 2014 E.c) Secondary data used to supplement
the data received from questionnaires.

The independent variables consists of budget utilization determinants, which are

government policy, Staff Capacity, political Stability, inflation rate and auditing
system. These independent variables use to asses real factor that hold back budget
utilization performance.

3.5 Target Population of the Study

The total population of this study is all 260 employees of Kellem Wallagga Finance
and Development offices staffs. But the target population of this study contains 165
employees who are directly involved in the budgeting Utilization process of the
organization, the rest 95 staffs were supportive staffs and do not have direct
involvement in the budgeting Utilization process. The lists of employees who are
involved in the budgeting Utilization process and their functional position in the
organization are shown in Table 1 below:

27
 Table1: Sample size determination for each District using proportion

Woreda Total population Sample

Jimma Horro 32 23
Dale Wabara 35 25

Dale Sadi 27 19

Dambi Dollo City 34 24

Kellem Wollega Finance 37 26

Total 165 117

3.6. Sample Design

Multi-stage sampling techniques will be used in this study. In the first stage,five
Finance and Economic Development Offices in Kellem Wallaga Zone namely, Zonal
Finance and Economic Development office, Dambi Dollo Town Finance and
Economic Development office, ,Haroo Sabbuu , Dallee Wabera, and Jimma Horroo
District Finance and Economic Developments will be selected Purposively. The reason
behind purposive sampling is that the researcher expected that sufficient information
can be obtained from the select five offices because Zonal Finance and Economic
Development office provides the overall information and ,Haroo Sabbuu , Dallee
Wabera, and Jimma Horroo , District Finance and Economic Development office
provides information related to districts‟ Finance and Economic Development Offices.
In the second stage, stratified sampling techniques will be used to select sample from
each office. As the data from human resource indicated the Kellem Wallagga Finance
and Development offices staff constituted 165 employees and managers who are
directly involved in the budgeting utilization process.

For selecting a representative sample, a finite population sample formula of Yemaneh

(1967) is used for the study as follows:

𝐧= 𝐍
𝟏 + 𝐍(𝐞)𝟐
Where:

28
n = the required sample size: (?)

N = the target population (total number of employees)

e = value for selected alpha level of 0.05 = 1.96 (the alpha level of 0.05 indicates the
level of risk the researcher is willing to take that true margin of error may exceed the
acceptable margin of error.)

𝐧 = 165 = 𝟏6𝟓 ≈ 𝟏17

𝟏 + 165(𝟎.𝟎𝟓)𝟐 𝟏.𝟒125

Therefore, n = 117 were taken as a sample size for the study.

After identifying the sample size using the above equation the researcher allocated the
estimated sample size to each stratum in the study to maximize the predictive power of
the sample size. One method is proportional allocation. Thus the proportional allocation
is done using the Kothari (2004) formula as follows

n𝐡 = 𝐧𝐍h
𝐍
Where:

nh = Proportional sample to the strata

n = Sample size determined using the formula provided by (Yemaneh, 1967)

Nh = Total number of population in each strata

N = Target population

3.7. Data Analysis and Interpretations.

The information obtained by the use of the questionnaires will be edited for consistency
and completeness. In order to draw meaningful conclusions the various variables and
key into descriptive statistical tools such as measures of the central tendency (means),
measures of dispersion (range, standard deviation& variance), distributions
(percentages, frequencies) and multiple linear regression model use.

3.8. Model Specification

Multiple linear regression models used to identify factor influence budget utilization.
Multiple linear regressions prediction equation is Yt =β0+β2x2t +β3x3t +···+βkxkt +
ut, t =1, 2... T.

29
So the variables x2t, x3t,...,xkt are a set of k−1 independent variables which are
thought to influence, and the coefficient estimates β1,β2,..., βk are the parameters which
quantify the effect of each of these independent variables on y and ut are residual term.
The coefficient interpretations are slightly altered in the multiple regression contexts.
Each Coefficient is known as a partial regression coefficient, interpreted as representing
the partial Effect of the given independent variable on the dependent variable, after
holding constant, or eliminating the effect of all other explanatory variables. Depending
on the theoretical model and the measurement of the variable shown as conceptual
frame work above, the empirical model that this study employed as follows:

BUt= β0+β1 GPt+ β2ADMt+ β3SCt + β4PSt+ β5IRt +et

The study employed the model to identify the direct association between the budget
utilization and seven factors of budget utilization in Kellem Wallaga administrative
zone. The abbreviations in the model are as follows;

BU - Budget utilization SC -Staff capacity

GP -Government policy IR -Inflation rate

ADM -Auditing and monitoring PS-Political Stability et -

Error term

30
 CHAPTER FOUR

4. RESULT AND DISCUSSION

4.1. Descriptive Statistics

Table 4.1: descriptive Statistics for dummy variable

Variables Frequency Percent

Education Level 5 4.27
Level Degree 100 85.47
Above degree 12 10.26
Sex Male 30 25.64
Female 87 74.36

Source: Own Computation using STATA15X64

Table 4.2: descriptive Statistics for Continuous Variable

Variable Obs Mean Std. Dev. Min Max

age 117 35.385 7.927 24 56
experiance 117 12.949 5.804 4 30
Source: Own Computation using STATA15X64

4.2. Econometrics Result

4.2.1. Diagnostic test Result

4.2.2. Multi-collinearity Test Result

Collinearity is where two independent variables are highly correlated or
multicollinearity, where more than two independent variables are highly correlated and
this can have damaging effects on multiple regression. Different authors suggest
different way of identifying multicolinearity problem. However as rule of thumb
(Yfield, 2009) suggested that variable inflation factor (VIF) of any independent
variables should not be greater than 10.

Table 4.2: variance inflation factor

VIF 1/VIF
inflation 2.45 .408
political stability 2.389 .419
auditing system 2.077 .481
staff capacity 2.03 .493
government policy 1.989 .503
corruption 1.746 .573
Mean VIF 2.114 .
Source: Own computation using STATA 15X64

31
According to the results in table above, all the variables have small VIF values which
implies that there is no a problem of multicollinearity.

4.2.3. Correlation Test

This section provides the correlation analysis. A correlation coefficient enables us to
quantify the strength of the linear relationship between two variables. The Pearson‟s
product-movement correlation matrix indicates the linear correlation between
variables. . According to Kennedy (2008) correlation coefficient between any
independent variables should not be above 0.7.

Table 4.3: Correlation Test Result

Variables (1) (2) (3) (4) (5) (6) (7)

(1) budget_utiliza~n 1.000
(2) government_pol~y 0.399 1.000
(3) auditing_system 0.199 0.615 1.000
(4) staff_capacity 0.226 0.534 0.619 1.000
(5) inflation 0.134 0.368 0.481 0.567 1.000
(6) political_stab~y 0.186 0.488 0.393 0.431 0.676 1.000
(7) corruption 0.176 0.422 0.383 0.349 0.544 0.612 1.000

Table 4.3 above indicates that the correlation coefficient among explanatory variables
in this study. The highest correlation coefficient for this study explanatory variable is
0.676 that is between Political stability and inflation which is less than 0.7. Therefore,
there is no evidence for presence of correlation problem in this study model.

Table 4.3: Coefficient Regression

budget_utilization Coef. St.Err. t-value p-value [95% Conf Interval]

government_policy 0.315 0.09 3.49 0.001 .136 .493
auditing_system -0.065 0.079 -0.81 0.417 -.222 .093
staff_capacity 0.037 0.069 0.54 0.593 -0.1 0.175
inflation -0.008 0.075 -0.11 0.911 -0.158 0.141
political_stability -0.012 0.078 -0.16 0.872 -0.166 0.141
corruption 0.019 0.067 0.28 0.776 -0.113 0.151
Constant 2.936 0.254 11.55 0.000 2.432 3.44
Source: Own Computation using STATA15X64

We can write the regression equation as follows:

𝐵𝑈 = 𝛼𝑜 + 𝛼1 𝑋1 + 𝛼2 X2 + 𝛼3 𝑋3 + 𝛼4 X4 + 𝛼5 𝑋5 + 𝜀𝑡

BU = 2.936 + 0.315𝐺𝑃 − 0.065 𝐴𝑆 + 0.037𝑆𝐶 − 0.008𝐼𝑅 − 0.012𝑃𝑆

+ 0.019𝐶
Where

32
BU - Budget Utilization

GP - Government Policy

AS -Audit System

SC - Staff Capacity

IR -Inflation Rate

PS - Political Stability

C – Corruption

4.3. Descriptive Analysis

Figure 4.1: Sex of Respondent

Figure 4.2: Education Level of Respondent

33
 4.2. Analysis of secondary data on budget Utilization
Table 4.4: Comparison of Adjusted budget with recurrent expenditure and
capital expenditure in Kellem Wollega.

Budget Recurrent Expenditure

Year Adjusted Budget Adjusted Recurrent
Organization %
Budget Expense
Dambi Dollo City 2010-2014 105.161679
544,678,000.84 475,163,097.88 499,689,490.29
Daallee Waabaraa 2010-2014 105.751056
668,009,531.56 583,564,869.12 617,126,008.81
Daallee Sadii 2010-2014 103.860641
761,412,752.50 665,445,481.40 691,135,939.77
Jimma Horroo 2010-2014 105.966138
565,527,667.29 494,655,857.70 524,167,708.11
Total 105.10584
2,539,627,952.19 2,218,829,306.11 2,332,119,146.98

Budget Capital Expenditure

Year Adjusted Budget Adjusted Capital
Organization %
Budget Expense
Dambi Dollo City 2010-2014 18.23231152
544,678,000.84 69,514,902.96 12,674,173.66
Daallee Waabaraa 2010-2014 37.60162441
668,009,531.56 84,444,662.44 31,752,564.80
Daallee Sadii 2010-2014 44.1918878
761,412,752.50 95,967,271.10 42,409,748.77
Jimma Horroo 2010-2014 23.32970615
565,527,667.29 70,871,809.59 16,534,184.92
Total 32.222914
2,539,627,952.19 320,798,646.08 103,370,672.15
Table 4.4 above demonstrates that just 32% of the budget for the fifth budget year was
allocated to capital expenditures, while 105% of the allowed budget was used for
recurrent expenses. Thus, the evidence shows that spending on a selected sample of
budget holders is against the country's fiscal strategy, which suggests that the majority
of the budget be set aside for capital expenditures rather than recurring expenses. In the
last five fiscal years, the sampled budget holder's recurrent budget has been utilized
more frequently. The Kelem Wollega's ability and commitment to contribute to national
development plans has not been good.

34
 CHAPTER FIVE

CONCLUSION AND RECOMMENDATION

5.1. Conclusion
The study's overarching goal is to pinpoint the key factors that influence how the budget
is used in the Kelem Wolega zone. Five year (2010-2014 E.G.) secondary data have
been used to assess the problem at hand in order to achieve this goal. The 165
employees in the study's target group who have direct involvement in budget-related
operations in the public finance office chosen for the Kelem wollega zone. 117 of those
respondents gave their responses back. Both a descriptive survey and multiple linear
regression models were used to analyze the data in this study.

 The study demonstrates that just 32% of the budget for the fifth budget year was
allocated to capital expenditures, while 105% of the allowed budget was used
for recurrent expenses.
 According to study of secondary data from the previous five fiscal years, the
sampled budget holder's recurrent budget is used more frequently. The Kelem
wollega's ability and commitment to contribute to national development
projects has not been in a favorable place. .
 Fund diverting is prevalent in the sampled woreda throughout the past five
years. The concept of a plan has long since vanished in the Kellem wollega zone
since it is difficult to carry out tasks in accordance with the intended project
rather than budget being merely shifted from planned program to unexpected
program.

35
5.2. Recommendation
The following steps are advised in order to address the difficulties stated above about
budget use in Kelem Wollega.

 The needs of society should be taken into account by the government when
allocating funds to various sectors.
 The government should have to minimize diverting fund from one activity to
another.
 The zone should be transparent on the allocated budget annually for the
agency which enhances the sense of ownership among the employee on the
utilization of the overall resources of the finance.
 The fundamental aspects of the individual organizations' performance that
may be improved are their structural components, therefore these
organizations should educate and persuade all of their departments and units to
work as a team, especially when it comes to utilizing their budgets.
 Enhance the budget utilization of the zones by properly managed its budget
and time based procurement system which enables to improve its efficiency.
 The zone should be improving the ways of collecting taxes and give train on
the issue of taxes to taxpayer.
 There should be strong supervision and control by the budget holder leaders,
must distribute activities with responsibility and their successive subordinates;
on budget utilization in order to correct the observed problems.
 Suitable mechanisms should be designed and put in place to ensure public
budget allocations at woreda level are based on local community needs and
priorities.

36
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38
Appendix
QUATIONERIES
WALLAGAA UNIVERSITY
BUSINESS AND ECONOMICS COLLEGE
Survey Questionnaire

I am a postgraduate student at Wallagaa University, college of business and economics;

Department of accounting and Finance. I come to this zone/woreda to conduct research
for my MSc thesis entitled ‘Determinants of budget utilization at public Administration:
Case of Kellem Wallaga Administrative Zone’. There for; you are kindly requested to
be honest and frank in responding all questionnaires you have been asked. I will assure
you that your response will be used only for the academic purpose and kept confidential.

Part A Give Your Background information in the space provided below

Wereda Position
__________________________ _____________________________
Educational Level: _______________ Age: _____________________________
Specialization : Sex: _____________________________
___________________
Experience : Marital Status
______________________ _______________________
Part B: Please indicate the extent to which you agree with the following statement by
circling the appropriate number as indicated below
5-Strongly Agree, 4-Agree, 3-Neutral, 2-Disagree, 1-Strongly Disagree
No Variables Scale
5 4 3 2 1
Budget Utilization
1 Each sector will take allocated budget on time
2 Your office utilizes the approved budget Based on its plan
3 Sectors haven’t a trend of submits repeatedly a request for
adjustment of budget portions after it is approved.
4 Payment is implemented always based on full documents and
evidences.

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5 Your office always presents timely, explanatory, and complete
budget implementation report
Government Policy
1 The budget for the sector is planned in line with the country budget
utilization policy.
2 Every budget allocation is as per the policy requirements of the
sectors.
3 Budget utilization of the organization is periodically evaluated
whether it’s going in line with the country policy or not.
4 The budget utilization related policies are well implemented in the
organization and the policy allows the implementation of the
budget use to be flexible in case of unique implementation
requirements
5 The budget policy of the country is supportive to all the budget
utilization cases arising in the organization.
Auditing System
1 Auditing performance is not challenge on budget Utilization in
your sector.
2 There is effective evaluation of each Budget activities in your
sector.
3 There is a proper involvement of auditor in all office major
projects.
4 Budget utilization is always audited based on full documents and
evidences of revenues office.
5 The financial statement of your office is audited regularly by an
independent auditor
Staff Capacity
1 All finance office leaders have public finance knowledge skill to
manage.
2 Your office has required number of professionals who prepare
plan and budget.
3 . Employee continues get training to improve their practical
knowledge on budget implementation.

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4 Your employees have enough knowledge and experience in
implementing allocated budget in line with budget utilization
policy.
5

No Variables Scale
5 4 3 2 1
Inflation
1 Inflation should not affect the use of the government budget
2 Inflation has not posed a problem in translating capital budgets
into actual operations.
3 Inflation has not affected the Executive budget
4 Inflation should not affect government purchases.
5 An increase in prices will lead to an increase in the budget
deficit
Political Stability
1 political stability has not affected the use of government
budgets
2 the project is being carried out in full swing as there is political
stability
3 There is political stability and the budget is reaching the people
and serving the people.
4 From district to village level, the announced budget is being
used because there is political stability
5 There is no problem in budget allocation due to political
stability
Corruption
1 corruption has not affected procurement administration
2 There is no corruption in the use of the budget.
3 there is no bribery when project tenders are issued.
4 Auditor investigation as in your office there is no money
hidden by corruption

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5 your office works thoroughly to ensure that budgets are not
wasted on corruption
THANK YOU FOR YOUR COOPERATION

Part C:
Dear respondent, the objectives of the study is to investigate factors affecting budget
utilization at Kellem Wollega zone of some selective Woredas. In doing so, the
following unstructured interview questionnaire is placing for academic purpose thereby
to obtain your earnest, honest responses as well your kindly requesting.

1. What are the strengths of your district / zone in terms of budget utilization?

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_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_______________________________________________________________
2. What are the challenges of zone or district in using budget effectively and
efficiently?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
3. What recommendation do you want to give in order to solve the problems?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
____

THANK YOU FOR YOUR COOPERATION

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