Utilization in public organizations: a case study of dawuro zone finance and economic development department
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| CHAPTER ONE INTRODUCTION 1.1 Background of the Study According to (Khan and Hildreth, 2002), budget is an itemized summary of estimated expenditure forgiven period along with proposals for financing them. In the public service in Ethiopia, the main sources of finance inculde taxes levied directly or indirectly, fines, and penalities, revenues from profit making state corporations, charges and fees on services rendered, foreign aid and donations from development partners and internal and external borrowing. According to Hyde 1992, budgeting is partly poletical, partly economic, partly accounting and partly adminstrative. As political document, it allocates the scarce resources of a society among a multiple, complicating and computing interest. As an economic and fisical document, it serves as the primary instrument for evaluting a jurisdication’s redistribution of income, stimulating its economic growth and development, promoting full employement, combating inflation, and maintaing economic stability. As an accounting document it provids aceiling on government spending and makes it legally binding for it to live with the allocated funds. Finally as a managerial and administrative document, it specifies the way and means by which public services are provided, and it establishes criteria by which they are monitored, measured and evaluated. These shows that the divergent role that government budgeting plays further reinforce the general perception as to why it is so difficult to have asingle theory that can tie all these 8 elements acoherent theme(Hayde, 1992). From the practical point of view, however, this lack of inner cohesion may serve both a weakness and strength. Although Budget allocation problem arises frequently in the real world. Budget allocation problem was fundamentally- multi objective problems where multiple views have reconciled to achieve organizational goal. Examples include finance, education, constriction, transportation, ecology and telecommunication. Phillips and Buna e Costa 2007 describes the decision dilemma in such budget allocation problems benefits are typically expressed by multiple objectives often on conflict decision maker cannot know every detail about a large number of a given alternatives to make informed decision individual optimal decisions rarely lead to the collectively best use of the available resources involved stockholders cause dispute and computation and those who disagree with decision overemphasis their own opinions on implementation. Uncertainty from incomplete information is a major reason for misallocation of resources. (Doughery & G.psacharopoulos., (1977); (N.Al-Najjarr, 2008). In government organization budgetary allocations are integral components to annual financial plan, or budget of the organizations. They indicate the level of resource an organization is comitting a department or programs. So without allocation limits,expenditures can exceed revenues and understand how the are used and the limitations they provide. The basic budgeting problem is multidimensional and has to be tackled simulti-dimensional and has to be tackled simultaneously from various prospectives. One approch focus on the compititive adevantage of the state in the economy, identfying the underlaying rationale for public interventions through an analysis of the conditions of supply and demand for public 9 and private goods. Another seeks to prioritise of alternative applications of public funds by applying the priciple can be extended to embarce the maximization of utility through an assessement of the social benefit of public spending using cost benefit analysis (Samuelson, 1954,1969). Budget is central to realize development, goals and programs and it has multiple functions such as control of public resources planning for future allocation of resources and measurements of resources.(World Bank, 1998). According to MOFED, the national budget allocation is not only the allocation of available financial resources to public sectors, but, it also involves a complex process that include the analysis of expenditure in relation to gross domestic product (GDP, amount of foreign aid and loans, levels of deficit financing, proportion between capital and recurrent budget, structure of capital expenditure or sectoral priority. this factors help policymakers to divert resources from unproductive areas or increase/decrease government spendings. In Ethiopia is the critical questions of the government policies and priorities, poverty reduction program, and resource envelope in relation to propose budget are not critically debated by cabinet, parliament and other concerned groups.These process may lead to large growing budget deficit of the country and increasing the problems of financial resources for investment. (MoFED, 2003) From the prospectives of public policy and budget allocation process, the finance and economic development office shares the major characteristics of other sectors of government. This means that the citizens of any country will benefit from a Government budget that is subjuect to the same broad set of rules and procedures that are applied to other sectors. For budget allocation and utilization processes to be effective and economic, they must be based 10 on well-argued and elaborated plans and program. Contemporrary studies show that governments which have effective fiscal rules have strong budget discipline. These rules focus on formal and informal procedures for preparing the budget end managing expenditure Schick, 2007). The sectoral approach to budgeting ensures that focus shift from line item or single sectorial level to comprehensive analysis of policy priorities.This helps ineffectively prioritizing expenditure on the basis of the government’s soccio-economic program by enhancing intera,sectorial alloction of resources. (Charles and Solomon. In Ethiopia government sectors, the budget implementation period or the financial years runs from july st to June 31. During this period the current and midium term expendture framwork budget cycle followed in the prepartion and implementation of national budget. Though budget implementation process is the actual execution of the allocated budget and application of funds to the planned activities. During the current financial year, however, not all funds are expanded as per the proposed plan. These critical problems that causes where the allocated funds may not be enough to fully the stated goals. In Ethiopia, the constitution of the Federal Democratic Republic of Ethiopia comprise a federal state and member states since 1991 G.C. in which both organs shall have either respective legislative executive and Judicial powers. A number of changes have been made in the budget allocating and utilization of the country pursuant to structural changes. The current budget structure in Ethiopia is designed to fit the political structure of government. Accordingly, regional governments have legilative, executive and judicial powers to prepare 11 their own budget based on their resources and the needs of local society. The decentralized system and structuring of budgeting and expenditure management system had also improved the budget preparation and the expenditure management of the government as compared the previous ones. But, because of the sem-autonomous nature of the various local authorities, the implementation level of budget preparation and expenditure management has tended to vary from place to place (MOFED, 2009). Generally, in the government organization and particularly in the Zonal level, there is scarcity of financial resource to expand on operating activities and to invest on different Social- Economic and development facilities in a struggle to bring the intended development. In the existence of such development constraints in a given area, the role of budget allocation and utilization in controlling the appropriate expenditure mangement of existing resource could be improntant. It should be sound when ones seethe sitution from the Zonal prospective where all activities are directly affected budget allocation and its utilization knowledge and experience about different factors affecting budget allocation and utilization could enable to a Zone to make rational decision in order to achieve optimum benefit from the activities it accomplishes and consequently maximizes the ultimate benefit to residents. On other hand, any factors that negatively affect the budget allocation and utilization have an adverse impact in overall performances of the Dawuro Zone Finance Economic Development Department . Thus, this study examines how efficient and effective the budget allocation, expenditure control, utilization and assess factor affecting budget allocation and utilization of Dawuro Zone Finance Economic Development Department. |