Utilization in public organizations: a case study of dawuro zone finance and economic development department
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- 2.2 Concepts of Budget
| CHAPTER TWO REVIEWS OF LITERATURES 2.1 Introduction The government (be it Federal, Regional, Zonal or woreda) is a powerful actor in the economy. Thus how it spends the money is a large determinant of economic development with redistributive impact. It is the most important economic policy instrument of government and 19 as such can be a powerful tool in transforming the economy to meet the needs of the poorest. Budget is also a fundamental tool in the implementation of public policy. Thus a budget process i.e. the process of preparation, approval, implementation and review needs to be governed by the principles of participation, involvement of all concerned stockholders, transparency, provision of comprehensive, accurate, timely and frequent information, and accountability, answerability of decision makers and implementers with regard to budgetary processes to those whose interest are affected by their actions and in actions (Wubeshet, 2002). In this chapter the concept of budget, allocation of budget, utilization and some empirical literatures are discussed. This is achieved by gathering the available literature by scholars and academicians on subject area. 2.2 Concepts of Budget The word budget is derived from the French bougette, bag or purse, and is applied in modern time to the statement of revenues and expenditures ( including the balance between the two of government, for the fiscal year (Wubehet, 2002) budget is viewed as a process by which state’s financial resources is planned and controlled. Public budgeting involves the selection of end and the selection of means to those ends. It also involves the division of society economic and financial resources among the computing public sector needs. Robert, 2004 cited in (Assefa, 2007) 20 A budget is a legally approved plan of financial operations embodying the authorization of expenditures for specified purposes to be made during the budget period and the proposed means of financing them. In other words, budgeting is the process of allocating resources to unlimited demands, and a budget is a dollar and cents plan of operation for specific period of time. At a minimum, such a plan should contain information about the type and amounts of proposed expenditures, the purposes for which they are to be made, and the proposed means of financing them. It describes in detail for what purpose the resources will be used, from where it will be obtained and the period it is granted for use (Antony 1989). From local government point of view budget proposals are used its expenditure and revenue, reflecting its policy priorities and fiscal targets. It also permits a local government to undertake its programmes with effectiveness, efficiency, and economy. Though the budget it informs its citizens the estimated level of revenue to be collected during the year, while also reflecting the type of activities on which revenue will be spent. By realizing such information, a local government enhances accountability and transparency in its operations (MOFED- Layperson’s Guide to the public Budget process at woreda level 2009: Pb Budget allocation Is dividing a sum of money in various ways, allocation of capital budget, recurrent budget, allocation of funds to a project (callin, 1986:11) The financial resources are in scarce supply to meet every increasing social needs and population growth. The availability of financial resources in constrained by difficulty of generating the required level of saving out of low 21 level of per capita income and economic growth. So in viewing limited resources and increasing demands, there is a need to improve resources allocation through proper economic policy and effective utilization of planning. Ethiopia is the st country in Africa to formulate and launch national development plan in 1950 (Dejene, 1996). The government has launched three consecutive five year plans, (1957- 61, 1963-67, 1968-73) to promote economic growth and improve the living standard of the population. The objective these development plan and programs were to mobilize domestic and external resources in order to allocate into priority areas. In pre 1974 the role of Ethiopian government had been mostly limited to the allocation of resources, economic stabilization and economic growth. After 1974 the government followed a central planned economy where the government was involved and expanded in productive and distributive areas (Teshome, 1993). The government has large expansion in the economic and service sectors was achieved through nationalization of large scale private enterprises and at the same time by the establishment of new owned enterprises. The allocation scarce resources where used to strengthen those sectors under the process of central planning. This kind of economic policy required a lot of resources from the state to finance public enterprises, which were the cause for growing budget deficit (Jammal, Public budgeting systems are intended for carrying out numerous significant functions. Among the functions of a budget, the most fundamental one is controlling public expenditure, which is commonly carried out by exercising financial control over inputs. It is also instrumental for allocating scarce resources to government priorities so that government 22 objectives are achieved in the most efficient and effective manner (Bradley, 1968). The analytical farm work for analysis of the basic budgeting problem has boarded. It is now recognized, following Musgrave (1959), that solutions to resource allocation cannot be abstracted from other functions of the public expenditure management system, namely the pursuit of macroeconomic stability and efficiency in the use of public funds. From the s the problems of macroeconomic stabilization dominates the literature and resource allocation is for the most part, treated as a secondary issue. Admas (2001), view, budget as a future plan of action for the whole organization or a sector thereof. Budget are plan that deal with future allocation and utilizations of Resources to different activities over a given period of time. For any organization to make a progress or achieve its goals it needs effective preparation of budget, it requires planning of its resources, which can only be achieved through budgeting, hence budgeting serves as a tool for financial planning. Lucey (2010), in supporting of the CIMA’s defined period of time, usually showing planned income to be generated or expenditure to be incurred during the period and the capital to be employed to maintain the given objective. From this definition, we can as well state the budget is an aid to making and coordinating short range plan advice for communicating plan and communicating and objectives to various responsibility center and a basic evolutions of performance. Download 0.82 Mb. Share with your friends:
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