ADDIS ABABA UNIVERSITY

SCHOOL OF PUBLIC AND BUSINESS ADMINISTRATION

DEPARTMENT OF ACCOUNTING AND FINANCE

The move towards program based budgeting system in Ethiopian public agencies
and its implications: The case of Federal Ministries.

By: Abdurahman Aliyi

June 2011
 ADDIS ABABA UNIVERSITY
SCHOOL OF PUBLIC AND BUSINESS ADMINISTRATION
DEPARTMENT OF ACCOUNTING AND FINANCE

The move towards program based budgeting system in Ethiopian public agencies
and its implications: The case of Federal Ministries.

By: Abdurahman Aliyi

A thesis submitted to the department of Accounting and Finance, school of Business and
Public administration, Addis Ababa University, in partial fulfillment of the requirement of
MSc Degree in Accounting and Finance.

Advisor: Dr. Degefe Duressa

June 2011
 ADDIS ABABA UNIVERSITY
SCHOOL OF PUBLIC AND BUSINESS ADMINISTRATION
DEPARTMENT OF ACCOUNTING AND FINANCE

The move towards program based budgeting system in Ethiopian public agencies
and its implications: The case of Federal Ministries.

By: Abdurahman Aliyi

Master of Accounting and Finance (Msc. in Accounting and Finance)

Approved by Examining Board

Advisor Signature

Internal Examiner Signature

 DECLARATIONS

I, the undersigned declare that this Thesis is my original work and is not presented
for a degree in any other university and that all sources of material used for this
Thesis have been duly acknowledged.

Declared by: Abdurahman Aliyi

Signature: _______________

Date: _______________

This thesis has been submitted for examination with my approval as a University
advisor:

Confirmed by: Dr. Degefe Duressa

Signature: ___________________

Date: ___________________

Addis Ababa University

June 2011
 Abstract
This study analyzes the process of moving towards program budgeting in Ethiopian
public agencies and its implication on the budgeting system. The study focuses on
identifying reform needed for program budgeting system in Ethiopian public agencies
at federal ministries level, analyzing the attitude of employees towards new
budgeting system at the federal offices of the ministry. It also focuses on analyzing
the challenges and implication of program budgeting system in public agencies at
federal office of the ministries.

The study employed the mixed approach that is qualitative and quantitative research
design to describe the respondent’s responses and to answer the research questions.
Specifically, the data was collected through semi-structured questionnaire which
contains both open-ended and closed questions. The study descriptively analyzes the
data elicited from surveys and documents. The data was presented in the form of
table and analyzed using frequency and percentage. Then the data interpreted based
on the analysis. Lastly, the findings derived from the interpretations.

The result of this combined research methodology reveal that there is no need of
new organizational design for program budgeting. However, the study identified that
reform in financial management, linking program structure with the objectives of
organizational structure, and new technologies are needed for the implementation
of program budgeting. The study also reveals that there is a confusion and
challenges in implementing program budgeting. The study also identifies manger’s
responsibilities in the system and implication of program budgeting on the public
expenditure.

The study suggests the effective way which could be taken by the concerned body
and Ministry of Finance and Economic Development in particular, to make the
transition to program budgeting and implementation of program budgeting. Finally,
the thesis forwarded: How the program based budgeting system will increase the

i
output of the public agency?, Evaluation of program budgeting in relation to
strategic policy of the government, analysis and evaluation of analytical part of
program budgeting process in public agencies, and the area of incentives and
motivation to employees in program budgeting, legislative aspect and
administration aspect of program budgeting as the suggestion for further research.

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 Acknowledgements
I am heartily thankful to my adviser Dr. Degefe Duressa, for his help by reading each
and every item and commenting and advising me still the end in providing
constructive knowledge about my titles and generally about research by expending
his precious golden time and energy. I am also indebted to my mother Maryen
Usman Agibir, for her morale and encouragement in my life, to whom this paper is
dedicated, and to all members of my families and friends. Particularly, I would like to
extent my gratitude to my sister Rukiya Abdi and Brother Adam haji Sani whose
necessary moral supply support has been with me until the completing of the paper.

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Contents

Abstract .......................................................................................................................... i
Acknowledgements ..................................................................................................... iii
List of table .................................................................................................................. vi
List of figure ................................................................................................................. vi
Acronyms .................................................................................................................... vii
Chapter one ................................................................................................................... 1
1.1. Introduction ........................................................................................................ 1
1.2. Statement of the problem ............................................................................... 4
1.3. Objectives of the study ................................................................................... 7
1.4. Research questions ......................................................................................... 8
1.5. Significance of the study ................................................................................ 8
1.6. Scope and limitation of the study ................................................................... 9
Chapter two ................................................................................................................. 11
2. Literature review................................................................................................. 11
2.2. Theoretical overview of budgeting system .................................................. 12
2.2.1. Program based budgeting system ......................................................... 13
2.2.2. Conceptual Dilemmas in Program Budgeting ...................................... 15
2.2.3. Line-item budgeting system.................................................................. 16
2.2.4. Performance budgeting system ............................................................ 17
2.2.5. Concept of Budgeting systems in public agency and their applicability
in public agency .................................................................................................. 18
2.3. The Transition to Program Budgeting.......................................................... 20
2.3.1. Legislative Considerations .................................................................... 21
2.3.2. Challenges in implementing Program Budgeting ................................. 21
2.3.3. Linking Programs to Strategic Planning Processes .............................. 22
2.4. Empirical Study to integrate program based system in public agency ............ 23
2.5. Conclusion and knowledge gaps in respect to moving to program based
budgeting system in Ethiopian public agency ............................................................ 27
Chapter three ............................................................................................................... 29
3. Research methodology ........................................................................................ 29
3.1. Research design ............................................................................................... 29
3.2 Data collection methods ............................................................................... 30
3.3. Sample size................................................................................................... 31

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 3.4. Data analysis procedures .............................................................................. 32
Chapter four ................................................................................................................ 33
4. Data presentation and analysis ............................................................................ 33
4.1. Explanatory Statement ................................................................................. 33
4.1.1. Personal profile of sample Respondents ............................................... 33
4.2. The transition to Program based budgeting system in public agencies ....... 36
4.2.1. Reform needed in financial management in implementing PBS .......... 38
4.2.2. New technologies or computer software needed for the implementation
of PBS. .............................................................................................................. 40
4.2.3. Human Resources needed for PBS ....................................................... 41
4.2.4. PBS training for employer .................................................................... 43
4.3. Implementation of program budgeting system in federal public agencies .. 45
4.3.3. The understanding of respondents about program budgeting system ... 49
4.3.4. Relationship between program budgeting structure and organizational
structure .............................................................................................................. 50
4.3.5. The responses for the link between program budgeting and program
structures out put ................................................................................................. 51
4.3.6. Methods of implementing program Budgeting system......................... 53
4.3.7. Responsibilities of Head of budgetary directorate in federal public
agencies .............................................................................................................. 54
4.3.8. Flow of Information in PBS.................................................................. 55
4.3.9. Does the Ethiopian budget encourage participation? ........................... 56
4.3.10. Challenges in Implementing PBS ..................................................... 57
4.4. Implications of PBS in Ethiopian Public Agencies...................................... 61
Chapter five................................................................................................................. 66
5. Finding, conclusions and recommendations ...................................................... 66
5.1. Summary of finding and conclusions ........................................................... 66
5.2. Recommendations ........................................................................................ 73
Reference .................................................................................................................... 76
Appendix ..................................................................................................................... 81

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List of table

Table: 1 Sample size in each federal ministry………………………………………………………32

Table: 2 Respondents by Education, Work Experience and Job Description…………34
Table: 3 Responses of respondents on organizational design for PBS………………….37
Table: 4 Reforms needed in financial management for PBS………………………………..38
Table: 5 New computer software technology for PBS………………………………………….40
Table: 6 The sufficiency of human resources for the implementation of PBS………41
Table: 7 Responses on PBS training for the respondents……………………………………..43
Table: 8 Respondents responses on the adequacy of the training……………………….44
Table: 9 Responses of respondents on confusion related to PBS…………………………46
Table: 10 Responses on attitude towards Program budgeting system…………………48
Table: 11 Responses on the understanding of program budgeting………………………49
Table: 12 The relation between PBS structure and organizational structure………..50
Table: 13 Responses for the link between PBS and structure output……………………52
Table: 14 Approaches of implementing PBS…………………………………………………………53
Table: 15 The responses for the budget participation………………………………………….57
Table: 16 Challenges in implementing PBS………………………………………………………….58
Table: 17 Responses on what PBS improve in Federal public agencies………………..61

List of figure

Figure 1 Response for the sufficiency of human resources for the implementation of
PBS…………………………………………………………………………………………………………………………43
Figure 2 Respondents responses on the adequacy of the training…………………………45
Figure 3 Responses of respondents on confusion related to PBS…………………………..47
Figure 4 Responses on attitude towards Program budgeting system…………………….49

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 Acronyms

GASB-Government accounting standard board

IBEX -Integrated Budget Expenditures

MoA- Ministry of Agriculture

MoE-Ministry of Education

MoFED- Ministry of Finance and Economic Development

MoH-Ministry of Health

PBBS-Performance based budgeting system

PBS-Program budgeting system

PPBS-Planning, Programming Budgeting Systems

ZBB-Zero based budgeting

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 Chapter one

1.1. Introduction
This study deals with the move towards program budgeting system in Ethiopian
public agencies and its implication on the management of public expenditure.
Specifically, the study focuses on the move from the existing budgeting system to
the program based budgeting system in the selected federal ministries and the
implication of this new budgeting system. The need to have effective budgeting
system is just as important for nonprofit organizations, which by their nature are not
required to maximize their profits, as it is for businesses, which exist to bring the
utmost return on the stockholders’ investments.

Mullins and Pagano (2005) stated that the art of budgeting in government is
essentially a process of allocating limited financial resources to services and
activities in a manner that will most effectively meet the needs of the citizens.
Typically, a simplistic and often used approach to budgeting is called line-item
budgeting (Boex, et al, 2000). In essence, the line-item budgeting is derived from the
current year’s budget by adding amounts expected to the required by line items. It
also focuses largely on controlling resources inputs and typically uses the line-item
budget format in which the focus is on departmental expenditures for specified
purposes or objects, such as personnel, supplies, equipment and travel.

On the other hand, Cutt (1974) noted that the program budget differs from the
traditional line-item approach to preparing, reviewing, and presenting the budget.
Rather than focusing on what a community buys (personnel, commodities, etc.), a
program budget focuses on the expected results of services and activities that you
carry out. In this case, the emphasis is on the attainment of long-term, community-
wide goals. In a program budget, the organization link revenues and expenditures to
multiyear programs that meet federal ministries’ goals, objectives, and strategies.

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Importantly, a program budget identifies the anticipated results and outputs of
these investments.

In addition, West, Eric and Lindquist (2009) assert that Program budgeting removes
activities from their organizational homes for analytical purposes and evaluates
them in terms of their contributions to hierarchically ordered objectives. As such, it
is designed to allow managers, budgetary directorate heads and policy makers to
plan, to hold implementing officials accountable, to identify redundancies, and to
compare the marginal utility of spending on different activities with similar goals.

Studies performed in the area of government budgeting system also suggest that
traditional budgeting has come under criticism for being overly time consuming, and
rigid. For example, Bagdigen (2001) noted that line-item budgeting system
encounters various limitations in budgeting process, like that; it assumes activities
and methods of working will continue in the same way, no incentive for developing
new ideas, no incentives to reduce costs and encourages spending up to the budget
so that the budget is maintained next year.

In contrust, Kluvers (2001) argued that Program budgeting system (PBS) is the
planning of public expenditure for the purpose of achieving explicitly defined results,
which may be policy objectives or simply outputs of routine public service activities.
The ultimate aim of PBS is far from simply being an elaborate way of measuring or
recording activities but instead, it is a mechanism that will help government in
decision-making depending on whether the objectives are being met or not, and
enhancing transparency and accountability.

Moreover, program budgeting as an alternative model of budget management aims

at clarifying policy priorities consistent with government’s strategic objectives and
allocates resources more tightly on strategic priorities (West, Eric and Moshe, 2009).
In addition PBS can motivate program-managers and service-providers to have a
genuine interest in improving performance. It also identify the causes of good and
2|Page
bad performance and thereby improving the value for money of public spending by
reducing waste and increasing impact and facilitate cross-institutional working.

On the other hand, many studies argued that it makes the service-providers
(Ministries, Departments or city administration and any public agency) more results-
accountable to beneficiaries of services provided, to government for policy
implementation and to taxpayers for good use made for their contribution to the
coffers of the government. This ultimately leads to more transparency. Thus, the
move is increased to run from traditional budgeting system to the new PBS in the
Ethiopian Puplic sector.

Interestingly, in Ethiopia many studies have recommended that program budgeting

system is needed to be applied in Ethiopian public sector to have a better delivery of
servece to their society. Moreover, Ethiopian ministry of Finance and Economic
Development has designed to adopt program based budgeting system in the public
sector.

Number of studies also address the question how the government move towards
the program based budgeting stystem and identify the preconditions needed to be
taken to apply this new budgeting system in foreign countries. Undoubtfully, having
a clear understanding of significant problem of the line-item budgeting system and
how to apply the new budgeting system in Ethiopian government sector can be
more helpful in designing program based budgeting system for public agency.
Accordingly, this research focused on the analyzing move towards program based
budgeting system in the context of Ethiopian public agency the case of federal
ministries and the implication of this budgeting system on the activities of federal
ministries.

This study drew data from the four selected federal ministries of the Ethiopian
public agencies. The site provided an in-depth understanding of the overall aspect of
program budgeting system in Ethiopian government sector. Accordingly, one of the
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main criteria to select these four federal ministries for data collection is that they
appear that their program and budgetary directorate, and planning and budget
administration offices of the four federal ministries office is going to have program
based budgeting system based on the guidance of the Ethiopian Ministry of Finance
and Economic Development and to change the line item budgeting system.

So, this study analyzed the move to program based budgeting system by focusing on
Ethiopian public agency at the selected four federal offices of the ministries.

1.2. Statement of the problem

Traditionally, government’s view of budget management focused primarily on input
control and resource allocation, and it was also highly centralized. Central budgeting
departments focused exclusively on control in budget management with little or no
follow-up in checking the performance of spending departments in terms of
achieving planned objectives. It has been argued that previous view of line-item
budgeting system focused primarily on resource allocation and input control, and
was usually highly centralized (Bellamy, and Kluvers, 1995).

Taken the limitation of incremental budgeting system as a whole, many

governments are striving to adopt program based budgeting as an alternative model
of budget management that aims at bringing a more direct link between allocating
resources with budgets and performance in reaching planned objectives.

The results of research conducted by Kluvers (2001) indicated that Program

Budgeting has become an accepted management tool. According to (Bellamy, and
Kluvers, 1995) 77 percent of the cities surveyed in the USA reported using program
budgeting. The longevity of Program based budgeting in large numbers of
jurisdictions, with very few reported instances of jurisdictions having tried and
rejected PBS, indicates that PBS has become a staple rather than a fad in public
management. The results of a survey conducted by Kluvers (2001) indicate that 74
percent of large cities in the USA use Program budgeting system.

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Several recent writings, (Bourdeaux, 2007, Smithies, A 1965; Bellamy, and Kluvers,
1995) in the area of public budgeting system stated that the theory behind program
based budgeting is that in return for greater accountability for results, agency
managers will be given increased flexibility to manage inputs as necessary in order
to produce the desired results. For this reason, many developing countries have
been transitioning to PBS in an effort to focus resource allocation decisions on
outcomes or results rather than on control over inputs.

Programs based budgeting often provide the platform for a performance based
system because of the intuitive idea that a program is the appropriate budgetary
unit for assigning managerial flexibility and responsibility for results (Bourdeaux,
2007). In this formulation, programs are the level at which agencies enter into a
contract to produce results. Programs are also often linked to result measures and
overall agency goals through a strategic planning process. Research like Wildavsky,
et al (1966) as well as the general literature suggests building a program structure
for program budgeting aligns resources with strategic plans and ties services or
products to outcomes, objectives, goals, and mission.

However, implementing program budgeting necessitates a number of changes in

traditional budget management. Accordingly, a decision about whether to introduce
such a system in any specific country should be based on serious consideration of
the governance conditions, government structures and problems in implementing
the new budgeting system. For example, Robinson (1992) clearly stated that one of
the thorniest problems for program budgeting is the relationship between programs
and organizational structure. Similarly, Bourdeaux (2008) noted that there has been
a fundamental restructuring of the budget system in many developing countries to
move towards new budgeting model that is program based budgeting system.

In addition, Pugh (1984) argues that staff capacity to address the information
requirements of program based budgeting is the main institutional pre requisite. He
also recommends good accounting and auditing procedures as additional pre

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requisites and general recognition of the need for reform and government agencies
need greater managerial autonomy and freedom from tight input control.

Moreover, numbers of interviews undertaken in the states of USA by Bourdeaux

(2007) showed that in the implementation of program budgeting there are lack of
clarity about program definitions and some of the programs, as defined, may lack
integrity or it is not entirely clear how different activities and associated
expenditures and revenues are assigned to programs. The other difficulties are
conflict between the legislative and executive branches over strategic control of
agency priorities as well as control over federal and other funds.

In Ethiopia, the civil service reforms went ahead without appropriate improvements
in the budgetary process, i.e., ministries were undergoing major changes without
any corresponding improvements in the way their budgets were being prepared or
executed. In 2005, the ministry of finance and economic development initiated work
on introducing program budgeting on a pilot basis in the office of ministries. The
design of programs builds on the work already carried out on strategic plans for
these ministries, with the intention of aligning resource allocation with the new
directions being implemented under those plans.

Following the above issues, introducing new budgeting system in Ethiopian

government sector is the current issue to curve the previous budgeting system
limitations. In this context, adopting program based budgeting is one issue by which
the Ethiopian government at the federal ministries would improve its budgeting
system and mitigate the limitation of traditional budgeting system.

Following the above statements, the transition to the program budgeting, the
difficulties in the implementation of program based budgeting system at federal
ministries level and the implication of this budgeting system on the activities of the
agency are worth investigation. In addition, the qualification of the employees, and
human resource requirements, facilities, and administration aspect of program
budgeting are the area that require concrete study in Ethiopian context.
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Organizational design and program structures for program budgeting is one aspect
of issues in moving to program budgeting in Ethiopian public agency.

In addition, other areas like: The way to move to program budgeting, the level of
participation of employees, lower level management in program budgeting, the
confusions and understanding of employees on PBS and implication or
consequences of PBS in the implementation of process, reform needed in the
ministries and identifying the challenges are the areas that are not yet studied in
Ethiopia.

So far, there is no study which deals with the process of implementing this new
budgeting system and the reform needed to implement this budgeting system and
its implication on the management of the federal ministries. Therefore, this study is
an attempt to fill this gap by analyzing the move from the traditional method to
program based budgeting in Ethiopian public agencies and its implication on the
budget process.

1.3. Objectives of the study

Based on the research problem, the main objectives of this study are:

1. To analyze the reform needed and conducted for program budgeting

system in Ethiopian public sector at federal ministries level.
2. To analyze the attitude of employees towards new budgeting system
at the federal offices of the ministry.
3. To analyze the challenges and implication of program budgeting
system in public agencies at federal office of the ministries.

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1.4. Research questions
To achieve these broad objectives, a central research questions and sub-questions
are developed in this section. The research questions are presented as; one primary
question (PQ) and four secondary questions (SQ) in order to address the main
research question of the study.

PQ. What are infrastructures needed to implement program budgeting in the

Ethiopian public agencies at federal public agencies and how do programs interact
with competing budgetary purposes and agenda and budget structures that might
be adjusted to better improving the budgeting process?

In addition to the above the central research question, this study will seek to answer
the following secondary research questions.

SQ1. Was there need for change in the organizational design needed to move
towards program budgeting?

SQ2. What technologies and human resources were needed to move towards
program budgeting system and how well was the new system understood by the
employees?

SQ3. Is the new budgeting system participative budgeting system?

SQ4. How do the agencies apply the new budgeting system? And what is implication
of program budgeting on the management of the budget?

1.5. Significance of the study

The concept of program budgeting is not entirely new at least in the literature. Its
application, however, not yet fully in place even in developed countries. In Ethiopia
it is not only a new attempt but also part of the recent waive of reforms related to
expenditure management program. There is yet very few study conducted on the
subject yet MoFED is pushing its implementation by all government budgetary
agencies. As a new system being implemented various issues is expected to come

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out of the venture when such huge government bodies move into it all at once. This
makes the subject current and relevant both for practical evaluation and theoretical
discussion.

1.6. Scope and limitation of the study

Scope of the study

The study highly concentrates on reviewing and assessing the move to program
based budgeting system in Ethiopian public sector, the reform needed in Ethiopia to
adopt this budgeting system and the way in which this new budgeting system to be
adopted. However, assessing how the program based budgeting system will increase
the output of the public agencies and evaluation of program budgeting in public
agencies is not to be concerned under this study. In addition, the study did not
assess the entire public agency in the Ethiopia.

Limitation of the study

Having the above scope, the study is subject to the following limitations.

 First of all, the study is restricted mainly to the case of four Ministry offices
for data collection.

 It was found that offices of budget directorate and head of planning are not
yet well organized to obtain necessary information on PBS.

 Unavailability of literature and concrete research on the subject made it

difficult to better collect information.

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Structure of the study

This study focuses on the move towards program budgeting system in Ethiopian
public agencies and its implication at federal ministries level. Thus, the study
structured as follows. Chapter 1 deals with an introduction of the study including
background for the study, statement of problem, and scope and limitation of the
research. The discussion of Literature review of study presented in chapter 2. The
overview of Research methodology is discussed in chapter 3. Chapter 4 presents
data discussion and analysis. Finally, Chapter 5 presents finding, conclusion and
recommendations for the study.

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 Chapter two

2. Literature review
It is difficult to conceive of any public policy, objectives and activities that can be
carried out without money and the way money is allocated to those through
budgets. Therefore budgeting system is key to the implementation of all policies and
objective of the government. From theoretical point of view, these budgeting
systems may include traditional budgeting system (incremental budgeting or line
item budgeting in other ward), zero based budgeting, program based budgeting
system and performance based budgeting.

2.1. Budget concern

A major element of financial data activity rests in the act of budgeting. Budgeting is
the process of allocating finite resources to the prioritized needs of an organization.
In most cases, for a governmental entity, the budget represents the legal authority
to spend money (Hirsch, 1966). Adoption of a budget in the public sector implies
that a set of decisions has been made by the governing board and administrators
that culminates in matching a government's resources with the entity's needs. As
such, the budget is a product of the planning process.

As Jensen (2009) noted the budget also provides an important tool for the control
and evaluation of sources and the uses of resources. Using the accounting system to
enact the will of the governing body, administrators are able to execute and control
activities that have been authorized by the budget and to evaluate financial
performance on the basis of comparisons between budgeted and actual operations.
Thus, the budget is implicitly linked to financial accountability and relates directly to
the financial reporting objectives established by the GASB (Jensen, 2009).

On the other hand, the link between financial planning and budget preparation gives
the budget document a unique role in governmental organizations. In this case, the

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work of Werner (2001) suggested budgets in the public arena are often considered
the definitive policy document because an adopted budget represents the financial
plan used by a government to achieve its goals and objectives. Dean (1986) pointed
out when a unit of government legally adopts a financial plan; the budget has
secured the approval of the majority of the governing board and reflects

 Public choices about which goods and services the unit of government will or
will not provide,
 The prioritization of activities in which the unit of government will be
involved,
 The relative influence of various participants and interest groups in the
budget development process, and
 The governmental unit's plan for acquiring and using its resources.

2.2. Theoretical overview of budgeting system

Many budget policies, procedures, and technical practices that we currently
associate with modern budgeting were developed during the nineteenth century
when major changes in budget practices occurred in France (Schaeffer and Yilmaz,
2008). The experiences from USA showed that over the past 30 years, governmental
entities in the United States have used a variety of budget approaches and formats.
The development of more advanced budget philosophies reflects growth in both the
scope and the complexity of governmental operations and the simultaneous need
for systems that are capable of translating the variety of policy decisions into
financial plans (Carlin, 2004).

To effectively achieve the objective of providing services the public agencies use
different budgeting system at federal, State, Local government sector and city
administration level. The theoretical conception has already provides various
budgeting guidelines for the public agency and these various budgeting models
continue to be commonly used and fall predominantly into categories of (1) line-
item, or "traditional," budgeting; (2) performance budgeting; (3) program based
12 | P a g e
budgeting (4) zero-based budgeting (ZBB); and (5) site-based budgeting. In addition,
many governments use a variety of hybridized versions to address the specific needs
of the organization. Although these approaches are considered distinct in terms of
the underlying preparation process, actual formats of the prepared budgets may be
quite similar; for example, the format of a site-based budget may be quite similar to
the format of a line-item budget (Johnson, 2003). Based on the theoretical overview,
types of budgeting system and concept of budgeting system in public agencies and
their applicability in public agencies are to be discussed here under.

2.2.1. Program based budgeting system

Program budgeting refers to a variety of different budgeting systems that base
expenditures primarily on programs of work and secondarily on objects. It is
considered as a transitional form between traditional line-item and performance
based budgeting approaches, and it may be called modified program budgeting. In
contrast to other approaches, a full program budget bases expenditures solely on
programs of work regardless of objects or organizational units (West, Eric and
Moshe, 2000). As these two variations attest, program budgeting is flexible enough
to be applied in a variety of ways, depending on organizational needs and
administrative capabilities.

In addition, Program budgeting differs from approaches previously discussed

because it is much less control- and evaluation-oriented. According to Jones and
Mccaffery (2005) noted that budget requests and reports are summarized in terms
of a few broad programs rather than in the great detail of line-item expenditures or
organizational units. PBS systems place a great deal of emphasis on identifying the
fundamental objectives of a governmental entity and on relating all program
expenditures to these activities. This conceptual framework includes the practices of
explicitly projecting long-term costs of programs and the evaluation of different
program alternatives that may be used to reach long-term goals and objectives
(Jones and Mccaffery, 2005). The focus on long-range planning is the major

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advantage of this approach, and advocates believe that organizations are more likely
to reach their stated goals and objectives if this approach is used.

On the other hand, PBS is the planning of public expenditure for the purpose of
achieving explicitly defined results, which may be policy objectives or simply outputs
of routine public service activities (Mosher, 2009). The ultimate aim of PBS is far
from simply being an elaborate way of measuring or recording activities but instead,
it is a mechanism that will help Government in decision-making depending on
whether the objectives are being met or not, and enhancing transparency and
accountability. Concerning decision-making, it helps to (Gilmour, J and Lewis et al
2006):
 Clarify policy priorities consistent with Government’s strategic objectives.
 Allocate resources more tightly on strategic priorities.
 Motivate program-managers and service-providers to have a genuine
interest in improving performance.
 Identify the causes of good and bad performance and thereby improving the
value for money of public spending by reducing waste and increasing impact,
and facilitate cross-institutional working.

However, several limitations exist in the actual implementation of this approach,

including changes in long-term goals, lack of consensus regarding the fundamental
objectives of the organization, lack of adequate program and cost data, and the
difficulty of administering programs that involve several organizational units.
However, Bagdigen (2001) documented that, yet despite its limitations, program
budgeting is often used as a planning device while budget allocations continue to be
made in terms of objects and organizational units or structure.

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2.2.2. Conceptual Dilemmas in Program Budgeting
Why Use Program Budgeting?

Different literature on program budgeting show that program budgeting is expected

to have the following benefits (Spigelman, 1967, Pugh, 1984, et al):

 Increases transparency by showing the relationship between funding and

public purposes.
 Gives managers freedom from restrictive control over inputs.
 Provides a platform for attaching outcomes to key public services and for
evaluating the relationship between funding and outcomes.
So, most of public organization go to budget reforms. But the move to program
budgeting need to ensure that they do not undermine existing systems that provide
controls over potential waste, fraud, and abuse (Bourdeaux, 2007).

Unlike the private sector, which can focus heavily on efficiency, public systems
generally require a heavier emphasis on control. Public organizations are influenced
by public perception about how public resources are being spent, and public
organizations do not face competitive pressures to enforce efficiency (Boland and
Fowler, 2000).

Program budgeting has its origins in the 1960s with a reform known as Planning,
Programming Budgeting Systems (PPBS). As Bourdeaux (2007) coted from
(Wildavsky 1969; Schick 1966) PPBS was intended to reorient decision-making
towards a planning focus, allowing top managers to evaluate the efficiency of
existing strategies in achieving broad based objectives and to assess public
expenditures across previous budgetary and organizational silos. This reform wilted
in part from the magnitude of its ambition and it required complex analysis and
significant institutional change to support it (Schick 1973; Mosher 1969).

Since then, budgeting has been influenced by ideas surrounding performance based
budgeting, a reform that focuses both on performance measures or outcomes and

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on managerial entrepreneurialism (Bourdeaux, 2007). The theory behind
performance based budgeting is that managers should be held accountable for
results, but should be allowed to shift inputs as needed in order to achieve these
results (Rubin, 1990).

Based on the work of Robinson (1992) performance based budgeting has become
interlinked with program budgeting because of the intuitive idea that programs are
the level at which managers should be given financial flexibility to achieve results.
On this point Bourdeaux (2007) added that some public agencies in USA, For
instance, Texas, New Mexico and Florida all developed their program structures, in
theory, starting with agency strategic planning and then conceptualizing programs
as the activities or strategies through which agencies achieve their goals and
objectives.

2.2.3. Line-item budgeting system

From theoretical point of view, line-item budgeting uses a budget prepared using a
previous period’s budget or actual performance as a base, with incremental
amounts added for the new budget period. It assumes activities and methods of
working will continue in the same way. There is no incentive for developing new
ideas. In this system the budget is stable and change is gradual and Managers can
operate their departments on a consistent basis. On the other hand, Bagdigen
(2001) identified that, if the budget is prepared regarding the nature of income and
expenditure, it is called Traditional budgeting system or Line-Item Budgeting system.

Lee and Wang (2009) noted the line-item budget approach has several advantages
that account for its wide use. It offers simplicity and ease of preparation. It is a
familiar approach to those involved in the budget development process. This
method budgets by organizational unit and object and is consistent with the lines of
authority and responsibility in organizational units. As a result, this approach
enhances organizational control and allows the accumulation of expenditure data at
each functional level. Finally, line-item budgeting allows the accumulation of

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expenditure data by organizational unit for use in trend or historical analysis
(Robinson, 1992)

2.2.4. Performance budgeting system

A different focus is seen in performance budgeting models. Gilmour and Lewis

(2006) affirmed that in a strict performance budgeting environment, budgeted
expenditures are based on a standard cost of inputs multiplied by the number of
units of an activity to be provided in that time period. The total budget for an
organization is the sum of all the standard unit costs multiplied by the units
expected to be provided (Bagdigen and Muhlis, 2001). Although this strict approach
may be useful for certain types of operations, many organizations require a more
flexible performance approach. For example, expenditures may be based simply on
the activities or levels of service to be provided and a comparison of budgeted and
historical expenditure levels.

Further, Mullins and Pagano (2005) noted that performance budgeting includes
narrative descriptions of each program or activity-that is, it organizes the budget
into quantitative estimates of costs and accomplishments and focuses on measuring
and evaluating outcomes. Finally, the performance approach eases legislative
budget revisions because program activities and levels of service may be budgeted
on the basis of standard cost inputs (Gilmour and Lewis, 2006).

Generally, the identification of the method of budgeting system depends on its

existing characteristics that differs it from others. In other words, Jensen (2009)
noted if the budget is prepared regarding the nature of income and expenditure; it is
called Traditional budgeting system that is the earliest application in the budgeting
systems. As this system mostly depends upon the method of considering materials
and line-item, it is also called Line-Item- Budgeting system.

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 2.2.5. Concept of Budgeting systems in public agency and their
applicability in public agency
The definition of budgeting system has a wide understanding in different sector.
While different understanding of budgeting exists, in specific sense for the
government sector budget is the basic way in which policies are turned into action
(Carlin, 2004). In other case, Santiso (2005) noted that the budget sets out the plan
for government spending and therefore shows what will be delivered. It also shows
the long-term financial plan of the government for the year ahead. In focusing on
the aspect of budgeting system in government budgeting system, the concept of
budgeting system may serve different functions such as: forcing managers to plan
ahead and therewith reducing ad hoc decisions; communicating objectives,
perceived problems and opportunities, as well as role that everyone is expected to
play; coordinating the separate activities and ensuring that all parts of the
organization in mutual harmony. Following the above concept, Jacobs (2006) noted
that budget system is a system of rules governing the decision-making that leads to
a budget, from its formulation, through its legislative approval, to its execution.

After outlining some aspects of public budgeting system above, this part aims to
highlight some budgeting systems and their applicability by the public agency.
However, it must be pointed out that a comprehensive review of all the budgeting
systems is neither possible, nor convenient regarding the space availability for this
paper. Therefore, two budgeting systems are particularly reviewed. Although there
are plenty of budgeting system in public sector, Bagdigen (2001) wrote that there
are two important types of budgeting system that is incremental budgeting system
or Traditional Budgeting System (TBS) and program based Budgeting System (PBBS).

Because the Line-Item-Budgeting System pays most of its attention on the level of
spending, it is mostly preferred by those who are seeking to control the amount of
expenditure. Therefore, as Schick (2010) refers, the importance of line itemizations
and the level of expenditure, that play crucial role in the line item budgeting in order
for resources to be estimated, are distributed and completed on 'objects of
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expenditure'. Furthermore, as the system ignores the evaluation of outputs, there is
no requirement within the process to address why and for what purposes the inputs
are going to be used in the budget. This means that the system does not only fail to
give information about the outputs, but also increases the cost of every single
objective.

On the other case, Caiden (2010) noted that Because of taking last year budget as
base, application of the system is seen as simply preparing of next year's budget.
The procedure does not require a great deal of work to compute next year's
spending by orienting it simply from previous year's budget items, i.e. TBS allows
participants to accept estimations without making any argument or disagreement. It
would be enough for decision-makers just to focus on that of last year's budget
items in order to decide on the level of spending of next year's budget. Budgetary
decision-makers do not tend to analysis appropriateness of the objects of
expenditure on the objectives.

On the other hand, program budgets use statements of missions, goals and
objectives to explain why the resource is being spent. It is a way to allocate
resources to achieve specific objectives based on program goals and measured
results. Similarly, Cutt (1974) stated that program based budgeting aims to improve
the efficiency and effectiveness of public expenditure by linking the funding of
public sector organizations to the results they deliver, making systematic use of
performance information. Jensen (2003) define the program budgeting as budget
preparation and adoption process that emphasizes performance management,
allowing allocation decisions to be made in part on the efficiency and effectiveness
of service delivery. This broader concept of the two budgeting system signify that
incremental and program based budgeting systems can help to determine the
benefits of the two systems in using for implementation in the government.

Hence, the move to apply the new budgeting system not the matter of choice rather
it needs a critical consideration of different factors about the budgeting system that

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going to apply (Diamond and Jack, 2003). These compromises imply that the need
to budgeting approach is not simply driven by compliance with management
attitude or values, but with a set identifying of fundamental factors that provide the
limitations and merits of each budgeting approach in government activity and
objectives. Diamond and Jack (2003) noted that the need to move from the
traditional budgeting to new budgeting is about the integrity of the program based
budgeting system in the government of financial plan to achieve their activity
through which deficiencies of the previous budgeting system are resolved or
mitigated and identifying the process to integrate the new budgeting effort to be
used in public sector. Thus, identifying the limitation of old budgeting system and
understanding the way to devise the new budgeting system in every policy and
objectives implementation will enables government sectors institutions to achieve
their goals.

2.3. The Transition to Program Budgeting

The most recent effort to transition to program budgeting was initiated to link public
agencies resources to result oriented. As Robinson (1992) noted the initial transition
to program budgeting was intended to help the new executive staff handle the
shortfall through a better understanding of the purposes for which state funds were
being spent. Program budgeting with a performance orientation was also viewed as
a best practice and one that would presumably reorient managers away from inputs
towards results.

The new budget instructions of program budgeting required agencies to prepare a

strategic plan with performance measures linked to countrywide priorities, as well
as to develop a budget based on programs. According to the Wildvasky (1983)
stated that each public agency had to identify its core businesses with associated
performance measures and indicators. A subset of these core businesses would be
programs which would be identified in the agency annual business plan. Each of
these programs was expected to be attached to a set of results measures and

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agencies were required to rank the importance of these programs in a prioritization
process.

2.3.1. Legislative Considerations

Concerning legislative for program budgeting Caiden (2010) totally stated the
following statements: “Presumably program based budgeting alone could occur at
an agency rather than program level in conjunction with lump sum budgets. In
return for maximum flexibility, agency heads agree to produce certain results and
achieve a certain level of savings. The legislators and legislative staff appear to be
also interested in using program designations to clarify actual levels of spending on
state services, evaluate at this level, and to strengthen the legislative ability to set
strategic priorities.”

2.3.2. Challenges in implementing Program Budgeting

Although seemingly a simple shift, the actual designation of a program structure for
the state lies at the cross section of several competing agendas as well as a series of
technical and organizational challenges for agency staff (Rubin, 1990). One of the
challenges associated with program budgeting is defining a program for budgetary
purposes is conceptually more complex that most people realize. According to
Bourdeaux (2007), although significant attention has been given to policy criteria
linked to strategic planning, program definitions in actuality also need to
accommodate:

 Varying levels of control and accountability.

 Demand for transparency and links to evaluation.
 Technical and managerial concerns.

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2.3.3. Linking Programs to Strategic Planning Processes
What is a Program?

Most states begin their program based performance oriented budgeting process by
attempting to define programs in relations to a strategic plan. Program should be
designed in such away that it provides to identify mission, goals, objectives and
outcomes and then the strategies or programs that would be associated with
attainment of those outcomes and objectives (Smithies, 1965).

In addition, Smithies (1965) stated that programs should be customer and outcome
focused and should result in a positive change for the programs' customers.
Programs should address key policy and service areas, and decision makers must be
able to link budget requests, funding, and expenditures to individual programs
(Pugh, 1984). Other literatures like Kluvers et al (1999) define programs as follows:

 A method to achieve goals and objectives. Formulated from goals and

objectives- a program is a means of transforming inputs into outputs and
ultimately outcomes with the best use of resources.
 Programs are products or items produced by the agency or services (an
action that the agency takes to fulfill its mission).
 A set of activities undertaken in accordance with a plan of action organized
to realize identifiable goals and objectives based on legislative authorization.
These definitions of a program provide a basic framework. The linkage to products,
services, or outcomes is particularly important. Different functional categories listed
in the public agencies particularly executive operations, administration, and human
resources, probably would not count as programs under the definitions above
because they are not directly associated with a distinct end product, service, or
outcome. Similarly, such criteria suggest identifying activities that produce similar
products, services, or outcomes and combining them into a single program.

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2.4. Empirical Study to integrate program based system in public
agency
There are different ideas regarding the need to adopt program budgeting system in
public agency. At the first glance, the idea take place the position of simply moving
from old budgeting system to the program budgeting system in government sector
or integrating program budgeting system by considering different requirement. As
per Diamond (2003), since the incremental budgeting system primarily focus on
resource allocation and input control and highly centralized, it is needed to flow
from the incremental budgeting to program budgeting. On this point this approach
to budget management accepted a set of policy objectives usually poorly articulated
with little attempt at quantification and allocated inputs to reach these objective
(Diamond, 2003). At the same, central budgeting agencies focused almost
exclusively on control and compliance as the primary modus operand in budget
management. There was often little follow up in examining the subsequent program
structure and performance of spending department.

In addition, various writers argued that it is important for government to shift from
the traditional budgeting system to program based budgeting system Carlin (2004).
According to the Bagdigen (2001), in incremental budgeting or line item budgeting,
it seems rather necessary to use public resources in a way that makes sure inputs
are being used as sanctioned. If it did not so, there would be tight control by the
appropriation Body, which is in the charge of the operating the budget. It also,
seems as a good monitor to control whether the level of accepted spending has
done according to the initial approval. Accordingly, efficiency, accountability and
control are seen as primary objectives of the administration unit in incremental
budgeting system rather than focusing on the linking the budget with program
structure output. This implied that, the reforming is needed to apply the new
budgeting system in government public agency. In addition, the study of Carlin
(2004) also indicated that the major criticism of the traditional annual budgeting
approach is that the process is incapable of meeting the demands of the competitive
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environment in the information age. According to the finding of Carlin, et al (2004) ,
the specific criticism points are: encouraging rigid planning and incremental thinking
being time-consuming producing inadequate variance reports leaving the 'how' and
why' questions unanswered ignoring key drivers of shareholder value by focusing
too much attention on short-term financial numbers being a yearly rigid ritual.
Incremental budgeting system could indeed have a resource allocation and input
control without considering the performance of the government organization and
need to be replaced by the performance budgeting system(without precondition).

In contrast to the above argument, Bourdeaux (2008) emphasizes that

disagreements on TBS would be unnecessary. He indicates to the reason of
unnoticeable of disagreements. According to him, any possible disagreement
between and amongst participants would likely be upon the level of spending rather
than programs. In order to solve the matter, it seems most applicable way for them
to make some increase or decrease in the objects of expenditure. Policies and
programs and their possible results may not need to be considered at all. It is one of
the fundamental aspects of TBS that final approval body of the budget takes into
account only list of categories included in the budget and their level of spending.
Then the approval body decides whether it is appropriate to accept or need some
increase or decrease at the level of spending regarding previous year's results as
measurement (Bourdeaux, 2008 ).

Other arguments have stated that before integrating program budgeting system in
the budgeting system of the public sector, it needs to understand a precondition to
move towards the new system. As per Kluvers (2009) program based budgeting
aims to improve the efficiency and effectiveness of public expenditure by linking the
funding of public sector organizations to the programed activities, functions to be
performed and objectives results they information. In doing so, they conclude that
program based budgeting should not be seen as an isolated initiative rather It
should be viewed, as part of a set of broader reforms of the program structure of

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the public agency that is designing to focus public management more on results
delivered and less on internal processes. These broader reforms include civil service
reforms designed to increase the motivation and incentives of public employees;
organizational restructuring to increase the focus on service delivery and improve
coordination. For example, creation of agencies and reduction of the number
deliver, making systematic use of performance of public agency; and institutional
and oversight changes to strengthen public accountability for performance.

Bourdeaux (2008) added that this form of budgeting was intended to reorient
decision making toward a planning focus, allowing top managers to evaluate the
efficiency of existing strategies in achieving broad-based objectives and to assess
public expenditures across previous budgetary and organizational silos. The
conclusion of Bourdeaux’s (2008) argument is that a decision about whether to
introduce such a system in any specific municipal or local government agency should
be based on sober consideration of the governance conditions, the state of the basic
public financial management systems, and the available human and financial
resources.

In other case, Bellamy and Kluvers (1995) indicated that the implementation of
program budgeting also requires that the government becomes more transparent
and accountable to its citizens on how allocated resources were used to achieve
planned policy objectives. So, the government should consider the way to apply the
program based budgeting system. Accordingly, Santiso (2005) stated that experience
shows that, in order for program based budgeting to work, reconsideration of
spending priorities and program performance need to be formally integrated into
the budget process. These routines need to be designed so as to make maximum
use of available information on program performance. The precise form should be
country-specific, depending in part on national specifics such as the characteristics
of the political and administrative systems. However, some key common elements
are a strategic phase early on in the budget cycle, which incorporates a preliminary
consideration of the government’s broad expenditure priorities (Santiso, 2005).
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In addition to the above viewpoints, Bourdeaux (2008) added that in order to adopt
the new budgeting system there must be a general recognition of the need for
reform of government structure. When introducing program budgeting model,
which promotes managerial freedom, it became evident that greater managerial
flexibility could be viewed not only as a tool to improve efficiency but also to achieve
expenditure targets that had been set (West, Eric and Moshe, 2009). Typically,
program managers are in the best position to make decisions on the most
appropriate mix of inputs to be used to produce outputs for their programs. Others
also support to integrate program budgeting into the system through defining
programs of the government, outputs, outcomes, and the links between inputs and
outputs and outputs and outcomes, together with the selection of performance
indicators.

Moreover, Diamond (2003) noted that budget reform has been an evolutionary not
discrete process. This idea is supported by the work of Bourdeaux (2008),
accordingly, before introducing the new budgeting: reform strategy must form part
of the government overall policy as well as part of municipal and local public agency
specific policy, there must be assurance of adequate levels of fiscal control, a solid
foundation of cost accounting in government, a clearly defined and well-organized
budgeting structure, Organizational capacity to handle program evaluation and
cultural shift to results-orientated management It is always as well to recognize that
budget systems moving through distinct stages (Santiso, 2005).

It is generally agreed that a modern budget system should be able to meet three
main requirements: first, to ensure control over expenditures and program
performance so that they are consistent with budget law, second, to stabilize the
economy through time by timely and efficient adjustment mechanisms for the fiscal
aggregates, and third, to promote allocate and technical efficiency in service delivery
through procedures that provide incentives for greater productivity and satisfied
services delivery to the societies.

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 2.5. Conclusion and knowledge gaps in respect to moving to
program based budgeting system in Ethiopian public agency
In line with the above discussions of the literature on line item budgeting system
and the increased demand towards program budgeting system in public agency,
there had not been evidence or studies available regarding to why the Ethiopian
public agency could not apply program budgeting system, challenges to move from
the old budgeting system to program based budgeting system and the impact or
implication of this budgeting system if it applied in Ethiopian case.

Although most of the researches related to the deficiencies of line-item budgeting

and the need to accept the program budgeting system in the public sector’s
budgeting system undertaken in foreign countries, in Ethiopia, it can be said that
there is little scholarly literature on the information to indicate the concrete
deficiency of the existing budgeting system on public agency activities particularly at
federal ministries, how to move towards the program based budgeting system, the
procedure used to adopt the new budgeting system, the challenges to accept this
new system and to what extent this new system is to be used.

In addition, while a substantial body of literature is available to assist public agency

in developing performance measures, program development for program budgeting
has received little recent attention in the scholarly literature. So, the process of
moving towards program budgeting and its implication, the challenges that might
encounter the offices of Ethiopian federal ministries and the reform needed for
program budgeting by Ethiopian federal ministries provides the gap that the
literatures did not provide any information.

Therefore, it is imperative to study this move from line-item budgeting system to

program based budgeting system in Ethiopian public agencies. Thus, based on the
gaps in literature about the Ethiopian case of needs to move towards the new

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budgeting system in Ethiopian public agency, the following main research question
raised:

What are infrastructures needed to implement program budgeting in the Ethiopian

public agencies at federal public agencies and how programs interact with
competing budgetary purposes and agendas and budget structures might be
adjusted to better improving the budgeting process?

So, to answer this research gap questions and other specific questions, this study
drew and collect data from the case of offices of federal ministries through semi-
structured questionnaire for primary data and document for secondary information
to assess the transition to program budgeting, and its implementation process and
implication of program budgeting system.

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 Chapter three

3. Research methodology

3.1. Research design

In order to achieve the main research objectives a mixed method that is qualitative
and quantitative approach is adopted. The purpose of using such a mixed methods
approach is to gather data that will not be obtained by adopting a single method
and for triangulation so that the findings with a single approach could be
substantiated with others wherever possible.

According to Creswell (2009) qualitative research is a means for exploring and

understanding the meaning of phenomenon from the view of participants. In other
case, Dawson (2002) explained that qualitative research approach enables inquirer
to inductively develop a theory or meaning of phenomenon being studied. In other
case, qualitative research is not intended to test a predetermined theory or
hypothesis; instead, it is exploratory in nature and through induction it builds
meanings, theories or hypotheses (Greener, 2008).

In addition, Qualitative research tries to assess experiences and events contextually

and within their natural setting and attempts to analyze them holistically Louis
(2000). This implies that qualitative research examines events or circumstances
without much disruption in their natural environment and it focuses on
understanding a phenomenon in its entirety instead of detaching a constituent and
assessing it separately from its whole part. This shows that qualitative research is
concerned with, among others, developing a comprehensive understanding of a
phenomenon under investigation.

On the other hand, Creswell (2009) noted that a quantitative research approach
employs strategies of inquiry such as experiments and surveys, and collects
information using preset standardized instruments that can generate relevant

29 | P a g e
statistical data. So, quantitative research design uses statistical methods in
describing patterns of behavior and generalizing findings from samples to
populations of interest.

Based on these, the purpose of employing both qualitative and quantitative

research method or mixed is to find and analyse the transition to program based
budgeting system and its implication, challenges in implementing the federal
ministries and explain the relationship of applying program based budgeting system
with results that will be obtained from this system through qualitative elements in
research and supporting this data with quantitative approach. Therefore, adopting
this approach with case study of the federal strategy inquiry will be to gain wide
exploration about the phenomenon being studied.

3.2 Data collection methods

Data was collected from four federal offices of the ministries. One of the main
criteria to select site is that it appears that these ministerial offices are in the
process of implementing of program based budgeting system. Data was gathered
through semi-structured questionnaire that is both closed and open ended
questions for primary data, and documents of the offices for secondary data from
the budgetary director and planning offices of the four federal ministries.

According to Dawson (2002), semi structured questionnaires are used both in

qualitative research design and quantitative research design. It contains both closed
ended questions and open-ended questions. Louis (2000) also noted that stated that
Open-ended questions in semi-structured might be used to find out what
participants think about the issues to be studied. But closed questions in semi-
structured questionnaire are used to enable the respondents to choose among the
alternative or to tick the boxes.

To focus on the primary and secondary research questions, both open-ended

questions and closed ended questions in semi structured questionnaires used to

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collect data from the staff in the budgetary directorate and planning of the four
ministries those who are in connection with budget administration. Respondent to
respond in her/his own terms, the semi-structured questionnaire sets the agenda
but does not presuppose the nature of the response.

So, semi-structured questionnaire used to collect the variables like the reform
needed or infrastructure required in the implementation of PBS, the attitude of
employees towards program budgeting, confusions among the employees on the
program budgeting, adequacy of training for employees, participation level of the
concerned parties in program budgeting, the understanding level of employees
about program budgeting, the way to implement PBS and others.

For further information the study used secondary data that support the primary
information for exploring information, identifying data, comparing them, weighing
their relevance and significance with information gathered through primary data.
The variables like the use of program budgeting in public agencies and further
information to be collected through secondary data that is document of the offices
of the ministries.

3.3. Sample size

Having the above methods of data collection, purposeful Sample size was taken
from four federal ministries. Out of twenty-one ministries four ministries were
selected, that is, 15 percent of the total ministries. These four ministries have 60
employees in their program and budgetary directorate and planning and budget
administration offices of the four federal ministers. From the total of 60 employees
in the selected federal ministries, the researcher selected 30 employees as a sample
which is around 50% of the total population. Based on this, the following table
shows sample size of the respondents from four respondents.

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Table 1: Sample size in each federal ministry.

Offices of the federal ministries No of employees Sample size

Ministry of finance and economic development 30 10
Ministry of education 20 6
Ministry of agriculture 15 6
Ministry of health 15 8
Total 80 30

3.4. Data analysis procedures

Since this study is the descriptive type of research, the collected data was analysed
by using frequency and percentage of the respondents. To show and rank the
respondent’s responses table and graph are used. As, Greener (2008) stated that in
most types of research studies, the process of data analysis involves the following
three steps: first preparing the data for analysis, then analyzing the data and finally,
interpreting the data. Based on these steps, Content analysis of data involved
presenting data or respondent’s responses in table form or graph form then data
was analyzed using frequency percentage and the information from secondary data
supports the analyses. Then the data from open-ended questions were analyzed.
Finally, the analyzed data were interpreted into results. Lastly, the results obtained
from the analysis were presented as a finding in chapter five of this paper.

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 Chapter four

4. Data presentation and analysis

4.1. Explanatory Statement

This chapter deals with data presentation, analysis and interpretation. These data
are presented and analyzed based on data collected through structured and open
ended questions in semi-structured questionnaires, and secondary data or
documents from four offices of the federal ministers. For this purpose,
questionnaires have been distributed to 30 staff members of program and
budgetary directorate and planning and budget administration offices of the four
federal ministers, which are, ministry of finance and economic development
(MoFED), Ministry of Education (MoE), Ministry of Agriculture and Rural
Development (MoA) and Ministry of Health (MoH). Out of 30 staff members
program and budgetary directorate and planning and budget administration offices,
18 of them are budget experts, 4 are planning officers, 5 are groups head in the
budget office and 3 are budget directorates. All the questionnaires that were fielded
are returned. These questionnaires are related to program budgeting system in
Ethiopian federal public agencies and its implication.

In addition to the questionnaires, secondary data or documents that are related to

program based budgeting system were used in the presentation and analysis.

4.1.1. Personal profile of sample Respondents

In the following table, demographic information of sample respondents were
presented and analyzed. These include educational back ground, and work
experience, position of the respondents and Educational qualification of sample
respondents. To get information on these issues the respondents were asked
structured questions and their responses are presented and analyzed here under.

33 | P a g e
Table:2 Respondents by Education, Work Experience and Job description (position)

S.N Items Respondents

Frequency Percent
1 Position
Budget expert 19 63.33
Planning officer 3 10
budget directorates 4 13.33
Group head 4 13.33
Total 30 100
2 Qualifications
Masters Degree 10 33.33
BA/Bsc Degree 18 60
Diploma 2 6.67
Total 30 100
3 Experience
years 1-2 6 20
Years 2-4 9 30
Years 4-6 8 26.67
Years 6-8 2 6.67
Above 8 5 16.66
Total 30 100
4 Field of study (specialization)
Accounting 5 16,67
Economics 12 40
Management 8 26.67
Others 5 16.66
Total 30 100
Source: Field survey 2011

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As it can be seen from table 2, out of 30 sample respondents, 18 (63.33%) are
budget experts, 3 (10%) are planning officers, budget directorates 4 (13.33%) and
the remaining 4 (13.33%) are group heads in the ministries budgetary control and
planning offices. When we see the work experience of the respondents, out of 30
respondents 6 (20%) of them have 1-2 years of work experience in the current
position and 9 (30%) are under category of 2-4 years of work experience. However,
33.34% of the total respondents in the four federal ministries have 4-8 years work
experience in the current position. The remaining 5 (16.66%) are the respondents
who have above 8 years of work experience.

Table 2 also shows qualification of the sample respondents. Accordingly, out of 30

respondents, 10 (33.33%) have Masters Degree and 18 (60%) of the respondents
have BA or BSc degree in different educational qualifications. The remaining 2 (6.67)
have diploma. From the table 2, majority of the respondents are specialized in field
of Economics which accounts for 40% of the total sample respondents. This followed
by 26.67% and 16.67 of the management and accounting field of study respectively.
The other 16.66% of the respondents are specialized in other field of education.

As it is discussed on the above two paragraphs, the majority of the respondents are
budget experts and followed by group heads and budgetary directorate of the
budgeting controlling and planning offices of the four federal ministers. This indicate
that the collected data enables us to have a clue idea of the program budgeting
system (PBS) in Ethiopian federal public agencies since budget experts in the budget
and planning offices, group head of the offices and budgetary directorate of the
offices are closely related to program budgeting system in the federal ministers and
have a clear idea of what is going on about the PBS.

In terms of educational qualification and field of study, majority of the respondents

have a good level of educational qualification that is BA or BSc degree and Masters
Degree which enables the respondents to have a clue idea of the PBS and trainable
on the subject. Moreover, majority of the respondents studied the field related to

35 | P a g e
business which enables them to understand the implementation of PBS in the
ministries. As indicated on the above discussion, most of the respondents are
economists. This shows us majority of the respondents have an idea about planning
and programing which more important for the implementation of PBS.

In case of working experience, most of the respondents have relatively good work
experience in their current position that is from 2-6 (56.66%) years of work
experience which enables them to work effectively in the of implementing of PBS in
the federal ministers. This data shows that experts in the offices of the budgetary of
the ministries are young energetic and smoothly trainable about program
budgeting. Generally, the respondents work experience shows that majority of the
respondents a mix of young energetic and senior workers in the offices.

4.2. The transition to Program based budgeting system in public

agencies
The essence of program budgeting in federal public agencies is to allocate resources
to outputs in a program structure and allocating budgetary resources according to
government policy objectives and priorities. To make PBS in line with program
structure of the agencies, different reform processes have been designed for the
implementation of PBS. Accordingly, the transition to program budgeting system in
Ethiopian public agencies required different prerequisite reform for the
implementation process. So, to get information on this issues the respondents were
asked different questions such as: responses for questions related to organizational
design needed to program budgeting, reform in financial management, and training
received by employees.

36 | P a g e
Table: 3 Responses of respondents on organizational design for PBS

Responses
Respondents 1 2 3 4 Total
MoFED - 9 1 - 10
MoE - 6 - - 6
MoA - 5 1 - 6
MoH - 7 1 8
Frequency - 27 2 1 30
Percent - 90 6.67 3.33 100
Source: Field Survey 2011 1=yes 2=no 3=somewhat 4= No opinion

As it can be seen from the table 3, the respondents were asked whether the PBS
require new organizational design in the ministries. Accordingly, 27 of the
respondents which constitutes 90 percent supports that there is no need of new
organizational design for PBS in the Ethiopian public agencies whereas 6.67% of the
respondents from all four federal ministries responded that at some level reform is
needed in organizational design for PBS in the federal ministries. The remaining 3.33
percent of the sample respondents have no opinion on the organizational design for
PBS.

Data obtained from the open ended questions revealed that there is no need for
restructuring of organizational design that is there is no reshelf of employees, no
restructuring of information flow in the organizational design, restructuring
organizational authority and others instead the PBS require adjusting the new
budgeting structure with existing organizational design of the federal ministers. In
addition, the information from the document of the budgeting office in four
ministries identified that program budgeting system focusing on the already
designed of organizational objectives and it keeps programs within the existing
organizational structure that is clarifying lines of accountability and program
management. In this regard, Bourdeaux (2008) finalized that it is only by basing

37 | P a g e
programs on product lines of the organizational structure of ministries that
programs become a useful tool for expenditure prioritization and a good means of
increasing pressure upon ministries to deliver better results to the community.

From the majority of the sample respondents, information obtained from the
budgeting offices of the four ministries, and the idea disclosed from the literature, it
is possible to conclude that there is no new organizational design for program
budgeting system. So, program budget keeps programs within the existing
organizational structure and combine all activities according to program objective
with the existing organizational design.

4.2.1. Reform needed in financial management in implementing PBS

The other reform which is to be concerned in PBS is financial management of the
federal public agencies. To get more information on this issue the respondents were
asked whether the federal ministries were concerned with reform in financial
management for the implementation of PBS or not.

Table: 4 Responses of respondents for reforms needed in financial management

for PBS

Responses
Respondents 1 2 3 4 Total
MoFED 8 2 - - 10
MoE 5 6
MoA 4 2 6
MoH 6 1 1 1 8
Frequency 23 5 1 1 30
Percent 76.67 16.67 3.33 3.33 100
Source: Field survey 2011 1=yes 2=no 3=somewhat 4=I do not know

The above table 4 shows the response of respondents for the questions related to
the reform needed in federal ministries. According to the responses from all four
38 | P a g e
ministries, 25 (76.67%) said that reform in financial management for the
management of public expenditure is the main requirement for the implementation
of PBS. While other 16.67 percent of respondents stated that the existing financial
management system enables the new implementation of PBS in Ethiopian federal
public agencies and the remaining 10 percent of the samples respondents of four
ministers at some level reform is needed in financial management for the
implementation of PBS in the public agencies. This analysis shows that majority of
the respondents support that the reform in financial management is the
requirement of the PBS in the federal public agencies.

This means in order to implement PBS, planning of financial resources needed, and
controlling or control price, cash management and feedback system in the public
agencies’ expenditures need to be reformed from expense oriented to result based
system. In addition, from respondent’s point of view most of the respondents
showed that prior to the implementation of program budgeting system financial
management of the ministries focus on input based that is expenditure based for
the budgeting system. However, financial management of the ministries under PBS
mainly focuses on output or the objective of the ministries. This means financial
management of the public expenditure is needed to be reformed in terms of in
coordination of resources, cash management and auditing and accounting structure
of the public expenditure.

The information obtained from the budgeting offices of the four ministries and the
idea pointed out from the literature, it is possible to conclude that PBS requires the
reform in financial management for the public expenditure in planning, controlling,
coordinating and feedback of the budgeting system of the federal ministries. So,
program budget system requires reform of financial management from expenditure
oriented to output or objective based of the ministries or public agencies.

39 | P a g e
 4.2.2. New technologies or computer software needed for the
implementation of PBS.
The other Questions raised for the respondents were related to whether the new
technologies or computer software are needed for the implementation of PBS in
public agencies. The following table shows the responses of the respondents
computer software required to process PBS.

Table: 5 Responses of respondents on new computer software technology for PBS

Responses
Respondents 1 2 3 4 Total
MoFED 8 - - 2 10
MoE 5 - - 1 6
MoA 4 1 1 6
MoH 7 - - 1 8
Frequency 24 1 - 5 30
Percentage 80 3.33 16.67 100
Source: Field Survey 2011 1=yes 2=no 3=somewhat 4=I do not know

As indicated on the above table 5, 80% of the respondents from all ministers
showed that PBS requires additional computer software technologies to run PBS.
But, 3.33% of the sample respondents indicate that the existing software can run the
PBS. The Remaining five respondents (16.67 %,) stated that they have no idea about
requirement of new software for the program budgeting system.

From the majority of respondents’ point of view and documents of the federal
ministries showed that in addition to the existing excel system, the program system
that is IBEX (Integrated Budget Expenditure) system is required for effective
implementation of PBS in the federal ministries’ budgeting offices. According to the
information from offices document IBEX will offer many benefits. IBEX has been

40 | P a g e
designed to be flexible and extensible meaning that additional functionality such as
new reports can be added quickly and on the fly.

A further advantage that IBEX offers is that budget and expenditure data will be
real-time, meaning that budgets can be promptly prepared and accounts kept
current. IBEX represents a truly integrated financial management system that
addresses the core functions of financial management (Budgeting, Accounting and
Disbursements) in the short term, and is flexible enough to allow for the inclusion of
non-core. In addition, new submission format is prepared with IBEX. Accordingly,
the idea of introducing computers software for PBS and new format for the PBS is
one reform in the budgeting control and planning offices of the federal ministries.

4.2.3. Human Resources needed for PBS

In addition to the above infrastructures needed for the implementation of PBS,
human resources that used to run PBS is also one aspect of the requirement of PBS
in the public agencies. To analyze this issue, the respondents were asked whether
the existing human resources are sufficient to run PBS or not. Based on this, the
following table shows the responses for this question.

Table: 6 Responses for the sufficiency of human resources for the implementation
of PBS

Responses
Respondents 1 2 3 4 Total
MoFED 6 2 2 10
MoE 3 2 1 6
MoA 4 1 - 1 6
MoH 5 1 2 8
Frequency 18 6 5 1 30
Percentage 60 20 16.67 3.33 100
Source: Survey 2011 1=yes 2=no 3=somewhat 4= No opinion

41 | P a g e
About 60% of the respondents agreed that additional human resources are not that
much needed for the implementation of PBS and they support that increasing the
quality of the existing human resources are sufficient to run PBS. However, 20% of
the sample respondents from all ministries agreed that there should be additional
human resources in order to effectively implement PBS in the federal public
agencies. The remaining 3.33% of the respondents identified that they have no
opinion about the level human resources is needed to implement PBS.

The majority agreed that existing human resource is sufficient to run the system.
Further discussion with respondents during open ended questions revealed that
they suggest improvement of skills or knowledge of existing employees is preferable
rather than additional personnel. The open ended questions also showed that the
quality of the personnel in terms of level of academic qualification, experience and
trained with specific skills in budgeting system is needed to effectively move to
program budgeting.

So, it can be concluded from the majority of the respondents point of view and
literature evidences that the requirements of experts for the implementation of PBS
is not mostly determined by the number of human resources but the quality of the
experts and increasing the understanding of experts about program budgeting
system.

42 | P a g e
Figure 1 Response for the sufficiency of human resources for the implementation
of PBS

The above graph depicts the respondents’ responses about the sufficiency of human
resources for program budgeting system in terms of respondents’ frequency and
percentages.

4.2.4. PBS training for employer

In the transition to PBS in Ethiopian federal public agencies, the respondents were
asked whether the training has been provided or not.

Table: 7 Responses on PBS training for the respondents

Responses
Respondents 1 2 Total
MoFED 10 0 10
MoE 5 1 6
MoA 4 2 6
MoH 7 1 8
Frequency 26 4 30

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Percentage 86.67 13.33 100
Source: Field survey 2011 1= yes 2= No

According to the table, 86.67% of the respondents affirmed being trained for the
transitioning to PBS, the remaining clients that they were not trained. This
information shows us that even though the majority of the respondents have
received PBS training, still there is a need for PBS training in the federal public
agencies.

The information from the budget controlling and planning offices also showed
training on the PBS had been provided for the most of the budget department staff
in each ministers and training is also annually scheduled on the continuous bases for
the remaining staff in each ministers. Moreover, the information from the
documents of the ministry of Finance and Economic development indicated that
training manual has been prepared and provided for the trainees in each federal
ministry. The information also identified that the training was given in careful
manner and helpful in enabling the employees to have a clue idea of program
budgeting.

Table: 8 Respondents responses on the satisfactory of the training

Level of Respondents
satisfactory MOED MOE MOA MOH Frequencies Percent
High 5 3 4 5 17 56.67
Low 2 1 0 0 3 10
Moderate 3 2 2 3 10 33.33
Total 10 6 6 8 30 100
Source: Field Survey 2011

In terms of the satisfactory of the training, 56.67% respondents from four federal
ministries said that the given training was enough and highly satisfied. They also
pointed out that the given training enables them to implement PBS. While 10% of

44 | P a g e
the respondents identified training and need additional training in order to
understand the implementation of PBA. But out of total 33.33% respondents
indicated that moderately understood the training. Most of the respondents pointed
out that there should be continuous training on PBS. So, from the majority of the
respondents, it is possible to say there is still a need for sufficient training for the
effective implantation.

Figure 2 Respondents responses on the adequacy of the training

This graph also shows the PBS training satisfactory level of the respondents. The
graph uses to show frequencies and percentages of the respondents to indicate the
adequacy of PBS training for employees.

4.3. Implementation of program budgeting system in federal

public agencies
This section of the paper discusses issues related to the process of implementing
PBS in federal public agencies. For this purpose, the respondents were asked the
confusions related to PBS among the participants, the attitude of respondents
towards PBS whether program budgeting structure and organizational structure
have a relation, whether the PBS used to link the budget with program structure

45 | P a g e
output of the organization responsibility of budgetary directorate in PB, approaches
in PBS in Ethiopian federal ministers and about flow of information in PBS.

4.3.1. Confusion related to PBS

During the transition from line item budgeting system to PBS, some confusions were
encountered the respondents from all four federal ministries. The following table
shows the respondents’ responses for the question related to whether confusion is
occurred at the time of transition to PBS or not.

Table: 9 Responses of respondents on confusion related to PBS.

Level of Respondents
confusion MOED MOE MOA MOH Frequencies Percent
High 4 3 3 4 14 46.67
Low 3 2 2 2 9 30
Moderate 3 1 1 2 7 23.33
Total 10 6 6 8 30 100
Source: Field survey 2011

According to the responses obtained from the question about confusions in PBS
during the transition in to PBS Showed that 23.33 percent of the sample
respondents said that they moderately confused about program budgeting system.
While 30 percent of respondents from all four federal ministries stated that there is
no that much confusion during the transition to program budgeting system. The
remaining fourteen (46.67%) agreed that there is high confusion in the
implementation to PBS.

The respondent’s point of view for open ended questions revealed that the
confusions have been derived from lack of well under standing of PBS and problems
in differentiating between PBS and line-item budgeting system, not all people in
concerned with budgeting system fully trained and the main confusion is related to
synchronizing or linking the program structure with existing accounting structures
46 | P a g e
and organizational arrangements of the federal ministers. In additions, the
discussions of open ended questions indicated that since there is no cost center in
program budgeting system, some institutions were confused how to operate it. The
information also affirmed that the attempts were taken to reduce confusion by
exposing employees in different workshop regarding program budgeting and
increasing the understanding level of the employees about PBS.

Figure 3 Responses of respondents on confusion related to PBS.

The same as the above table 9, this graph shows the confusion level of the
respondents about program budgeting in four federal ministries by using the
percentage of the respondents.

4.3.2. The attitude of respondents towards Program budgeting system

During the implementation of PBS there is different attitude towards the system. To
analyze this, respondents were asked their attitude about the PBS. The following
table shows these issues.

47 | P a g e
Table: 10 Responses on attitude towards Program budgeting system

Attitude of the Respondents

respondents MOFED MOE MOA MOH Frequencies Percent
Negative - 1 - - 1 3.33
Positive 7 3 4 6 20 66.67
Middle one 3 2 2 2 9 30
Total 10 6 6 8 30 100
Source: Field survey 2011

Table 10 identified the respondent’s attitude towards PBS in Ethiopian federal public
agencies. The respondents from all ministries have their own attitude towards this
budgeting system. Accordingly, out of 30 respondents 20 (66.67%) have positive
attitude towards program budgeting whereas 30% of the sample respondents are in
the middle one between the positive and negative attitude towards PB system. This
indicates that majority of the respondents support the implementation of the PBS in
Ethiopian public agencies.

Besides, open ended questions for the respondents pointed out the reasons for
positive attitudes towards program budgeting are: PBS has clearer objectives, it
provides more effective control of inputs, it provides more effective control of
outputs, it has better reporting than line item budgets and budget decisions. This
indicates that majority of the respondents support the implementation of the PBS in
Ethiopian public agencies.

48 | P a g e
Figure 4 Responses on attitude towards Program budgeting system

The same as the above table 10, this graph shows the confusion the attitudes of the
respondents towards program budgeting in four federal ministries by using the
percentage of the respondents.

4.3.3. The understanding of respondents about program budgeting

system
The understanding of PBS among the employees in the budgetary controlling and
planning office of the ministries are different. Accordingly, the respondents were
asked their understanding level of the PBS. The suggested variable for the level of
understanding are high level, low and moderate level of understanding.

Table: 11 Responses on the understanding of program budgeting

Understanding Respondents
level of PBS MOFED MOE MOA MOH Frequencies Percent
High 4 2 2 3 11 36.67
Low - - 2 1 3 10
Moderate 6 4 2 4 16 53.33
Total 10 6 6 8 30 100

49 | P a g e
The above table 11 shows the questions rose for the respondents about their
understanding level about PBS. From this table, one can understand that PBS was
not well understood by the respondents. In this case, 53.33% of the respondents
from all federal ministries disclosed that the moderately understood the
implementation of PBS while 36% of the respondents said that fully understood the
process and implementation of PB in federal public agencies. Moreover, 10% of the
respondents still have low understanding of the implementation of PBS. The
responses for open ended questions showed the reasons for middle level
understanding on program budgeting: PBS provides the information for each
program structure, simply link the budgeting with outputs of organization.

These information shows that there should be continuous training on PBS for
employees in order to enable the employees to understand PBS. So the
understanding of respondents’ enables us to say the transition to program
budgeting could be smooth in the federal public agencies.

4.3.4. Relationship between program budgeting structure and

organizational structure
One of the main aspects of program budgeting system in federal public agencies is
the relation between program budgeting and organizational structure. Accordingly,
the respondents were asked whether the relation between program budgeting and
organization of the federal ministries.
Table: 12 Responses for the relation between PBS structure and organizational
structure

Responses
Respondents 1 2 3 4 Total
MoFED 8 1 1 - 10
MoE 5 1 - 6
MoA 5 1 - 6
MoH 7 1 - 8

50 | P a g e
Frequency 25 2 3 - 30
Percent 83.33 6.67 10 - 100
Source: Field survey 2011 1=yes 2=no 3=at some level 4=no opinion

From the above table, it can be identified that most of the respondents which
constitutes 83.33% the total sample stated that there is strong organizational
structure of the federal ministries office and PBS structure of the organization. On
the other hand, 6.67% of the respondent indicated that there is no relationship
between organizational structure and PB structure of the institutions. The remaining
10% of the responses showed that at some level the organizational structure and PB
structure have a relation.

In addition, the responses from open ended questions also support that there is
relationship between PBS structure and organizational structures, program
budgeting relies upon a structured program budget and established organizational
structure that it allows the activities of several agencies or departments to be
assembled. This indicates that the program structure for PBS is more or less assigned
with organizational structures. Moreover, data obtained from document indicates
that the establishment of programs in federal public agencies should fit the
organizational structures for the implementation of PBS.

For these reasons, strong pressures arise to force programs to conform to

organizational structure. So, from the above information, one can say that PB
structure should concurrently fit the existing organizational structure of the federal
public agencies.

4.3.5. The responses for the link between program budgeting and
program structures out put
The chief feature of PBS is its output orientation; that is, it allows the activities of
several agencies or departments to be assembled in terms of specific output
packages. Accordingly, the respondents were asked whether there is a link between

51 | P a g e
budget and objective or output. So, the following table shows the responses for this
issue.
Table: 13 Responses for the link between PBS and structure output

Responses
Response 1 2 3 4 Total
MoFED 9 - 1 - 10
MoE 4 - 1 1 6
MoA 5 - 1 - 6
MoH 6 - 2 - 8
Frequency 24 - 5 1 30
Percent 80 - 16.67 3.33 100
Source: Field survey 2011 1=yes 2=no 3=somewhat 4= No opinion

According to the above table, out of 30 respondents 24 that is 80% of revealed that
program budget has strong link with the out put or objective of program structure of
the organizations and 5 respondents which constitutes 16.67% of the sample
respondents had an idea that at some level program budget and objective of the
organization structure have a relation. However, the remaining 3.33% of the sample
have no opinion on this issue.

In addition, the information obtained from the ministries shows that most of the
time PBS is designed according the expected output or objective of that organization
and it is stated that basic idea of program budgeting is very simple: budget
information and decisions should be structured according to the objectives of
government. Moreover, it has been added that from a pure results-based
orientation, program definitions originate with the identification of outcomes
desired in program structure and then an assessment of the clusters of activities or
strategies being used to achieve these outcomes. This shows that in PBS the
resources are allocated according to the objective of the structure of that
organization.

52 | P a g e
From these information it can be said that program budgeting has to conform with
program structure of the federal ministries to enables the ministries deliver the
services to the communities.

4.3.6. Methods of implementing program Budgeting system

In addition to the above aspects of PBS, how to implement PBS in Ethiopian federal
public agencies is one issue. Accordingly, the respondents were asked the ways or
methods implementing PBS in their organization. The suggested variables to this
question are whether the program budgeting system is implemented with line item
budgeting system or stand alone approaches. Based on this, the following table
depicts methods to implement PBS in public agencies.

Table: 14 Approaches of implementing PBS

Approaches for Respondents

implementing MOED MOE MOA MOH Frequencies Percent
PBS
Parallel to line 7 4 2 3 16 53.33
item budgeting
system
Stand alone PBS 3 2 4 5 14 46.67
Total 10 6 6 8 30 100
Source: Field survey 2011

From the table, we can understand that there is a difference among the methods of
implementing PBS in the four federal ministries. Accordingly, among 10 respondents
of MOFED, 7 of them which constitutes 43.75% of total 16 respondents support the
implementation is undertaking through parallel to line- item budgeting system in the
ministry and 3 respondents of the MOFED which constitute 21.43% out of 14
respondents the total who support stand- alone PBS. In all four ministries 53.33%
and 46.67% revealed that PBS is implementing in line or parallel with line item
system and stand alone approaches respectively.
53 | P a g e
In MOE, 25% of its respondents revealed that the implementation of PBS is
undertaking through parallel with line item budgeting system and 14.29% of MOE
support that PBS is running in through stand –alone. The other respondents from
MOA identified that 12.50% of the respondents showed that PBS is implementing
parallel with line- item budgeting system and 28.57% of the respondents stated that
PB is undertaking without the traditional budgeting system. The remaining
respondents from MOH also disclosed that PBS is implementing parallel to line- item
budgeting system by 18.75% and 35.71% of the MOH also support the
implementation is undertaking without PBS.

When we see the over all four federal ministries majority of the respondents
indicated that PBS is implementing through parallel to the line item budgeting
system. This indicated by 532.33% of the total respondents support that PBS is
implemented through two way approach that is parallel to line- item budgeting
system. Whereas 46.67% the respondents from all ministries support that PBS is
implementing in stand alone approaches.

The above information shows that there is vary among the federal ministries in the
way to implement PBS. The other information from the organizations shows PBS is
implementing through parallel to line item budgeting system to support the new
budgeting system and to avoid the confusion. On the other hand, the information
from the offices indicated that PBS is implementing without the help of line item
budgeting system to save time and money.

4.3.7. Responsibilities of Head of budgetary directorate in federal public

agencies.

The other issues related to PBS in the federal public agencies are what
responsibilities would Head or manager of budgetary directorate have. Accordingly,
the respondents were asked about the responsibilities of the Head of budgeting
offices.

54 | P a g e
Based on this, the Data obtained from open ended questions showed that majority
of the respondents stated that head of the budgetary directorate was different
responsibilities regarding the implementation of PBS in federal public budgeting
system from the point of view, the managers or head of the budgetary directorate in
PBS the implementation of PBS as follows.

 Deciding the smart objectives of the office.

 Deciding outputs or objectives and activities of the structure.
 Deciding the budgets because they are accountable to the PBS.
 Directing the implementation of PBS.
 Constructing program budgeting with the concerned parties.
 Controlling and following up the activities of program structures.
From the above issues raised by respondents, it is possible to say that the head of
budgetary department in all four federal ministries are responsible for the above
responsibilities in the implementation of PBS.

4.3.8. Flow of Information in PBS

In addition to the above aspects of PBS, how budget information flow in Ethiopian
federal public agencies is one issue. Accordingly, the respondents were asked the
how information that required to set the budget and control budget flow. Based on
this, the variables for this question is whether information flows from bottom to top
or from top to bottom of the ministries. The following table shows the responses of
the respondents.

Table 14: Responses on Flow of information for program budgeting system

How information Respondents

MOED MOE MOA MOH Frequency Percent
From bottom to 9 5 4 6 24 80
top
From top to 1 - 1 2 4 13.33

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bottom
No opinion - 1 1 0 2 6.67
Total 10 6 6 8 30 100
Source: Field survey 2011

The results indicate that most of the times the information flow come from the
bottom or lower level of the federal ministries budgeting and planning offices from
program department of the ministries. On this point, 80% of the respondents from
all sample ministries budgeting and planning offices identified that the information
needed to prepare budget at ministry level is come from the lower level of the each
program in the organization. However, 13.33% of the respondents from all
ministries disclosed that sometimes the information come from the top level of the
organization. The remaining 6.67% of the sample respondents showed that they
have no opinion about the flow of information in PBS. This leads to say the flow of
stated that the information in program budget information could flow in both way.

4.3.9. Does the Ethiopian budget encourage participation?

One aspect of program budgeting is whether the program budget is transparent and
encourages the participation of civil society in the government’s budget decision-
making. The suggested variable for this purpose is fully participative, semi
participative and centralized to encourage the participation of the parties. Based on
this, the following table shows the responses of the respondents on these issues.
Table: 15 The responses for the budget participation

Responses Respondents
MoFED MoE MoA MoH Frequencies Percent
Fully participative 2 1 2 2 7 23.33
Semi participative 8 5 4 6 23 76.67
Centralized - - - - - -
Total 10 6 6 6 30 100
Source: Field survey 2011

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Based on table 15, 23.33% of the respondents from all federal public agencies
indicated that PBS is fully participative. However, 76.67 of the sample respondents
said that PBS is not fully participative rather it is semi participative.

This shows that majority of the sample respondents disclosed that program
budgeting is semi participative in process of the budget. From the open ended
question, the reasons for semi participative is that the budgeting system of
Ethiopian Public agency is not mostly open and the planning and budgeting process
of the federal public agencies are almost closed.

4.3.10. Challenges in Implementing PBS

The other aspects of program budgeting system in federal public agencies is what
challenges conformation on this issues, the respondents were asked to have their
opinion on the factors that contribute for the challenges of implementing PBS.
Accordingly, the following table depicts the respondent’s responses for challenges
that confront the implementation of PBS.

Table: 16 Challenges in implement PBS

No Suggested Strongl Agree Strongly Disagreed Total

challenges for y agree disagreed
program budgeting F % F % F % F %
1 Lack of trained 1 40 10 33.33 3 10 5 16.67
personnel needed 2
to carry out the
requisite analysis
2 Lack of stability 9 30 10 33.33 5 16.67 6 20
necessary to enable
the implementation
of PBS.
3 Lack of consistent 3 10 4 13.33 12 40 11 36.67

57 | P a g e
 political
commitment
necessary to allow
the reform to be
fully implement
4 Lack of adequate 5 16. 8 26.67 7 23.33 10 33.33
information used to 67
run PBS
5 Low standing of 1 40 8 26.67 4 13.33 6 20
employees about 2
PBS
6 Lack clear program 3 10 5 16.67 8 26.67 14 46.66
structure used to
implement
Source: Field survey 2011

As it depicted in table 16 out of the 30 respondents in all four ministries

respondents which constitutes 40% of the total respondents agreed that lack of
qualified trained personnel to carry out the PBS in Ethiopian federal public agencies
is one challenge that slightly affect the implementation of program budgeting
system. Moreover, 33.33% of the respondents strongly agreed on that the lack of
highly trained personnel for the implementation of PBS is a challenge. However, 10%
of the respondents in all the federal ministries were strongly disagreed that the lack
of trained personnel is not the challenges for the proper implementation of PBS. In
addition, 16.67% of the respondents also slightly agreed that the lack of trained
personnel is not the challenges that confront the implementation process of PBS in
the organizations.

As stated on the above, it can be understood that the majority of the respondents
support that the lack of trained personnel are the challenges for the implementation

58 | P a g e
of PBS. So, it could be possible to say that PBS system could be confronted by the
lack of the trained personnel.

The table also depicts 30% of the sample respondents strongly agreed that lack of
stability of the program structure could challenge the implementation of program
budgeting system 33.33% of the respondents also agreed that stability in program
structure is necessary to properly run PBS. On the other hand, 16.67% of
respondents in all four federal ministries strongly disagreed lack of stability could
not affect the program budgeting system and 20% also agreed that stability is not
that much affect PBS. From the majority of the respondents support lack of the
program structure stability necessary to properly implement the PBS is one factor
that challenges the implementation of PBS.

Table 16 also shows that out of 30 respondents 12 respondents that is 40% of the
total sample respondents strongly disagreed that lack of political commitment
necessary to allow the reform needed to implement PBS is not challenge the
effective implementation of PBS. Moreover, 36.67% of the respondents also agreed
that lack of political commitment could affect PBS. As Kluvers (2001) noted that a
program budget cannot be initiated without sufficient political support and guidance
from the mayor, the finance director, and budget committee of the local
government. This leads to say the champions of program budgeting would depend
on the political commitment of the government.

However, 10% of the participants strongly agreed that lack of political commitment
which necessary for the reform needed could affect the implementation of PBS. The
remaining 13.33% of the respondents agreed that lack of political commitment
could affect the implementation of PBS.

The above table 16 also showed that 33.33 of the respondents strongly disagreed
about in adequate information used to run PBS is not that much the challenge in the
implementation of PBS where as 16.67% strongly disagree lack of the adequate
information is challenges that confront the implementation of PBS. However,
59 | P a g e
26.67% of the respondents agreed that inadequate information for PBS is one factor
that challenges the implementation of the PBS in the federal public agencies. Where
as 33.33% disagreed that lack of adequate information used to run PBS is not that
much a challenge in implementation of PBS.

Table 16 also identified that 40% the respondents strongly agreed that low
understanding of employees about PBS is one factor which challenges the
implementation of PBS in federal public agencies. While other 13.33% of the
respondents strongly disagreed that low understanding of PBS was not main factor
that challenges the implementation of PBS. The other 26.67% of the respondents
agreed that low understanding of employees about PBS is one factor which affects
the implementation of PBS and 20% of the respondents disagreed that low under
standing of employees about PBS could affect the implementation process.

Lack of clear program structure used to implement PBS is one factor that affects the
implementation process. Accordingly, table 16 showed that 46.67% the respondents
disagree that lack of clear program structure is not the factor which confront the
implementation of PBS where as 16.67% of the respondents strongly agreed that
lack of clear program structure is one challenge which confront PBS.

The remaining 26.67 of the respondents strongly disagreed that lack of clear
program structure did not challenge the implementation process of the PBS. While
10% strongly agreed lack of clear program structure affect the process to implement
PBS.

60 | P a g e
 4.4. Implications of PBS in Ethiopian Public Agencies
This section discusses about the consequences of the implementation of PB in
federal public agencies. In this case, different questions have been raised to the
respondents to in all four ministries.

Table: 17 The respondents’ responses on what PBS improve in Federal public

agencies

No Does program Yes No Some what No opinion

budgeting improve F % F % F % F %
1 Service delivery of 12 40 2 6.67 15 50 1 3.33
the ministries
2 Information 15 50 3 10 10 33.33 2 6.67
gathering of the
ministries
3 Reducing waste of 16 53.33 - 13 43.33 1 3.33
Public money
4 Financial 11 36.67 5 16.67 10 33.33 4 13.3
management 3
5 Increase 13 43.33 6 20 11 36.67
transparency and
accountability in the
office
6 Setting and follow 18 60 3 10 9 30
up of budgets
Source: Field survey 2011

AS table 17 shows PBS improves service delivery of the ministries, improves follow
up of budgeting and increases transparency and accountability. It also improve

61 | P a g e
information gathering of the ministries. Based on this, majority of the respondents
which constitutes 40% of the total sample support that program budgeting improve
service delivery of the ministries. Moreover, 50% of the respondents agreed that the
implementation of PBS enables the organization to deliver service effectively.
However, 6.67% said that PBS not that much improves the delivery of the ministries
and the remaining 3.33% of the respondents stated that they have no opinion on
PBS. So, from the majority of the respondents’ point of view and the related
literature, it is possible to say PBS improves service delivery of the federal public
agencies.

In table 17, 50% of the respondents agreed that PBS improves information gathering
of the ministries regarding the budget system in the offices. The other 33.33%
revealed that at some level PBS increases the ability to gather information regarding
the budget system of the offices where as 10% of the respondents responded that
PBS does not improve information gathering system of the organization. The
remaining 6.67% of the sample respondents have no opinion on this idea.

According to the above table, 16 (53.33%) respondents replied that PBS reduces
waste of public money when comparing with line- item budgeting system while
43.33% respondents support that PBS relatively reduces the waste of public money.
The remaining 3.35% replied that they do not have on opinion on this idea. This
shows that the system can reduces the waste of public resources by linking every
resource with the structured program of the public agencies.

In terms of the financial management implication of PBS, table 17 depicts that

36.67% of the total sample respondent identified that financial management of the
federal ministries are improved through the implementation of PBS. Moreover,
33.33% the respondents from all four ministries also support that PBS relatively
improve financial management of the federal ministries. On the other hand, the
above table highlights 4 respondents which constitute 13.33 of the total

62 | P a g e
respondents replied that they do not have any information on the improvement
financial management.

The other implications of PBS in Ethiopian federal public agencies are the issues
related to transparency and accountability in the office. For this purpose, the
respondents were asked whether the implementation of PBS increases transparency
and accountability of the ministries regarding budget control or not.

Based on this, table 17 shows 13 respondents from all four ministry offices which
constitute 43.33% the total respondents agreed that the implementation of PBS
increases the transparency and accountability in the budgeting system of the
ministries. This idea is supported by the responses of 36.67% respondents those
who said that PBS relatively increases the transparency and accountability in
budgeting of the federal public agencies. But, the remaining 20% of the respondents
said that PBS does not that much improves the transparency and accountability of
the ministries in budgeting process.

The above information shows us that the implementation of PBS is likely to improve
the budgeting process of the offices in terms of transparency and accountability in
the budgeting system.

The final points of the implications of PBS are the improvement in the setting up of
budgeting and follow up of the budgeting process of the federal ministries. In this
regard, the respondents were asked whether PBS improve budgeting process and
follow up of the budget. Based on this, Table 17 shows that majority of the
respondents replied that the implementation of PBS improves the setting up of
budgeting and follow up or controlling of budget in the offices of federal ministries
are improved. In addition, 9 respondents who constitute 30% of the total sample in
all four federal ministries office support that PBS relatively enables the budgeting
directorate to effectively set the budgeting process and follow up the budget.

63 | P a g e
From the above information, it is possible to conclude that majority of the
respondents are agreed that PBS improve the follow up of the budgeting activities
with program structure of the ministries budget offices.

In addition to respondents opinion, document information from the offices

identifies different uses of program budgeting. On the basis of practices in the
federal ministries, identified that four different uses of a program budget: (1) as a
tool of policy analysis, program budgeting facilitates comparison and evaluation of
the cost-effectiveness of alternative spending options that have the same
objectives. (2) As a means of improving government performance by giving
managers operating discretion. (3) It facilitates accounting for the full cost of
government activities. (4) It enables the government to plan ahead and set spending
priorities. The four approaches are not mutually exclusive; all can be served by the
same budget system.

64 | P a g e
65 | P a g e
 Chapter five

5. Finding, conclusions and recommendations

5.1. Summary of finding and conclusions

The main objective of this paper is to analyze the move to program budgeting
system in Ethiopian public agencies the case of Ethiopian federal ministries and its
implications in enhancing of service delivery, analyzing the process of moving
towards PBS and implementation process, analyzing attitudes of the employees
towards PBS and challenges in implementing PBS. The qualitative and quantitative of
research approaches have been used, and the data has been collected through semi
structured questionnaires and office document information.

As it was presented in the previous chapter, findings and conclusions are made from
the responses sample respondents, information from budgeting controlling and
planning offices in the ministries and literature review relating to the process of
moving towards program budgeting and its implications in public agencies. The
findings and conclusions are summarized for the issues of the transition to program
budgeting, implementation of program budgeting and implication of the program
budgeting.

The transition to Program based budgeting system (PBS) in public agencies

 The surveys result showed that there is no new organizational design for
program budgeting system in the selected four ministries and the program
budgeting need to conform to organizational design of the public agencies.
This idea is also supported by statements of Marc Robinson et al (1992) that
stated program budgeting should ideally be based on output groups but not
restructuring of the organizational design of the public agencies because not
all organizational structures are defined in program terms. In addition,
Bourdeaux (2008) disclosed that the program budgeting ideal is that programs

66 | P a g e
 should be based on groups of services delivered to external parties (outputs)
which have common outcomes in the organizational design. So, if this is the
case in actual way of the federal ministries, it is possible to conclude there was
no need for new organizational design for the purpose of implementing
program budgeting in the case of the federal public agencies. It is also possible
to conclude that program budgeting system can keep programs within the
existing organizational structure and instead of designing new organizational
structure for program budgeting, combine all activities according to program
structure objective with the existing organizational design.

 From theoretical point of view, one part of public financial management is

managing public expenditure. In this regard, public agencies with line item
budgeting system more focus on the expenditure that is expenditure for
authorized (budget) item only. But government’s financial management under
program budget focuses on the expected results of services performed by the
government rather than on what a ministry buys, resources went to deliver
defined services and task. Accordingly, from the majority of the sample
respondents, and information obtained from the budgeting offices of the four
ministries and the related literature indicated that reform in financial
management for public expenditure is required for the implementation of
program budgeting system. Accordingly, financial management for
expenditure and accounting structure of the federal public agencies need to
shift from expenditure oriented to output or objective based of the ministries
or public agencies. Moreover, Bagdigen, Muhlis, et al (2001) also showed that
Prior to program budgeting, most public agencies accounted for expenditures
based on object class, cost center (organizational unit), and typically some mix
of functional classifications which varied widely. But government financial
management for expenditure under program budget focuses on the expected
results of services performed by the government rather than on what a

67 | P a g e
 ministries buys (for example, human services or commodities). As a result of
this, it can be concluded that for the implementation of PBS reform in financial
management is one requirement for program budgeting system.
 In the aspect of processing program budgeting, the surveys and documents of
the budgeting and planning offices indicates that program budgeting required
new technology. This result shows that in addition to the existing excel
system, the new software system that is IBEX (Integrated Budget Expenditure)
System is required for effective implementation of PBS in the federal
ministries’ budgeting offices. Accordingly, it is possible to conclude that the
idea of introducing or applying computers software for PBS is one reform in
the budgeting control and planning offices of the federal ministries.
 In terms of human resources for program budgeting system, the majority of
the responses from the respondents and the related literature noted that the
transition to program budgeting is not determined by increasing number of
human resources in the budgeting offices rather it require high quality and
experienced budget experts. In addition, the evidence from literature showed
that when introducing program budgeting model, which promotes managerial
freedom, it became evident that greater managerial flexibility and trained
personnel could be viewed not only as a tool to improve efficiency but also to
achieve expenditure targets that had been set (West, Eric and Moshe, 2009).
So it is possible to say in the moving to program budgeting system increasing
the understanding of experts about program budgeting system through
continuous training on program budgeting is one factor that the new
budgeting system requires in the Ethiopian public agencies.
 When we look at PBS training and it’s satisfactory, responses from majority of
the respondents supports that most of the budgeting control and planning
offices of the ministries received the training on budgeting system and
satisfied with the training. But the survey also shows that there is sill a need
for sufficient and quality of training on program budgeting. Besides this, the

68 | P a g e
 information from ministries budgeting offices indicates that continuous
training would be provided to the budgeting experts annually. If this is the
case, the trained of budget expert in program budgeting system will increase
and the understanding of the employees will develop. So, it can be said the
sufficiency and quality of training on program budgeting for all budgeting
experts in all federal ministries is required for the effective of implementation
of PBS.

Implementation of program budgeting system in federal public agencies

 Survey results showed that the implementation of program budgeting in

federal public agencies face high level of confusion even though minority of
the respondents found themselves at lower confusion. In this case, as the
respondents and supported literature indicate, high confusions have been
derived from lack of well understanding of PBS and problems in
differentiating between PBS and line-item budgeting system, and the main
confusion is related to synchronizing or linking the program structure with
existing accounting structures and organizational arrangements of the
federal ministries. Moreover, Jones and McCaffery (2005) noted also the
main confusions during the transition to program budgeting are
fundamentally related to synchronizing the program structure with existing
accounting structures and organizational arrangements. Generally, from the
majority of the respondent’s view and the supported literature, it can be
understood that there is some confusion in the implementation of PBS. This
leads to conclude that there is a confusion among the employees on the
implementation of the program budgeting.
 As observed from the responses of the respondents, majority of them
indicate that they have positive attitudes towards the program budgeting
system whereas some of them have negative attitudes. Besides, open ended
question for the respondents pointed out the reasons for positive attitudes
towards program budgeting are: PBS has clearer objectives, it provides more
69 | P a g e
 effective control of inputs, it provides more effective control of outputs, it
has better reporting than line item budgets and budget decisions. These
enables to conclude that the even though some of the respondents have
negative attitude towards program budgeting, majority of the respondents
support the implementation of PBS in the Ethiopian public agencies at
federal ministries level.
 Majority of the respondents revealed that their understanding level of
program budgeting is moderate one and some of the findings also shows the
respondents have high and low level of understanding. In that PBS provides
the information for each program structure, simply link the budgeting with
outputs of organization and others. So the understanding of respondent’s
enables us to say the transition to program budgeting moderately
understood. However, since there is low understanding of PBS among the
employees the continuous training needs to be provided for the employees.
 As indicated by majority of the respondents, the information from the offices
and the supported literature, there is strong relationship between PBS
structure and organizational structures. Moreover, Carlin (2004) noted that
one of the thorniest concept for program budgeting is the relationship
between programs and organizational structure. In addition, Carlin (2004)
stated that if ministries have major organizational units which straddle
several programs, significant practical problems arise in linking organizational
unit budgets in the organization structure and program budgets. These
shows program budgeting relies upon a structured program budget and
established organizational structure that it allows the activities of several
agencies or departments to be assembled in the organizational structure of
the ministries. For these reasons, it is possible to conclude the
implementation of the program budgeting need to combine with the
department and services under organizational structure of the Ethiopian
federal public agencies.

70 | P a g e
 In the case of the link between program budgeting and program structure
objectives, most of the respondents stated that PBS is designed according to
the expected output or objective of that organization. This shows program
structure should be linked with each program structure of the ministries.
Moreover, Smithies (1965) noted that one idea of program budgeting making
programs conform to organizational structure and program structure output.
This means whatever the existing organizational structures are; one simply
defines programs in terms of them. As a result, it is possible to say in
implementing program budgeting, program budgeting structure need to be
designed in terms of project to be accomplished by the ministries.
 From the survey results it can be understood that there is a difference
among the methods of implementing PBS in the four federal ministries. But
the information from the document of the ministry of finance and economic
development indicates that the program budgeting is implemented through
stand alone approaches and as a whole from the four ministries the result
shows moving towards program budgeting is through stand-alone
approaches.
 The analysis disclosed that majority of the sample respondents stated that
program budgeting is semi participative in the process of budgeting. As
information shows the budget planning and process is a closed process with
no participation and the media have limited access to information about
upcoming budget discussions. This enables to conclude that Ethiopian
budgeting system is semi participative and does not that much encourage
the participation of the concerned parties.
 In terms of the challenges that confront transition to program budgeting,
most of the suggested factors have been supported by the majority of the
respondents that those factors affect PBS implementation. Accordingly, lack
of trained personnel needed to carry out the requisite analysis of program
budgeting, lack of stability necessary to enable the implementation of PBS,

71 | P a g e
 lack of consistent political commitment necessary to allow the reform to be
fully implementing, lack of adequate information used to run PBS, low
standing of employees about PBS and lack clear program structure used to
implement are the challenges that mostly indicated by majority of the
respondents in the implementation of the PBS.

Implication of PBS in Ethiopian Public Agencies

 As implied in survey results, in most cases the respondents agreed that PBS
improve the service delivery of the federal ministries by enabling the public
agencies linking the resources to the output or objective of the ministries. As
Werner (1966) noted that in program budgeting, if benefits and costs were
exhaustive, certain, and commensurable, efficient resource allocation would
result from a policy calculated to yield the greatest present value of net
benefits to communities and enables the public agencies to deliver services
to community. So, it is possible to say that PBS can improve the delivery
service of the public agencies.
 In the case of reducing the waste public agencies, the survey result shows
that almost all respondents revealed that PBS can improve the waste of
public resources through making resources to have a link with each objective
of the public agencies. Based on this, it is possible to conclude that PBS could
improve the management of the public resources.
 According to the survey results, it is clear that PBS could enable federal
ministries to increase transparency and accountability in their budgeting
system and providing services to the community. Also, majority of the
respondents agreed that PBS has an ability to improve the transparency and
accountability of the federal ministries for the community.

72 | P a g e
 5.2. Recommendations
To improve the move to program based budgeting system and its consequences in
Ethiopian public agencies the case of federal ministries, the challenges in the
transition to program budgeting, inadequacy of training and the confusions on the
program budgeting that observed in the findings should be looked carefully. Thus,
some recommendations are forwarded to modify or alleviate them here below:-

 It could be suggested that program budgeting of the ministries need to be

specifically separated according to the strategic plan of the ministries in its
organizational structure. In addition, each and every resources allocation in
PBS has to be result oriented and link with structural output of the ministries
strategic objectives. In this case, every public agencies first need to state its
mission, vision and objectives. Then prioritize or rank its strategic objectives.
Then, describe smart objectives in terms of program description. Finally,
construct or develop full program for that objective and allocate resources
for that structured program.
 The training for the experts on program budgeting should be continued in
order to maintain and increase the understanding of the employees on
program budgeting system. The training should be provided for all
employees in all ministries. In addition, it is advisable to facilitate workshop
for the experts in each ministries to share experience among the federal
budgeting and planning directory of each ministries. Since program
budgeting requires highly trained personnel to process it, it is advisable to
the ministries to provide them high quality training on PBS.
 To make the implementation process smooth, the challenges that confront
the PBS should be carefully identified and corrective action need to be taken.
To make this possible it is advisable that Ministry of finance and economic
development to establish a group that follow up the smoothness of
implementation process and take to correct the actions.

73 | P a g e
 To make PBS more effective in increasing transparency and accountability of
the ministries, it is advisable to the ministries to measure the performances
and follow up of the whether the resources allocated to the strategic
objectives results the expected outputs of the described program or not. In
every program designing for PBS, it is advisable for the concerned bodies to
make the program structure fit with strategic objectives of the agencies. This
may results accountability and transparency in PBS.
 It could be effective way for the Ethiopian public agencies to follow stand
alone implementation process of PBS. This could reduce the complication of
the budgeting system, work load in the budgeting offices, reduces costs need
to be incurred if the public agencies use parallel with line item budgeting
system to implement PBS, it is simple to the employees and it saves time to
implement PBS.
 It is advisable to the concerned bodies increasing civil societies or the
representative participation in budget hearing and budget planning to make
PBS more effective. It also advisable to growth up the degree and nature of
participation by civil society during budget hearings to say their opinion on
budget planning and budget hearings. So this may leads to have a fully
participative PBS.
 To increase the effectiveness of program budgeting, it is recommendable
that the concerned bodies should increase incentives and motivation to
employees, make legislative aspect favorable and increase the quality of
human resources, increases facilities, and promote administration aspect of
program budgeting.
 The existence of adequate staff capacity to address the informational
requirements program based budgeting is the main institutional
prerequisite. So, it is advisable to have good accounting and auditing
procedures and it is recommended that there must be a general recognition

74 | P a g e
 of the need for reform and government agencies need greater managerial
autonomy and freedom from tight input controls
 Finally, it is recommended that further research is required by using the
outcomes of this research as inputs. Based on this, the study has raised the
new questions. Few of areas that this thesis could provide information and
which could be of interest for further research are presented here below.
How the program based budgeting system will increase the output
of the public agency?
Evaluation of program budgeting in relation to strategic policy of
the government.
Analysis and evaluation of analytical part of program budgeting
process in public agencies.
The area of incentives and motivation to employees in program
budgeting, legislative aspect and administration aspect of program
budgeting require further study.

75 | P a g e
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http://onlinelibrary.wiley.com/doi/10.1111/j.14678500.1967.tb00163.x/abstract

Schaeffer, Michael & Yilmaz 2008, ‘Serdar, Strengthening Local Government Budgeting
and Accountability’, World Bank Policy Research Working Paper Series,
http://ssrn.com/abstract=1297806

Smithies, A. 1965, ‘Conceptual Framework for the Program Budget: Program

Budgeting, Program Analysis, and the Federal Budget’, David Norvick, Harvard
University Press, Cambridge.

William M, Capron 1969, ‘PPB and State Budgeting’, Public Administration Review, Vol.
29, No. 2, pp. 155-159, Published by: Blackwell Publishing on behalf of the
American Society for Public, viewed 02/04/2011 02:37
http://www.jstor.org/stable/973696

Werner Z. Hirsch 1966, ‘Toward Federal Program Budgeting’, Public Administration

Review, Vol. 26, No. 4, pp. 259-269, Blackwell Publishing on behalf of the
American Society for Public, viewed 22/03/2011 01:40
http://www.jstor.org/stable/973297

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West, W, Lindquist, E and Mosher-Howe, K 2009, ‘NOAA's Resurrection of Program
Budgeting: All Over Again?’ Public Administration Review, pp.435–447,
http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6210.2009.01990.x/abstract

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Appendix
Addis Ababa University

School of Business and Public Administration

Program MSc in Accounting and Finance

(To be filled by employees)

This questionnaire is designed to collect information about the move to program budgeting
system in Ethiopian public agencies the case of federal ministries. The data or information
collected in such a way shall be used as primary data in my thesis, which I am conducting as
a partial fulfillment for the requirement of my study in MSc in accounting and finance at
Addis Ababa University, School of Business and Public Administration.

It is hoped that this research will contribute towards understanding of the move to program
budgeting and its implications in the public agencies. Therefore, I will be pleased to submit
a copy of my final report to your office at the completion.

Your prompt and reliable responses will be much appreciated as it will enable the timely
completion of this project and enhance the benefits of the paper in terms of its relevance.

Note:

 No need of writing your names.

 You may choose more than one answers.
 Where answer options are available please tick in the appropriate box &
for open ended questions, please provide your response on the space
provided. If it is not sufficient, you can use the back of each sheet by
identifying the question number.

Thank you for commitment in advance.

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Part one: Personal Information

1. Position: □ Head of department manager □budget directory □Planning

officer □ budget expert □ group head
2. Experience or number of years you work in current position.
□1-2 □2-4 □4-6 □6-8 □above 8

Educational background: □Certificate □Diploma □ BA/BSc Degree masters degree

What is your qualification?

A) Accounting b) Management c) Economics d) Other

Part two: Questions related to the transition to program budgeting system in offices of
federal ministries. The following are questions that analyze program budgeting and its
implication.

1. Does program budgeting system require any change in organizational design?

Yes  No  somewhat  No opinion 

If yes, is there any change in

a) Structure reform 
b) Assignment or reshelf of employees 
c) Information flow 
d) Others 

2. Does program budgeting system require reform in financial management?

Yes  No  somewhat  I do not know  No opinion 

3. Does program budgeting system require new technological or computer

software?

Yes  No  somewhat  I do not know  No opinion 

If yes, what types of technology?

_______________________________________________

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 _______________________________________________

4. Is the existing human resource sufficient to run program budgeting?

Yes  No  somewhat  No opinion 

If yes, state number of human resources needed and quality

____________________________________________________________________
____________________________________________________________________
______________________________________________________________

5. Have you received any training concerning about program budgeting system
Yes  No 

6. If yes, what is your level of satisfaction?

High  Low  Moderate 

Part three: questions related the implementation process of program budgeting system in
federal public agencies

1. Is there any confusion during transition to program budgeting

Yes  No

If yes, what is that confusion?

____________________________________________________________________
____________________________________________________________________
__________________________________________________________

2. What is your attitude towards the program budgeting system

Negative attitude  Positive attitude  Middle one 

Please write the reasons for choosing such alternative_____________________

_________________________________________________________________

_______________________________________________________________

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 3. How much is the new system understand by employee
High  Low  Moderate 

Write reasons for level of understanding_______________________________

________________________________________________________________

________________________________________________________________

________________________________________________________________

4. Is there any relation between program budgeting structure and organizational

structure?

Yes  No  somewhat  No opinion 

If yes, state their relation

____________________________________________________________________
____________________________________________________________________
__________________________________________________________

5. How the agency framed program budgeting system

a) Parallel to line-item budgeting system
b) Stand-alone program budgeting system
6. What is the responsibility of managers or budgetary director in program budgeting
system?
____________________________________________________________________
_______________________________________________________________
____________________________________________________________________

7. The flow information in program budget is?

From bottom to top

From top to bottom 

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 8. Is program budgeting system
a. Fully participative
b. Semi participative
c. Centralized

State your reasons for choice ______________________________________________

____________________________________________________________________

___________________________________________________________________

Make (x) under your choice that you think as challenge for program the implementation of
program budgeting system.

Suggested challenges for program Strongly agree Strongly Disagree

budgeting agree disagree
Lack of trained personnel needed to
carry out the requisite analysis
Lack of stability necessary to enable
the implementation of PBS.
Lack of consistent political
commitment necessary to allow the
reform to be fully implement
Lack of adequate information used to
run PBS
Low standing of employees about PBS
Lack clear program structure used to
implement

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9. Make (x) in the following table under your choice that you think as implication of
program budgeting system.
Implications of program budgeting yes No somewhat No opinion
system
Improving service delivery of the
ministries
Improving Information gathering of the
ministries
Reducing waste of Public money
Improving Financial management
Increase transparency and
accountability in the office
Improving Setting and follow up of
budgets

10. Is your office ready to apply program budgeting system?

Yes  No 

12. Does program budgeting used to illustrate

a) Goals of the office 

b) Strategies of your organization 
c) Results expected from your office 

11. Is this budgeting system reducing west of public money?

Yes  No 

12. Could program budgeting increases transparency?

Yes  No  I don’t know 

13. Does really program budgeting system link the budget with program structure
output? Yes  No  I Don’t know 

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