A Study of Practices, Problems and Prospects of Cost-Center Budgeting in Addis Ababa University
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Date
2007-04
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Addis Ababa University
Abstract
Higher education and training in Ethiopia has started over 50 years ago, but still remains highly
underdeveloped, poorly connected with national development requirements, and hardly meet
international standards. Recognizing these limitations, the Ethiopian government has introduced
several policy and strategy provisions and major reform initiatives. This study was, therefore,
aimed at assessing the practice, problems and prospects of cost-center budgeting of Addis Ababa
University during the year 2001 -2006, in relation to the CSRP of the BRP, and HEP that
introduced new provisions relate to administrative andfinancial autonomy of institutions.
The study was conducted in all of the available sub-agencies of the university. Based on this,
sixteen Budget Stalfi', ten Finance/Budget Heads, nine Deans of Sub-agencies, two Planning and
Budget Officers and the Vice President for Business and Development of AA U, and two Officers
ji-om Ministry of Finance and Economic Development, and one Officer ji-om MinistlY of
Education were taken as actual sources of information The information was collected through
questionnaire, interview and ji-om the documents. The data obtained were analyzed mainly using
percentage. 1n some parts, especially for interview results, a purely qualitative discussion was
employed.
The results of this study indicate that the growth and importance of the AA U has displayed
changes in the last jive years. Resources marshaled by the university are indeed immense both in
relative and absolute terms. Moreover, due to the scope and diversity of service activities in some
academic programs, proper management of financial affairs is more complex than ever.
However, the budget systems of the university do not fully show these sound financial
management practices. As a result, agencies do not clearly know their authorities over budget
management and over fundsji-om various sources. The existing cost-center budgeting practice of
the university cannot envisage a sujficient basis for measuring the autonomy and 1Je1jormance of
the budgetmy agency or a program, nor can it be employed to the decentralization of budgetmy
management to the sub-agencies of the university. Furthermore, recurrent and capital budgets
are not budgeted and executed together- the two types of budgets are not linked by cost-centers.
The budget preparation system of the university was mostly incremental in its approach, and not
developed and adopted through participatory budgeting. As well, the unevenness of the budget
structure of the university, delayed budget proposal and reports, lack of trained and qualified
staff at bOlh levels were the major problems that need commensurate emphasis to the particular
allribules of the AA U'sfinancial management.
In light of these findings, it is necessary to give due attention on contempormy financial management
requirements. The university needs to re-define its responsibilities and competences paying
particular attention to its role regarding the restructuring of the sub-agencies (budget mapping);
shared responsibility, operational directives and controls, planning and programming, measuring
Ihe autonomy and performance of the budgetary agencies. In addition, financial management
expertise will need to be strengthened at both levels in order to anticipate and manage effectively the
implications of the recently announced shifi to formula fimding and block grant allocations for, and
some policy and implementation issues, of cost sharing, need to be given also serious consideration
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Keywords
Problems and Prospects of Cost-Center Budgeting