budgeting practice in dpi mongolia

BUDGETING PRACTICE IN

DOWNSTREAM

PETROLEUM INDUSTRY IN

MONGOLIA ARIUNAA JARGALSAIKHAN – MBA, CPA, CPTA

Issues in Management Accounting

Ariunaa Jargalsaikhan

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Table of Contents

CHAPTER 1: INTRODUCTION ........................................................................ 2

1.1. Background of study ........................................................................................................ 2

1.2. Problem statement ............................................................................................................ 2

1.3. Research questions ........................................................................................................... 3

1.4. Significance of the study .................................................................................................. 3

1.5. Limitations of the study.................................................................................................... 4

1.6. Scope of the study ............................................................................................................ 4

CHAPTER 2: LITERATURE REVIEW ............................................................... 5

2.1. Petroleum industry ............................................................................................................... 5

2.2. Downstream petroleum industry in Mongolia ..................................................................... 5

2.3. Budgeting ............................................................................................................................. 6

2.4. Purpose of budgeting ............................................................................................................ 6

2.5. Approaches of budgeting ..................................................................................................... 7

2.6. Problems and challenges of budgeting ................................................................................. 8

CHAPTER 3: METHODOLOGY ..................................................................... 10

CHAPTER 4: FINDINGS AND DISCUSSION ..................................................... 11

4.1. Descriptive analysis............................................................................................................ 11

4.2. Interview result ................................................................................................................... 12

CHAPTER 5: CONCLUSION AND RECOMMENDATION ................................... 19

Recommendation #1:................................................................................................................. 19

Recommendation #2:................................................................................................................. 19

REFERENCES ............................................................................................. 21

APPENDICES .............................................................................................. 25

Appendix 1. ............................................................................................................................... 25

Appendix 2. ............................................................................................................................... 27

Appendix 3. ............................................................................................................................... 30



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CHAPTER 1: INTRODUCTION

1.1. Background of study

In management accounting field budgeting is of the most extensively studied fields (Uyar and

Bilgin, 2011). Vast of recent studies in budgeting emphasize on debate regarding to usefulness

and effectiveness of traditional budgeting versus new trends in budgeting practice such as

beyond budgeting (Neely et al 2003; Libby and Lindsay, 2010; Bourmistrov and Kaarboe, 2013).

More importantly, effectiveness of various budgeting approaches in practice and problems and

challenges, faced by firms during the process of preparation and implementation of budgeting,

have been studied across different industries and countries (Ahmad et al, 2003; Joshi et al, 2003;

Bissessar, 2010; Uyar and Bilgin, 2011).

1.2. Problem statement

However, some researchers criticize that most literature in budgeting practices focus on the

relevancy and application of budget in manufacturing industries particularly in context of

developed countries. Hence, budgeting practices in service sector specifically in developing

countries receive less research concentration (Joshi et al, 2003; Ahmad et al, 2003). Similarly,

academic study emphasizing on budgeting practice in oil and gas industry tend to be limited,

especially in Mongolian context. Consequently, in framework of this study, approaches used by

managements in preparing budgets and problems and challenges faced in preparation and

implementation of budgeting among companies which operate in downstream petroleum industry

(DPI) in Mongolia.



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1.3. Research questions

Main purpose of the research is investigating budgeting practice in downstream petroleum

industry (DPI) in Mongolia. Hence, research questions of the study are defined as follow:

RQ-1: What are the approaches used by managements in preparing budgets among

companies that operate DPI in Mongolia?

RQ-2: What are the problems and challenges faced in preparing budgets among

companies that operate in DPI in Mongolia?

1.4. Significance of the study

By identifying the budgeting approaches used by firms and problems and challenges faced in

preparing and implementing budgets among business in DPI in Mongolia, this research

contributes following issues from different perspectives:

The importance of the study to academia is that it provides fundamental academic

research in Mongolian context regarding to budgeting practice in the industry. Hence, the

research can be used as literature review for the further researches in management

accounting field in the country.

From the industry perspective, the research provides crucial information reflecting

current budgeting practices – approaches, problems, and challenges – in the industry.

Therefore, based on the benchmark provided by the study, management of companies

would be able to make decision to improve their current budgeting practice or transfer to

another system. The management will be enabled to improve controlling in the



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organization, enhance accuracy of forecasting, and smoothen the coordination between

functional areas and increase effectiveness of performance measurement system as well.

1.5. Limitations of the study

The potential restraints of the study would be defined as follow. First disadvantage of the

research may be caused by limited number of survey participants. Due to constraints of time,

only 3 participants will be interviewed and thus, the result of the research may be influenced by

biased judgments. Secondly, as the research strives to find out sensitive and potentially

confidential information of the firms such as problems and challenges faced to them during the

budgeting process; survey participants may avoid providing the real scene or their real point of

view regarding to the budgeting practice in the business.

1.6. Scope of the study

This research intentionally focuses on the current budgeting practice among the companies

operating in DPI in Mongolia. According to Central Information Data for Petroleum (2011a), by

April 2011, there are 17 companies which import and trade petroleum products in Mongolia.

Hence, 3 of 17 companies are emphasized in framework of the study. The research is undertaken

using the qualitative research approach.



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CHAPTER 2: LITERATURE REVIEW

2.1. Petroleum industry

Petroleum industry consists of the various processes of exploration, distillation, cultivating,

transporting, and marketing petroleum products (Trencome, 2013). Hence, the petroleum

industry is divided into 3 main sectors namely upstream, midstream and downstream. Upstream

petroleum sector is a process of exploring and appraising potential underground or underwater

oil and gas water field, and developing and constructing system that bring crude oil and gas into

surface (Australian Government Productivity Commission, 2013). Midstream petroleum sector

comprises processes of storing, marketing and transporting petroleum crude oil, gas and other by

products as well (Citizendium, 2013). Downstream petroleum sector refers to refining of

petroleum crude oil and processing of natural gas, marketing and distributing products derived

from petroleum crude oil and gas (Citizendium, 2013; US Legal, 2013). However, in framework

of this research, only downstream sector especially marketing and distribution in Mongolia will

be emphasized.

2.2. Downstream petroleum industry in Mongolia

Influence of petroleum product on economy of the country is enormously huge as it acts as

important factor of determination of commodity (Erdenebat, 2011). Although Mongolia explores

oil in few strategic oil fields and, such explored crude oil is directly exported to foreign market

without any refining process. Therefore, supplement of domestic petroleum consumption is fully

dependent on import from Russia and China. In Mongolian downstream petroleum market,

currently there are 17 companies are operating which are mainly import and market oil and gas

products into domestic market (Central Information Data for Petroleum, 2011a).



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2.3. Budgeting

Joshi et al (2003) defines budget as financial blueprint that quantifies an organization’s plan for a

future period, while Steed and Gu (2007) states it as means of converting firm’s strategic plan

into a measurable standard. Also Collier and Berry (2002) describes budgeting process as a

formal method through which plans are constituted for forthcoming time period with

consideration of risks and uncertainties.

2.4. Purpose of budgeting

Budgeting performs various roles in the organization. Hansen and Van der Stede (2004) define 4

main interrelated reasons for budgeting at short-term operational level (operational planning and

performance evaluation) and long-term strategic level (communication of goals and strategy

formation). Budgeting process enables organization to develop coordinated planning across

functional areas (Joshi et al, 2003) and such budgetary planning is likely to be effective in

organizations in which the operation is more reparative (Hansen and Van der Stede, 2004).

Moreover, budgetary control is an integral part of management control system (Van der Stede,

2001) and it functions historically important role in the control system (Libby and Lindsay, 2010)

as it regulates the behavior by specifying the expected outcome (Joshi et al, 2003). Budgetary

control style of certain organization might be derived from two important antecedents which are

past performance of business unit and competitive strategy of the organization (Van der Stede,

2000). Moreover, Hansen and Van der Stede (2004) found that the organizations that possess

more identifiable resources are likely to utilize budget as performance measurement tool while

level of environmental uncertainty and uncontrollable risk negatively associated with utilization

of budget in performance evaluation.



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Budget is considered means of communication tool in organization as it connects expectations of

top management with managers and employee (Joshi et al, 2003). Hansen and Van der Stede

(2004) found that task structure, interdependence of tasks and competitive environment of the

organization positively influence on utilization of budget for planning purpose.

To achieve strategic goal of the organization resource should be allocated accordance with the

strategic aim. Thus, budgeting is utilized for formation of organization strategy. The most

influential determinants of usage of budgeting in strategic formation are extent of division, type

of strategy and operation and competitive environment (Hansen and Van der Stede, 2004).

2.5. Approaches of budgeting

Management decisions rely on calculation of which alternative budgeting methods are

considered and selected (Davis et al, 1966). Hence, budgets are prepared through various

approaches and at different levels of organization under the different purpose. Therefore, few

different approaches of budgeting are briefly discussed follow:

In respect to the methodology of creating budget, it can be classified into incremental budgeting,

zero-base budgeting and activity based budgeting. Incremental budget is a traditional budgeting

method in which current period’s budget or actual performance used as a base and some amounts

of adjustment are made on the base to provide coherence with inflation, change in price and cost

as well (Good, 2011). In zero-based budgeting all functions of the firm are analyzed for their

needs and costs in every budget period like if they were totally new in organization and are

justified in aspects of efficiency, effectiveness, and priorities (Dirsmith and Jablonsky, 1979). On

the other hand, activity based budgeting is derived from activity based costing. Therefore, in this



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budgeting approach, budgets are built based on all the activities that incur costs in all functional

areas in a firm (Shane, 2005).

In respect to the adjustment of budgets regarding to fluctuations in operation, budgeting can be

categorized into 3 main parts namely fixed budgeting, and flexible budgeting. Flexible budget is

a detailed plan for controlling overhead costs that is valid in the organization’s relevant range of

operation and it enables accurate basis for comparison between actual and planned costs at actual

operation level (Ueno and Sekaran, 1992). On the other hand, in fixed budgeting, budgets are

prepared only at one operational level and fluctuation in operation is not considered in

comparison of performance actual and planned budget.

In aspect to budget preparation in conditions of uncertainty, budgeting can be classified into

rolling budget and contingency budget. In rolling budget, as each budget period passes the

organization develops new set of budget for the next budget period as a replacement of expired

budget (Larson et al, 2001). On the other side, contingency budget is developed to predict a

potential change to the firm’s principal budget during the budget period (Bell and Schaffer,

2005).

2.6. Problems and challenges of budgeting

Although budgeting provides future planning, performance measurement, communication tool of

goals and support of strategy formation; still there are limitations of budgeting in business. In

their study, Neely et al (2003) systematically reviews literature works and empirical studies that

emphasize on drawbacks of budgeting practice. They categorized weaknesses of budgeting into 3

main categories namely competitive strategy, business process and organizational capability.



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Firstly, in terms of competitive strategy, budgets are tend to be less emphasized on strategy of

the firm and in some case budgets even contradict with it. Also, budgets are more toward cost

reduction instead of value creation of the firm. Moreover, through strict budgeting businesses

constrain flexibility and thus become resistant to change. Lastly, budgets add less value as it is

tend to bureaucratic and de-motivate creativity in the organization.

At second point, from the perspective of business process, budget preparation and coordination

takes vast amount of time and demands high cost. Also, budgets are generated and revised too

infrequently (i.e. usually annually) and based on ungrounded expectations and guesswork.

Furthermore, budgets favor various budget gaming and misappropriate behavior.

Thirdly, in terms of organizational capability, budgets encourage vertical command and control,

as such budgeting constrains successful implementation of network structure within the

organization. Moreover, budgeting encourages departmental barriers instead of supporting

knowledge sharing across functional areas. Last but not least, budgets also make feel people that

they are depreciated.



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CHAPTER 3: METHODOLOGY

This study is considered as an explanatory research due to its nature. Qualitative approach is

utilized in the study. Total population of the study is 17 companies which import and trade

petroleum products in Mongolia. However only 3 of the companies are selected due to their huge

market share on DPI in Mongolia (Central Information Data for Petroleum, 2011a). Thus, the

sample companies represent approximately 44% of total market share. Therefore, to acquire

information about budgeting practice of the selected companies, personnel who works as an

accountant, middle and top managers were approached for interview. The qualitative data was

collected through pre-defined interview questions and interviews were recorded as audio (Please

refer to Appendix 1 and Appendix 2 for interview questions).



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CHAPTER 4: FINDINGS AND DISCUSSION

First of all, some fundamental information (i.e. name, operation years, market share, number of

stations, basis and workers) about the firms which are studied in this research is given in Table 1.

Table 1: Profiles of the firms

Items Firm A Firm B Firm C

Name *** *** ***

Established year 19** 19** 19**

Market share **% **% **%

Number of

stations

*00 *00 *0

Number of basis ** ** *

Number of

workers

**** **** ***

Source: Central Information Data for Petroleum (2011a);

4.1. Descriptive analysis

Descriptive analysis of survey participants was indicated in Table 2. As we can see from the

table, one of the participants is an executive director of a branch while others are CFO and

accountant at group level. Also, we can conclude that the participants are quiet experienced in

petroleum industry as their most part of work experience refer to this industry and all have more

than 2 years of experience in petroleum industry.

Table 2: Descriptive analysis

Items Firm A Firm B Firm C

Participants code Participant A Participant B Participant C

Participant’s position Chief Financial

Officer

Executive Director of

Branch

Accountant

Total work experience ** years ** years ** years

Industry experience ** years ** years ** years

Source: Survey participants



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4.2. Interview result

The result of the interview is indicated and interpreted through Part 1 and Part 2.

Part 1.

Table 3: Approaches used in preparing budgets

Questions Participant A Participant B Participant C

1. Which

functional areas in

your organisation

budget for?

All the functional areas are

included in budgeting. Exp:

Management office,

Finance office, Fuel Basis,

Stations, Transportation

division, Engineering and

Technical division, Safety

division

All the functional areas

are included in

budgeting.

All the functional areas

are included in

budgeting.

2. Which

budgets

methodology your

company is using?

For example, zero

based budgeting,

incremental etc...

Master budget

Combination of

incremental and zero

based budgeting

method. Because during

the budget preparation,

every employee are

asked to define his or

her material and other

needs for the coming

budget period. However,

cost calculations are

based on previous

budget period and

current adjustment.

Short-term budgeting –

1 year

Master budget

Incremental

budgeting

Long-term

budgeting – 5 years

Master budget

Combination of

incremental and zero

based budgeting

method. Because

during the budget

preparation,

functional areas (i.e.

Fuel Basis, Stations,

Engineering)

that related to

operating activities

are asked to define

their material and

other needs for the

coming budget

period. However,

budgets of non-

operating functional

areas such as

management, finance,

marketing and HR

departments are

based on previous

budget period

performance and

current adjustment.

Short-term budgeting

– 1 year



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3. Can you

describe the

budgeting process

in your

organisation?

1. Every division roughly

defines its expected

amount of inputs and

outputs with

participations of every

employee.

2. Accountants revise the

rough calculation made

by divisions and

combine.

3. Management Council

Board discusses budget

projection and

approves.

4. All budget projections

of branches are revised

and combined at group

level by accountants at

headquarter.

5. Board of Directors

discusses combined

group budget projection

and approves.

1. Every division

prepares its budget

projection.

2. Economic division

revises and

combines budget

projections of all

divisions.

3. BOD discusses

combined group

budget projection

and approves.

1. Every division

prepares its budget

projection.

2. Economic division

revises and

combines budget

projections of all

divisions.

3. BOD discusses

combined group

budget projection

and approves.

4. Is your

organization

benefiting from

preparing budget?

Could you share

how your

organization has

benefited from

budgeting?

Cost reduction tool

Control and

performance

measurement

Coordination of goals

Cost reduction tool

Control and

performance

measurement

Cost reduction tool

Control and

performance

measurement

The first part of the interview was designed to identify which kinds of methods and approaches

the firms use in budgeting process and what are the benefits that they yield from the budgeting.

Referring to Table 3, we can conclude that all the firms are use master budgets through all

functional areas. Also, the budgets are prepared based on incremental base however some

aspects of the budgets are more similar to zero-based budgeting. Moreover, the most of the firms

prepare budget for short-term at only yearly basis while another one company prepares long-term

budget for 5 years. The process of preparing budget is generally similar among the firms. The



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budget projection is prepared by each functional areas and it is revised and approved by

economists. Economists combine all the projections at the group level and then, the group

projection is discussed and approved by BOD. Also, as result of the interview, we can see that in

DPI in Mongolia, firms use budgets under the purpose of cost reduction and performance

evaluation tool, however minority of the firms claim that they use budgeting to enhance

coordination of goal between functional areas.

Part 2.

Table 4: Problems and challenges faced in budgeting

Questions Participant A Participant B Participant C

1. How long

does the

budgeting

process

generally

take?

Start: October

Finish: January

Approve: end of January

In total: 4 months

Start: October

Finish: February

Approve: March

In total: 4 months

Budgeting process starts

after Financial

Statement of 3rd quarter

is released, as long as

operation in 4th quarter

tends to comparable

constant due to the

nature of the business.

Annual report is

prepared by 10th

February and some

information is gathered

from annual report.

Start: November

Finish: January

In total: 2 months

2. What are the

resources

required in

preparing

budgets?

Labor: employees,

accountants, economists,

engineers, 3 levels of

managers

Capital: computer,

software

Labor: economists,

accountants, engineers,

management 3 levels of

managers

Capital: computer,

Budget package of ERP

Consultant fee

Labor: accountants,

economists,

engineers, 3 levels of

managers

Capital: computer,

software



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3. Who are

those in

your

organization

that are

involved in

the budget

process?

All employees Employees who have

Confidentiality Contract

with the firm such as

economists,

accountants,

management 3 levels of

managers

economists,

accountants,

management 3 levels

of managers

4. Is everyone

in the

company

committed

to the

preparation

of budgets?

Yes No No

5. From your

experience,

could you

comment on

the accuracy

of the

forecast

figure that

had been

made in the

previous

year?

Budgets should be more

flexible. Budgets and

actual performance should

be assessed more

frequently (i.e. by quarter

or half year). So that,

timely amendments can be

done and accuracy of

budget would be enhanced.

As such, performance

evaluation would be more

accurate and fair.

Employees’ usage skill

of budget software

should be improved

(excluding finance

department).

High level of political

risk and political

intervene.

No comment

6. These days

business

environment

changes

dynamically

, do you

think that

budgets are

still relevant

and

adaptable to

the changing

business

environment

?

Budgeting is not that much

relevant to the changing

business environment.

Because in Mongolian

economy, the market is

unstable and import of

petroleum totally depends

on few suppliers.

Therefore, fuel shortage

occurs periodically.

Government policy toward

Value Added Tax and

Excise Duty is not stable.

Also, the government

defines ceiling price for

fuels to keep the economy

stable and avoid inflation.

In this nature, coping the

Budgeting cannot be

that much relevant to

the changing business

environment.

As long as business

environment is rapidly

changing, organizations

should learn and

implement new

budgeting techniques

that could cope with

changing environment.

Also, capability of HR

and availability of

budgeting software is

crucial for successful

adoption of budgeting in

changing environment.

Currently, budgets

are not relevant to

changing business

environment. For

example, due to

fluctuation in rate, it

is certain that for

2013 the company

cannot meet its

budget. As dollar

rate dramatically

increases since June,

cost of sales has been

enormously raised.

On the other hand,

the government

holds fuel price.

Hence, the company



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business environment

through budgeting is very

complicated.

is experiencing huge

loss for this year.

Due to that situation,

aggressive cost

reduction is taken

place in the

organization, which

result de-motivation

and depression on

employees.

7. In which

extend do

you rate the

effectivenes

s of the

budgetary

process in

adapting to

market

changes?

Medium

Budgets tend to be flexible.

If there is any variance due

to market change, only the

rational reason should be

disclosed. Middle level

managers are allowed to

make decision regarding to

employing new

opportunity and to adapt

with new business

environment. However,

sizeable decisions should

be discussed with top

management.

But, the budget cannot

effectively influence to

adapt business

environment change

resulted by macro-

economic factors.

Medium

Budgets tend to be non-

flexible. Middle and

lower level managers

must refer to upper

managers to make

decision regarding to

employing new

opportunity and to adapt

with new business

environment.

Budget amendments can

be made in July during

BOD meeting.

The budgets are not able

to impact on adaption of

business environment

change resulted by

political, legal,

economic environment

change.

Low

Budgets tend to be

non-flexible. Middle

and lower level

managers must refer

to upper managers to

make decision

regarding to

employing new

opportunity and to

adapt with new

business

environment.

The budgets are not

effective on adaption

of business

environment change

resulted by political,

legal, economic

environment change

in the industry.

8. What other

challenges

do you face

during the

preparation

and

implementat

ion of

budgets?

The firm is more oriented

to cut costs. Due to that

situation, to get approval

on their actual budget,

branches needed to play

‘budget games’ such as

intentionally add costs.

Although they are able

to reduce their cost,

functional areas are not

willing to do so. Thus,

to enhance cost

reduction and reduce

unnecessary spending,

the economist more

likely to cut divisions’

budget. However, in

turn, managers of the

divisions tend to play

various ‘budget games’

to keep their desired

As proposed cost in

budget projection

tends to be cut, in

turn managers play

‘budget game’ by

automatically adding

some amount of the

actual budget.

Managers prefer to

spend their budgets

during the early

months of the year.

Because, during the

end of the year,



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budget. budgets are more

likely to be cut and

funds are limited due

to unexpected

business

environment

changes.

Referring to Table 4, we can see that the firms normally spend 2-4 months for preparing the

budget for coming year depending on the firm size. Moreover, when preparing budgets human

resource, computers, and software are required. Also, some of the firms hire experts and

consultants during the preparation of budget. Normally, in process of budget preparation, 3 levels

of managements, economists, accountants, and engineers participate. Only one firm claim that all

the employees participate in budget process, while majority limits regular workers’ participation

in the preparation of budget.

To enhance accuracy and relevancy of the budgeting, the participants argue that budgets should

be more frequently reviewed and amended to reflect the real business situations. Also, they argue

that non-finance employees’ knowledge and skills regarding to usage of budget software should

be improved.

Generally, the participants believe that current budget practice cannot be that much relevant to

the changing business environment. They rationalize that such irrelevancy of budgeting is due to

unstable economic condition such as increase in exchange rate and inflation, and special

characteristics of the Mongolian petroleum industry itself. The domestic petroleum consumption

of the country is totally dependent on very few suppliers in Russia and China. Therefore, there is

high risk of fuel shortage if the main suppliers like *** limit their supply to Mongolia. On the



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other hand, Mongolian government regularly intervene the industry and control the fuel price by

direct and indirect way. Consequently, these uncontrollable forces make the budgets irrelevant to

changing business environment.

The majority of the participants demonstrate that their firms are willing to do amendments on the

budget or accept variances if doing so helps the company to adapt the market change. However,

in most cases, managerial decisions that are not relevant to the budget must be reported and

approved by upper level management.

Lastly, the participants name ‘budget game’ as a compelling challenge which is faced to

effective budgeting practice in the industry. The respondents argue that, on the one hand, the

firms are very cost conscious and strive to cut cost through tight budgeting. On the other hand, to

keep their operation at desired quality level managers of divisions need sufficient resources. Due

to that contradiction, managers play various ‘budget game’ to get approved enough resources for

their division.



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CHAPTER 5: CONCLUSION AND RECOMMENDATION

Recommendation #1:

As deliberated in discussion part, the survey participants believe that current budget practice

cannot be that much relevant to the changing business environment due to unstable economic

condition and special characteristics of the industry itself. Therefore, in this situation, some

scholars suggest firms to exercise rolling budget as a main alternative to the annual budget

(Ekholm and Wallin, 2000). By focusing on key set of business drivers and having exception

based monitoring and benchmarking system, the firms would be able to foresee risk and

opportunities exposed by a dynamic business environment. Therefore, the firms are enabled to

adjust their business strategy with new business scene and efficiently allocate resources and

manage activities to gain competitive advantage at periodic frequencies (Ekholm and Wallin,

2000; Cognizant, 2011). Also, there is a common practice that utilizing rolling forecast

alongside the annual budget, which can be a practical solution for the companies operate in

petroleum industry in Mongolia (Ekholm and Wallin, 2000).

Recommendation #2:

As we discussed in previous chapter, survey participants name “budget game” as one of the

compelling issues that blur the effectiveness of budgeting within the firms. Therefore, based on

the academic researches, I have proposed a potential solution for firms to deal with “budget

game”.



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There are 2 contradicting interest in budgeting process which are cost cutting and sustaining

business operation at desired quality level. Thus, finding the correct balance of budget slack is

crucial (Yang et al, 2009).

As defined by Collins et al (1999) and re-categorized by Huang and Chen (2009) “budget game”

can be classified into 2 main parts which are Devious (non-straightforward) games and

Economic (straightforward) games (Please refer to Appendix 3 to examples and illustrations of

both games). Based on agency theory proposition, Huang and Chen (2009) argue that managers

who play Devious budget game are more likely to serve for their own interest rather than the

firm’s. Also, Collins et al (1999) found that managers who play Devious games are less

demonstrates budget effort whereas those who play Economic game put more effort on budget

compliance.

Consequently, when revising and approving budget projections; economists and top management

of the firms should define exactly which kind of budget game the managers who are requesting

budget is playing. Therefore, authorities would be able to make more accurate decision whether

to cut cost through budget or provide the requested amount of budget to the managers of

divisions.



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http://www.petroleum.mn/companys/import.html?format=html&lang=en



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APPENDICES

Appendix 1.

Interview questions (in English):

Part 1: Approaches used in preparing budgets

Question 1: Which functional areas in your organisation budget for?

Question 2: Which budgets methodology your company is using? For example, zero based

budgeting, incremental etc...

Question 3: Can you describe the budgeting process in your organisation?

Question 4: Is your organization benefiting from preparing budget? Could you share how your

organization has benefited from budgeting?

Part 2: Problems and challenges faced in preparing budgets

Question 5: How long does the budgeting process generally take?

Question 6: What are the resources required in preparing budgets?

Question 7: Who are those in your organization that are involved in the budget process?

Question 8: Is everyone in the company committed to the preparation of budgets?

Question 9: From your experience, could you comment on the accuracy of the forecast figure

that had been made in the previous year?

Question 10: These days, business environment changes dynamically, do you think that budgets

are still relevant and adaptable to the changing business environment?

Question 11: In which extend do you rate the effectiveness of the budgetary process in adapting

to market changes?



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Question 12: What other challenges do you face during the preparation and implementation of

budgets?



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Appendix 2.

Interview questions (in Mongolia):

1-р хэсэг: Төсөв бэлтгэхэд ашиглагдаж буй аргачлалууд

Асуулт 1: Танай байгууллага аль аль хэлтсийн үйл ажиллагаандаа төсөв, төсөвлөлт

ашигладаг вэ?

Жиш нь: Үйлдвэрлэл, борлуулалтын хэлтэс, хангамжийн хэлтэс, ШТС, хүний нөөц

Асуулт 2: Танай байгууллаг ямар ямар төсөв бэлтгэх аргачлалыг ашигладаг вэ?

Жиш нь: Тэг суурьт төсөв – өмнөх жилийн төсөв, гүйцэтгэл дээр үндэслэн төсөв зохиодог,

өсөн нэмэгдэх төсөв – төсөв зохиох бүрт үзүүлэлт бүрийг нэг бүрчлэн шинээр тотоодог.

Урт хугацааны төсөвлөлт – 3 болон түүнээс дээш жилээр төсөв зохиож мөрдөх

Богино хугацааны төсөвлөлт – 3-с доош жилээр төсөв бэлтгэж мөрдөх

Ихэвчлэн ямар зорилгоор төсөвлөлтийг ашигладаг вэ – хяналт, төлөвлөлт, гүйцэтгэлийн

хэмжүүр, байгууллага дахь хэлтэс тасаг хоорондын ажлын уялдаа холбоог дэмжих

Асуулт 3: Та өөрийн байгууллага дахь төсөв бэлтгэх процессийг дүрсэлнэ үү?

Жиш нь: Төсвийн төсөл боловсруулах, Хэлэлцэх, Батлах

Төсвийн төслийг хэлтэс тасгууд өөрсдөө боловсруулж батлуулдаг уу эсвэл удирдлагаас

боловсруулдаг уу, эсвэл хамтдаа боловсруулдаг уу

Асуулт 4: Төсөв бэлтгэж ашигласнаар танай байгууллага ямар ямар ашиг тус хүртэж

байна вэ? Та бидэнтэй төсөв ашигласнаар танай байгууллага хэрхэн ашиг тус хүртэж буй

талаар хуваалцана уу?

Жиш нь: Тэг суурьт төсөв – өмнөх жилийн төсөв, гүйцэтгэл дээр үндэслэн төсөв зохиодог,

2-р хэсэг: Төсөв бэлтгэхэд тулгарч буй асуудлууд

Асуулт 5: Танай байгууллага төсөв бэлтгэх процесс хэр урт хугацаа зарцуулдаг вэ?

Жиш нь: 14 хоног, 1 сар гэх мэт

Асуулт 6: Тaнай байгууллагат төсөв бэлтгэхэд ямар ямар нөөц шаардлагатай байна вэ?



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Жиш нь: Хүн хүч, компьютер, тооцоолуур, мэргэжилтэн хөлслөх, зөвлөгөө авах г.м

Асуулт 7: Төсөв бэлтгэх процесст хэн хэн оролцдог вэ?

Жиш нь: Нягтлан бодогч (удирдлагын, ерөнхий, ахлах г.м)

Удирдлага (ерөхний захирал, гүйцэтгэх захирал, салбар хэлтэс хариуцсан дарга,

санхүүгийн албаны дарга г.м) Эдийн засагч, Санхүүч Хүний нөөц, Маркетинг,

Борлуулалтын алба, Үйлчилгээний алба г.м

Асуулт 8: Төсөв бэлтгэх болон хэрэгжүүлэх процесст үүнд хамааралтай бүх хүмүүс

оролцож чаддаг уу?

Жиш нь: Төсөв хамааралтай бүх хэлтэс тасгаас төлөөлөл оролцох г.м

Асуулт 9: Таны туршлагаас харахад, өнгөрсөн жилийн урьдчилсан тооцоолол болон

төсөвлөлтийн үнэн зөв, яв цав байдал болон түүнийг дээшлүүлэх тал дээр ямар бодолтой

байна вэ?

Жиш нь: Өнгөрсөн жилийн төсөвлөлт дээр гаргасан алдаа оноо

Төсөвлөлтийг сайжруулах шинэ санал, санаачлага

Асуулт 10: Өнөө үед бизнесийн орчин маш хурдацтайгаар өөрчлөгдөж байна. Та төсөв,

төсөвлөлт нь бизнесийн өөрчлөгдөж буй орчинд дасан зохицоход хэр холбогдолтой гэж

бодож байна уу?

Жиш нь: Монгол дахь вальютын ханшны өсөлт, үнийн өсөлт, эдийн засгийн өсөлтөөс

үүдсэн бараа бүтээгдэхүүний хэрэгцээний өсөлт, өсөн нэмэгдэж буй гадаадын хөрөнгө

оруулалт, засгийн газрын бодлого

Асуулт 11: Хувьсан өөрчлөгдөж буй зах зээлийн өөрчлөлтөнд тухайн байгууллагын дасан

зохицох процесст төсөв, төсөвлөлт хэр үр дүнтэйгээр нөлөөлж байна гэж та бодож байна

вэ?

Жиш нь: Гэнэтийн борлуулалттай холбоотойгоор төсөвлөгдөөгүй зардал гаргаж болдог

эсэх,



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Асуулт 12: Төсөл бэлтгэх болон хэрэгжүүлэх явцад өөр ямар ямар асуудал тулгарч байна

вэ?

Жиш нь: төрөл бүрийн “төсвийн тоглоом” – төсвийг зөвхөн төсөвт хугацааны сүүл хэсэгт

зарцуулж төсвөө хэтрүүлэхгүй байснаар дараа дараагийн төсөв захиран зарцуулах эрхээ

алдахгүй байх



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Appendix 3.

Examples and illustrations of Devious and Economic budget games (adopted from Collins et al,

1999 and Huang and Chen, 2009)

Devious (non-straightforward) games include the following:

Horatio at the bridge: A manager tries hard to keep what was in last year’s (period’s)

budget.

Piggyback: A manager attaches items that are likely to be cut from the budget, if

separately submitted, to other projects that are certain to be approved.

Relying on friendship: A manager relies on friendship with superiors to get what is

wanted in the budget.

Incremental: A manager seeks an additional amount over last period’s budgetary

amounts.

Camel’s nose: A manager asks for a small item knowing that he/she can ask for more

once this item is in the budget since large programs start from seemingly small

beginnings.

Sacrificial lamb: A manager adds an unwanted and likely-to-be-cut item to the budget so

the superior will not cut a wanted item.

Crisis: A manager gets what he/she wants in the budget by letting superiors think the

operation has a crisis and must have the budgetary request.

Economic (straightforward) games include the following:

All or nothing: A manager threatens the superior with shutting the operation down if the

desired budget is withheld.



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It’ll pay for itself: A manager tells the superior that the request will pay for itself.

Present facts: A manager presents the superior with the facts to get what he/she wants in

the budget.

On-site visit: A manager invites the superior for visits to justify the request.

budgeting practice in dpi mongolia

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