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
 Control and
performance
measurement
 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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chapter2.pdf [Accessed: 20 Nov, 2013].
Bell, J. & Schaffer, E. (2005) Financial Leadership for Nonprofit Executives: Guiding Your
Organization to Long-Term Success. 2nd
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[Accessed: 18 Nov, 2013] Translated from Mongolian by Ariunaa Jargalsaikhan.
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www.petroleum.mn/companys/import.html?format=html&lang=en [Accessed: 1 Dec,
2013]. Translated from Mongolian by Ariunaa Jargalsaikhan.

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Lasts’. Policy and Society. 2011(30). p.p. 41-51.

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Planning Evaluation in Bahrain”. Managerial Auditing Journal. 18(9). p.p. 737-750.
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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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