The electronic structure of Pulsed Laser Deposited (PLD) ZnO, Zn_0.95Fe_0.05O (ZFO), Zn_0.98Al_0.02O (ZAO) and Zn_0.93Fe_0.05Al_0.02O (ZFAO) films were investigated by Photoelectron spectroscopy and X-ray absorption spectroscopy. X-ray diffraction and ϕ-scan measurements show epitaxial c-directional growth of the films. Temperature dependent magnetization and M-H loop measurements show the presence of room temperature magnetic ordering in all the films. Fittings of Fe 2p XPS and Fe L_3,2 −edge XAS of ZFO and ZFAO films show the presence of Fe, in both, Fe⁺² and Fe⁺³ states in tetrahedral symmetry. Valence band spectra in resonance mode show resonance photon energy at 56 eV showing the presence of Fe²⁺ state (∼2 eV) near the Fermi level. A significant effect of Fe and Al doping on the spectral shape of O K-edge XAS was observed. Results of the Spectroscopic studies reveal that, ferromagnetism in the films is due to the contribution of oxygen deficiency which increases the number of charge carriers that take part in the exchange interaction. Al co-doping with Fe (in ZFAO) results in the enhancement of saturation magnetization by increase in the carrier-mediated ferromagnetic exchange interaction.