INTRODUCTION TO FINANCIAL ADMINISTRATION

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FINANCIAL ADMINISTRATION (PAD 370)

The study of the revenue and expenditure activities of government.

About budgets, taxes, government expenditures, and public debts.

Hoover Commission – Financial management of a modern government. Financial Administration, involving the machinery and methods by which funds for the support of public service are raised, spent and accounted for is at the very core modern government. (1949, USA).

National or Public Financial Policy is to determine what is the government going to do with our country’s wealth:

to achieve economic growthFair distribution of wealthEffectiveness and efficiency of financial

management.

As a discipline study Explain unity of facts, principles and their

theories that related to an increase and matters by individual, businessman and government.

As a process Alderfer in his book ‘Local Government In

The Third World Country’ stated that Public Financial Management is time cycle starting from tax until to final expenditures.

He mentioned on: How to get How to spend As a management tools D.P Francis in “The Foundation of Financial

Management” – financial management as the use accounting known economic models, mathematical rules and aspects of system analysis and behavioral science for the purpose of assisting in its functions of financial planning and control.

R.J Chambers stated financial administration as the management of financial functions. Management aspect involves planning and control in goods used and services that is given financial value to achieve organization objective.

As a development tools Public finance management must give

benefits to the people. For example the New Economic Policy, which has implemented since 1970 aims to eradicate poverty and restructuring the society.

As a study regarding government activities Otto Eckstein in Public Finance suggests

Public Financial management as a study regarding on how government receive and increase government revenue and matters relating to the country debts.

As an activities and functionsNigro & Nigro in “The Modern Public

Administration”, suggests several activities and functions of public finance management which are:

To determine financial sources and tae action to get money or provision.

To determine method to divide and use money.

To control money usage and provision.To manage payment and account aspect.

To avoid wastage To avoid deception and breach of trust To ensure the proper revenue system and

expenses is carried out correctly To achieve government objectives To ensure that purchasing/procurement is

done appropriately, correctly and legally. To assess efficiency, effectiveness,

productivity and quality in the use of resources.

Ensuring financial accountability of all government agencies.

Proper management of public resources due to high and unlimited demand from the public.

Creating any alternatives ways in using/manage that resources.

Compliance with legal and other mandatory requirements.

To achieve government’s objective. To manage expenditure.

Budgeting A statement of revenue and expenditure for

the future, which is, used as planning and management tools of national economic sources to fulfill the people’s needs.

Types of budgeting Operation Budgeting Development Budgeting

Tax Management It is a compulsory exaction of money by a

public authority for public purposes enforceable by law.

Types of tax Direct Tax Indirect Tax

Accounting A process of recording, collecting and

spending public money and make a report about it.

Systems of accounting Obligation – recording the transaction

when make the order. Accrual – recording the transaction when

receive the goods Cash – recording when money change hand

Treasury Summarize, plan and implement the

financial policy and government expenditure.

To achieve a good economic growth and fair distribution go along with the government policy.

Treasury can control public money expenditure through three stages:

Stage 1 Formation and representation of suggestion

and approval from Treasury. Stage 2 Implementation of projects and programs

which had been approved by law and withdrawal of money passed by the law., so that, responsibility accord to the economic needs in all matters is under authority of Security Executive.

Stage 3 In auditing stage and report of general

auditor had been accepted, Treasury will investigate all matter that had been evoked with the purpose to assist Public accountant Committee in measuring the report.

Roles: To monitor government investment in

Non-Financial Public Enterprises. Responsible for procurement of loans

from foreign and domestic sources to finance national development projects.

To analyze and advise the Ministry of Finance on short and medium term micro and macro economic issues, policies and strategies particularly in the relation to fiscal and budgetary policies.

To formulates, implements and administers tax policies.

Advises on legal aspect of financial and loan management.

Responsible for the running of three specialized bodies:

Special Commissioner for Income Tax Office of the Ministry of Finance in Sabah Office of the Ministry of Finance in

Sarawak Issues guidelines and policies regarding the

procurement of goods and services by governments departments.

Supply management Used by the public sector in Malaysia

especially government agency. Stress on purchase management and

storage. These two aspects can create one system

supply management that can prepare equipments for the government agencies usage.

Public means the purposes/needs of the people to be served by the government.

It is related to services of the government. Private sector means the

person/individual that are consider achieving something by earn any profit as they can.

Profit vs non-profit oriented The ballot box vs the market place Different in decisions processes for private

and public spending.

1. why is public financial management important?

2. discuss the 6 main components of public financial management

3. compare public and private sector financial management

4. Discuss the development of public finance in Malaysia.