PAD190
PRINCIPLES OF PUBLIC
ADMINISTRATION
LESSON 9
PUBLIC FINANCE
ADMINISTRATION
INTRODUCTION
Government collects taxes and other source of
revenues to finance the expenditure. The
revenues collected must be properly managed
and considered as public money. Every year the
government has to prepare the budget for
parliamentary approval. Budget approved by
the parliament then should become the
financial prospectus of the government in
utilizing the fund. How the government manage
the fund? Public Finance administration.
THE OBJECTIVES OF THIS LESSON
After attended this lecture student should be
able to:1. Define financial administration.
2. Describe the importance of public finance
administration.
3. Describe the cycle and activities of public
finance administration.
4. Explain the public finance administration
process and practices in Malaysia
5. Describe the challenges of public finance
administration in Malaysia
WHAT IS PUBLIC FINANCE
ADMINISTRATION
• Public finance administration concerns with
the techniques of managing public monies.
• Deals with how the government utilizing the
public fund in delivering the services to public.
• As an activity of public administration that
concerns with how the government should
manage the collection of potential revenues
and spend the revenues.
THE IMPORTANCE OF PUBLIC
FINANCE ADMINISTRATION
• To ensure the government has enough money
for financing the program and activities and to
achieve the state’s desired goal.
• To ensure the public fund is managed in a
proper manner by following the law, rules and
procedures;
• To avoid any misused of the fund and achieve
efficiency in spending the public money.
THE ROLES OF PUBLIC FINANCIAL
ADMINISTRATION
• As a tool of management
It is an effort to enable a particular agency to spend money for execution
of the policy.
• “As a public manager, you will find that the budget process is critical to
your success and that of your agency, quite simply because the budget
process establishes the level of funding for your programs and those of
others”. (Denhardt & Grubbs, 2003)
• As an Instrument of Public Policy
The budget represented the public policies and measure of support for
specific program. It also appears for enforcing government policies.
• As an Instrument of Fiscal Policy
The budget is a fiscal tool for influencing the operation and directions of an
economy of a government such as level of taxation, public expenditure and
public debt (Kumar & Mittal, 2002). The fiscal policy can be clearly decided
through budget.
• To estimate the income and expenditure
By using budget a proper income and expenditure can be planned. It can be
done through the formulation stage where every detail of allocation and
distribution can be discussed or debated.
• To measure performance
Controlling and monitoring of the budget. Budgeting can ensure the
accountability of the financial administration. It makes sure the execution of
the public funds comply with the government plan.
• Source of information
Budget is the source of information for the past activities, present activities
and future activities for the government. It provides records of utilization of
the public funds.
PUBLIC FINANCE ADMINISTRATION
CYCLE
PLANNING
REVIEW
AUDITING
BUDGETING
ACCOUNTING
STAGE 1 - PLANNING
• The task of determining the financial plan of
achieving the strategic goals and objectives.
• The financial plan describes in detail the
program, activities and resources that are
needed to achieve these goals, as well as the
timeframes involved.
• The final output of financial plan is a budget
statement.
STAGE 2 - BUDGETING
• Budgeting is a process of the government
allocating financial resources to various agencies.
• Budgeting is a political process which involves two
major branches of government, the executive and
legislative body.
• Several techniques might be used in budgeting;
such as Line item Budgeting, PPBS, MBS and Zero
Based Budgeting System.
BUDGET
• Budget is a financial plan of intended
revenues and expenditure of the government
• Provide a forecast of revenues and
expenditures i.e. construct a model of how
the government might perform financially and
carried out the programs and activities.
• Enable the actual financial operation of the
government stated in a monetary terms.
• is a legal document that is often passed by the
legislature, and approved by the chief
executive -or president.
Budgetary Process/Cycle
• Revenue Estimation performed in the executive branch by
the finance director, clerk's office, budget director, manager,
or a team.
• Budget Call issued to outline the presentation form,
recommend certain goals.
• Budget Formulation reflecting on the past, set goals for the
future and reconcile the difference.
• Budget Hearings can include departments, sections, the
executive, and the public to discuss changes in the budget.
• Budget Adoption final approval by the legislative body.
• Budget Execution amending the budget as the fiscal year
progresses.
STAGE 3 - ACCOUNTING
• The art of recording, classifying, and summarizing
in a significant manner and in terms of money,
transactions and events which are, in part at least,
of financial character, and interpreting the results
thereof;
• Accounting provides financial information or
report about the government business to people
inside and outside the government entity.
• The process of accounting is carried out by
professional accountant and by following the
standard financial procedures established by the
Accountant General Office.
ACCOUNTANT GENERAL OF
MALAYSIA
• The Malaysian Federal Government Financial
Statement is prepared annually by the
Accountant General of Malaysia in accordance
with Section 16[1] of the Financial Procedure
Act 1957 [Act 61].
• The objective of Accountant General is to
enhance accountability and transparency in
Federal Government’s accounting and
financial management.
STAGE 4 - AUDITING
• Audits are performed to ascertain the validity
and reliability of information; also to provide
an assessment of a system's internal control.
• audit is an independent assessment of the
fairness by which a company's financial
statements are presented by its management.
• Auditors of financial statement can be carried
out by internal auditors (established by the
organization) and external auditor (An
independent audit firm)
Government auditing
• Government audits were mainly associated with
gaining information about financial systems and
the financial records of a government
department or agency
• Carried out by Auditor General.
• The appointment as well as the responsibilities
of the Auditor General are spelt out under Article
105 of the Federal Constitution and the Audit Act
1957.
• Auditor General Report will highlight any issues
on public finance administration.
National Audit Department
• To prepare quality and timely Audit Reports to
Parliament and State Legislatures
• To carry out audit activities and prepare
reports in an independent and balanced
manner
• To fulfill the needs and expectations of
stakeholders and auditees
• To manage audit activities efficiently and
effectively
• To be a model employer
SATGE 5 – FINANCIAL REVIEW
• An assessment on the achievement of an
organization/agency in terms of the financial
performance that has been achieved through
out the year.
• The report highlight the achievement,
shortcoming and weaknesses of the current
financial plan.
• The financial review report can be used as a
basis for preparing the future budget plan
PUBLIC FINANCE ADMINISTRATION
IN MALAYSIA
• Treasury Malaysia, Ministry of Finance is the
Central Agency that responsible in preparing
and managing the Federal Government
Budget and other financial matters.
• Financial administration in Malaysia is subject
to Financial Procedure Act 1957 (Act 61)
Treasury Instructions, Treasury Circulars
• The act to provide for the control and
management of public finance in Malaysia.
Internet Links
• http://www.treasury.gov.my/
• http://www.agc.gov.my/agc/Akta/Vol.%202/A
ct%2061.pdf
• http://www.anm.gov.my/public_html/eng/def
ault/org.php
• http://www.audit.gov.my/
TUTORIAL
• Define financial administration.
• Describe public finance
administration practices in Malaysia.
THAT ALL FOR TODAY
SEE YOU AGAIN NEXT LECTURE
LESSON 10
“CONTEMPORARY ISSUES IN PUBLIC
ADMINISTRATION”
THANK YOU