Finance for public administrators

Financial management in the public and private sector have very evident differences. Those who have experiences in one of the fields may not be able to handle financial administration in the other field. This fact is due to the differences that present themselves in the two areas. There have been a lot of theories that have been brought forward that say that the differences between these two are so obvious that the private sector management should not be applied to the public sector.

To ensure that the 100 million dollar project is completed successfully without any problems, there needs to be the proper financial management of the funds. This is because to achieve the desired progress within the set period there needs to be an appropriate financial management strategy (Guthrie, 1998).

Accounting

The financial management methods used in the accounting industry in the private and public sectors are entirely different. An example is the fact that in the private sector, the financial managers and accountants are governed by the accepted accounting principles (GAAP). This is the set of practices like the double entry used in the accounting profession which is employed in the balancing of balance sheets. This method is mainly used for the public sector funding where steps like budgeting are done. In our case, the accounting will be a crucial step since to finish the project with the set amount of money without experiencing an over expenditure in the finance we need to budget for the money allocated correctly.

Profit

Most of the parastatal bodies are not inclined on the profit factor. However, the private sector businesses are driven by the profits which they anticipate or hope to make once they began their journey in the enterprise they partake. On the public sector however like in our case the gain is substituted by the task orientation or some other motivating factor. In our case, the motivating factor is the accomplishment of the project with budgeted funds that have been allocated to the project (Schick, 1998).

Context

Context is an important difference between the public and private sector financial managers. The context influences how each of the financial managers approaches the work they are involved in doing. The private sector financial managers are driven by the realization of profit. Therefore, the decisions he will make will be by ensuring that in whatever he does he gets to benefit. The public sector financial manager, on the other hand, will not make decisions hastily. The public sector financial managers must practice constraint in their decision making so as not to make decisions which will be seen as autonomous in nature. In my case being a financial advisor in the public sector, I will have to be careful with the decisions; I make concerning the one hundred million that I am in charge of since the decision may determine how people judge me.

Decision making

From the context, we come to the decision-making part. Decision making for the private and public sector financial managers is also very different. The decision making and context can be seen to be very closely related since they are based on the same concepts. In the private sector, the decision-making process can be seen as much easier as compared to the public sector. The reason for this is very simple, in the private sector, the decision-making process flows down a certain form of hierarchy from the head down to the workers. However, in the public sector things are much more different since the finance manager has to make his way through political constituencies and the competing interest groups. In our case, I cannot be able to make decisions and implement them just like that all the decisions made are subject to public deliberation, approval, and sanction.

Business account has been compared from time to time with government accounting. This is why many think that the fundamental elements of government accounting have been borrowed from the business accounting.

Proper accounting and with the following reporting systems are the most crucial for public expenditure management. There are various accounting systems which are used, and they are classified into different groups. First and foremost we have the cash accounting this is the path of accounting that is concerned with cash flows and cash balances. In our case, cash accounting will be very crucial regarding the fact that it enables the financial manager to regulate the expenditure control this will be achieved and at the same time there will be a system used for the registration of any arrears that have been experienced in the project funding.

Another group that accounting is divided into is the modified cash accounting. In this group, we deal with adding to the previous group of cash accounting a complimentary period for the recognition of the end of year payments. There is a disadvantage that comes with this accounting since it usually adds risk and trouble hence it is to be avoided entirely. Modified accrual accounting is the method of accounting that covers the assets as well as the liabilities to the cash in hand. This in our case is the one hundred million that has been allocated for the project. The modified accrual in turns helps to complete a proper framework for the registration of liabilities and expenditures. We also have another regulatory method for accounting which is the full accrual accounting. The full accrual accounting is similar to the accounting for commercial enterprises. It all covers all the liabilities and the assets this accounting method gives the proper platform for analyzing the performances and full costs.

The full understanding of the budget planning is needed in the financial management sector. This is because one is charged with the responsibility of analyzing expenditure projections and also advising the policy makers on the best budget proposal to use for a certain project. For a financial manager in my case, my work was as an adviser as what is the best way forward in the budgeting of the new project. For someone in my shoes, it is important for them to realize that it is very easy to control government expenditures at the initial level before the execution part arrives.

The primary objective of the public expenditure management is so that there can be the maintenance of the aggregate fiscal discipline. This means the effective control of the budgets totals. An actual budget, therefore, is one that has some desired totals. Another reason as to why the budget is managed is so that resources can be allocated with the government priorities in mind. Promoting the efficient delivery of services is also among the main reasons for controlling public expenditure.

To manage the public spending, there are a set of measures that need to be implemented to ensure that the management is a success. A strategy for the application of this rules is put in place some of these strategies include; institutional framework there should be some clearly defined principles which are set in the states constitution. This means that the budget should ensure that it covers all the expenditure and all the subsequent revenues. Any extra funds and external finance should also be highlighted in the budget.

Another measure that is used is the medium-term fiscal framework. In this measure, the countries are supposed to provide the medium-term fiscal frameworks and the set objectives. The budget preparation process is also another means of controlling the public expenditure. There should be a well-defined and understood array of steps in the creation of the budget whereby each step will have the ample time I need to be fulfilled. We also have the budget execution and monitoring whereby spending limits which have been agreed by the parliament are enforced and the ministry of finance in the country, in turn, ensures that these boundaries are enforced. This subsequently ensures that the public expenditure is controlled considerably.

Other measures include the accounting and reporting action whereby the budget should contain a conventional system of analysis which will, in turn, promote accountability. The concepts that are put to work in accounting need to be used for the disbursement of funds also so as to ensure that the funds are properly divided and in turn properly utilized. We also have the financial control whereby this entails the comprehensive statutory base that defines the system and the functions of the management control and the internal control.

However, out of all these measures for ensuring that public expenditure is properly managed by the government the best measure that can be used and can bring results is the budget execution and monitoring. This is because before the public funds can be disbursed to be used there will be an already understood purpose as to the reason the money has been paid. When one wants to get money for a certain project, one must, first of all, write a budget, and this will be the draft which will, in turn, be taken to parliament to be analyzed. This draft should contain the government's objectives and the macroeconomic policy together with the plans for a budget. The risks of the project should also be listed in the draft as well. Once it has been analyzed in parliament, then I will be represented to the public in a clear and concise form whereby the members of public will also be able to analyze it further. This is the best method of public funds will not go missing every time. If there is a project which needs funding, then the project will have to be analyzed if it is genuine or not this, therefore, ensures that those fake projects that may misuse public funds have no way of succeeding.

Due to the different political cultures of governments around the world, their fiscal transparency varies differently. The western democracy shares the following fundamental measures in their method of finance reporting. First of all credibility which means that the government financial reports are supposed to portray the element of trust. This confidence may be described through the presentation of information that is reliable following the standards that have been set by a body which have a high level of independence. The financial report is also supposed to be fair in its presentation though the government may not be subject to disclosing all the financial information they should be accurate in revealing their financial plans, conditions, and performance they are experiencing.

Value added is also another factor that the government considers in its financial reporting. Here the government should ensure that the financial reports increase their value about the already disclosed budget and any other information that has been released concerning the project. The financial report should be consistent and uniform also, this is to mean that the same rules should be employed for all the financial reports. Exceptions should only be made once the scenarios change and the same reporting format should also be encouraged. The format, therefore, ensures that the financial reports are understandable and are comparable so that they can be harmonized when necessary and reconciled if need be.

A budget is a comprehensive and formal plan which estimates the expenditure and income for an organization be it a private or public organization. A reasonable budget uses the sound business judgment strategy in the analysis of past trends. This information is critical as it can help the company in a lot of ways. A real budget facilitates for business or even the parastatal to assess the available opportunities. The budgeting process also allows the firms to plan the long term and short term strategies to increase profits or for the parastatal to achieve their primary goals. In my case, the budget would be useful for ensuring that the project is completed in time.

A good budget should be realistic and quantifiable in nature. The parastatal or the firm should set goals that will be attainable so as to make use of the little resources that may be available to it. This element of realism will ensure that those that associated with the project are committed enough in ensuring that the project is realized. Another reason that a realistic budget would be the best is because an unrealistic budget will, in turn, tamper with the creditworthiness of the project. A proper budget should ensure that the historical element is met. This only means that the budget should reflect a clear comprehension of the past outcomes and the expected future results as well. This, in turn, ensures that the firm sets benchmarks that they can use as motivating factors in the project.

A real budget should also portray elements of period specificity; this means that a company should set a budget that indicates the time of the project. They should show a reasonable amount of time that they require finishing up the project. The budget should also be standardized which means to apply the use of standardized research techniques, formulas, and forms. This will, in turn, ensure that the budget is efficient in relaying the messages that it has to offer.

The budget is also supposed to be inclusive which means that the budget should include even the smallest detail that will be used in the project. In turn, this ensures that the budget covers the small places thus ensuring that it is adequately filled with helpful information. The budget should also be successfully reviewed; this means that even those who make the budget are supposed to reviews their budget to ensure that they have not made any errors, or they haven't left out any information that may be helpful. The budget is also supposed to be formally adopted and disseminated; this means the budget should, first of all, be accepted by the people at the top. Therefore, the management will subsequently ensure that the plan to use for the budget is distributed properly to the workers (Ebdon & Aimee, 2006).

A budget is also supposed to be frequently evaluated. The parties that are involved in the budget are expected to visit it from time to time to ensure that they achieve the milestones which they have set. They are obliged to ensure that they compare the budget and the results they have gotten to make sure that they are on the right track. In a nutshell, the primary importance of a budget is that it guarantees proper utilization of the public funds and also the use of the company resources.

References

Ebdon, C., & Aimee, F. L. (2006). Citizen participation in budgeting theory. Public Administration Review, 66(3), 437-447.

Guthrie, J. (1998). Application of accrual accounting in the Australian public sector–rhetoric or reality. Financial accountability & management, 14(1), 1-19.

Schick, A. (1998). A contemporary approach to public expenditure management. World Bank Institute.