Master in Public Management

PUBLIC FISCAL ADMINISTRATION

WHY DO WE HAVE TO STUDY PUBLIC BUDGETING AND
FINANCE?

We must make choices about how resources

are utilized, and working through finances
gives a good start in organizing the options.
We operate in the PUBLIC TRUST and need to
be able to control the use of public resources.
We are using other peoples money and those
people get MAD when they money disappears
We need to make sure they do not run out of
money before they run out of need for the
service being provided with money
 We need to make a case for the
resources appropriate to provide
services to our constituents and clients,
to legislative and executive bodies
We need to understand the case being
made by other managers
We do not want to go to jail for misuse
of resources that belong to the public or
their organization
 The people in any organization who actually
understand what the organization is doing are the
people who understand the finances of the
organization
Non-profit organizations frequently have abysmal
financial management in place
Government crises, regardless of whether the
government is national, state or local, often have
budget underpinnings that could have been
avoided with better budget systems and
mechanisms for finance
 It is simply fun to understand what is
going on in public organizations, and
understanding finance is the most
important single step in gaining that
understanding
PUBLIC FINANCE VS. BUSINESS FINANCE
PUBLIC FINANCE
Uses the same tools as business
finance to allocate and control
finances but differ in terms of
resource constraints, ownership
and objectives
Government may tax to enlarge
their resources
Ownership of the government is
not clear because many
stakeholders share a legitimate
interest in government decisions
Value of government services is
neither easy to quantify or
reflected in a single measure
BUSINESS FINANCE
Increase the value of the firm to
its owners by judicious allocation
and control of resources
Operates by generating an income
stream from the sale of goods and
services on the market
Owners and stakeholders are
easily identified
Businesses output can be
measured by sales or profits
PUBLIC FINANCE VS. BUSINESS FINANCE
PUBLIC FINANCE BUSINESS FINANCE
The value of government is Value received by individual
collective, for the community as a through purchases of business
whole services
Generally, not for profit Profit-driven
WHAT IS PUBLIC FISCAL ADMISTRATION?
Generally refers to the FORMULATION,
IMPLEMENTATION and EVALUATION of
policies and decisions on taxation and
revenue administration; resource
allocation, budgeting and public
expenditure; public borrowing and debt
management; and accounting and
auditing
 Viewed as a system, it includes the
environment, structures, systems,
processes and personalities involved in
fiscal administration
FISCAL POLICY
Refers to the mix of policies on
taxation, expenditures and borrowings
for the achievement of government
objectives
PUBLIC SECTOR VS. PRIVATE SECTOR
These are sectors involved in a mixed
economy
Market mechanism is allowed to operate
freely in the operation of the price system
Even then, government intervention is
important in running the economy
Mixed economy therefore is a combination
of a market system tempered by
government regulation
Also referred to as, capitalist
Centralized-state planning = socialist
DEVELOPMENT OF PUBLIC FINANCE INSTITUTIONS

ANCIENT: SLAVE SOCIETIES

Development of settled agriculture and
rudimentary advances in the production of
goods led to the great slave empires of
Asia
Beginnings of public finance started from
the creation of the state
ANCIENT: SLAVE SOCIETIES
EXPENDITURES Largely for defense and
aggression; narrower scope of
public finance
FUNCTIONS:
-Protection of the people,
territory and sovereignty
-Preservation of internal peace,
order and security and the
administration of justice
-Maintenance of state religion
-Maintenance of the monarch
and household
-Public works/construction
- Others i.e. limited goods and
services, public recreation and
physical education
REVENUES -Lootings and tributes from
conquered people
-War chest
-Fines
ANCIENT: SLAVE SOCIETIES
BUDGETING No distinction between the
public and the monarchs
private expenditures
BORROWINGS Practically none
AUDITING -Principle of Accountability
-Maintenance and inspection of
financial records
DEVELOPMENT OF PUBLIC FINANCE INSTITUTIONS

MEDIEVAL: FEUDALISM
Characterized by changes in the political
structure
Feudalism essentially the system of
economic relationship based upon land
tenure, among the king, the lord and the
vassals
Land-based
MEDIEVAL: FEUDALISM
EXPENDITURES -Public functions of central
government usually confined
to national wars and
administration of the royal
domain
-Feudal lords take care of the
needs of their fiefs
REVENUES -Collected taxes from serfs
-License fees from merchants and
traders who passed by the manor
-Collected gross produce taxes,
inheritance tax, marriage fees
-Tolls on rivers, bridges or roads
-Aids
BUDGETING Fiefs budget was the lords
personal budget
AUDITING No central accounting system and
record keeping
BORROWINGS Personal transaction between
the monarch as borrower and
the lender ordinarily, a
wealthy trader
DEVELOPMENT OF PUBLIC FINANCE INSTITUTIONS

BEGINNINGS OF CAPITALISM
Began from the breakdown of feudalism
Period of expansion and rationalization of
national finances