Bài giảng quản trị công chapter 6 pgs ts sử đình thành

CHAPTER 6

FINANCIAL MANAGEMENT
SU DINH THANH


LEARNING OBJECTIVES


GOVERNMENT BUDGET REVIEW
ƒ B
Budget
d t is
i finance
fi
off governmentt
ƒ There are two main functions for the government
b d t in
budget
i an overall
ll sense: economic,
i andd financial
fi
i l
(Musgrave and Musgrave, 1989).


Economic functions of the budget
ƒ Th
These are usually
ll described

d
ib d as policies
li i for:
f
ƒ allocation (the relative size of the public and
private
i t sectors);
t )
ƒ distribution and;
ƒ stabilization.
t bili ti


Financial functions of the budget
ƒ Th
The financial
fi
i l functions
f ti
off the
th budget
b d t are analogous
l
to accounting. Balance sheets need to be drawn up
f the
for
th whole
h l off governmentt activity.
ti it
ƒ The financial functions of the budget are:

ƒ an evaluation
l ti
off total
t t l governmentt andd public
bli
authority expenditures within the budget sector;
ƒ to
t actt as the
th legislature’s
l i l t ’ instrument
i t
t off
accountability and control over the government
i its
in
it handling
h dli off financial
fi
i l matters.
tt


THE THREE MODELS OF PFM
ƒ Th
The classical
l i l model
d l
ƒ The ‘new public management’ (NPM) model
ƒ The
Th Barnard–Simon

B
d Si
governance model
d l


The classical model
„ There are two cardinal/main rules in the classical PFM

model:
„
„

(1) a governmentt should
h ld balance
b l
it budget.
its
b d t
(2) a government unit should not overspend its appropriations.
These rules are codified in laws and regulations.

„ In conformity with this provision, there are statutes and

regulations
g
on budget
g ppreparation,
p
, approval

pp
and execution,,
and eventual cash disbursement by the Treasury. Financial
management makes budgetary resources available to officials
to carry out authorized
h i d purposes.
„ Can you give some weakness of this model? To refer to
p
102 - 103.
103


The classical model
„ Such as: Financial management is an invisible

bureaucratic function uninvolved in policy decision
making and largely unaffected by budgeting
approaches.
„

As PPBS, ZBB and mission budgeting.


The ‘new p
public management’
g
model
„ NPM model
d l conveys the
h implications

i li i
off private
i

sector practices:
„
„
„
„
„

Citizens
Ci
i
are considered
id d as customers.
Performance and results – not inputs – are stressed.
Outputs and outcomes should be
measured, compared with benchmarks and verified
by value-for-money audits.
audits
Universal rules of the marketplace: economy and
efficiency.
Double-entry recording should replace the singleentry
y system.
y


The ‘new p
public management’

g
model
„ NPFM has the potential to energize an ossified

bureaucracy, but there are several problems with it.
„ First, it does not address the core issue in
ggovernment. If ggovernment exists to take care of the
consequences of market failure, doing those things
for which business lacks incentives or is not
equipped to handle. But equity rather than
efficiency, economy or even effectiveness is the
ultimate criterion in public or political decision
making in a democracy.


The ‘new p
public management’
g
model
„ Second, corporate model has several scandals. It is

not perfectible in practices .
„ Third, It elevates administrative discretion at the
expense
p
of legislature
g
ppower. It ppromotes the ethos
of the business-minded managers against the
politically savvy policy analysts. It does not

appreciate the primacy and resiliency of budget rules
in government.


The ‘new p
public management’
g
model
„ => What is needed is a governance model that

recognizes the respective roles, competences and
advantage of government, civil society and
businesses.


The Barnard–Simon ggovernance model
„ Chester Barnard and Herbert Simon are pioneers to

trace to an organization theory.
„ Barnard (1968, originally 1938) and Simon (1945)
viewed an organization
g
– ggovernment or business –
as being in equilibrium when its managers succeed
in balancing the contributions from its stakeholders
(table 1)


The Barnard–Simon ggovernance model
Table 1

The Barnard–Simon ggovernance model
„ Barnard

and Simon focused on individual
organizations. However, the solution of many
complex societal problems requires the co-operation
of a network of public and private institutions
„ Working through network provides government with
more tools. Besides direct provision of goods and
services, government could enter into contracts with,
or give grants to business and nonprofit
organizations. It could provide loans, loan
guarantees or insurance coverage (Table 2).


The Barnard–Simon ggovernance model
Table 2


COMPARATIVE APPRAISAL OF THE MODELS
„ The role of financial management is influenced

heavily by its environment. Specifically, the nature
of the entity being managed and the higher level
manager tend to affect what financial managers do


Comparative appraisal

„ Its
I different
diff
roles
l in
i altered
l d contexts have
h
serious
i

implications for the content of public financial
management.
management
„ Financial managers are rewarded for their
contributions to conformity (classical model),
model) shortshort
term efficiency and economy (NPM model), and
longterm effectiveness and equity (governance
model).
„

Consequently, they think of what is managed
differently, and monitor different aspects of financial
performance.


Comparative appraisal

Comparative appraisal

„ Public financial management – in the broad sense –

is aided by budgeting, accounting and auditing.
„ The input and control orientation in the classical
model ggives wayy to the mission-driven output
p
budgets favoured by the NPM model.
„ The macro perspective of the governance model
requires a more encompassing budget to see how
resources are allocated to various service providers
(global).


Comparative appraisal