FISCAL MANAGEMENT MEANING AND

IMPORTANCE

Subject: RD 614 ( Financial Management)

Professor: Dr. Rudina May M. Ramos
Reported by: HADIJAH L. ALI
FISCAL MANAGEMENT MEANING AND
IMPORTANCE

1. Public and Private Management

2. Organization of the Financial Management function
3. The National Perspective on Financing Education
4. Public and Private Sectors: Role in Economic
Development
What is Fiscal Management?
 Fiscal Management=It is concerned with the efficient use of
an important economic resource namely, capital funds. 
 Financial management deals with procurement of funds and
their effective utilization in the business. 
 Financial management is an application of general
managerial principles to the area of financial decision-
making. 
 Financial management is area of financial decision making,
harmonizing individual motives and enterprise goal. 
 Financial management “is the operational activity of a
business that is responsible for obtaining and effectively
utilizing the funds necessary for efficient operations.
 Financial management is the practice of making a
business plan and then ensuring all departments stay on
track.
Why Fiscal Management is Importance?
1. Monitoring
 Capital expenditures to make sure that the company is investing its
funds in assets that will help it generate more profit
2. Managing
 The company’s cash flow to make sure that expenses are covered and
that the company has enough funds available to continue operating
3. Planning
 To minimize tax burdens and meet tax obligations so that the company
avoids costly and embarrassing fines
4. Reducing
 Operating expenses and finding ways that the company can continue to
be productive and meet its expectations without spending more money
than necessary
 Increasing
5.

The overall efficiency of the company by taking a comprehensive view of the company’s operating status
and the benchmarks it needs to meet to continue to be profitable or meet its demands
6. Solid financial management provides the foundation for three pillars of sound fiscal governance:

7. Strategizing, or identifying
What needs to happen financially for the company to achieve its short- and long-term goals. Leaders
need insights into current performance for scenario planning, for example.

8. Decision-making
Helping business leaders decide the best way to execute on plans by providing up-to-date financial
reports and data on relevant KPIs.

9. Controlling,
Ensuring each department is contributing to the vision and operating within budget and in alignment with
strategy.

10. With effective financial management, all employees know where the company is headed, and they
have visibility into progress.
Public and Private Finacial management

Public Financial Management

The Public Financial Management (PFM) Reform Program aims to improve efficiency,
accountability and transparency in public fund use in order to ensure the direct,
immediate, substantial and economical delivery of public services especially to the poor.
The Program implements the key strategies of the Philippine PFM Reform Roadmap:
Towards Improved Accountability and Transparency (2011-2016), a comprehensive
reform agenda that seeks to clarify, simplify, improve and harmonize the government’s
financial management processes and information systems. The integrated systems will
cover all transactions of government and apply uniformly to all government agencies.
Public Financial Management (PFM) is concerned with aspects of resource mobilization
and expenditure management in the public sector. PFM system is commonly described
in terms of an annual budget cycle as illustrated in figure 1.1. This annual cycle aims to
ensure that public expenditure is well planned, executed, accounted for, and scrutinized.
It typically centers around the following key phases:
 Public financial management (PFM) is a central element of a
functioning administration, underlying all government activities.
 It encompasses the mechanisms through which public resources
are collected, allocated, spent and accounted for. As such, PFM
processes comprise the whole budget cycle, public procurement,
audit practices and revenue collection.
 Sound, transparent and accountable public financial management
is a key pillar of governance reform and of vital importance to
provide public services of good quality to citizens, as well as to
create and maintain fair and sustainable economic and social
conditions in a country
1. Budget formulation. The budget is prepared with due
regard to government fiscal policies, strategic plans, and
adequate macroeconomic and fiscal projections.
2. Budget approval. The budget is debated and approved
by the legislature.
3. Budget execution. The budget is executed within a
system of effective standards, processes, and internal
controls, ensuring that resources are obtained and used as
intended.
4. Accounting and reporting. Accurate and reliable records are
maintained, and information is produced and disseminated at
appropriate times to meet decision-making, management, and
reporting needs.
5. External security and audit. Public finances are independently
reviewed, and there is external follow-up on whether the executive
has implemented the recommendations for improvement.
Private Financial Management
= is Private enterprise, industry and business which is
owned by individual people or commercial companies, and
not by the government or an official organization. Example:
Square company, Uniliver, GSK, Grameenphone, Airtel etc
 GOALS OF FINANCIAL MANAGEMENT OF PRIVATE SECTOR
ENTERPRISE
• Goal 1: To ensure profitability in the market.
• Goal 2: To protect equity financing & debt financing.
• Goal 3: To provide the information and tools to maximize
competitiveness and enable economic growth for Bangladeshi
private industries, workers, and customers.
• Goal 4: Foster science and technological leadership by protecting
intellectual property, enhancing technical standards, and advancing
measurement science.
• Goal 5: Observe, protect, and manage the Earth’s resources to
promote environmental stewardship.
OBJECTIVES OF FINANCIAL MANAGEMENT OF
PRIVATE SECTOR ENTERPRISE
• (a) To earn high profit.
• (b) To maximize the wealth of shareholders.
• (c) Growth.
• (d) To fulfill needs and wants of the people ;
The National Perspective on Financing Education
Education in almost all countries is provided in both the
private and public sectors. Education consumes a significant
amount of resources in almost all countries, running between
six and ten percent of gross national product. A certain
minimum level of educational provision is generally assumed
to be necessary for a country to attain a reasonably high rate
of economic growth. There are three main criteria by which
the systems of educational finance are traditionally judged:
whether the level of provision of educational services is
adequate; whether the distribution of educational resources
is efficient; and whether the distribution of educational
resources is equitable
These three criteria are interrelated. The objectives by
which adequacy of education is defined also require at least
a minimum level of competence and commitment on the
part of teachers. The requirements for real resources to
meet standards of adequacy set, in turn, the financial
requirements. There are two main approaches to the
problem of equity in finance of higher education. In Europe
and in most developing countries, the central government
pays most of the costs of postsecondary education,
including student maintenance, and the necessary funds
are distributed directly to the institutions.
 School Finance and Assistance
• Section 33. Declaration of Policy -It is hereby declared to be
the policy of the State that the national government shall
contribute to the financial support of educational programs
pursuant to goals of education as declared in the
Constitution. Towards this end, the government shall: 1.
Adopt measures to broaden access to educationthrough
financial assistance and other forms of incentives to schools,
teachers, pupils and students;and 2. Encourage and
stimulate private support to education through, inter alia,
fiscal and other assistance measures.
• FUNDING OF REPUBLIC SCHOOLS
Section 34. National Funds- Public school shall continue to
be funded from national funds: Provided, That local
governments shall been couraged to assume operation of
local public schools on the basis of national fund
participation and adequate revenue sources which may be
assigned by the national government for the purpose.
Section 35. Financial Aid Assistance to Public Secondary
Schools-The national government shall extend financial aid
and assistance to public secondary schools established and
maintained by local governments, including barangay high
schools.
• Section 36. Share of Local Government -Provinces, cities
and municipalities and barangays shall appropriate funds
in their annual budgets for the operation and maintenance
of public secondary schools on the basis of national fund
participation.
• Section 37. Special Education Fund -The proceeds of the
Special Education Fund accruing to local governments
shall be used exclusively for the purposes enumerated in
Section1 of Republic Act No.5447, and inaccordance with
rules and regulations issued by the Ministry of Education,
Culture and Sports and the Ministry of the Budget. Said
proceeds shall be considered a local fund and shall be
subject to Presidential Decrees No.477, Presidential
Decree No.1375 and other applicable local budget laws
and regulations.
[Link] and other School Fees
Secondary and post-secondary schools may charge tuition
and other school fees, in order to improve facilities or to
accommodate more students.
• [Link] OF PRIVATE SCHOOLS
Section 40. Funding of Private Schools -Private schools
maybe funded from their capital investment or equity
contributions, tuition fees and other school charges, grants,
loans, subsidies, passive investment income and income
from other sources.
Sec.41. Government Assistance. —The government, in
recognition of their complementary role in the educational
system, may provide aid to the programs of private schools
in the form of grants or scholarships, or loans from
government financial institutions: Provided, That such
programs meet certain defined educational requirements
and standards and contribute to the attainment of national
development goals.
• [Link] and Other Fees.- Each private school shall
determine its rate of tuition and other school fees or
[Link] rates and charges adopted by schools
pursuant to this provision shall be collectible, and their
application or use authorized, subject to rules and
regulations promulgated by the Ministry of Education,
Culture and Sports.
• Section 43. Income from Other Sources - Any private
school duly recognized by the government, may receive
any grant and legacy, donation, gift, bequest or devise
from anyindividual, institution, corporation, foundation,
trust of philanthropic organization, or research institution
or organization as may be authorized by law.
Furthermore, private schools are authorized to engage in
any auxiliary enterprise togenerate income primarily to
finance theireducational operations and/or to reduce the
need to increase students' fees.
• Section 44. Institutional Funds -The proceeds from tuition
fees and other school charges, as well as other income
ofschools, shall be treated as institutionalfunds. Schools
may pool their institutionalfunds, in whole or in part, under
joint management for the purpose of generating additional
financial resources.
Procedures followed in Financing Education by the
Municipal, City, Provincial, and National Governments
• There is no special education tax fixed by law in the
Philippines.
• Municipalities, municipal elementary education by virtue
of Commonwealth Act No.586 which placed the
responsibility of support for elementary education on the
National Government.
• Local entities may set aside sums from their general fund
income if they can afford, but it is optional.
• TheNationalGovernmenthasassumedthegreater
burdenofsupportfor:
– Elementary schools in the wholecountry
– Regional normal schools, vocational schools, specials
schools and partially even provincial secondary schools.
– Chartered colleges anduniversities
• The construction and repair and improvement of school
buildings remain the legal responsibilities of provinces,
municipalities and cities
• Procedures followed in Financing Education by the
Municipal, City, Provincial, and National Governments
Financial Aspects of Educational Planning
• Running schools and improving them cannot takeplace
without the proper resources, and it all starts with money.
• Finance is the life blood of any education system,making
it possible to build schools, hire and train teachers, and
equip classrooms with learning materials and technology.
Public and Private Sectors: Role in Economic
Development
A. Role of Public Sectors
By the term "Public Sector", it means, the Government.
It has been said that the sole responsibility of Government
is governance i.e. facilitating the economy. Governance
means the pulling together of all common resources in
formulation of policies, provision and establishment of law
and order, and the provision of infrastructure for economic
growth and development. Most successful nations of the
world owe their success to good governments, who have
provided enabling environments.
1. Policy Formulation
It is the prerogative of the government to formulate
policies that will facilitate business and economic development
in thecountry. The policies indicate what we stand for as a
nation. The economic policy should articulate the yearnings
and aspirations of the various sub-sectors and interest groups.
We now need target oriented action centred economic policies
that will bring distinctive results which will enhance the living
standards of our people.
2. Education.
The government should not relent in its efforts in increasing
the literacy level of our nation. Every child of school age
should be in school. The standard and curriculum appropriate
with our societal values should be specified clearly by the
government and enforced. Funding should also be adequate
since it is an investment in our future.
3. Provision of Essential Services:
Some services such as Electricity, Posts and
Telecommunications, Water Supplies and Medicare are basic
to the populace. Adequate and well spread supply of these will
go a long way in minimizing the rural/urban drift thereby
allowing the rural areas to contribute more meaningfully to the
economy in addition to improving their well being. The
government still has a lot to do in providing adequate primary,
secondary and tertiary health care services at affordable prices
to the populace since the majority of them can ill afford the
private medical establishments.
 Various immunization and health education programmes are
best done by the government. More specifically, the
government should see to the proper funding of the teaching
hospitals and other medical training establishments.
The role of efficient Posts and Telecommunications
services for any economy cannot be overemphasised
especially in the present world dispensation. While the
government is still a key player in this area, substantial
improvements are still necessary.
4. Provision of Infrastructure
Good road and rail network are needed for the movement of
people in addition to materials both for industrial use and
consumption. The current high price of food items are due primarily
to the absence of good roads to the rural areas where these food
items are primarily produced. Movement of raw materials to various
production centres and materials to sales points are now heavily
constrained by the poor state of our road. The network needs to be
restructured to serve our current needs and economic aspirations.
The government is the only organ most capable of addressing
these problems.
5. Administration of the Ports:
The ports are the gateways to the nation and the
economy. They give a very strong first impression about us
to visitors of various types. The situation where cargoes are
delayed at the ports for weeks due to administration
bottlenecks does not enhance economic development. Also
a situation where traffic to our airports is restricted does not
encourage foreign investments. The government needs to
ensure that well trained, courteous and efficient Customs,
Immigration and Security Staff are positioned at the ports.
6. Maintenance of Laws and Order
Maintenance of law and order is to a large extent a
prerogative of the [Link] the entire populace
need a social reorientation that will make us appreciate the
benefits of law and order, our police force needs more
encouragement and equipment in combating the social
miscreants.
7. Investment in Strategic and Sensitive Industries
The government still has access to more cash than any
organization. Experience in countries like Kuwait especially in boom
years has shown that such monies are better invested in strategic
and profitable ventures for the benefits of generations unborn.
Investments in strategic upstream industries like petrochemicals·,
iron and steel, metallurgy, petroleum exploration, heavy industries
have a very high multiplier effect on the rest of the economy
especially in the supply of raw materials. Sensitive industries such
as the defence industrial complex should be publicly owned and not
left in the hands of few individuals who may not be able to
accommodate the national interest in their agenda.
8. Social Welfare
The government should see it as its duty to rehabilitate drug
addicts, beggars, insane people who are nuisance on our roads. They
alsohave a role to play in economic development however it is small.
8. Security of the Country
The security of the country is the sole responsibility of the
government the world over. Our armed forces should be seen to be
willing and able to deter any external aggression. Experience in
Kuwait and Taiwan demonstrated that we cannot play without national
security. Warfare is no longer in numbers. Technology and weaponry
now play prominent roles.
B. Role of Private Sectors
By private sector in this case, means the 'business' sector. This sector is
concerned with the provisions of goods and services for a profit.
Profit is the reward of any enterprise for service to the society - a gesture of
appreciation from the society for the goods produced and services rendered to it.
It can thus be deduced that the more profit a business makes, the more the value it
has added to society. Businesses need to focus on the improvement of value
rendered to society by innovation through the application of science, technology
and management practices. Such will improve the efficiency of resource utilization.
Profit is often guaranteed in so doing. Profit is the engine of growth; it guarantees
the survival of the business and creates an incentive for other entrants thereby
multiplying activity. It can easily beconcluded that the private sector has a very
crucial role to play in our economic development.
1. Focus-on the Consumer and the Trade
Understanding/meeting the needs of the consumer
profitably justifies the existence of a business. Satisfying
the various consumer needs enhances their well-being thus
generating stronger demand in [Link] run.
2. Innovation
Innovation is simply the process of consistently applying
and adapting relevant practices to the above. Businesses
owe their survival to innovation since it makes the
products/services relevant. Demand will be sustained. This
will afford a competitive economy that will guarantee
profitably and ensure development in the long run.
3. Creation of jobs
A profitable business expands, creating the need for
more people. Lower levels of employment boost effective
demand thereby satisfying a crucial role for economic
development.
4. Payment of Taxes
One of the vital roles of a vibrant private sector is the
payment of taxes. Taxes are a veritable source of revenue
for the activities of government, in so doing. The private
sector is assisting in fulfilling the crucial role for the real
public sector as outlined earlier.
5. Human Resource Development
In fulfilling the roles, the private sector depends a lot on PEOPLE.
Afterall 'people make things happen'. In preparing them adequately
for these challenges, such people need to be well trained in the
course of their duties. Millions of Naira are expended annually by
serious companies on various human resource training and
development programmes both locally and abroad. In so doing, the
business sector enhances the level of awareness of the nation. The
people so trained are able to contribute significantly to society in
various ways. Some retire as consultants with years of
experience/expertise behind them while others also find their way
back into government where their expertise/ contributions are
invaluable. Some go on to set up their own businesses.
6. Provision of goods and services for export
Japanese products like cars, consumer electronics, computers and
ships, to mention a few, did not flood the world markets overnight.
Their success in the world market derive largely from their success in
the tough Japanese market. That is why any product that survives the
Japanese market is often a world beater. This is made possible by
consistent innovation, product quality, focus on consumer needs
fueled by an intense competition within the Japanese market. Japan
now has a huge trade surplus with the rest
of the world. This sustains a high level of employment within the
Japanese economy. The private sector has crucial roles to play in the
development of this economy.
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