Title of Presentation

Introduction to basic financial

management
Faculty: Management Sciences

Name of Presenter: Mr Olifant

Position: Lecturer
 Introduction
 Public resource management must be viewed from the
specific context of the public sector;
 The environment of public resource management involves
values, the general and specific environmental
components and laws.
 Public resource managers, and in particular financial
managers, must relate to their context if they are to
manage successfully;
 Public resource management can only be studied and
understood when its contextual values, environment and
laws are considered.
 These values are constitutionalism, democratic values,
economic values, other values;
 Financial management is a broader concept and
embraces the management all facets of the financial
management;
 This unit begins with the explanation of financial
management;
 And we will therefore provide an explanation of
financial management basic processes; the various
components of general environment; components of
management applicable to finance;
 The unit will be concluded with an explanation of the
financial management cycle.
What is public financial management?

 Public financial management is the study of

the role of the government in an economy, it is
the collection of sufficient resources from the
economy in an appropriate manner along with
allocating and use of these resources to
advance public interest, and it means applying
the management functions like planning,
organising leading and coordination to all
spheres of government.
 Public financial management focuses more on the
control of expenditure and accountability of resource
usage and distribution
 Financial management basic processes

Process Description
Budgeting

Safeguarding

Monitoring

Accountability
 Financial management basic processes

Process Description
Budgeting Determining the income and capital required
to finance the expenditure planned by
preparing the detailed budget
Safeguarding Implementing controls to ensure that the
income, capital and assets such as money
and motor vehicle are safeguarded against
the improper use loss or theft.
Monitoring Monitoring actual results and performance
against those budgeted through
management reporting
Accountability Reporting to all stakeholders by preparing
financial statements which are audited by
auditor general
Components of general environment

Political component
Economic component
Social component
Cultural component
Technological component

These components and trends above influences

the general environment of public resource
management system, we will therefore
explain each of these components in the next
slides
 Political component

This refers to the way in which society is

governed
This component has a major impact on all
societal organisations and their management
Public institutions across the country are
consistently influenced by political factors
 Economic component

The economic system of a society is the

method by which it creates and distribute
wealth
Through the economic system scarce
resources are allocated to competing
economic factors
Prevailing economic ideas, philosophies,
ideologies form the basis for international
economic structures and processes such as
the world Bank and IMF.
 Social component

This include demographics such birth and

death rates, gender composition, life
expectancy, age composition and many other
social indicators;
All these affect public resource needs and
management, as well as social makeup of
clients and employees
 Cultural components

This comprises of a society’s basic beliefs,

attitudes, role definitions and interactions;
It encompasses learned and shared
behaviour, norms, values, artefacts and the
behavioural patterns acceptable to groups
 Technological component

This involve the use of mechanical and other

processes to produce and distribute goods
and services;
It is the information, equipment, techniques
and processes required to organisational
inputs into outputs
Components of management applicable to
finance

Managing public funds is characterised by the

application or implementation of actions and
or adjustment of management functions to
exercise more effective control over limited
resources and these are;
Planning
Organising
Leading and motivation
Control
Co-ordination
 Planning

Plans are usually prepared to give guidelines to

managers;
It is therefore a process of determining in
advance what should be done and how it can be
realised;
The process applies to planning is done by
managers at various levels within the institution;
Planning should begin with an understanding of
the organisational mission.
From mission statement, specific objectives or
goal can be established
Planning accomplishes the following

Provides direction for project objectives;

Reduces the overall impact on change on a
project
Increases the productivity of a project team
Cost saving
 Organising

To carry out work involving a large number of

resources, there must be a clear indication of
who has to do what and, if something goes
wrong, who to report to;
This applies to situations ranging from an
office where various administrative functions
are performed to a government departments
projects involving several departments
Several methods can be used in the
organisational process
It is necessary to consider the organisational
and work objectives and to determine the
type of organising needed to accomplish
those objectives;
As an organisation method, division of work
can be classified into job specialisation and
depart-mentation
 Job specialisation

Is the division of a complex job into simpler

tasks so that one person or group may carry
out only identical or related activities;
The first aspect is the description of each
person task
Project managers must know that certain
jobs are not oversimplified leading to
boredom or fatigue
 Depart -mentation

It is a process grouping related work

activities into manageable units.
 Leading

Can be defined as the ability to influence

others to achieve certain objectives;
It is a process of leading and inspiring
workers to carry out task related activities of
a group;
E.g. Leaders can use their powers and
influence on others to encourage them to
perform;
The success or failure of the organisation
starts with leadership skills of a leader.
 Control

Once planning has been, the staff know what to

do and how to do it and they have necessary
support and motivation;
A system is needed so that managers can
determine whether work is progressing as
planned,
Control is the process that ensures that actual
activities correspond with the planned activities
It is an on-going process that follows planning
and organising
Actual results are compared to planned results
and corrective measures are taken.
 Coordination

Coordination refers to integration of staff,

departments and various activities to achieve
a purpose;
Coordination also refers to the time it takes
to accomplish an activity
 Public Financial management cycle
 Management is a continuous process of planning, organising, leading,
control and coordination
 The following diagram illustrate the financial management cycle:

Planning budget preparation

budget approval
Auditing and reporting

budget management and control

 Financial Planning

Concerns the analysis of and choice between

alternative plans for realising the goal and
specifying ways to achieve it;
In essence it entails two choices:
The problem of determining capital needs and
composition of assets, how much capital is
necessary, for what purpose, when and for how
long?
The problem regarding the provision of capital and
the composition of liabilities;
Financial management therefore gives expression on
monetary terms to possible future activities and
provide the quantitative basis for the future.
 Budget preparation

Budget preparation is the second step in the

financial management cycle;
This means that the revenue and expenditure of a
particular department must be planned and
captured in a specific department;
All public institutions are compelled by law to
prepare the budget for each financial year;
This budget must be approved before its financial
year to which they relate actually begins;
the budget for the year 2022/2023 financial year,
starting in July must be approved by end of June
2022.
 What is a budget

A budget is a plan

It summarises in financial terms the

activities planned for the next financial year
by setting out the expenditure which will be
incurred to carry out these activities as well
as the revenue or income and capital
required to finance these expenditure.
 Budget process

Budget instructions are issued to the various

heads of departments;
Detailed estimates are prepared of capital
and operating expenditure and income;
Departmental budget are combined and the
total expenditure for the institution is
calculated;
Draft budget is prepared
 Budget approval

The next step in the financial management

cycle is to get approval for the budget;
Approval depends on the information
contained in the draft budget and its
importance, which will enable financial
managers to achieve their policy priorities;
Sufficient time will have to be set aside to
study the budget in detail before it is
approved.
Budgetary management and control

Managers must be accountable for the

expenditure that takes place in their
departments;
Accountability refers to the obligation to
account or to answer for responsibilities, which
have been conferred upon a functionary by the
electorate;
Every public institution should have clearly
defined financial management strategies;
All levels of the workforce should be educated
on the resource control objectives.
 Auditing and reporting

Auditing and reporting is the last step in the

financial management cycle;
It is pointless for public managers to spend
considerable time approving a budget if
actual performance against the budget is not
measured during the budget year;
Management reporting is a tool used to
assess the extend to which the policies and
objectives should be achieved,
as well as to ensure that heads of
departments adhered to the budget
Any variance in the comparison between
actual income and expenditure and the
budgeted income should be reported;
The reports should be in written format:
What the institution should have done during
the review period
What the institution did during the review
period
Why the institution did not achieve its goals
 Specific outcomes for the test unit 1
and 2

Explain by means of a diagram how government

administers exploitation of resources. (15)
Give a comprehensive exposition, without he aid of
the diagram how the exploitation and utilisation of
resources is administered by the government.(15)
Describe administration of the following resources:
Natural, financial, human and information
resources. (20)
Describe planning (also refer to internal and
external purposes as part of management of
resources.(15)
Describe organising as part of the management of
resources (also add division of work and delegation of
authority). (15)
What tools are provided to management to facilitate
the exploitation and management of resources?{6}
Explain what financial management is? (5)
Illustrate the financial management basic processes.
(10)
Describe the various components of the general
environment.(15)
Components of management applicable to finance.
{25}
Discuss the steps in the financial
management cycle.(30)
 Thank you

Contact details
Name of Presenter: Mr Olifant
Position: Lecturer
Tel.: 051 507 3378
E-mail: [email protected]

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