RUNNING HEAD: FINANCE FOR PUBLIC ADMINISTRATORS 1 FINANCE FOR PUBLIC ADMINISTRATORS 10 Public Financial Management Industry’s Consultant Author’s (Name) Institution (Affiliate) Question 2: Public Financial Management Industry Consultant 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 decision ...

1. RUNNING HEAD: FINANCE FOR PUBLIC
ADMINISTRATORS 1
FINANCE FOR PUBLIC ADMINISTRATORS 10
Public Financial Management Industry’s Consultant
Author’s (Name)
Institution (Affiliate)
Question 2: Public Financial Management Industry Consultant
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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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.

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