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Full Project – Design and implementation of a public financial management system

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CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Financial management can be regarded as the process which ensures that financial resources are obtained economically and used efficiently and effectively in the accomplishment of the desired goals with proper auditing. These processes involve monitoring and analyzing public institutions financial conditions, general and special account, management budgetary procedures, financial statements and reports, payroll/income tax calculation and salary payments, and managing cash flow.Finance is the function in business (private/public) that acquires funds for the organization and manages those funds within the organization. These activities include preparing of budgets; doing cash flow analysis; and planning for the expenditure of fund, assets (Nickel, et. al. 2005:582). Public (Government) finance on the other hand refers to all activities of government in generating and allocating (spending) revenue towards ensuring efficiency of the state and the general well-being of the people, that is, financial operation of public treasury and its implication. Professor Dalton affirmed too, that Public Finance is concerned with income and expenditure measures of the public budget authorities together with the adjustment of one to the other. The management of public finance would bring about control and coordination of the funds to achieve viability of projects in the public sector. Ola and Offiong (2008) defined public financial management as “the measures put in place to control the people’s money or funds. The management of the public funds is known as public financial management.

A software system or mechanism used in the management of either a public or private financial system is called a Financial Management System.A financial management system is also the methodology and software that an organization uses to oversee and govern its income, expenses, and assets with the objectives of maximizing profits and ensuring sustainability.

In a modern money-using economy, finance may be defined as the provision of money at the time it is wanted. Every person responsible for finance, whether it be the finance of company (business), household (private) or government (public), is confronted with the prospect during the coming days, months or years of an inflow of an inflow of receipts on the one hand and an outflow of payments on the other. It is the person’s responsibility to try to ensure that the inflows and outflows are so arranged that money is always available to make necessary payments as they arise. Where both receipts and payments take place evenly and continuously little difficulty may occur. Where either the receipts or the payments or both occur discontinuously and especially if they occur in relatively large amounts at relatively long intervals, much care and forethought have to be taken to ensure that at any given moment there is money available to make the necessary payments. Public financial management is a vast field of endeavour which encompasses the whole processes of formulating and implementing decisions made on government services, expenditures, taxes, public debt and other revenue. For the Federal, State or Local Government, public financial management is vital in the governance than other matters; since money (funds) is the hub of the wheel of every government activity. Behind the formulation and execution of financial decisions like many questions of public policy, and this question ranges from: what fiscal measures are to be put in place to ensure high standard of living; satisfactory income distribution, resource allocation and public accountability? More questions could be raised as to what changes are required to make the tax system more equitable and efficient in order to generate substantial funds to meet the needs of the people.

The aims of government in a modern economy have identified four conceptual functions. The first is the provision of essential public services. The second function is the control of certain sectors of the economy – banking, manufacturing, agricultural, industry, for intervention and regulatory role. The third is the application of social policy and the fourth is that government assumes responsibility for the overall state of the economy. This involves the maintenance of a level of employment, the encouragement of growth in the economy’s productive capacity, the relative stable prices and the preservation of solvency in its external business relationships. The subject matter of public financial management could be pinned-down to the acquisition and disposal of resources by the government and it agencies through proper management and control. Public financial management is all about government’s management and control of its income and expenditure. This presupposes that the management and control involves governments’ budget usually prepared annually or through developmental plans for a specified period depending on the government’s needs. Financial management is divided into private, public and business. Ekpung (2001) cites definition of Financial Management as the study of money management. It deals with how businessmen, governments, financial institutions and families handle money. How they budget, save, lend, spend, and invest it in a more useful manner without misappropriation by the authority or to those concerned. Financial Management is allpervasive as it is to ensure that funds are efficiently acquired, safely held, properly committed, effectively and economically utilized to meet specific objectives. These objectives may include:

Determining financial policies of organization

Ensuring financial control

Setting out the required organisational structures for effective discharge of financial duties and responsibilities.

1.2 Statement of Problem

Prior to the emergence and introduction of computer all these processes and activities were done manually. The various public institutions today operated on manual systems with many still using the same manual practice.Like any other public institution, the Oshimili South Local Government office, is operated on government budget.This not only disclose that money allocated to this agency is limited but that it must be use with optimal accountability. Observations show that the agency still operate largely on manual system of financial management which on interview and internal auditing disclosed fund misappropriation, trumped up values and other financial recklessness.

The increase in the use of computer in both public and private institutions of the world economic is an undisputable conclusion for efficiency, speed and accuracy of its operations in achieving results.

However, the manual processes and procedures of financial resources allocation and utilization in our contemporary days have been confronted with consistent problems of errors and wastage of time which are traceable to human mistakes and shortcomings. The establishment of a sustainable, manageable, reliable and flexible financial management system forOshimili South Local Government Area to curb these problems inherent in the existing system is the bases of this project work. Such a financial management system will support all operational accounting procedures as well as financial management. Highlighted problems faced in the financial management activities includes

The consistent prevalence of errors in calculations carried out on financial reports which are traceable to human mistakes and shortcoming.
Improper handling of financial statement, reports and records as a result of the problem of space for storage and retrieval purposes which led to many files been misplaced.
The interval or time consumed in analyzing and ascertaining the accuracy and approval of financial statements and accounts which in turn affects decision making and policy formulation.

1.3 AIMS AND OBJECTIVES OF THE STUDY

The aim of this research study entails the design and implementation of a basic financial management system for a public institution. The objectives include the following:

To minimize and if possible eradicate the problems or errors made by human beings due to shortcomings. This will be achieved by the establishment of a sustainable, manageable and flexible financial management system.

To ensure that financial records are properly stored thereby preventing them from getting lost since these records will be used in the future especially when making or planning for budget.

To ensure that accurate, faster and reliable calculations are carried out on reports without any suspicious of any sought.

1.4 PURPOSE OF THE STUDY

This project work is very essential in various including the businessmen, sole proprietors, firms, organization, companies and both private and public institutions whose utmost desire is to ensure expansion of their institution through proper financial resources allocation and management. It will be of enormous benefit to both accountants and auditors from time to time. This is because it would serve as a reference point for all who desire a financial management system.

Also it is to remove repetitive, inefficient processes and unclear procedures and provides adequate information supporting financial decision making which enables the institution to secure its resources against dubious minded managers as well as unreliable information.

Finally, the project work is also to serve as a reference or guide for future research to be carried out for proper documentation.

1.5 Significance of the study

Upon the completion and implementation of the research work, the following significance are observed. Firstly, the system would provide a harmonized financial accounting system for the local government. It would also provide cash and expenditure analysis that can be viewed quarterly and effectively used to support the budgetary process. Other significances include serving as a reference point for related systems, providing prompt information on financial status of the institution as well as ensuring speedy budget preparation. Emphasis has been laid to building a system robust enough to automate the day to day transactional processes of the institution. Another major significance is the use of information technology in managing financial activities.

1.6 Scope of the Study

The study covers the design and implementation of a basic financial management system for a public institution. Due to the vast nature of public accounting, emphasis has been laid to the areas affecting the institution most. The planned system is intended as a means of studying the use of online platforms to solve the stated challenges.

1.7Limitations of the study

Major constraints to the study were, the collection of literature for the study and tools for the system development. Local literature on the researched topic is limited in availability thus leading to dependence on foreign sources. Also the software development tool were trial version downloads from the internet with the download process time consuming and inefficient due to poor network connections. Furthermore, power supply was another major obstacle as the researcher relied heavily on public power supply which is quite poor in the research study.

1.8 Definition of Terms

Finance– this refers to the management of large amounts of money, especially by governments or large companies.

Financial Management– refers to the efficient and effective management of money (funds) in such a manner as to accomplish the objectives of the organization. It is the specialized function directly associated with the top management

Financial Management System – is the methodology and software that an organization uses to oversee and govern its income, expenses, and assets with the objectives of maximizing profits and ensuring sustainability.

Information Management System (IMS) –is a general term for software designed to facilitate the storage, organization and retrieval of information. IMS is also the name of IBM’s mammoth software program developed in the 1960s to support NASA’s Apollo space program.

Management Information System (MIS) – refers to the processing of information through computers to manage and support managerial decisions within an organization.

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