Introduction to Public Financial Administration

Practice flashcards covering definitions, core concepts, components, comparison of public and private finance, and legal frameworks in public financial administration.

Public Financial Administration (Hoover Commission, 1949)

Financial administration which involves the machinery and methods by which the funds for the support of public services are raised, spent and accounted for.

Public Financial Administration (Fox & Meyer, 1995)

Activities involving finance and taxation, including central and regional institutions for accounting, auditing and budgeting, tax administration, and disbursement of funds.

Discipline of Study

A concept of public financial administration that explains several principles and theories related to financial administration such as principles of taxation, principles of accounting and theories of procurement.

Process for financial management

A time cycle process beginning with tax collection for revenue generation then spending, recording for account preparation, and finally auditing.

Management Tool

A concept where financial administration involves the management of financial functions such as planning and control of goods and services used to achieve government objectives.

Development Tool

The use of proper financial administration to accomplish development goals, stabilize the economy, and maintain effective public service operations through proper procurement methods.

Scope of Public Financial Administration in Malaysia

Involves all Ministries and departments under the control of Treasury, all state departments, local government bodies, and all statutory bodies of the federal and state government.

Statutory Bodies Examples

Examples of federal and state statutory bodies include MARA, RISDA and PKNS.

Six Main Components of Public Financial Administration

Tax administration, Budgeting, Purchasing/Procurement, Accounting, Auditing, and Treasury/ Ministry of Finance.

Tax

A compulsory charge imposed by the state or public authority in respect of which no specific service to the individual is rendered in return.

Direct Taxes

Taxes levied directly on the income or assets of individuals or company.

Indirect Taxes

Taxes used to control spending on luxury goods and to discourage behaviors such as excessive drinking and smoking.

Budgeting

A statement of revenue and expenditure of government for the future and a planning tool used for national economic purposes.

Operating/Recurrent Budget

Used for recurrent expenditure such as payment of salaries and stationery.

Development Budget

Used to achieve governments planning objectives such as the spending made under Malaysia Plans.

Procurement/Purchasing

The purchasing of government goods, services and works, including storage and the process of disposing of assets.

Procurement Methods

Includes Casual buying/ Direct purchase, Quotations, Tenders, Emergency purchase, and Foreign buying/International purchasing.

Accounting

A process of recording, collecting and disbursing of government resources and making reports concerning those operations.

Accrual Accounting

The process of recording when goods are received but not yet paid and revenue is recorded when it is supposed to be earned.

Cash Accounting

Recording revenue when it is received and recording spending when it is paid; specifically when cash changes hands.

Hybrid Accounting

A combination of both accrual and cash accounting types depending on the operation.

Internal Auditing

A review and examination of government revenue and expenditures done by the Controlling Office of a Ministry, department, or the Treasury.

External Auditing

Auditing performed by the Parliament and the office of the Auditor General.

Pre-audit

An audit performed before expenditure is incurred.

Post-audit

An audit performed after expenditure is incurred.

Treasury/Ministry of Finance (MOF)

The body responsible for all government financial and economic matters, preparing annual budgets, Appropriation bills, and providing general oversight of government department finances.

Income and Expenditure Adjustment (Public Finance)

Income is adjusted according to expenditure.

Income and Expenditure Adjustment (Private Finance)

Expenditure is adjusted according to income.

Surplus Budget Perception

Considered a vice in the public sector but a virtue in the private sector.

Federal Constitution Article 96

States that no taxation shall be imposed unless authorized by law.

Federal Constitution Article 105

Provides for the office of the Auditor General.

Federal Constitution Article 103

Contains provisions regarding the Contingencies Fund.

Financial Procedure Act 1957 Section 4

Outlines the duties of accounting officers.

Financial Procedure Act 1957 Section 18

Specifies provisions regarding a Surcharge.

Treasury Instruction 173

Covers Casual purchase/Direct purchasing of not more than $RM\,50\,000$ per year.

Treasury Instruction 170

Covers Quotations requiring at least $5$ suppliers for contracts between $RM\,50\,000$ and $RM\,500\,000$ per year.

Treasury Instruction 171

Covers Tenders requiring a newspaper notice to invite at least $5$ suppliers for contracts over $RM\,500\,000$.