The Components Of Public Financial Management Accounting Essay

In Public Sector Financial Management ( PFB ) it focuses on the procedures, systems, regulations and ordinances that are designed enforced and maintained to successfully pull off authorities ‘s fundss. PFB focuses on the function of authorities in society in respects to fiscal maps. PFB is made up of a theory and practical constituent and in this essay I will look at and discourse assorted cardinal facets when it comes to authorities disbursement, budgeting and besides the public involvement in the fiscal growing of the state.

Components of public fiscal direction

Several single constituents make up PFB. Each one is alone and they function within the funding map of authorities. The constituents nevertheless jointly form and complete the model of funding map and they are as follows.


A budget is basically a model associating disbursement aims with their associated costs. It is hence applicable to any state of affairs where disbursement aims have to be determined, this can run from a family to a transnational company. Budgets serves as the footing for authoritiess fiscal activities since all the other constituent in the populace sector is besides related to the budget. A public budget has four basic dimensions:

To get down with it is a political tool that allocates rare public resources between the societal and economic demands of a legal power.

Second a budget is a managerial and or administrative instrument. It specifies the traditions and agencies of supplying public plans, services and establish the cost and or standards by which its activities are measured for their efficiency and effectivity and value.

Third a budget is a tool that can direct a states, state and municipality ‘s economic growing, development and advancement.

And last a budget is an accounting tool that holds authoritiess functionaries accountable for both the outgos and grosss of the plans over which members has control

It is of import to understand that PFB is a procedure and budgeting is a mechanism. Budget forms the base of authoritiess fiscal planning, allotments of money on disbursement aim and it serves as footing for control and answerability.

Outgo direction ( EM )

This aspect relates to the day-to-day operations linked to the executing of policy aims stated in the budget which is the disbursement of money. If the budget has approved disbursement it is of import that direction of authorities section should be carried out in a manner that achieve the greatest value. Expenditure direction are concerned with the day-to-day and monthly hard currency flow state of affairs, paying of providers, wages and receiving of money to call a few. With expenditure direction deferent methods and processs are used in which resources are utilised to accomplish maximal benefits.

The fiscal direction system ( FMS )

The FMS purposes to ease EM every bit good as some others facets of FMA such as turn outing budgetary information. The FMS has standard processs for entering of minutess. The FMS provide regular updated records of disbursement forms by which the followers can be determined

Spending to day of the month in comparing to the budget

Current outgos and future committednesss compared to the budget

Deviations from the budget and

addition and lessening of the budget


Accounting in SA has been converted from a hard currency accounting to an accumulations system in order to give a better penetration into SA ‘s true fiscal place. Accounting serves as a record for all minutess it besides provides fiscal informations and organize the footing for answerability in the populace sector. There are assorted accounting models used such as

By and large Accepted Accounting Practice ( GAAP )

By and large Recognized Accounting Practice ( GRAP )

Internationally Public Sector Accounting Standards ( IPSAS ) and

By and large Accepted Municipal Accounting Practices ( GAMAP )

Public answerability and control

One of the basicss of a representative democracy is that legislative assembly be held answerable by the electorate. The legislative assembly should do certain that mechanisms and processs and steps are in topographic point to help public answerability. Control over public financess is of great importance. The Auditor-General and the Standing Committee on Public Account ( SCOPA ) are of great importance as they are known as the Parliaments “ watchdogs ”

Performance direction ( PM )

Performance direction is new to the FMS in SA. PM can be linked to the degrees of service bringing achieved by passing public moneys. It besides can be linked to see how effectual money is spent. PM introduced the construct of ‘profit ‘ to the populace sector since public presentation in this application determines the comparative end products of public entities.

The average term outgo program ( MTEP )

The average term was introduced to do proviso for the deficiency of long-run ends that could non be provided for the one-year budget. The MTEP is designed to advance efficiency in both direction and footings of fundss. Specific benefits includes the followers

allotment of resources to precedence services

greater efficiency in planning and direction

a model in which policy proposals can be assessed

greater transparence in authorities

decrease in axial rotation over and

clear presentation on how financial marks will be met ( natioanlbufget1998 )

Business program

The concern program evolves from a sections strategic mission. These are described and quantified in elaborate end products and required inputs. The concern program are closely associated with the section ‘s budget. Operational budget fulfill the same intent, finding functional results linked with fiscal duty and other resources required to accomplish a concern ‘s set ends and aims.

Strategic program

Strategic plans contain a sections cardinal results and are a consequence of the sections set mission statement. Strategic program have a three to five old ages clip frame. Output aims and public presentation steps and indexs are straight linked to the strategic program.


The provisioning map is incorporated as a portion of the FMS due to the impact on public outgos as it constitutes a resource to be used by an accounting officer. The assets obtained through purveying signifiers a critical portion of FMS. ( Visser & A ; Erasmus, 2002 )

Lacks Inherent in the Market System

Looking at economic sciences there is technically non a market. You can non see or touch the markets but in society you can see the consequence of markets in society. When gross revenues takes topographic point between two people a market status is created. If there is no merchandising or trading it means that there is no market. Market failure can be seen if the allocate resources and the distribution thereof fail for assorted ground ensuing in the demand of society non being met. We can place four common lacks built-in to the market system consequence in the inequality of the use of resources and the allotment of map. The four common lacks are as follows.

Unequal Access to the Market

The entree to the market systems has become progressively more hard to persons. One is the grounds is that non all persons who are seeking to utilize the chance have capital available. The market becomes progressively more sole due to the limited handiness of financess. In some instance statute law and ordinances may curtail or restrict some facets of the market. Factors such as high monetary values, restrictive trading hours and districting ordinances can take to this facet. The monolithic addition in street sellers are an illustration of some of the old restrictive policing being relaxed.

Unequal entree to information

The information refering factors of production, handiness of resources and a broad choice of other of import information are going more unachievable. This is non needfully due to preset action. Having more valid and substantial information leads to better informed determination doing which so reduces the hazard which so leads to an increasing alteration for success.

The “ closed store ” syndrome

Some action are predetermined to intentionally maintain new comers out of a certain industry. This fundamentally mean that bing market participants choose to except other persons to take part in the same industry. This action can be achieved by a assortment of methods for illustration, make up one’s minding to take down trade good monetary values for a clip period until the fledgling are fundamentally forced out of the market.

Corporate pick

The single consumer makes determinations sing their demands in footings of nutrient, vesture, attention etc and the private sector these merchandises through the map of market systems ( supply and demand ) an a monetary value can be fixed on such points. ( Visser & A ; Erasmus, 2002 )

The Division of Power of Government

In order for authorities to keep a system of ‘checks and balance ‘ they function within three separate domains. The ground for this is that if for case the statute law makes jurisprudence, make up one’s mind on the jurisprudence reading and besides command the executing of the jurisprudence, the whole rule of democracy would be negated and secondly a bossy government would be the consequence, The power of authorities are divided into the undermentioned three domains. The legislative, the executive and the bench.

The Legislative Authority: The Parliament serves as the highest legislative authorization in South Africa ( SA ) . By the way, the Constitution of the Republic of South Africa Act 200 of 1993, provinces: aa‚¬A“The legislative authorization of the Republic shall, capable to this Constitution, waistcoat in parliament, which shall hold the power to do Torahs in the Republic in conformity with this Constitutionaa‚¬A? ( Government Gazette, 1994 ) . In footings of authorities fundss, these Torahs emerge into aims that must be executed by the executive authorization. Political procedures and party political relations are non associated to public fiscal direction since party political relations do non coerce authorities

disbursement straight. The governing party are in a place to explicate policies in footings of which financess are assigned through the budgetary procedures. Parliamentary portfolio commissions are created to cover with the assorted facets of the executive maps of authorities, such as athletics, communicating, wellness, instruction, agribusiness etc. They serve chiefly in an fact-finding and consultative capacity with no power to do Torahs. The Standing Committee on Public Accounts, ( SCOPA ) nevertheless, serves as Parliamentaa‚¬a„?s most important bureau on

fundss. This bureau reexamine studies from the Auditor-General, look into any evildoings, and do recommendations to Parliament. Finally, the Fiscal and Financial Commission ( established in footings of Chapter 13 in the Constitution ) ( Government Gazette, 1994 ) makes recommendations to Parliament in regard of fiscal affairs, such as:

National gross financess

Equitable portions and allotment of gross

National, provincial and municipal budget

Treasury control


Government warrants

Wage of individuals keeping public office.

Executive Authority: The executive authorization is made up of the president of the state, the deputy president and selected members appointed by the president, functioning as cabinet members. Cabinet members are appointed and serve as curates of province sections. The same executive members besides serves as members of the legislative authorization. This consequence in coordination between the legislative and the executive authorization and the province section.

The Judiciary: The bench comprises assorted degrees of tribunal from High Court, Magistrate Courts and Children Courts. The fundamental law prescribes that the reading of statute law and judgement in all these tribunals be capable to scrutiny by a Constitutional Court. The Constitutional Court may besides declare statute law passed by Parliament unconstitutional if it is found to be a dispute of the Constitution itself. It must be considered that the Constitution of the Country is the ultimate guideline to which all Torahs must adhere. With respect to public finance, you should be reminded that the legislative portion of the authorities substructure is chiefly concerned with policies and policymaking, control and answerability. Keep in head that politicians are chosen to function the public assistance of the people of the state and to do certain that they make right Torahs to function those involvements and do certain they are implemented out by the executive.

Advantages and Disadvantages of Estimates

An estimation of outgo indicates a rational patterned advance to make up one’s mind the fiscal value of resource demands, needed by an organisational establishment to recognize a predetermined nonsubjective successfully and professionally. A states economic system can non indefinite expand of its bing province services. It is imperative that governments often deliberate on its services rendered and by supervising this the governments can be after carefully to guarantee the entire outgo does n’t transcend the fiscal capacity of the province. An of import portion of planning is the fiscal estimations of a proposed class of action. Without this it will be really hard for the governments to set up the short- or long-run economical proof and fiscal affordability of the intended action. There is a relationship between the estimations and the budget and with any type of relationship you will hold some advantages and some disadvantages of estimations.

Advantages of estimations:

Estimates can give a clear indicant of the fiscal costs of a preplanned activity at a early phase, manner before the beginning of the fiscal twelvemonth. This early appraisal aid function participants determined if the cost involve justifies the expected consequences.

Estimates Acts of the Apostless as a measuring tool to find the direction against the guideline sum to find whether equal financess are available.

At a ulterior phase the after existent outgo has incurred one can analyze the original estimations to see if any divergence has taken topographic point and why. This will assist to guarantee that future estimations are more accurate and dependable

Estimates and revised estimations give timely indicant of salvaging or over outgos in assorted standard points and their influence on the entire cost of the aim. The timely warning allows governments to take disciplinary action.

Fiscal estimation that shows the high cost of an pre determined program can assist governments to look for options before forcing money into an expensive program. Options include utilizing less expensive equipments or engaging equipment alternatively of purchasing it.

Estimates promote rational determination devising. The appraisal of costs my lead to the original program being adjusted, amended or even scratched

An estimation is an instrument by agencies of which officials rationally consider the hereafter executing of their directives. They do n’t merely trust on the history of their maps, but they do concentrate on the hereafter.

Estimates allows the orderly fiscal direction of activities, as the instrument represents the lone method of guaranting equal financess and timely accommodations to activities aimed at suiting current fortunes.

Last estimates provide top functionaries, such as plan directors and the direction consultative commission with the information required to for important decision-making in regard of allotment of financess o those aims with the highest precedence.

Disadvantages of estimations:

Their truth reflects the fullness of the available information.

Estimates are dependent on the compiler ‘s dedication, every bit good their expertness and devotedness to accurately treat the fiscal information reflected.

They require periodic rewriting and updating to guarantee the fiscal information reflects the current position quo

If they are amended at will, without a proper foundation, this may ensue in a negative perceptual experience of their value

The unrealistic attacks of some people may ensue in a ‘wish list ‘ alternatively of a proper appraisal, ensuing in cutback and therefore taking to miss off meaningful attending to estimations. ( Visser & A ; Erasmus, 2002 )

Budget features.

A budget is a list of aims with a money value attached to it. The budget will place what objects you are traveling to pass your money on. A personal budget can include rent, fuel, nutrient, and electricity to call a few. In footings of authorities a budget will bespeak what nonsubjective demand to be achieved by naming their points in a budget. As a consequence a budget has so called features and they are as follows.

Beginning of information: Since the authorities budget includes the aims in which they are be aftering to pass money on, the budget will include the undermentioned. Governments policy aims, Financial deductions associated with the aims and implied revenue enhancement steps linked to fiscal duties

Second fiscal information: If a budget reveals all the sums linked to each aim, the entire sum will uncover the undermentioned information. Tax steps, Budget shortages and loans which are used to bridge the shortage spread. This information is really of import to the private sector because this information will provides them with the program revenue enhancement duties they will confront.

Third working paperss: The budget maps as a on the job papers because it contains all of the maps of the province sections. This provides fundamentally merely a wide lineation of the budget item.

Last control instrument: The listed aims in the budget, each with all their associated costs serves as a footing for control in two ways. First control can be exercised whether those aims have been achieved and secondly whether section corsets in the constrains of sanctioned sums.

Gross Appraisal:

The Treasury Regulations are used as a place of going in measuring which types of gross sections and other public establishments may roll up. The gross received by the province can consist of assorted types, each grouped harmonizing to its single beginning. They are:


Duties on mine leasing and licences

Auction dues and

Licenses for motor vehicles, fishing, wagering, etc.

User Levy

Sale of green goods, shops, farm animal or equipment

Grosss from the control and disposal of province belongings such as lease and proprietary responsibilities

Lab and analyzing services

Hospital fees

School fees

Board and lodging fees

Tollage ( toll roads ) and

Licenses and entryway fees.

Sundry Gross


Recovery of loans

Registration and review fees

Fines and forfeitures

Witness fees and pension parts


Gifts and

Exchange and other net incomes. ( Erasmus, 2012 )

Economic Categorization of Outgo:

In a budget papers that gets send to parliament there are proviso made for allocated columns in the money columns for a subdivision of the requested sum. This is to offer an indicant of the economic and fiscal value in regard to bing and capital outgos. The guidelines used by the authorities are based on the acknowledged statistical and national history categorizations. The economic categorizations of outgo are classified into the undermentioned classs:

Current Outgo: This is the perennial outgo of the sections, disposal on supplies and services non classified as transportation payments and non intended for the constitution or acquisition of capital assets as referred to below. It includes wage of employees, acquisition of office demands, rental, fuel and electricity, fixs and care, printed affair, equipment of low value or an mean life of less than one twelvemonth. Some other current outgos includes province sawmills, authorities printing imperativenesss, authorities garages. Defense expenditures includes machinery, equipment and constructions which are non intended for lodging of residential intents. ( Visser & A ; Erasmus, 2002 )

Capital Outgo: This outgo include Land, Buildings and Equipment. Land that was purchased including that for defence intents rights and servitudes. Added to this are disbursals on repossession betterment and development of the dirt and the development and enlargement of wood, plantations, groves and mines. Buildings and Structures includes outgo in regard of the acquisition or hard-on of edifices, constructions and technology plants. Residential countries including the adjustment for lasting force members of the South African Defense Force ( SANDF ) are besides under this outgo. Some other illustrations includes School inns, old age places, hotels and mills to call a few. Equipments outgo includes in nexus with the purchase of lasting long permanent machinery, equipment and agencies of conveyance with a life clip transcending one twelvemonth. Some illustrations are Expenditure in the betterment of lasting goods, the buying of boats, ships, aircrafts, armored combat vehicles oil and gas drills. Buying of tools and machinery with life rhythm more than one twelvemonth. Vehicles and reconstructing and betterment of bing conveyance equipment.

Transportation payments: This payment refers to the sums that will non be disabused on goods and services by the sections whose ballot they appear on, but will be paid over to other organic structures. They are derived into two classs viz. , Current transportations which include grant-in-aid subsidies, parts, fiscal aid, assistance to foreign states pension and societal benefits. Secondly Capital transportations which includes ordinary capital transportations, acquisition of portions and loans granted. Ordinary grants includes the followers, payments by the province, payments for goods and services included in bing fixed capital goods. Compensation to receivers for amendss of capital assets. Whenever the giver or receivers regards the transportation as capital transportation. Capital transportations besides consist of payments for salvation of capital debt incurred by other every bit long as the does n’t accepts the debt or obtain a corresponding claim against the debitor. Procurement of portions, loans granted

The budget for all national authorities section are submitted to parliament for blessing. The budgets are compiled harmonizing to these above mentioned categorizations Current, Capital and transportation. ( Erasmus, 2012 )

General Procurement Guidelines ( GPG ‘s )

The GPG ‘s are guidelines given to us by Government non merely as a direction of criterions of behaviour, moralss and answerability, But it can besides be used as a statement by Governmentaa‚¬a„?s to show their pledge and dedication to a procurance system which enables the outgrowth of sustainable little, medium and micro concerns which will add to the

common wealth and the accomplishment of enhanced economic and societal wellbeing of all South Africans. The guidelines can by summarized under five alleged pillars that are used to supply the minimal set of criterions. The five pillars are:

Value for money

Monetary values does non ever reflect whether value for money will be achieved as an important result. Looking at the procurance guidelines, a rule is adhered to that best value for money shows the best available result when all relevant costs and benefits over the procurement rhythm are carefully taken into consideration, to make this certain facets need to be taken into consideration to be exact.

Avoid any and all unneeded cost and holds for themselves and or their providers

Monitor the supply agreement and reconsider them if the expected consequences are non met.

Focus on uninterrupted betterment in the efficiency of internal procedures and systems

Open and effectual competition.

One of the facets related to authorities statute law is to accomplish peculiar aims in society. Several of the lacks inherent in the market system restricts a individuals from engagement in the economic system. Open and Effective Competition are the 2nd pillar in the GPG ‘s and considerations that need to be taken into consideration are:

A model of crystalline procurance Torahs, policies and patterns. This paperss must be available to all parties

Openness in the procurance procedure

They must back up effectual competition through procurance methods appropriate to market conditions and

Follow the commissariats of the Preferential Procurement Policy Framework Act.

For sections to guarantee the best possible results from the markets they need to guarantee that:

Prospective providers have entree to procurement chances and that available chances are published in the Government Tender Bulletin.

Where market fortunes limit competition, sections recognize that fact and utilize procurement methods that take history of it

Sufficient and appropriate information is provided to providers to enable them to offer

No unfairness and favouritism

The costs of command for chances are non so high that it scares off competent providers

Costss incurred in advancing competition are at least commensurate with the benefits received.

Ethical motives and just covering

The 3rd pillar of GPG ‘s are:

Acknowledging and covering with struggles of involvement or the possible there for

To cover with providers without bias

To guarantee they do non compromise the standing of the province through credence of gifts or cordial reception

To be painstaking in their usage of public belongings

To supply all aid in the riddance of fraud and corruptness.

Accountability and coverage.

Last one of the primary elements of the populace sector answerabilities are openness and transparence in disposal.

Heads of sections are accountable to their curates for the overall direction of procurance activities ;

Heads of procurance and senior procurance managers are accountable to caputs of sections for assorted high-ranking direction and co-ordination activities ;

Individual procurance officers are accountable to caputs of procurance, and to their clients, for the services they provide ; and

All people exerting procurement maps must hold respect to these guidelines and are accountable to direction. ( Erasmus, 2012 )


Proper Financial direction is indispensable to the well being of the Country and it citizens. Government budget and disbursals is of import for all the citizens in the state. The revenue enhancement remunerator needs to cognize where their money is traveling, who is passing it and who is blowing it. The authorities has to recognize that there are both Public and Private sectors at drama in the economic system and just and equal opportunities should be provided for both sectors to acquire just entry into the market systems. The authorities should guarantee economic stableness, proper economic growing and monetary value stableness. The Constitution plays a immense function in the success of the PFB, regulations and ordinance should be decently assessed and right managed to do certain all function participant understand the reading and the map of the statute law.