Friday, 13 July 2018

Impact of financial control system on fund management in the public sector


1.1 Background of the Study 

In modern management, financial control is very important. Financial control is one of the performance control tool that are used by managers. Financial control allows an organization to evaluate, in a continually objective and systematic manner the variances that are generated on previously established strategic and operation lines.

By so doing, this kind of control provides management, or others holding a high level of   responsibility in the business or organizations, with enough useful arguments and insights allowing them to take decision that guarantee the follow-up of any corporate objective(s) proposed.

According to Udeagha (2013), financial control system is the processes and procedures used by an organization’s management to exercise financial control and accountability. These measures include recording, verification and timely reporting of transaction that affects revenues, expenditures, assets, and liabilities.

It goes to show from the above views that, managers put financial controls into place to track performance and evaluate progress toward the financial goals of any organization or company. Thus, Obadan (2012) posits that, financial control are among the tools that managers use to satisfy the third and fourth aspects of their roles, tracking progress and evaluating results and they fall into the controlling category.

Financial controls are the most important for objective measures of planning.
The public sector is the part of the economy that is controlled by the state. The public sector is that portion of an economic system that is controlled by national, state or provincial and local governments. According to Oduma (2011) the public sector is the part of national economy providing basic goods or services that are either not, or can not be provided by the private sector.

It consists of national and local governments their agencies, and their chartered bodies. Given that most agencies or organizations in the public sector are not really proper oriented or dogged moved by profit maximization, there to be increasing cases of mismanagement of funds in  most of public sectors hardly use financial control system to ensure adequate management of fund.

These often result in cases of looting of public treasury, financial crimes/ frauds, poor inventory management and low productivity and profitability.
In view of this, Odimegwu (2012) observes that, public sector undertakings spend too heavily on construction as well as designing. This occurs mostly as a result of lack of proper planning, which results heavy draining of funds. Again, public sector undertakings are heavily over- capitalized with the result that there is unfavourable input- output ratio.

Inadequate planning, inordinate delays in construction etc are also reasons for over capitalization still another problem is that of budgeting. It seems most of the public sector undertaking have no serious budgeting system. The budgets are of course prepared, but these are primarily with a view of obtaining funds from the government.

The budget estimates are kept very high providing for a margin for cuts and when cuts are not made to the extent to which these have been incorporate in the estimated budgets the whole exercise becomes unrealistic.

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