Public Administration Optional (Financial Management) by Abhishiekh Saxena

Model Answer

Question #1. Budget is an effective tool of the administration. Comment.             

Approach:

• After briefly explaining what is a budget. Elaborate on how it’s a useful tool for admin.

Budget today has become one of the primary tools of financial administration. It is “the master financial plan of the Government. It brings together estimates of anticipated revenues and proposed expenditures implying the schedule of activities to be undertaken and the means of financing these activities.”

Budget is the very core of democratic government and in the words of Harold Smith, “The objectives of the Budget should be to implement democracy and provide a tool which will be helpful in the efficient execution of the functions and services of government… The budget is a device for consolidating the various interests, objectives, desires, and needs of our citizens into a programme whereby they may jointly provide for their safety, convenience and comfort. It is the most important single current document relating to the social and economic affairs of the people.”

It lays emphasis on the need for state programmes to be executed as efficiently as possible so that maximum results are obtained for the money spent on them. “In one sense the entire budgetary process can be said to have as a single objective the attainment of economy and efficiency; the determination of how the country’s scarce resources can best be served by the diversion of scarce resources, through taxation and other methods, from private to public use and by the allocation of those resources among various Government uses. Such a determination covers both the questions what programmes should be undertaken and how they should be executed.”

Question #2. Accounting is the science of producing promptly and presenting clearly the facts relating to financial conditions and operations that are required as a basis of management. Comment.  

 Approach:

• Explain the importance of accounting.

Accounting means keeping a systematic record of financial transactions. A good accounting system is indispensable for adequate budgetary control. It is only through systematic accounts supported by vouchers and receipts that the legality and honesty of the transactions as also the fidelity of the officers handling the funds can be determined.

Secondly, it is through accounts only that it can be ascertained whether provisions of the budget as voted by the legislature have been properly implemented or not, i.e., how much has been spent and for what purpose and whether within the budgetary limits or not.

Thirdly, accounts furnish the valuable information needed regarding financial conditions and operations for policy determining and programme making.

Francis Oakey in his book titled Principles of Government—Accounting and Reporting, rightly defines the term Accounting “as the science of producing promptly and presenting clearly the facts relating to financial conditions and operations that are required as a basis of management.”

In the words of Dr. L.D. White, “The primary functions of a system of accounts are to make a financial record, to protect those handling funds to reveal the financial condition of the organisation in all its branches, to facilitate necessary adjustments in rates of expenditure, to give information to those in responsible position on the basis of which plans for future financial and operating programmes can rest and to aid in the making of an audit.”