Financial Management and Control of the Public Sector in Ghana

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CHAPTER ONE

INTRODUCTION

1.0 Background of the study
Financial management issue in the public sector has become focus of increasing attention in recent years. Financial management could be defined as series of processes consisting of the operations, maintenance of capital and assets, monitoring of performance particularly financial reporting on the state of the finances. (Local Government Information Digest –November 2000.) Financial management is seen in this text as being proactive in the use of financial and other information to actively manage the public sector enterprise to achieve goals and lay down objectives and not merely as the provision of financial information. (Coombs and Jenkins 1994)

Financial managers control the financial aspect of an organization by monitoring system and procedures to ensure that development coincide with plans. Proper financial management is of importance to firms. The following are some importance of financial management; * Proper financial management ensures that each every staff is accountable to someone. * It enables an organization to utilize its revenue or income efficiently. * It enables an organization to eliminate waste in its revenue or income generation and disbursement. Financial managers performs various functions such as allocate funds to current and non-current assets, obtain the best mix of financing alternatives and develop an appropriate dividend policy within the firms objectives.

Public sector is that part of the economy that is significantly dominated by the central government. Public sector organizations include all organizations that are not privately owned and operated. In public sector organizations the individuals have no equity interest. The public sector is made up of diversely differing organizations. The diversity stems mainly from the differing objectives of these organizations. There are those organizations like public corporation, which operate on commercial lines and sell their product at the market place. At the other end of the spectrum of public sector organizations are Ministries, Department and Agencies (MDAs), which exist primarily to provide services, which are not sold in the open market. The following are some of the functions of public sector organizations; * To provide services for all citizens regardless of their ability to pay. * To provide services which are beyond the private means of the people using those services * To provide benefit to everyone within socially acceptable norm. Example, equal access to minimum health care and education. The local government reforms initiated by the erstwhile Provisional National Defense Council (PNDC) actually began in 1987 and became operational in 1988 when the district assemblies were first established. The establishment of the district assemblies was an important chapter in the efforts to provide a system of local government which is sound, strong and democratic. Many efforts were made to decentralize and democratize the management of public affairs to involve a wide spectrum of the Ghanaian citizenry in governance and development. The results so far reflect a positive role of decentralized process to promote the hopes and aspirations of ordinary people for good governance and development. Even though the policy of decentralization is laudable and widely acceptable, there are a number of difficulties inherent in its practice. Some of the difficulties relate to financing, staffing, public structure relationships between the centre and decentralized institutions on the one hand, and the districts on the other.

The central government has encroached on the rights of people at the local level. This is because resources were usually duplicated leading to under utilization and sometimes waste of resources. The irony is that, projects which were sited haphazardly due to simplistic political...
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