Understanding Public Finance and Public Financial Management
Understanding Public Finance. Terminology of Public Finance which can be interpreted as State Finance, government finance which means government financial activities (our study does not include government activities in the economy). In theory, it is not always clear the subject of public finance, because it depends on the form of the state, the government system and the constitution that governs the life of a country's state
State finance: all rights and obligations of the state that can be valued in money, as well as everything in the form of money or in the form of goods that can be owned by the state in connection with the implementation of these rights and obligations.
Public finance also includes aspects of financing carried out by the government (Public sector financial management for Economic Growth):
Financing is any revenue that needs to be paid back and / or expenses to be received again, both in the relevant fiscal year and subsequent fiscal years.
Other terminology of state debt and / or accounts receivable
The approach used in formulating State Finance is in terms of:
Objects, In terms of objects referred to as State Finance include all rights and obligations of the state that can be valued in money, including policies and activities in the field of fiscal, monetary and management of separated state assets, as well as everything in the form of money, or in the form of goods that can be become the property of the state in connection with the implementation of
Subjects, from the subject matter referred to as Finance covers all objects as mentioned above which are owned by the state, and / or controlled by the Central Government, Regional Governments, State / Regional Companies, and other bodies that are related to state finance.
Process, In terms of process, State Finance covers the entire set of activities related to object management as mentioned above starting from policy formulation and decision making to accountability.
Objectives, In terms of objectives, State Finance includes all policies, activities and legal relations relating to ownership and / or control of objects as mentioned above in the context of administering state government.
Definition of Public Financial Management
The understanding of the public sector is seen from the perspective of economics that is the public sector is an entity whose activities are related to efforts to produce public goods and services in order to meet the needs and rights of the public.
The public sector is a place for the government to produce public goods and services in meeting public needs by prioritizing the welfare of society. So that in carrying out all its activities the public sector is arranged in all its activities and work programs in a budget. The main role of public sector management accounting is the provider of accounting information that will be used by public managers in carrying out organizational planning and control functions. Management accounting is the most important part of an integrated management control system.
The Institute of Management Accountats (1981) defines management accounting as a process of identifying, measuring, accumulating, analyzing, preparing, interpreting, and communicating financial information used by management for planning, evaluating, and controlling an organization and for ensuring that resources are used appropriately and accountable.
Public Financial Management is all activities or efforts or activities carried out by the government (central and regional) in managing all state affairs, particularly those relating to government financial activities ranging from managing revenue, expenditure to financing policies.
While the understanding of the public sector budget Public sector budget is a plan of activities presented in the form of revenue and balance acquisition plans in monetary units. The public sector budget is a breakdown of all aspects of the activities to be carried out which are composed of revenue and expenditure plans that will be carried out within one year. The public sector budget is made to assist the government in helping the level of community growth such as electricity, clean water, health quality, education and so on so that it is appropriately guaranteed and the level of community welfare will be more secure and the use and allocation more effective and efficient.
The principles of the public sector budget according to Mardiasmo (2004; 67-68) as follows, namely:
Authorization by the legislature, Public budgets must get authorization from the legislature before the executor can spend the budget.
Comprehensive, the Budget must show all government revenues and expenditures. Therefore, the existence of non-budget funds basically violates the principle of a comprehensive budget.
Budget integrity, All government revenues and expenditures are collected in general funds.
Non dissretionary appropriation, Amounts approved by the legislative council must be utilized economically, efficiently and effectively.
Periodic, the Budget is a periodic process, can be annual or multi-yearly
Accurately, budget estimates should not include hidden reserves (hyden reserves) that can be used as pockets of waste and inefficiency of the budget and can lead to the emergence of underestimate income and undere- stimate expenditure.
Clearly, the Budget should be understood by the public and not be confused.
Known to the public, the Budget must be made public.