PFM4 – Public Sector Financial Management

PFM 4: PUBLIC SECTOR FINANCIAL MANAGEMENT

4.4.1. LEARNING OUTCOMES OF THE COURSE Upon successful completion of this course, a student should be able to:

1. Explain the principles of Public Finance and Economics that relate to Public Budgeting and the budgetary process;
2. Demonstrate knowledge of the budget preparation process;
3. Explain how government sources funds;
4. Undertake investment appraisals of a project; and
5. Outline various Financial Management activities.

4.4.2. MODULE UNITS AND WEIGHTINGS

Unit	Title	Weight %
1	Principles of Public Finance	10
2	Budget Preparation Process	10
3	The role of Financial Management in the Public Sector	10
4	Public Sector Financing	15
5	Investment Appraisal in Public Sector	15
6	Treasury Management activities in Public Sector	15
7	Risk Management Concepts	10
8	Performance Management in the Public Sector	10
9	Public Sector Financial Management Reforms	5

4.4.3. COURSE CONTENT

UNIT 1: PRINCIPLES OF PUBLIC FINANCE Unit Topic:

• 1.1 Public Finance
  • 1.1.1 Economic theory and the Role of Government in the Economy
  • 1.1.2 Market failures
  • 1.1.3 Public Goods
  • 1.1.4 Externalities

UNIT 2: BUDGETARY PREPARATION PROCESS Unit Topics:

• 2.1 Budgetary theory
  • 2.1.1 Budgetary theory and Practice
  • 2.1.2 Legal and institutional frameworks in budgeting
  • 2.1.3 The Budgetary Process and logic
  • 2.1.4 Functions of the Budgetary Process
• 2.2 The Budget Cycle
  • 2.2.1 The Government Budget Process
  • 2.2.2 Supplementary Budgets
  • 2.2.3 Budget Deficits and Balanced Budget Requirements
• 2.3 Operating Budgets
  • 2.3.1 Budgeting methods
  • 2.3.2 Analyzing Budget Requests
  • 2.3.3 Budget Balancing Techniques
  • 2.3.4 Budget execution
• 2.4 Capital Budgeting
  • 2.4.1 Rationale for Capital Budgeting
  • 2.4.2 Capital Budgeting Process
  • 2.4.3 Determining Costs
  • 2.4.4 Investment Decisions
  • 2.4.5 Cost Benefit Analysis

UNIT 3: THE ROLE OF FINANCIAL MANAGEMENT IN THE PUBLIC SECTOR Unit Topics:

• 3.1 The Public Sector Financial Management and its Stakeholders
• 3.2 Role of Accountant in Public Sector Financial Management
  • 3.2.1 Asset Stewardship
  • 3.2.2 Debt Management
  • 3.2.3 Internal Controls and systems management
  • 3.2.4 Risk Management
• 3.3 The Financial system and Government’s role
• 3.4 Financial Management as a function

UNIT 4: PUBLIC SECTOR FINANCING Unit Topics:

• 4.1 Sources of finance
  • 4.1.1 Non Tax Revenue
  • 4.1.2 Tax Revenue
  • 4.1.3 Borrowings
  • 4.1.4 Grants
  • 4.1.5 Exceptional Revenue
• 4.2 Financial Structure of Public Entities
• 4.3 Financing Options for Public Sector Entities

UNIT 5: INVESTMENT APPRAISALS IN PUBLIC SECTOR Unit Topics:

• 5.1 Investment and financing plans
• 5.2 Revenue and Capital expenditure
• 5.3 Importance of non financial factors in capital expenditure decision making
• 5.4 Cashflow, benefits, risk identification and risk attitude
• 5.5 Funding options and financial structure
• 5.6 Investment Appraisal Techniques:
  • 5.6.1 Payback Period
  • 5.6.2 Net Present Value (NPV)
  • 5.6.3 Accounting Rate of Return (AAR)
  • 5.6.4 Internal Rate of Return (IRR)
• 5.7 Analysis of Capital Expenditure Decision Making
  • 5.7.1 Weighted benefit criteria
  • 5.7.2 Cost benefit analysis
  • 5.7.3 Cost effectiveness studies
• 5.8 Measurement of Risk on Capital Expenditure Decisions
  • 5.8.1 Simulation
  • 5.8.2 Sensitivity Analysis

UNIT 6: TREASURY MANAGEMENT ACTIVITIES IN PUBLIC SECTOR Unit Topics:

• 6.1 Cash Resource Management
• 6.2 Asset and Liability Management (Maturity Matching)
• 6.3 Investment and Debt Management
• 6.4 Banking Services

UNIT 7: RISK MANAGEMENT CONCEPTS Unit Topics:

• 7.1 Risk Management framework
• 7.2 Different types of risks in the public sector
• 7.3 Types of risk management tools
• 7.4 Application Risk Management tools

UNIT 8: PERFORMANCE MANAGEMENT IN THE PUBLIC SECTOR Unit Topics:

• 8.1 Performance Management in the Public Sector
• 8.2 Theory of Performance Management
• 8.3 Indicators of Performance Management in the Public Sector
• 8.4 Evaluating Public Sector Performance

UNIT 9: PUBLIC SECTOR FINANCIAL MANAGEMENT REFORMS Unit Topics:

• 9.1 Scope and focus of Public Sector Financial Management Reforms.
• 9.2 Assessment of Public Sector Financial Management Performance.
• 9.3 Factors impacting on Public Sector Financial Management Reforms.

4.4.4 The Examination Paper Format:

Structure of the Paper	Marks
Section A: 1 Compulsory question of 40 marks	40
Section B: Any 3 out of 4 questions, 20 marks each	60
TOTAL	100

The candidates will be allowed fifteen (15) minutes reading time. 4.4.5 Recommended Readings: ZICA PFM 4 Study Materials